EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made the ___ day of
December, 2001 by and between NEOWARE SYSTEMS, INC., a Delaware corporation
("Employer"), and XXXXXXX X. XxXXXX ("Employee").
W I T N E S S E T H :
WHEREAS, Employee has been employed by Telcom Assistance Center
Corporation ("Telcom"); and
WHEREAS, Employer and Telcom have entered into an asset purchase
agreement dated November __, 2001 (the "Purchase Agreement") which provides for
the purchase of substantially all of the assets of Telcom by Employer (the
"Purchase"); and
WHEREAS, the execution of this Agreement by Employee and Employer is a
condition to the obligation of Telcom to closing of the Purchase; and
WHEREAS, Employer desires to employ Employee and Employee desires to
accept such employment, all upon and subject to the terms and conditions
contained in this Agreement;
NOW, THEREFORE, the parties to this Agreement, for good and valuable
consideration and intending to be legally bound, hereby agree as follows:
SECTION 1. EMPLOYMENT.
(a) Duties. Employer agrees to employ Employee as the Executive Vice President
of Employer responsible for North American Marketing, Sales and Business
Development. Employee agrees to perform such duties and services consistent with
Employee's position and to perform such other duties and to serve in such
capacities at such location as may be determined and assigned to him from time
to time by the Chief Executive Officer or Board of Directors of Employer, it
being expressly provided that the duties of Employee may be enlarged or
diminished, as the Chief Executive Officer or the Board of Directors determines.
Employee will use his best efforts to perform his duties and discharge his
responsibilities pursuant to this Agreement competently, carefully and
faithfully.
(b) Devotion of Time. Employee will devote his entire time, attention
and energies to the affairs of Employer. Employee will not enter the employ of
or serve as a consultant to, or in any way perform any services with or without
compensation to, any other person, business or organization without the prior
written consent of the Board of Directors of Employer, provided that Employee
shall be permitted to devote a limited amount of time, without compensation, to
charitable or similar activities.
(c) Former Employment. Employee represents and warrant that he is a
party to an employment agreement with Telcom dated September 29, 2000 (the
"Telcom Agreement"), and that his performance under the Agreement shall not, in
any way, breach or conflict with the terms of the Telcom Agreement in any
manner. Employee and Employer further agrees that Employer has not and does not
assume any obligation to Employee under the Telcom Agreement, including but not
limited to, payment of any severance or other benefits to Employee. Employee
hereby releases and forever discharges Employer from any and all claims,
actions, demands or lawsuits of any type that he may have which relate in any
manner to the Telcom Agreement and agrees to indemnify and hold Employee
harmless from and against any cost, loss or expense (including attorneys' fees)
arising out of or relating to any breach of the warranty described in this
Section 1(c).
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SECTION 2. DURATION AND TERMINATION OF EMPLOYMENT.
(a) Term. The term of this Agreement shall begin as of the date hereof
and shall continue for an initial period of two years unless terminated pursuant
to this Section 2 hereof, with or without cause, and shall automatically
continue thereafter year-to-year unless terminated pursuant to this Section 2
hereof, with or without cause (collectively, the "Term").
(b) Termination by Employer. Employer may terminate Employee's
employment pursuant to this Agreement as follows:
(i) If Employee shall die during the Term, Employee's
employment shall terminate, except that Employee's legal representatives shall
be entitled to receive the base salary provided for under Section 3 hereof
prorated to the last day of the month in which Employee's death occurs.
(ii) If during the Term, Employee shall become physically or
mentally disabled whether totally or partially, so that Employee is unable
substantially to perform Employee's services hereunder for a period of four (4)
consecutive months, Employer may, by written notice to Employee, terminate
Employee's employment hereunder. In the event of Employee's termination pursuant
to this Section 2(b)(ii), Employee shall be entitled to receive the payments
described in Section 2(c)(i), less any amounts received by Employee from any
source for disability-related benefits.
(iii) Employer may, by written notice to Employee, terminate
Employee's employment hereunder for "cause." For the purposes of this Agreement,
"cause" shall mean Employee's termination only upon: (A) Employee's continued
neglect of such assigned duties and responsibilities as shall be consistent with
the terms of this Agreement or Employee's responsibilities after receipt of a
written warning of specific deficiencies and Employee's failure to cure said
deficiencies within thirty (30) days; or (B) Employee's engaging in willful
misconduct which is demonstrably injurious to Employer; or (C) Employee's
committing a felony or an act of fraud against or the misappropriation of
property belonging to Employer, or (D) Employee's breaching in any material
respect the terms of this Agreement and Employee's failure to cure the breach
within thirty (30) days after written notice of the breach from Employer.
