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TERMINATION AND SERVICE
AGREEMENT
This Termination and Service
Agreement (the “ Agreement ”) is entered into by and between Michael
Kantrowitz (“ Executive ”), and Neoware, Inc., on behalf of itself
and each of its present and future related entities, affiliates,
subsidiaries and each of their respective successors and assigns
(the “ Company ”).
BACKGROUND
A. Executive has served as Chief
Executive Officer of the Company pursuant to the terms of an
employment letter dated October 18, 2005.
B. By mutual agreement, Executive is
resigning as Chief Executive Officer of the Company effective on
October 30, 2006 upon the terms and conditions set forth in this
Agreement.
C. The Company and Executive desire
to enter into this Agreement with respect to such resignation and
to provide for the appointment of Executive as Executive Chairman
of the Board of Directors upon the terms and conditions set forth
in this Agreement.
AGREEMENT
The parties, intending to be legally
bound hereby and for good and valuable consideration, the receipt
and sufficiency of which are acknowledged, agree as
follows:
1. Termination as Chief Executive Officer
.
1.1 Executive hereby resigns as Chief
Executive Officer effective on October 30, 2006 (the “
CEO Termination Date
”).
1.2 In consideration of
Executive’s release of claims and covenants set forth in this
Agreement, including but not limited to, Executive’s release
of all claims for compensation, personal injury, mental and
emotional distress and attorneys’ fees, provided that
Executive has not revoked this Agreement as set forth in Section
13.7 and has complied with his obligations under this Agreement,
and without creating any precedent in the administration of its
policies and benefits, the Company agrees as follows:
(a) to pay Executive separation pay
(the “ Separation
Pay ”) in the gross
amount of five hundred forty three thousand ninety nine dollars
($543,099), less taxes and other deductions required by law to be
withheld, representing eighteen (18) calendar months of
Executive’s current base salary. The Company agrees to pay
Executive the Separation Pay (i) one-third in a lump sum on the
Separation Pay Commencement Date (as defined below), (ii) one-third
in continuous normal payroll periods during the six-month period
(the “ First
Separation Pay Period ”) commencing on the first regular payroll
date following the Separation Pay Commencement Date, and one-third
in continuous normal payroll periods during the 12-month period
commencing on the first regular payroll date following the end of
the First Separation Pay Period. The “ Separation Pay Commencement Date
” shall be the earliest to
occur of: (x) April 30, 2007; (y) the termination of Executive as
Executive Chairman by either the Company or Executive upon 15 days
prior written notice to the other party; and (z) the date upon
which there is a change in the composition of the Board of
Directors such that two or more Board members who are in office on
the date of this Agreement cease to be members of the Board or two
or more Board members are added to the Board of
Directors;
(b) to pay Executive in a lump sum on
the Separation Pay Commencement Date the amount of two hundred
twenty thousand one hundred three dollars ($220,103), less taxes
and other deductions required by law to be withheld, representing
an amount equal to 1.5 times the average of Executive’s
annual bonus earned over the fiscal years ended June 30, 2004, 2005
and 2006;
(c) to provide Executive with the
continued use of his Company-provided automobile and repair
expenses (or cash equal to the direct lease payments in lieu
thereof if the lease for such automobile has expired) for a period
of eighteen (18) months commencing on the date of Executive’s
actual termination of service to the Company as Executive Chairman,
in accordance with Section 2.1 (the “ Post Termination Benefits Period
”);
(d) to pay Executive’s COBRA
payment, on behalf of Executive, in order to provide Executive with
continuation of Executive’s then existing Company medical,
vision and dental benefits for himself during the Post-Termination
Benefits Period;
(e) on the date of actual termination
of Executive’s service to the Company as Executive Chairman,
all of Executive’s outstanding and unvested options granted
under the Company’s 1995 Stock Option Plan, 2002
Non-Qualified Stock Option Plan and 2004 Equity Incentive Plan
(collectively, the “ Plans ”), and the agreements thereunder, shall
vest and become exercisable and will continue to be exercisable for
twelve (12) months. Exhibit A lists all of Executive’s
outstanding stock options as of the date of this Agreement, the
Plans under which they were granted and their dates of grant;
and
(f) to pay Executive his accrued,
unused Paid Time Off accumulated as of the CEO Termination Date,
less taxes and other withholdings required by law, which will be
included in Executive’s final paycheck on the CEO Termination
Date, in accordance with the Company’s policy; and
(g) to Executive’s continued
use of Executive’s Company-provided laptop
computer.
