SEVERANCE AGREEMENT AND GENERAL RELEASE
This is an Agreement, dated as of October 19, 1998, between Xxxxxxx X.
Xxxxxxx (the "Employee") and Micro Warehouse, Inc. (the "Company").
WHEREAS, the Company has urged the Employee to remain in its employ,
WHEREAS, the Employee has decided that he wishes to leave the employ of
the Company,
WHEREAS, the Employee and the Company intend the terms and conditions of
this Agreement to govern all issues related to the Employee's employment and
resignation from the Company,
WHEREAS, the Employee has had at least 21 days to consider a draft of this
Agreement, and
WHEREAS, the Employee has been advised to consult with an attorney before
signing this Agreement,
NOW THEREFORE, in consideration of these premises, the Employee and the
Company agree as follows:
1. Resignation: The Employee shall resign as Executive Vice President
of Sales of the Company and from all other positions with the
Company and its subsidiaries and affiliated companies, effective
December 31, 1998 (the "Termination Date"). The Employee shall have
no further duties or responsibilities with respect to the Company or
his employment after the Effective Date (as defined below), except
as expressly set forth herein.
2. Payment:
a. The Company shall continue to pay the Employee his base salary of
$250,000 annually ("Base Salary") through December 31, 2000.
Commencing January 1, 1999, the Base Salary to be paid to the
Employee during each year shall be increased by any increase in the
cost of living determined in accordance with the formula set forth
in subparagraphs (i), (ii) and (iii) hereinbelow.
i. For the purposes of this paragraph 2, the following
definition shall apply:
1. The term "Base Year" shall mean the twelve-month period
commencing on January 1, 1998 and terminating on December 31,
1998. The term "Second Year" shall mean the twelve-month
period commencing on January 1, 1999 and terminating on
December 31, 1999. The term "Third Year" shall mean the
twelve-month period commencing on January 1, 2000 and
terminating on December 31, 2000.
2. The term "Price Index" shall mean the average of the
monthly "Consumer Price Index" published by the Bureau of
Labor Statistics of the U.S. Department of Labor, New York,
Northern New Jersey, Long Island, New York-New
Jersey-Connecticut, for urban wage earners and clerical
workers, or a successor or substitute index appropriately
adjusted ("Consumer Price Index"), for each month of any given
twelve-month period.
ii. Effective as of each of January 1 of 1999 and 2000, there
shall be a cost of living adjustment to the Base Salary
applicable for the succeeding twelve-month period. The
adjustment shall be based on the percentage difference between
the Price Index for the Second Year and the Price Index for
the Base Year, with respect to the adjustment to be made on
January 1, 1999; and the Price Index for the Third Year and
the Price Index for the Base Year, with respect to the
adjustment to be made on January 1, 2000.
In the event that the Price Index for the Second Year reflects
an increase over the Price Index for the Base Year, the Base
Salary originally herein provided to be paid shall be
multiplied by the percentage difference between the Price
Index for the Second Year and the Price Index for the Base
Year, and the resulting sum shall be added to such original
Base Salary, effective on January 1, 1999. Said adjusted Base
Salary shall thereafter be payable hereunder until it is
readjusted pursuant to the terms of this paragraph 2 as of
January 1, 2000. In the event that the Price Index for the
Third Year reflects an increase over the Price Index for the
Base Year, the Base Salary originally herein provided to be
paid (unchanged by any adjustment made pursuant to the
immediately preceding sentence) shall be multiplied by the
percentage difference between the Price Index for the Third
Year, and the Price Index for the Base Year, and the resulting
sums shall be added to such original Base Salary, effective on
January 1, 2000.
In the event that the Price Index ceases to use 1982-1984 =
100 as the basis of calculation, or if a substantial change is
made in the terms or
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number of items contained in the Price Index, then the Price
Index shall be adjusted to the figure that would have been
arrived at had the manner of computing the Price Index in
effect at the date of this Agreement not been altered. In the
event such Price Index (or a successor or substitute index) is
not available, a reliable governmental or other non-partisan
publication evaluating the information theretofore used in
determining the Price Index shall be used.
iii. In no event shall the Employee's Base Salary provided
herein, as the same may be increased from time to time
pursuant to this paragraph 2, be reduced by virtue of this
paragraph 2.
b. The Employee shall receive payments at such intervals each year
as salary payments are made to other executive officers of the
Company. Deductions will be made from such payments for statutorily
mandated federal, state and local withholding and other applicable
taxes.
