EMPLOYMENT AGREEMENT

 

                                                                    Exhibit 10.1

 

 

                                                                  Execution Copy

 

                              EMPLOYMENT AGREEMENT

 

     This EMPLOYMENT AGREEMENT is entered into as of the 14th day of July, 2005,

(the "Effective Date") by and between Emtec,  Inc., a Delaware  corporation (the

"COMPANY")  and John Howlett (the  "EXECUTIVE");  subject to the condition  that

this Agreement will become  effective only upon the closing of the  transactions

contemplated  by  that  certain  Agreement  and  Plan  of  Merger  (the  "MERGER

AGREEMENT")  by and among the Company,  Emtec  Viasub,  LLC, a subsidiary of the

Company ("Acquisition") and DARR Westwood Technology Corporation, dated July 14,

2005 (the "CLOSING").

 

 

                                WITNESSETH THAT:

 

     WHEREAS, Executive is a valued employee of the Company;

 

     WHEREAS,  the parties desire to enter into this Agreement pertaining to the

employment of the Executive by the Company;

 

     NOW, THEREFORE, in consideration of the mutual covenants and agreements set

forth below, it is hereby covenanted and agreed by the Executive and the Company

as follows:

 

1.   EMPLOYMENT; POSITION AND RESPONSIBILITIES; TERM.

 

     (a) During the Agreement Term (as defined below),  and subject to the terms

of this  Agreement,  the  Executive  shall be  employed by the Company and shall

occupy the position of  President  of the  Company's  Northeast  Operations  (as

defined below).  The Executive agrees to serve in that position or in such other

executive  offices or  positions  with the Company or a  Subsidiary  (as defined

below),  as shall from time to time be determined by the Board of Directors (the

"BOARD"). The Executive represents that his employment with the Company does not

violate any other agreement to which he is a party.

 

     (b) During the  Agreement  Term,  the  Executive  shall  report  solely and

directly to the Chief Executive Officer of the Company or his designee.

 

     (c) During the Agreement Term, while employed by the Company, the Executive

shall  devote his full time and best  efforts to the business of the Company and

shall  perform all duties and services for and on behalf of the Company as shall

be reasonably  requested by the Board in its sole and absolute  discretion.  The

Executive's duties may include providing executive services for both the Company

and the Subsidiaries, as determined by the Board.

 

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     (d) During the Agreement  Term, the Company shall use its  reasonable  best

efforts to maintain an office within 15 miles of Chatham, New Jersey.

 

     (e) The term of  employment  under this  Agreement  shall  commence  on the

Effective  Date and,  unless  earlier  terminated  under Section 3 below,  shall

terminate on August 31, 2008 (the "AGREEMENT TERM").  Thereafter,  the Agreement

Term may be extended  annually for additional  one-year  periods with the mutual

consent of the Company and the Executive.

 

     (f) For purposes of this Agreement:

 

          (i) The term  "SUBSIDIARY"  shall mean any  corporation,  partnership,

     joint  venture  or other  entity  during any period in which at least a 50%

     interest in such entity is owned,  directly or  indirectly,  by the Company

     (or a successor to the Company).

 

          (ii) The term "NORTHEAST  OPERATIONS" means the regions  designated as

     comprising  the Company's  Northeast  Operations,  including any additional

     regions,  business lines or  acquisitions  that may become  included in the

     Company's  Northeast  Operations  after the Effective Date. The Company may

     give the  Executive  authority  and  responsibility  with  respect  to such

     additional regions,  business lines or acquisitions as it determines in its

     reasonable  judgment  are  appropriate,  and  target  EBITDA  levels may be

     adjusted  with the  mutual  consent of the  Company  and the  Executive  to

     account for such additional regions, business lines or acquisitions.

 

2.   COMPENSATION AND OTHER BENEFITS.

 

     (a) BASE SALARY.  During the Agreement Term, the Executive shall receive an

annual base salary ("BASE  Salary"),  payable in  accordance  with the Company's

normal payroll practices, of $230,000. The Board shall increase such Base Salary

by 5% as of each anniversary of the Effective Date during the Agreement Term.

