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                                                                    Exhibit 10.1
                                November 1, 2002



By Hand Delivery
----------------

Anthony J. DePaul
204 Woods Road
Glenside, Pennsylvania

         Re:   Separation Agreement
               --------------------

Dear Tony:

         This letter is to confirm your termination of employment from Neoware
Systems, Inc. (the "Company") effective December 15, 2002, your voluntary
resignation from your position as Executive Vice President of North American
Marketing and Sales of the Company effective as of the date hereof, and your
agreement to remain as a non-officer employee of the Company for the period from
November 1, 2002 until December 15, 2002 (the "Termination Date"). The parties
acknowledge that you and the Company are parties to an Employment Agreement
dated December 4, 2001 (the "Employment Agreement"), a copy of which is attached
hereto. Except as set forth herein, the terms and conditions of the Employment
Agreement shall remain in full force and effect.

         In an effort to provide you with certain benefits in addition to those
provided in the Employment Agreement relating to your termination of employment,
the Company proposes the following agreement ("Separation Agreement"), which
includes a general release:

         1.       In consideration for your general release and your fulfillment
                  of the various undertakings set forth in this Separation
                  Agreement, the Company agrees as follows:

                  (a)      During the period from November 1, 2002 until
                           December 15, 2002, the Company will employ you as a
                           non-officer employee of the Company and will pay you
                           your current base salary and benefits, at regular pay
                           intervals and less taxes and other deductions
                           required by law to be withheld.

                  (b)      The Company has previously granted to you options to
                           acquire a total of 140,000 shares of the Company's
                           common stock. Notwithstanding your release under
                           paragraph 2(c) below, the Company acknowledges that
                           the provisions of the Company's 1995 Stock Option
                           Plan and your option agreement (including the vesting
                           schedule until your termination of employment) will
                           continue to apply to your options in accordance with
                           the terms of the Plan and your option agreement.







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                  (c)      Subject to the terms and conditions of your
                           Employment Agreement and this Separation Agreement,
                           the Company agrees to provide to you the severance
                           benefits pursuant to Sections 2(b)(iii) and 2(c)(i)
                           of the Employment Agreement.

         2.       In consideration for the Company's promises in paragraph 1,
                  and intending to be legally bound, you represent, warrant and
                  agree as follows:

                  (a)      You agree that you hereby voluntarily resign as
                           Executive Vice President of North American Marketing
                           and Sales of the Company effective as of the date
                           hereof.

                  (b)      Subject to paragraph 3, you agree that from and after
                           November 1, 2002 until December 15, 2002 you will
                           serve as an employee of the Company and will provide
                           such services as may be reasonably requested by the
                           Company. You agree that in such position, you will no
                           longer be an officer of the Company.

                   (c)     By your signature on this Separation Agreement,
                           you hereby fully and forever release and discharge
                           the Company and its parents, affiliates and
                           subsidiaries, including all predecessors and
                           successors, assigns, officers, directors, trustees,
                           employees, agents and attorneys, past and present
                           ("the Released Parties"), from any and all claims,
                           demands, liens, agreements, contracts, covenants,
                           actions, suits, causes of action, obligations,
                           controversies, debts, costs, expenses, damages,
                           judgments, orders and liabilities, of whatever kind
                           or nature, direct or indirect, in law, equity or
                           otherwise, whether known or unknown, arising out of
                           your employment by the Company or the termination
                           thereof, including, but not limited to, any claims
                           for relief or causes of action under Federal, state
                           or local statute, ordinance or regulation regarding
                           discrimination in employment and any claims, demands
                           or actions based upon alleged wrongful or retaliatory
                           discharge or breach or contract under any state or
                           Federal law. This release shall include a release of
                           all claims for attorneys' fees.