3. Incentive Compensation: In addition to Base Salary, the Employee
shall receive incentive compensation through December 31, 1998
("Incentive Compensation"). The amount of Incentive Compensation to
be paid to the Employee will be calculated pursuant to the Incentive
Plan established for executive officers for 1998, which is attached
hereto as Exhibit A, as the same may be adjusted from time to time.
The amount of Incentive Compensation shall not exceed One Hundred
Percent (100%) of Base Salary. The Incentive Plan sets forth a
target bonus amount, which amount for calendar 1998 shall be One
Hundred Twenty-Five Thousand Dollars ($125,000) (hereinafter the
"Target Bonus Amount"). One Hundred Percent (100%) of that amount
shall be payable for accomplishing One Hundred Percent (100%) of
targets in 1998. The actual amount, if any, of Incentive
Compensation to which the Employee may be entitled shall range on a
linear basis from Fifty Percent (50%) of Target Bonus Amount if
Eighty Percent (80%) of Targets are achieved to a maximum of Two
Hundred Percent (200%) of Target Bonus Amount if One Hundred Twenty
Percent (120%) of Targets are achieved. By way of example, One
Hundred Percent (100%) of Target Bonus Amount at accomplishment of
One Hundred Percent (100%) of Targets shall be One Hundred
Twenty-Five Thousand Dollars ($125,000). If the Company achieves
Eighty Percent (80%) of Targets, Target Bonus Amount shall be
Sixty-Two Thousand Five Hundred Dollars ($62,500) (i.e., .5 x
$125,000), which shall be automatically due and payable to the
Employee. By way of further example, if the Company achieves One
Hundred Ten Percent (110%) of Targets, Target Bonus Amount shall be
One Hundred Eighty-Seven Thousand Five Hundred Dollars ($187,500)
(1.50 x $125,000), which shall be automatically due and payable to
the Employee. The incentive compensation shall be paid to the
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Employee in a lump sum cash payment as soon as practicable after
December 31, 1998, but not later than the date other executive
officers are paid incentive compensation for 1998.
4. Target Commission Compensation: The Employee shall receive target
commission compensation through December 31, 1998. For the period
January 1, 1998 through December 31, 1998, the Employee shall
receive $100,000 in target commission compensation, due and payable
to the Employee upon execution of this Agreement.
5. Mitigation: The Employee is under no obligation to seek other
employment opportunities during any period between the date of this
Agreement and the December 31, 2000 expiration of this Agreement
(the "Effective Period"), and the Employee is not obligated to
accept any other employment opportunity that may be offered to the
Employee during the Effective Period. Nothing in this Agreement,
however, shall prohibit the Employee from accepting other employment
opportunities during the Effective Period, in which event the
Employee shall continue to receive the entire amount due and owing
to him under Sections 2, 3 and 4 above and retain all his other
rights hereunder without any offset for any amount paid to the
Employee arising out of any new employment relationship.
Notwithstanding the foregoing, medical, dental, hospitalization and
life insurance and short-term disability benefits will be reduced to
the extent comparable insurance benefits are actually received by
the Employee from another employer during the Effective Period. Any
such benefits actually received by the Employee shall be reported by
the Employee to the Company.
6. Stock Options: The Employee's outstanding stock options are set
forth on Exhibit B attached hereto. All stock options granted to the
Employee by the Company shall continue to vest according to their
terms until December 31, 2000, without regard to termination of
Employee's employment. Any stock options that have not vested as of
December 31, 2000 shall lapse. Except to the extent set forth in
Section 13(c), which shall control in the event of conflict, each
outstanding stock option shall be exercisable at any time prior to
the earlier of (i) its expiration date or (ii) the later of (A) the
expiration of twelve (12) months after vesting, or (B) the
expiration of twelve (12) months after the Termination Date.
7. Business Expenses: The Company agrees to reimburse the Employee for
all reasonable and necessary expenses incurred by him in connection
with the performance of his duties for the Company. The Employee
shall submit vouchers, invoices and such other documentation in
accordance with the Company's standard policy concerning business
expenses.