 

     (b) BONUS.  In respect  of each  fiscal  year  during the  Agreement  Term,

beginning  with the fiscal year ending August 31, 2006,  the Executive  shall be

eligible  to  receive  a Level 1 Bonus and a Level 2 Bonus  (as  defined  below)

provided that the performance goals set forth below are met. The foregoing shall

be referred to  collectively  as the "BONUS." 75% of the Bonus (if any) shall be

paid  within  100  days  after  the end of the  applicable  fiscal  year and the

remaining  25% of the Bonus (if any) shall be paid within 10 business days after

the Company's  audited (or if no audit is done for the fiscal year, the reviewed

or compiled) financial statements for the applicable fiscal year are completed.

 

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          (i) LEVEL 1 BONUS.  The  Executive  shall be  entitled  to  receive an

     annual bonus of $100,000 (the "LEVEL 1 BONUS") if the Company's  EBITDA for

     the applicable fiscal year equals or exceeds the following targets:

 

               (A) for the fiscal year beginning on September 1, 2005 and ending

          August 31, 2006, $3,700,000;

 

               (B) for the fiscal year beginning on September 1, 2006 and ending

          August 31, 2007, $4,000,000; and

 

               (C) for the fiscal year beginning on September 1, 2007 and ending

          August 31, 2008, $4,800,000.

 

     If the Company's EBITDA for the applicable fiscal year is more than 80% but

     less than 100% of the applicable  target for that year, the Executive shall

     be  entitled  to receive 25% of the Level 1 Bonus  (i.e.,  $25,000)  plus a

     portion  of 75% of the  Level 1 Bonus  (i.e.,  $75,000)  equal  to  $75,000

     multiplied by a fraction (not to exceed one), the numerator of which is the

     amount by which the Company's EBITDA for the applicable fiscal year exceeds

     80% of the  applicable  target for that fiscal year and the  denominator of

     which is 20% of the applicable  target for that fiscal year (the difference

     between 80% and 100% of the applicable  target for the fiscal year). If the

     Company's  EBITDA for the  applicable  fiscal year is 80% of the applicable

     target for that fiscal year, the Executive shall be entitled to receive 25%

     of the Level 1 Bonus  (i.e.,  $25,000).  If the  Company's  EBITDA  for the

     applicable  fiscal year is less than 80% of the applicable  target for that

     year, no Level 1 Bonus shall be payable.  No Level 1 Bonus shall be payable

     for fiscal years ending after August 31, 2008.

 

          (ii) LEVEL 2 BONUS.

 

               (A) The Executive shall be entitled to receive an annual bonus of

          up to .40  multiplied  by his  Base  Salary  (the  "NORTHEAST  LEVEL 2

          BONUS") upon the achievement of the following targets by the Northeast

          Operations:

 

                    (1) If the portion of the Company's  EBITDA allocable to the

               Northeast Operations (the "NORTHEAST  OPERATIONS EBITDA") for the

               fiscal year  beginning  on September 1, 2005 and ending on August

               31,  2006  equals or exceeds  $1,850,000  (the "YEAR 1  NORTHEAST

               TARGET  EBITDA"),  the  Executive  shall be entitled to receive a

               portion of the  Northeast  Level 2 Bonus  equal to the  Northeast

               Level 2 Bonus  multiplied by a fraction (not to exceed one),  the

               numerator  of which  shall be the  amount by which the  Northeast

               Operations EBITDA for the fiscal year

 

<PAGE>

 

               exceeds  $1,850,000 and the denominator of which is $650,000 (the

               difference between $1,850,000 and $2,500,000).

 

                    (2) If the Northeast  Operations  EBITDA for the fiscal year

               beginning  on  September  1, 2006 and ending on August  31,  2007

               equals  or  exceeds  $2,000,000  (the  "YEAR 2  NORTHEAST  TARGET

               EBITDA"), the Executive shall be entitled to receive a portion of

               the Northeast  Level 2 Bonus equal to the Northeast Level 2 Bonus

               multiplied  by a fraction  (not to exceed one),  the numerator of

               which  shall be the  amount  by which  the  Northeast  Operations

               EBITDA for the fiscal year exceeds $2,000,000 and the denominator

               of which is $1,000,000  (the  difference  between  $2,000,000 and

               $3,000,000).