(iv) Employer may terminate Employee's employment hereunder
"without cause" upon thirty (30) days prior written notice. A termination
"without cause" shall mean the termination of Employee's employment by Employer
under this Agreement other than pursuant to Sections 2(b)(i), (ii) or (iii)
above.
(c) Severance; Change of Control.
(i) If Employer terminates this Agreement during the first
twenty four (24) months of the Term for any reason other than pursuant to
Section 2(b)(i), (ii) or (iii) above, Employer shall continue Employee's then
current annual base salary and health benefits for a period of six (6) months.
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(ii) If, during the Term, Employee is not offered employment,
for any reason other than for "cause," by Employer's successor on the occurrence
of a Change in Control (as defined below), (a) Employee will be entitled, under
this Section 2(c)(iii), to payment of the amounts specified in Section 2(c)(i),
which shall be in lieu of any payments under Section 2(c)(i), and (b) any
options to purchase shares of Employer's Common Stock held by Employee shall
become fully exercisable. "Change in Control" shall have the meaning set forth
in Section 14 of the Company's Stock Option Plan (the "Stock Option Plan"), a
copy of which is attached as Exhibit A.
(d) Employee Obligations. Notwithstanding the foregoing, no amount will
be paid or benefit provided under Section 2(c)(i) or 2(c)(ii) unless and until
Employee executes and delivers to Employer a release substantially identical to
that attached hereto as Exhibit B and the Revocation Period described therein
has expired. In the event that Employee violates any of the provisions of
Sections 4 or 6 hereunder, Employer's obligation to make payments under Section
2(c) shall terminate immediately.
(e) Termination by Employee. Employee may terminate his employment
hereunder upon thirty (30) days prior written notice to Employer.
(f) Survival. Notwithstanding any termination of Employee's employment
as provided in this Section 2 or otherwise, the provisions of Sections 4, 5, 6
and 7 shall remain in full force and effect.
SECTION 3. COMPENSATION.
(a) Base Salary. Employee's base salary shall be $175,000 per annum,
payable in equal, bi-weekly installments, subject to annual review and
adjustments at the discretion of the Chief Executive Officer and the
Compensation and Stock Option Committee of the Board of Directors.
(b) Bonus; Options. Employee shall be entitled to participate in any
employee bonus pool and stock option plans at the discretion of the Compensation
and Stock Option Committee or Board of Directors, as applicable.
(c) Employee Benefits. Employee shall participate in Employer's
standard employee benefit plans (for example, life insurance, disability
insurance, health and dental insurance) available to similarly situated
employees.
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SECTION 4. COVENANT NOT TO COMPETE OR SOLICIT.
(a) Non-Competition. Employee agrees that he will not directly or
indirectly engage in (whether as an employee, consultant, proprietor, partner,
director or otherwise), or have any ownership interest in, or participate in the
financing, operation, management or control of, any person, firm, corporation or
business that engages in or (to Employee's knowledge) intends to engage in a
"Restricted Business" (as defined below), during the Term of his employment by
Employer and for a period of six (6) months following the later of (i) the
termination of this Agreement other than pursuant to Section 2(b)(iv) or (ii)
the termination of payments under Section 2(c)(i).
Ownership of (i) no more than five percent (5%) of the outstanding
voting stock of a publicly traded corporation, or (ii) any stock presently owned
by Employee, shall not constitute a violation of this provision. In addition,
this provision shall not apply to Employee's employment by a company if: (i)
less than ten percent (10%) of the company's revenues during the prior twelve
(12) months were generated by the Restricted Business and (ii) Employee is not
employed by the division or subsidiary engaged in the Restricted Business.
"Restricted Business" shall mean any business that is engaged in or is
preparing to engage in the sale or provision of products and/or services
comparable to the products and/or services offered by Employer at any time
during Employee's employment with Employer. At the time of the execution of this
Agreement, upon consummation of the Purchase, "Restricted Business" is defined
as any business involved in the creation, marketing and sale of software,
services or solutions for the appliance computing, thin client, server-based
computing, MSP or ASP markets.
(b) Non-Solicitation. With respect to non-solicitation obligations,
Employee agrees to be bound by the Non-Solicitation and Confidentiality
Agreement between Employer and Employee, the form of which is attached hereto as
Exhibit C and incorporated herein, and which shall be executed by Employer and
Employee concurrently with this Agreement (the "Non-Solicitation and
Confidentiality Agreement").
(c) Worldwide. The parties acknowledge that the market for products of
the type sold by Employer is worldwide, and that, in this market, products from
any nation compete with products from all other nations. Accordingly, in order
to secure to Employer the benefits of this Section 4, the parties agree that the
provisions of this Section 4 shall apply to each of the states and counties of
the United States and to each nation worldwide.