1.3 All compensation and benefits to
be paid or provided to Executive under ¶1.2 (a) – (g),
inclusive, and under ¶4.1 of this Agreement are deemed by the
parties to be either “wages” or “fringe benefits
or wage supplements” under the provisions of the Pennsylvania
Wage Payment and Collection Law, 43 P.S. § 260.1 et
seq.
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2. Appointment as Executive Chairman
.
2.1 The Company hereby appoints
Executive to serve in the capacity of Executive Chairman of the
Board (the “ Executive Chairman ”) during the period (the “
Executive Chairman Term
”) commencing on the CEO
Termination Date until the earlier of (i) such date as Executive is
not elected by the stockholders of the Company to serve as a member
of the Board of Directors or (ii) the termination of Executive as
Executive Chairman by either the Company or Executive upon 15 days
prior written notice to the other party (the “
Separation Date
”)
3. Duties and Responsibilities
. During the Executive Chairman Term,
Executive shall serve as a full-time employee of the Company and
shall preside over the meetings of the Board of Directors and will
provide such services as may be reasonably requested by the Board
relating to major corporate transactions and strategic
relationships involving the Company. Executive agrees that in such
position he will no longer be an executive officer of the Company.
Executive shall make available to the Company his full working
time, attention and energy to his duties and responsibilities as
Executive Chairman.
4. Executive Chairman Compensation
.
4.1 In consideration of
Executive’s Service as Executive Chairman, during the first
six months of the Executive Chairman Term (or such shorter period
in the event that Executive’s service is terminated as
provided in Section 2.1), and as mutually agreed by the parties
thereafter, the Company agrees:
(a) to pay Executive his current base
salary as of the date of this Agreement, less taxes and other
deductions required by law to be withheld, payable at regular pay
intervals;
(b) to provide Executive with the
continued use of his Company-provided automobile including repair
expenses (or cash equal to the direct lease payments in lieu
thereof if the lease for such automobile has expired);
(c) to provide Executive with all
then existing Company benefits, including but not limited to
medical, vision and dental benefits, but excluding bonus and other
incentive plans, for himself; and
(d) to reimburse Executive for
reasonable business expenses incurred by him in connection with the
performance of services requested by the Board of Directors of the
Company to be performed by him during the Executive Chairman Term
upon presentation of an itemized account of such expenses in
accordance with the Company’s policies.
4.2 The Company will provide
Executive with separate notice of Executive’s right to elect
continued benefits coverage, if available after the period
indicated under Section 1.1(d), under the Consolidated Omnibus
Budget Reconciliation Act (COBRA) and the Employee Retirement
Income Security Act (ERISA).
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5. General Release .
5.1 In consideration of the foregoing
(including without limitation the promises and payments as
described in Sections 1 and 4 above, which are in excess of that to
which Executive would have otherwise been entitled upon termination
of employment, Executive hereby:
(a) Fully and forever releases,
discharges, cancels, waives, and acquits for Executive, his heirs,
executors, administrators and assigns, the Company and any and all
of its related entities, affiliates, subsidiaries, corporate
parent, directors, agents, officers, owners, employees, attorneys,
successors and assigns (the “ Company Released Parties ”), of and from any and all rights, claims,
demands, causes of action, obligations, damages, penalties, fees,
costs, expenses, and liability of any nature whatsoever, including
personal injury claims, which Executive has, had or may have had
against any of the Company Released Parties, arising out of, or by
reason of the termination of Executive’s employment as CEO or
any cause, matter, or thing whatsoever , arising from events or
actions occurring on or before the CEO Termination Date, WHETHER
KNOWN TO THE PARTIES AT THE TIME OF EXECUTION OF THIS AGREEMENT OR
NOT.