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8. Insurance Benefits: The Company shall continue to maintain at
Company cost medical, dental, hospitalization and life insurance and
short term disability for the Employee and his dependents through
December 31, 2000 to the extent such policies are provided generally
to the senior executives of the Company. Employee shall be
responsible for such cost-sharing, co-pays and deductibles as may be
required of other senior executives. If and to the extent Employee
is unable to participate in any such benefits, the Company shall at
its cost obtain comparable benefits for Employee.
9. Insurance Assignment: The Company owns the insurance policies on the
life of Employee attached hereto as Exhibit C. The Company shall
assign to the Employee all rights it might have in such policies,
subject to compliance with any requirements imposed by the insurance
company.
10. Retirement Plan: The Company shall make matching contributions to
the Employee's 401(k) plan through December 31, 2000, according to
the prevailing practice for senior executives.
11. Other Benefits: The Company shall continue all other benefits
received by the Employee through December 31, 1998. In addition, the
Company agrees:
a. to assume all liability for the New Jersey rental home located at
000 Xxxxxx Xxxxx, Xxxx Xxxxx, Xxx Xxxxxx, including but not limited
to all rental payments and any risk of loss; and
b. to convey to Employee, without further consideration, all of its
right, title and interest in and to the computer and peripheral
equipment used by Employee, together with software as permitted by
the applicable licensing agreements.
12. Relocation Payments. Employee shall be entitled to reimbursement of
reasonable relocation expenses (including without limitation
brokerage commissions) of up to Fifteen Thousand Dollars ($15,000)
if he accepts a new position out of the area, but only to the extent
such expenses are not covered by his new employer. Any such payment
shall be subject to applicable withholding requirements.
13. Change in Control.
a. Definitions. For purposes of this Agreement, Change in Control
means the occurrence during the Effective Period of any of the
following events, subject to the provisions of paragraph 13(b)
hereof:
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i. All or substantially all of the assets of the Company are
sold or transferred to another corporation or entity, or the
Company is merged, consolidated or reorganized into or with
another corporation or entity, with the result that upon
conclusion of the transaction less than Fifty-One Percent
(51%) of the outstanding securities entitled to vote generally
in the election of directors or other capital interests of the
acquiring corporation or entity are owned directly or
indirectly, by the shareholders of the Company generally prior
to the transaction; or
ii. There is a report filed on Schedule 13D or Schedule 14D-1
(or any successor schedule, form or report), each as
promulgated pursuant to the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), disclosing that any person
(as the term "person" is used in Section 13(d)(3) or Section
14(d)(2) of the Exchange Act) has become the beneficial owner
(as the term "beneficial owner" is defined under Rule 13d-3 or
any successor rule or regulation promulgated under the
Exchange Act (a "Beneficial Owner")) of securities
representing Twenty Percent (20%) or more of the combined
voting power of the then-outstanding voting securities of the
Company; or
iii. The Company shall file a report or proxy statement with
the Securities and Exchange Commission pursuant to the
Exchange Act disclosing in response to Item 1 of Form 8-K
thereunder or Schedule 14A (or any successor schedule, form or
report or item therein) that a change in control of the
Company has or may have occurred or will or may occur in the
future pursuant to any then-existing contract or transaction;
or
iv. The individuals who, at the beginning of any period of two
(2) consecutive calendar years, constituted the directors of
the Company cease for any reason to constitute at least a
majority thereof unless the nomination for election by the
Company's stockholders of each new director of the Company was
approved by a vote of at least two-thirds (2/3) of the
directors of the Company still in office who were directors of
the Company at the beginning of any such period; or
v. The Board of Directors determines that (A) any particular
actual or proposed merger, consolidation, reorganization, sale
or transfer of assets, accumulation of shares or tender offer
for shares of the Company or other transaction or event or
series of transactions or events will, or is likely to, if
carried out, result in a Change in Control falling within
paragraph 13(a)(i), (ii), (iii) or (iv), and (B) it is in the
best interests of the Company and its shareholders, and will
serve the intended purposes of this
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Agreement, if this Agreement shall thereupon become
immediately operative with respect to the provisions of this
paragraph 13 regarding Change in Control
b. Exceptions. Notwithstanding the foregoing provisions of this
paragraph 13:
i. If any such merger, consolidation, reorganization, sale or
transfer of assets, or tender offer or other transaction or
event or series of transactions or events mentioned in
paragraph (13)(a)(v) shall be abandoned, or any such
accumulations of shares shall be dispersed or otherwise
resolved, the Board of Directors may, by notice to the
Employee, nullify the effect thereof and reinstate this
Agreement as previously in effect, but without prejudice to
any action that may have been taken prior to such
nullification.
