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.
<PAGE>
(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.
<PAGE>
(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
<PAGE>
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
tim