                           You agree that this release specifically includes a
                           release of any and all claims arising under the Age
                           Discrimination in Employment Act of 1967, as amended
                           ("ADEA"), and any state or local discrimination laws.
                           You acknowledge that you are being given twenty-one
                           (21) days in which to consider whether you wish to
                           sign this Separation Agreement, including this
                           release. Moreover, you agree that, once you sign the
                           Separation Agreement, including this release, you
                           shall then have seven (7) days in which to change
                           your mind and revoke it (the "Revocation Period"). If
                           you wish to revoke this release, you must send the
                           revocation in writing by overnight mail to Vincent T.
                           Dolan, Vice President-Finance and Administration, 400
                           Feheley Drive, King of Prussia, Pennsylvania 19406.

                   (d)     You acknowledge that your options to purchase 105,000
                           shares of the Company's common stock will be canceled
                           upon your termination of employment on the
                           Termination Date, or the cancellation of all of your
                           options if you terminate your employment on or before
                           December 9, 2002, and that you will have no further
                           rights to such options.






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                  (e)      You shall not at any time after the date of this
                           letter disparage or deprecate the Company or its
                           affiliates or any of their officers, directors,
                           employees, stockholders or principals, or any of
                           their operations, assets, services, work product,
                           character, motives or financial standing. Further,
                           you agree to keep the terms and conditions of this
                           Separation Agreement secret and confidential and not
                           to disclose them voluntarily to any third party,
                           except to the extent required by law, to enforce the
                           Separation Agreement or to obtain confidential legal,
                           tax or financial advice. You also agree to comply
                           with each of the provisions of the Employment
                           Agreement that survive the termination of such
                           agreement, including but not limited to, Sections 4,
                           5, 6, 7 and 8 of the Employment Agreement, including
                           the Non-Solicitation and Confidentiality Agreement
                           attached thereto and incorporated therein.

                  (f)      You agree that you will return to the Company on the
                           Termination Date all memoranda, notes, records,
                           reports, manuals, drawings and other documents (and
                           all copies thereof whether in written form or on
                           computer disk or tape) relating to the business of
                           the Company and/or its affiliates and all property
                           associated therewith, which you possess or have under
                           your control on the Termination Date. Without
                           limiting the generality of the foregoing, you agree
                           to return to the Company all copies of all data bases
                           containing information about the Company and/or its
                           affiliates, regardless of whether such information is
                           in hard copy or stored electronically or on tape. You
                           agree that on and after the Termination Date, you
                           will not seek to access the information systems of
                           the Company or its affiliates for any purpose
                           whatsoever.

         3. If you terminate your employment with the Company prior to December
15, 2002, your salary and benefits will terminate as of the date of your
termination and your right to the payments under paragraph 1(c) above will
commence on that date and terminate six months thereafter. In addition, you
understand that if you terminate your employment on or before December 9, 2002,
you will not be entitled to exercise any of your options to acquire any shares
of the Company's common stock.

         4. You acknowledge and agree that in order to receive the benefits
under Section 2(c)(i) of the Employment Agreement, you are required, among other
things, to execute a release substantially in the form of the release in
paragraph 2(c) above, and that the benefits you will receive under paragraph 1
above exceed the money and benefits to which you otherwise would be entitled,
and that such benefits are sufficient consideration to support the grant of the
general release in paragraph 2(c) above and to support your other undertakings
set forth in paragraph 2 above. More specifically, if you do not execute this
Separation Agreement, which includes a general release, or if you revoke your
acceptance, your employment will be deemed to be terminated on December 1, 2002
and you will only be entitled to receive the benefits which you are entitled to
receive under Section 2(c)(i) of your Employment Agreement, and you will not be
entitled to exercise any of the options to acquire shares of the Company's
common stock. Further, if you do not execute this Separation Agreement or revoke
your acceptance, and if you do not satisfy the requirements set forth in Section
2(d) of the Employment Agreement, including the execution of the release
attached to the Employment Agreement as Exhibit B and expiration of the
Revocation Period, you will not be entitled to receive any benefits under
Section 2(c)(i) or hereunder.






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         5. Consistent with Company policy, and notwithstanding anything to the
contrary in this Separation Agreement, you understand that your final regular
paycheck will include payment for all accrued and unused vacation.

         6. This Separation Agreement sets forth our complete understanding and
agreement and supersedes all prior agreements between us, oral or written,
express or implied, except for the Employment Agreement as attached hereto.