 

                    (3) If the Northeast  Operations  EBITDA for the fiscal year

               beginning  on  September  1, 2007 and ending on August  31,  2008

               equals  or  exceeds  $2,400,000  (the  "YEAR 3  NORTHEAST  TARGET

               EBITDA"), the Executive shall be entitled to receive a portion of

               the Northeast  Level 2 Bonus equal to the Northeast Level 2 Bonus

               multiplied  by a fraction  (not to exceed one),  the numerator of

               which  shall be the  amount  by which  the  Northeast  Operations

               EBITDA for the fiscal year exceeds $2,400,000 and the denominator

               of which is $1,200,000  (the  difference  between  $2,400,000 and

               $3,600,000).

 

                    (4) If the Northeast  Operations  EBITDA for the  applicable

               year is less than the applicable  Northeast Target EBITDA for the

               fiscal year, no Northeast Level 2 Bonus shall be payable.

 

               (B) The Executive shall be entitled to receive an annual bonus of

          up to .10  multiplied  by his  Base  Salary  (the  "SOUTHEAST  LEVEL 2

          BONUS") upon the achievement of the following targets by the Southeast

          Operations:

 

                    (1) If the portion of the Company's  EBITDA allocable to the

               Southeast Operations (the "SOUTHEAST  OPERATIONS EBITDA") for the

               fiscal year  beginning  on September 1, 2005 and ending on August

               31,  2006  equals or exceeds  $1,850,000  (the "YEAR 1  SOUTHEAST

               TARGET  EBITDA"),  the  Executive  shall be entitled to receive a

               portion of the  Southeast  Level 2 Bonus  equal to the  Southeast

               Level 2 Bonus  multiplied by a fraction (not to exceed one),  the

               numerator  of which  shall be the  amount by which the  Southeast

               Operations EBITDA for the fiscal year exceeds  $1,850,000 and the

               denominator  of  which  is  $650,000  (the   difference   between

               $1,850,000 and $2,500,000).

 

<PAGE>

 

                    (2) If the Southeast  Operations  EBITDA for the fiscal year

               beginning  on  September  1, 2006 and ending on August  31,  2007

               equals  or  exceeds  $2,000,000  (the  "YEAR 2  SOUTHEAST  TARGET

               EBITDA"), the Executive shall be entitled to receive a portion of

               the Southeast  Level 2 Bonus equal to the Southeast Level 2 Bonus

               multiplied  by a fraction  (not to exceed one),  the numerator of

               which  shall be the  amount  by which  the  Southeast  Operations

               EBITDA for the fiscal year exceeds $2,000,000 and the denominator

               of which is $1,000,000  (the  difference  between  $2,000,000 and

               $3,000,000).

 

                    (3) If the Southeast  Operations  EBITDA for the fiscal year

               beginning  on  September  1, 2007 and ending on August  31,  2008

               equals  or  exceeds  $2,400,000  (the  "YEAR 3  SOUTHEAST  TARGET

               EBITDA"), the Executive shall be entitled to receive a portion of

               the Southeast  Level 2 Bonus equal to the Southeast Level 2 Bonus

               multiplied  by a fraction  (not to exceed one),  the numerator of

               which  shall be the  amount  by which  the  Southeast  Operations

               EBITDA for the fiscal year exceeds $2,400,000 and the denominator

               of which is $1,200,000  (the  difference  between  $2,400,000 and

               $3,600,000).

 

                    (4) If the Southeast  Operations  EBITDA for the  applicable

               year is less than the applicable  Southeast Target EBITDA for the

               fiscal year, no Southeast Level 2 Bonus shall be payable.

