February 14, 2000
 
Mr. Michael Kantrowitz
620 Christian Street
Philadelphia, PA 19947
 
Dear Mike:
 
I'd like to take this opportunity formally to offer you the position of
President and Chief Executive Officer as well as a seat on the Board of
Directors of Neoware Systems, Inc., with a starting date of February 14, 2000.
 
We have structured a compensation package that consists of several components:
salary, bonus, executive equity plan, severance, and benefits.
 
1. You shall serve at the pleasure of the Board of Directors. Your starting base
salary shall be at a rate of $210,000 per year, paid according to standard
company payroll policy. You will be provided with the use of a company
automobile similar to your current automobile.
 
2. Your annual bonus opportunity will be up to 50 % of your base salary or
greater as determined solely by the Board of Directors. The annual bonus shall
be reasonably determined by the Board of Directors, based upon meeting certain
performance goals to be agreed on each year with the Board of Directors.
 
3. The company has established an executive equity plan that will enable you to
acquire and retain a significant equity stake in the company. You will be
granted an additional 130,000 options (bringing your total to 400,000 options)
at fair market value on the date of grant. The options will have a term of five
years and will vest at a rate of 25% per year on each of your first four
anniversaries of the date of this agreement.
 
4. We hope that the employment relationship will be mutually satisfactory;
however, in the event of any change in your position as President and CEO
reporting solely to the Board of Directors, or your involuntary termination for
reasons other than Cause, you will continue to receive your base salary, use of
your company-provided automobile and health benefits for a period of twelve
months from the date of your termination. For the purpose of this Agreement,
"Cause" shall mean your termination only upon: (a) your continued failure to
perform such assigned duties and responsibilities as shall be consistent with
the terms of this Agreement after receipt of a written warning with specific
deficiencies and your failure to cure such deficiencies within thirty (30) days;
or (b) your engaging in willful misconduct which is demonstrably injurious to
the Company; or (c) your committing a felony or act of fraud against or
misappropriation of property belonging to the Company. Your annual bonus for the
year of termination will be paid only if agreed goals have been met by the time
of termination. The annual bonus and the agreed goals will be adjusted pro rata
for the period of the year prior to the end of employment.
 
 
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5. In the event that there is a sale or merger of the company or substantially
all of its assets within your first twelve months of employment as CEO and you
are not employed by the new owners in a similar capacity (head of a business
unit reporting to the CEO or Board of Directors but not necessarily CEO of the
resulting company), or you do not accept, in your sole discretion, employment in
any other capacity offered by the new owners, immediately following such
transaction, you will continue to receive your base salary, use of your
company-provided automobile, and health benefits (or cash in lieu thereof) for a
period of twelve months and you will vest 50% of your then unvested stock
options. In the event that such transaction takes place after your first twelve
months of employment and you are not employed by the new owners in a similar
capacity (head of a business unit reporting to the CEO or Board of Directors but
not necessarily CEO of the resulting company), or you do not accept, in your
sole discretion, employment in any other capacity offered by the new owners,
immediately following the transaction, you will continue to receive your base
salary, use of your company-provided automobile and health benefits (or cash in
lieu thereof) for a period of twelve months and will vest 100 % of your stock
options. In either of these cases, your annual bonus will be paid only if agreed
goals have been met by the time of consummation of the transaction. The annual
bonus and the agreed goals will he adjusted pro rata for the period of the year
prior to the end of employment.
 
6. You will execute an appropriate non-disclosure agreement similar to one you
previously signed. You will agree not to compete with the Company while any
payments are made pursuant to Paragraph 4and for a period of six (6) months
thereafter. Competition shall include solicitation to hire any Neoware
employees, or employment by or consultation on behalf of any company whose
primary business is the development of thin client information appliances or
whatever other business the company is pursuing at the time of your separation;
or on behalf of a subsidiary or division of any company if the primary business
of such subsidiary or division is the development of thin client information
appliances or whatever other business the company is pursuing at the time of
your separation.
 
In addition to the above, during your employment, you will be entitled to all
benefits afforded to all Neoware employees.
 
Except as set forth herein, this Agreement sets forth our complete understanding
and agreement and supersedes all previous employment agreements or terms between
you and Neoware and terminates any rights under those agreements.
 
If the terms of this offer are acceptable, and I hope that they are, please sign
this letter in the space indicated and return it to me. Your signature will
acknowledge that you have read and understood and agreed to the terms and
conditions of this offer.
 
Mike, the Board and I are excited about our future together. Should you have
anything else that you wish to discuss, please do not hesitate to call me.
 
Very truly yours,
 
NEOWARE SYSTEMS, INC.
 
 
Arthur R. Spector
Chairman
 
 
Accepted and agreed to:
 
 
- -----------------------
Michael Kantrowitz