ii. Unless otherwise determined in a specific case by the
Board of Directors, a "Change in Control" shall not be deemed
to have occurred for purposes of paragraph 13(a)(ii) or (iii)
solely because (X) the Company, (Y) a subsidiary of the
Company, or (Z) any Company-sponsored employee stock ownership
plan or any other employee benefit plan of the Company or any
subsidiary either files or becomes obligated to file a report
or a proxy statement under or in response to Schedule 13D,
Schedule 14D-1, Form 8-K or Schedule 14A (or any successor
schedule, form or report or item therein) under the Exchange
Act disclosing Beneficial Ownership by it of shares of the
then-outstanding voting securities of the Company, whether in
excess of Twenty Percent (20%) or otherwise, or because the
Company reports that a change in control of the Company has
occurred or will occur in the future by reason of such
beneficial ownership.
c. Vesting Upon Change in Control. In the event that a Change in
Control occurs during the Effective Period, except as provided
herein, those of the 100,000 options granted to Employee in
February, 1998 that have not yet vested shall become accelerated and
immediately fully vested and exercisable, at any time prior to the
expiration date of such options, as specified in the applicable
stock option plan, or the expiration of twelve (12) months after the
date of acceleration, whichever is the longer period; provided,
however, that for purposes of this paragraph 13(c), no such options
will become vested and exercisable subsequent to the expiration date
of the options as specified in the applicable Stock Option Plan. If
(i) a Change in Control involves any combination of the Company with
any other entity, and (ii) the Company and such entity desire to
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account for such combination under the pooling-of-interests method
for financial statement purposes ("Pooling"), and (iii) the sole
reason that Pooling would be unavailable to the Company and such
entity is, in the opinion of the Company's independent accountants,
the acceleration of vesting of options provided for in this
paragraph 13(c), then this paragraph 13(c) shall be void.
14. Certain Additional Payments by the Company.
a. Anything in this Agreement to the contrary notwithstanding, in
the event that it shall be determined (as hereafter provided) that
any payment or distribution by the Company or any of its affiliates
to or for the benefit of the Employee, whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement
or otherwise pursuant to or by reason of any other agreement,
policy, plan, program or arrangement, including without limitation
any stock option, performance share, performance unit, stock
appreciation right or similar right, or the lapse or termination of
any restriction on, or the vesting or exercisability of, any of the
foregoing (a "Payment"), would be subject to the excise tax imposed
by Section 4999 of the Internal Revenue Code of 1986, as amended
(the "Code") (or any successor provision thereto) by reason of being
considered "contingent on a change in ownership or control" of the
Company, within the meaning of Section 280G of the Code (or any
successor provision thereto) or to any similar tax imposed by state
or local law, or any interest or penalties with respect to such tax
(such tax or taxes, together with any such interest and penalties,
being hereafter collectively referred to as the "Excise Tax"), then
the Employee shall be entitled to receive an additional payment or
payments (collectively, a "Gross-Up Payment"). The Gross-Up Payment
shall be in an amount such that, after payment by the Employee of
all taxes (including any interest or penalties imposed with respect
to such taxes), including any Excise Tax imposed upon the Gross-Up
Payment, the Employee retains an amount of the Gross-Up Payment
equal to the Excise Tax imposed upon the Payment.
b. Subject to the provisions of paragraph 14(f), all determinations
required to be made under this paragraph 14, including whether an
Excise Tax is payable by the Employee and the amount of such Excise
Tax and whether a Gross-Up Payment is required to be paid by the
Company to the Employee and the amount of such Gross-Up Payment, if
any, shall be made by a nationally recognized accounting firm (the
"Accounting Firm") selected by the Employee in his sole discretion.