 

For  illustrative  purposes,  attached  hereto  as  EXHIBIT  A is a  spreadsheet

depicting the Level 2 Bonus calculation mechanics of this Section 2(b)(ii).

 

          (iii) As used  herein,  the  "EBITDA" for a fiscal year shall mean the

     sum of (A) consolidated net income for such fiscal year, PLUS (B) provision

     for  income  taxes  of the  Company  during  such  fiscal  year,  PLUS  (C)

     depreciation  and  amortization  expense of the Company accrued during such

     fiscal year (but only to the extent not included in interest expense), PLUS

     (D) net interest expense during such fiscal year,  determined in accordance

     with U.S. generally accepted accounting principles in effect of the date of

     this Agreement and using a reasonable  methodology for allocating corporate

     costs.

 

          (iv) The term "SOUTHEAST  OPERATIONS" means the regions  designated as

     comprising  the Company's  Southeast  Operations,  including any additional

     regions,  business lines or  acquisitions,  that may become included in the

     Company's  Southeast  Operations  after the Effective  Date.  Target EBITDA

     levels  may be  adjusted  by the  Company to  account  for such  additional

     regions, business lines or acquisitions.

 

<PAGE>

 

     (c) EMPLOYEE  BENEFITS.  During the Agreement  Term, the Executive shall be

entitled to  participate on the same basis as the other  executive  employees of

the Company, in any pension,  retirement,  savings, medical, disability or other

welfare  benefit  plans  maintained  by the  Company  immediately  prior  to the

Closing,  in accordance  with the terms thereof,  and as the same may be amended

and in effect from time to time.

 

     (d) EXPENSE  REIMBURSEMENT.  During the Agreement  Term,  the Company shall

reimburse the Executive for all out-of-pocket  travel,  lodging,  meal and other

reasonable  expenses  incurred  by him in  connection  with his  performance  of

services hereunder,  upon submission of appropriate evidence, in accordance with

the Company's  policy,  of the  incurrence  and purpose of each such expense and

otherwise  in  accordance  with  the  Company's   business  travel  and  expense

reimbursement policy as in effect from time to time.

 

     (e) VACATION.  During the Agreement  Term,  Executive  shall be entitled to

four weeks of paid vacation on an annualized  basis.  Vacation shall be prorated

for part of a year worked.  Such vacation  shall be taken at such times as shall

be approved by the Company, in the reasonable exercise of its discretion.

 

     (f) AUTOMOBILE ALLOWANCE. During the Agreement Term, the Executive shall be

entitled  to an  automobile  allowance  of  $15,000  per year,  payable in equal

monthly  installments.  During  the  Agreement  Term,  the  Company  shall  also

reimburse the  Executive,  after receipt of appropriate  documentation,  for all

reasonable  costs  of  maintaining  the  automobile  acquired  by the  Executive

pursuant to such allowance,  including, but not limited to, the costs of repair,

maintenance, insurance, registration and fuel.

 

     (g) LIFE AND DISABILITY INSURANCE COVERAGE ALLOWANCE.  During the Agreement

Term, the Executive shall be entitled to an annual cash allowance in the pre-tax

amount of $12,000,  which the Executive  shall use to (I) maintain  present life

insurance coverage or purchase replacement life insurance coverage in the amount

of $1,000,000 and (II) purchase individual disability insurance coverage.

 

     (h) OTHER PERQUISITES. During the Agreement Term:

 

          (i) The  Company  shall  provide  the  Executive  with a monthly  cash

     allowance of $500.

 

          (ii) The Executive  shall be entitled to travel business class for all

     of his  international  business  travel  and  coach  class  for  all of his

     domestic business travel, and he shall be entitled to use any airline miles

     earned through his business travel to upgrade to first class.

 

3.   TERMINATION  OF EMPLOYMENT.  The  Executive's  employment  with the Company

during the  Agreement  Term may be  terminated  by the Company or the  Executive

without breach of this Agreement only as provided in this Section 3.