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(d) Severability. The parties intend that the covenants contained in
the preceding paragraphs shall be construed as a series of separate covenants,
one for each state of the United States, and each nation. If, in any judicial
proceeding, a court shall refuse to enforce any of the separate covenants (or
any part thereof) deemed included in said paragraphs, then such unenforceable
covenant (or such part) shall be deemed eliminated from this Agreement for the
purpose of those proceedings to the extent necessary to permit the remaining
separate covenants (or portions thereof) to be enforced. In the event that the
provisions of this Section 4 should ever be deemed to exceed the time or
geographic limitations, permitted by applicable law, then such provisions shall
be reformed to the maximum time or geographic limitations, as the case may be,
permitted by applicable law.
(e) Restrictions Reasonable. Employee acknowledges that the
restrictions imposed by this Agreement are reasonable and necessary in order to
protect the legitimate business interests of Employer and will not preclude
Employee from becoming gainfully employed following his termination of
employment with Employer.
SECTION 5. EMPLOYEE'S REPRESENTATIONS.
Employee represents and warrants to Employer that Employee is familiar
with and approves the covenants not to compete and not to solicit set forth in
Section 4, including, without limitation, the reasonableness of the length of
time, scope and geographic coverage of those covenants.
SECTION 6. PROTECTION OF CONFIDENTIAL INFORMATION.
In view of the fact that the Employee's work for Employer will bring
him into close contact with many confidential affairs of Employer not readily
available to the public, Employee agrees to be bound by each of the terms and
provisions of the Non-Solicitation and Confidentiality Agreement.
SECTION 7. REMEDIES.
(a) Employee Violations. If Employee violates any of the provisions of
Sections 4 or 6 hereof, Employer shall have the following rights and remedies:
(i) In the event of a breach, or a threatened breach, the
right and remedy to have the provisions of this Agreement specifically enforced
by any court having equity jurisdiction, it being acknowledged and agreed that
any such breach or threatened breach will cause irreparable injury to Employer
and that money damages will not provide an adequate remedy to Employer;
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(ii) In the event of an actual breach, the right to recover
damages for all losses, actual and contingent, and the right to require the
Employee to account for and pay over to Employer all profits or other benefits
(collectively "Benefits") derived or received by the Employee as a result of any
transactions constituting such a breach, and the Employee hereby agrees to
account for and pay over such Benefits to Employer; and
(iii) The immediate termination of Employer's obligation to
make payments pursuant to Section 2(c).
(b) Rights and Remedies Cumulative. Each of the rights and remedies
enumerated above shall be independent of the other, and shall be severally
enforceable, and all of such rights and remedies shall be in addition to, and
not in lieu of, any other rights and remedies available to Employer at law or in
equity.
SECTION 8. INTELLECTUAL PROPERTY.
(a) Owner of Intellectual Property. Employer shall be the sole owner of
all the products and proceeds of the Employee's services to Employer, including,
but not limited to, all materials, ideas, concepts, formats, designs,
suggestions, developments, arrangements, packages, computer programs,
inventions, patent applications, patents, copyrights, trademarks and other
intellectual properties (collectively, "Intellectual Property") that Employee
may acquire, obtain, develop or create in connection with the Employee's
employment hereunder, free and clear of any claims by Employee (or anyone
claiming under Employee) of any kind or character whatsoever (other than
Employee's right to receive payments hereunder).
(b) Assistance. Employee shall, at the request of Employer, execute
such assignments, certificates or other instruments as Employer may from time to
time deem necessary or desirable to evidence, establish, maintain, perfect,
protect, enforce or defend its rights, title and interest in or to any such
Intellectual Property.
SECTION 9. MISCELLANEOUS.
(a) Notices. All notices, reports or other communications required or
permitted to be given hereunder shall be in writing to both parties and shall be
deemed given on the date of delivery, if delivered, or three days after mailing,
if mailed first-class mail, postage prepaid, to the following addresses:
(i) If to Employee:
Xxxxxxx X. XxXxxx
000 Xxxxx Xxxx
Xxxxxxxx, Xxxxxxxxxxxx 00000
(ii) If to Employer:
NEOWARE SYSTEMS, INC.
000 Xxxxxxx Xxxxx
Xxxx xx Xxxxxxx, XX 00000
Attention: President
or to such other address as any party hereto may designate by notice given as
herein provided.
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(b) Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the Commonwealth of Pennsylvania,
without regard to its rule or principles relating to conflicts of laws.
(c) Amendments. This Agreement shall not be changed or modified in
whole or in part except by an instrument in writing signed by each party.
(d) Counterparts. This Agreement may be executed in several
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same agreement.
(e) Effect of Headings. The section headings herein are for convenience
only and shall not affect the construction or interpretation of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first set forth above.
NEOWARE SYSTEMS, INC.
By:
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Xxxxxxx Xxxxxxxxxx
President and CEO
EMPLOYEE
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Xxxxxxx X. XxXxxx
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