The Employee shall direct the Accounting Firm to submit its
determination and detailed supporting calculations to both the
Company and the Employee within thirty (30) calendar days after the
Termination Date, if applicable, and any such other time or times as
may be requested by the Company or the Employee. If the Accounting
Firm determines that any Excise Tax is
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payable by the Employee, the Company shall pay the required Gross-Up
Payment to the Employee within five (5) business days after receipt
of such determination and calculations with respect to any Payment
to the Employee. If the Accounting Firm determines that no Excise
Tax is payable by the Employee, it shall, at the same time as it
makes such determination, furnish the Company and the Employee an
opinion that the Employee has substantial authority not to report
any Excise Tax on his federal, state or local income or other tax
return. As a result of the uncertainty in the application of Section
4999 of the Code (or any successor provision thereto) and the
possibility of similar uncertainty regarding applicable state or
local tax law at the time of any determination by the Accounting
Firm hereunder, it is possible that Gross-Up Payments which will not
have been made by the Company should have been made (an
"Underpayment"), consistent with the calculations required to
be-made hereunder. In the event that the Company exhausts or fails
to pursue its remedies pursuant to paragraph 14(f) and the Employee
thereafter is required to make a payment of any Excise Tax, the
Employee shall direct the Accounting Firm to determine the amount of
the Underpayment that has occurred and to submit its determination
and detailed supporting calculations to both the Company and the
Employee as promptly as possible. Any such Underpayment shall be
promptly paid by the Company to, or for the benefit of; the Employee
within five (5) business days after receipt of such determination
and calculations.
c. The Company and the Employee shall each provide the Accounting
Firm access to and copies of any books, records and documents in the
possession of the Company or the Employee, as the case may be,
reasonably requested by the Accounting Firm, and otherwise cooperate
with the Accounting Firm in connection with the preparation and
issuance of the determinations and calculations contemplated by
paragraph 14(b). Any determination by the Accounting Firm as to the
amount of the Gross-Up Payment shall be binding upon the Company and
the Employee.
d. The federal, state and local income or other tax returns filed by
the Employee shall be prepared and filed on a consistent basis with
the determination of the Accounting Firm with respect to the Excise
Tax payable by the Employee. The Employee shall make proper payment
of the amount of any Excise Payment, and at the request of the
Company, provide to the Company true and correct copies (with any
amendments) of his federal income tax return as filed with the
Internal Revenue Service and corresponding state and local tax
returns, if relevant, as filed with the applicable taxing authority,
and such other documents reasonably requested by the Company,
evidencing such payment. If prior to the filing of the Employee's
federal income tax return, or corresponding state or local tax
return, if relevant, the Accounting Firm determines that the amount
of the
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Gross-Up Payment should be reduced, the Employee shall within five
(5) business days pay to the Company the amount of such reduction.
e. The fees and expenses of the Accounting Firm for its services in
connection with the determinations and calculations contemplated by
paragraph 14(b) shall be borne by the Company. If such fees and
expenses are initially paid by the Employee, the Company shall
reimburse the Employee the full amount of such fees and expenses
within five (5) business days after receipt from the Employee of a
statement therefor and reasonable evidence of his payment thereof.
f. The Employee shall notify the Company in writing of any claim by
the Internal Revenue Service or any other taxing authority that, if
successful, would require the payment by the Company of a Gross-Up
Payment. Such notification shall be given as promptly as practicable
but no later than ten (10) business days after the Employee actually
receives notice of such claim and the Employee shall further apprise
the Company of the nature of such claim and the date on which such
claim is requested to be paid (in each case, to the extent known by
the Employee). The Employee shall not pay such claim prior to the
earlier of (I) the expiration of the thirty (30) calendar-day period
following the date on which he gives such notice to the Company and
(ii) the date that any payment of amount with respect to such claim
is due. If the Company notifies the Employee in writing prior to the
expiration of such period that it desires to contest such claim, the
Employee shall:
i. provide the Company with any written records or documents
in his possession relating to such claim reasonably requested
by the Company;
ii. take such action in connection with contesting such claim
as the Company shall reasonably request in writing from time
to time, including without limitation accepting legal
representation with respect to such claim by an attorney
competent in respect of the subject matter and reasonably
selected by the Company;
iii. cooperate with the Company in good faith in order
effectively to contest such claim; and
iv. permit the Company to participate in any proceedings
relating to such claim; provided, however, that the Company
shall bear and pay directly all costs and expenses (including
interest and penalties) incurred in connection with such
contest and shall indemnify and hold harmless the Employee, on
an after-tax basis, for and against any Excise Tax or income
tax, including interest and penalties with respect thereto,
imposed as a
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result of such representation and payment of costs and
expenses. Without limiting the foregoing provisions of this
paragraph 14(f), the Company shall control all proceedings
taken in connection with the contest of any claim contemplated
by this paragraph 14(f) and, at its sole option, may pursue or
forego any and all administrative appeals, proceedings,
hearings and conferences with the taxing authority in respect
of such claim (provided, however, that the Employee may
participate therein at his own cost and expense) and may, at
its option, either direct the Employee to pay the tax claimed
and xxx for a refund or contest the claim in any permissible
manner, and the Employee agrees to prosecute such contest to a
determination before any administrative tribunal, in a court
of initial jurisdiction and in one or more appellate courts,
as the Company shall determine; provided, however, that if the
Company directs the Employee to pay the tax claimed and xxx
for a refund, the Company shall advance the amount of such
payment to the Employee on an interest-free basis and shall
indemnify and hold the Employee harmless, on an after-tax
basis, from any Excise Tax or income or other tax, including
interest or penalties with respect thereto, imposed with
respect to such advance; and provided further, however, that
any extension of the statute of limitations relating to
payment of taxes for the taxable year of the Employee with
respect to which the contested amount is claimed to be due is
limited solely to such contested amount. Furthermore, the
Company's control of any such contested claim shall be limited
to issues with respect to which a Gross-Up Payment would be
payable hereunder and the Employee shall be entitled to settle
or contest, as the case may be, any other issue raised by the
Internal Revenue Service or any other taxing authority.