 

     (a) TERMINATION DUE TO DISABILITY. The Executive's employment hereunder may

be  terminated  by the Company in the event of the  Executive's  Disability  (as

defined  below).  For  purposes  of this  Agreement,  "DISABILITY"  shall mean a

physical or mental disability that prevents or is reasonably expected to prevent

the  performance  by the Executive of his duties  hereunder for (X) a continuous

period  of 90 days or  longer  or (Y) 120 days or more  over any 365 day  period

whether or not continuous. The determination of the Executive's Disability shall

(I) be  made  by an  independent  physician  selected  by the  Company  and  the

Executive  (provided  that if the Executive  and the Company  cannot agree as to

such an  independent  physician,  each shall appoint one physician and those two

physicians  shall appoint a third physician who shall make such  determination),

(II) be final and  binding on the  parties  hereto and (III) be made taking into

account  such  competent   medical  evidence  as  shall  be  presented  to  such

independent physician by the Executive and/or the Company or by any physician or

group of physicians or other competent medical experts employed by the Executive

and/or the Company to advise such independent physician.

 

     (b) TERMINATION DUE TO DEATH.  The Executive's  employment  hereunder shall

terminate upon the Executive's death.

 

     (c)  TERMINATION  BY THE  COMPANY FOR CAUSE.  The  Company may  immediately

terminate the Executive's employment hereunder at any time for Cause (as defined

below).   "CAUSE"  shall  mean  (I)  the  continued  failure  of  the  Executive

substantially  to perform his duties  hereunder or his negligent  performance of

such duties  (other than any such  failure  due to the  Executive's  physical or

mental illness), (II) the Executive having engaged in misconduct that has caused

or is reasonably  expected to result in material injury to the Company or any of

its  Subsidiaries,  (III) a material  violation  by the  Executive  of a Company

policy,  (IV) the breach by the  Executive  of any of his  material  obligations

hereunder or under any other  written  agreement or covenant with the Company or

any of its Subsidiaries,  (V) material failure by the Executive to timely comply

with a lawful  direction or  instruction  given to him by the Board or the Chief

Executive  Officer,  (VI) the Executive  having been convicted of, or entering a

plea of guilty or nolo  contendere  to, a crime that  constitutes  a felony or a

misdemeanor  involving moral turpitude (or comparable  crime in any jurisdiction

that uses a different nomenclature) , including any offense involving dishonesty

as such dishonesty  relates to the Company's  assets or business or the theft of

Company  property and (VII) the Executive's  insobriety or use of illegal drugs,

chemicals or controlled  substances  either (A) in the course of performing  the

Executive's duties and responsibilities  under this Agreement,  or (B) otherwise

affecting  the ability of the  Executive  to perform  the same.  In the event of

litigation  concerning  the Company's  termination  of Executive for Cause,  the

 

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Company shall prove that it terminated  the Executive for Cause by a standard of

clear  and  convincing  evidence.  In the  case of a  termination  for  Cause as

described in clauses (i), (ii), (iii),  (iv) and (v) of this Section,  the Board

or the Chief Executive Officer, as applicable,  shall give the Executive written

notice of its or his intention to terminate him for Cause,  such notice to state

in detail the particular  circumstances that constitute the grounds on which the

proposed termination for Cause is based. The Executive shall have ten (10) days,

after  receiving such special notice,  to cure such grounds,  to the extent such

cure is  possible.  If he fails to cure such  grounds to the Board's  reasonable

satisfaction, the Executive shall thereupon be terminated for Cause.

 

     (d)  TERMINATION BY COMPANY  WITHOUT  CAUSE.  The Company may terminate the

Executive's employment hereunder at any time Without Cause (as defined below) by

giving the Executive  prior written  Notice of Termination  (as defined  below),

which notice shall be effective immediately,  or at such later time as specified

in such notice.  A termination  "WITHOUT  CAUSE" shall mean a termination of the

Executive's  employment by the Company other than as a result of his  Disability

or for Cause.  Notwithstanding the foregoing provisions of this Section 3(d), if

the Executive's  employment is terminated by the Company in accordance with this

Section 3(d) and, within a reasonable time period  thereafter,