         7. This Separation Agreement is being offered for the purpose of
assisting you in your transition. This Separation Agreement should not be
construed as an admission or concession of liability or wrongdoing by the
Company or by you.

         8. If any provision of this Separation Agreement is deemed unlawful or
unenforceable by a court of competent jurisdiction, the remaining provisions
shall continue in full force and effect.

         9. By your execution of this Separation Agreement, your represent,
warrant and agree to the following, each of which is material to the Company's
willingness to enter into this Separation Agreement:

            (a)      You have read carefully the terms of this Separation
                     Agreement, including the general release.

            (b)      You have had an opportunity to and have been
                     encouraged to review this Separation Agreement,
                     including the general release, with an attorney.

            (c)      You understand the meaning and effect of the terms of
                     this Separation Agreement, including the general
                     release.

            (d)      You were given sufficient time to determine whether
                     you wished to enter into this Separation Agreement,
                     including the general release.

            (e)      The entry into and execution of this Separation
                     Agreement, including the general release, is your own
                     free and voluntary act without compulsion of any
                     kind.

            (f)      No promise or inducement not expressed herein has
                     been made to you.








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         You have from November 1, 2002 through and including November 22, 2002
to consider this offer. You are encouraged to review this Separation Agreement
with an attorney. If you agree with the proposed terms as set forth above,
please sign this Separation Agreement indicating your understanding and
agreement and the attached Acknowledgment of Rights under the Older Workers
Benefit Protection Act and return them to me on or before the close of business
on November 22, 2002. The additional copies are for your records.

         Please note that if you sign this Separation Agreement, you will retain
the right to revoke it for seven (7) days. The Separation Agreement will not be
effective until the Revocation Period has expired. To revoke the Separation
Agreement, you must send a certified letter to my attention. This letter must be
post-marked within seven (7) days of you execution of this Separation Agreement.


If I do not receive a signed copy of this Separation Agreement by the close of
business on November 22, 2002, I will assume that you have rejected this offer.
If this offer is rejected, your employment shall nevertheless be deemed to have
terminated effective December 1, 2002.



























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         We wish you the best in the future.

                                           Sincerely,


                                           Neoware Systems, Inc

                                           By: /S/  Michael Kantrowitz
                                                  ------------------------------

                                           Name:  Michael Kantrowitz
                                           Title: Chairman, President and Chief
                                                   Executive Officer



Understood and Agreed,
intending to be legally bound:

Anthony J. DePaul

/S/ Anthony J. DePaul
---------------------

Date: November 1, 2002

Witness: /S/ Vincent T. Dolan























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                         ACKNOWLEDGMENT OF RIGHTS UNDER
                         ------------------------------
                      OLDER WORKERS BENEFIT PROTECTION ACT
                      ------------------------------------

         I, ANTHONY J. DEPAUL, acknowledge that I have read and understand the
attached separation agreement and general release ("Separation Agreement"). I
further understand that this Separation Agreement is revocable by me for a
period of seven (7) days following execution thereof, and that this Separation
Agreement shall not become effective or enforceable until this seven-day
revocation period has ended.

         I am aware that federal, state and local laws prohibit discrimination
against employees because of their race, color, religion, sex, age, national
origin, veterans status and disability and that any employee who believes that
he has been discharged or otherwise discriminated against for any of these
reasons has a right to file a lawsuit in court or initiate other proceedings
against the Released Parties and recover damages if it is proved that the
Released Parties violated any one of these laws.

         I acknowledge that I have been encouraged to discuss the release
language in the Separation Agreement with an attorney prior to executing the
agreement and that I have thoroughly reviewed and understand the effect of the
release. I further acknowledge that I have been given twenty-one (21) days in
which to consider the Separation Agreement and that, if I sign the Separation
Agreement before the end of the twenty-one day period, I am doing so freely,
voluntarily and after having had full and fair opportunity to consult with my
retained counsel.


Anthony J. DePaul

/S/ Anthony J. DePaul                                  Date: November 1, 2002
---------------------















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