This FULL WAIVER OF ALL CLAIMS
includes, without limitation, attorneys’ fees, costs, any
claims, demands, or causes of action arising out of, or relating in
any manner whatsoever to, the employment and/or cessation of that
employment, such as, BUT NOT LIMITED TO, any charge, claim, lawsuit
or other proceeding arising under the Older Worker’s Benefit
Protection Act (OWBPA), the Age Discrimination in Employment Act
(ADEA), the Civil Rights Act of 1866 (Section 1981), Title VII as
amended by the Civil Rights Act of 1991, the Americans with
Disabilities Act (ADA), the Labor Management Relations Act (LMRA),
the National Labor Relations Act (NLRA), ERISA, COBRA, the Fair
Labor Standards Act (FLSA), all as amended, as well as any claims
arising under any other federal, state, or local statutes and
common law claims for wrongful termination, discrimination, breach
of contract or misrepresentation. Nothing contained in this
Agreement, however, shall constitute a release by Executive of any
vested rights or benefits to which Executive may otherwise be
entitled and/or any claims for workers’ compensation
benefits.
Executive further agrees that, while
the release above may not prevent Executive from filing a charge
with the Equal Employment Opportunity Commission (“
EEOC ”) and/or participating in any such
proceedings to challenge the knowing and voluntary nature of this
Agreement under the ADEA, Executive acknowledges that he has not
filed any such claims or commenced any action with an
administrative agency or court regarding any claims released in
this Agreement;
(b) Waives all right, title and
interest in any benefit plan of the Company and waives and releases
all claims based on or related to such benefit plans or programs
other than those rights, title and interest which are vested, or
which vest by virtue of this Agreement, or which are specifically
provided to Executive in this Agreement, or which arise or accrue
after the CEO Termination date solely as a result of the Company
providing benefits to Executive in accordance with Section 4.1(c);
and
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(c) Refrains from engaging in any
activity harmful to the Company, except to the extent that
Executive may engage in lawful activities competitive with the
business of the Company that do not violate any restrictive
covenant between Executive and the Company or makes any disparaging
statements concerning the Company, its affiliates, corporate
parent, subsidiaries, officers, directors, attorneys, agents,
employees, successors or assigns, either publicly or
privately.
(d) Executes releases substantially
in the form of the above release contained in this Section 5.1 on
the Separation Pay Commencement Date and the Separation
Date.
6. Company Release .
6.1 In consideration of the mutual
promises made herein, the Company hereby fully and forever
releases, discharges, cancels, waives and acquits for the Company,
its successors and assigns, Executive of and from any and all
rights, claims, demands, causes of action, obligations, damages,
penalties, fees, costs, expenses, and liability of any nature
whatsoever, which the Company has, had or may have had against
Executive, arising from events or actions in connection with
Executive’s employment with the Company as CEO, or
termination thereof, or performance of job duties in the course of
employment with the Company as CEO or the termination of
Executive’s employment as CEO, WHETHER KNOWN TO THE PARTIES
AT THE TIME OF EXECUTION OF THIS AGREEMENT OR NOT.
6.2 Notwithstanding anything
contained herein to the contrary, the Company agrees to defend
and/or indemnify Executive and hold him harmless from any claims
made against him by a third party arising out of his activities as
an employee, officer or director of the Company, to the same extent
as the Company is, or may be obligated under its Certificate of
Incorporation, to defend and/or indemnify and hold harmless its
employees, officers or directors of the Company from any claims
made against them by a third party arising out of their activities
as employees, officers or directors of the Company, or to the same
extent that the Company customarily has in the past. Nothing in
this Agreement shall release the Company or any of its insurance
carriers from any such undertaking or obligation.
6.3 The Company shall refrain, and
shall use its best efforts to cause its affiliates, subsidiaries,
officers, directors, attorneys, agents, employees, successors or
assigns, from engaging in any intentional activity directed only to
Executive, and not to the Company’s employees in general,
that is deliberately harmful to Executive, except to the extent
that the Company engages in activities competitive with the
business of Executive; or to make any disparaging statements
concerning Executive, either publicly or privately.
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7. Non-Competition . As a material inducement to the Company to
enter into this Agreement, for a period of eighteen months from and
after the Separation Pay Commencement Date, Executive shall not,
other than for the Company, anywhere in the Area, on his own behalf
or in the service or on behalf of others: (i) provide Thin Client
Services (as defined below); or (ii) acquire or have an ownership
interest in (other than as a holder of less than o
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