g. If; after the receipt by the Employee of an amount advanced by
the Company pursuant to paragraph 14(f), the Employee receives any
refund with respect to such claim, the Employee shall (subject to
the Company's complying with the requirements of paragraph 14(f))
promptly pay to the Company the amount of such refund (together with
any interest paid or credited thereon after any taxes applicable
thereto). If; after the receipt by the Employee of an amount
advanced by the Company pursuant to paragraph 14(f), a determination
is made that the Employee shall not be entitled to any refund with
respect to such claim and the Company does not notify the Employee
in writing of its intent to contest such denial or refund prior to
the expiration of thirty (30) calendar days after such
determination, then such advance shall be forgiven and shall not be
required to be repaid and the amount of any such advance shall
offset, to the extent thereof; the amount of Gross-Up Payment
required to be paid by the Company to the Employee pursuant to this
paragraph 14.
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15. Confidential Information:
a. Employee acknowledges that the Company would be damaged if
Employee's knowledge with respect to the business of the Company
were disclosed to or utilized by parties other than the Company.
Accordingly, Employee covenants and agrees that he will not disclose
any presently known or hereafter acquired confidential or
proprietary information of the Company or its business to any
person, firm, corporation or other entity. For the purposes of this
paragraph, the term "confidential or proprietary information" shall
mean all information which is currently known to or hereafter
acquired by Employee and relates to such matters as customer mailing
lists, pricing and credit techniques, marketing techniques, research
and development activities, sources of product, lists of magazines
or other publications containing advertising of the Company and
other confidential or restricted information which is not in the
public domain. Confidential or proprietary information shall not be
deemed to include information released generally to the public by
the Company or others, information required by law to be disclosed
or information learned by the Employee from third parties without
restrictions on disclosure.
b. Employee shall return to the Company all confidential or
proprietary information of the Company in his possession or control.
Employee acknowledges that he has transferred to floppy disk or
other removable media and shall return to the Company any
confidential or proprietary information on the computer to be
retained by Employee.
16. Covenant Not To Compete: The Employee hereby covenants and agrees
that during the Effective Period (the "Non-Compete Period"), he
shall not, directly or indirectly, own, operate, manage, join,
control, participate in the ownership, management, operation or
control of, or be paid or employed by, or acquire any securities of,
or otherwise become associated with or provide assistance to, as an
employee, consultant, director, officer, shareholder, partner,
agent, associate, principal, representative or in any other
capacity, any business entity or activity which is directly or
indirectly a "Competitive Business" (as hereinafter defined);
provided, however, that the foregoing shall not prevent the Employee
from (i) performing services for a Competitive Business if such
Competitive Business is also engaged in other lines of business and
if the Employee's services are restricted to employment in such
other lines of business; or (ii) acquiring the securities of or an
interest in any Competitive Business, provided such ownership of
securities or interests represents at the time of such acquisition,
but including any previously held ownership interests, less than
Five Percent (5%) of any class or type of securities of, or interest
in, such Competitive Business. The term "Competitive Business" shall
mean (x) a business engaged in the marketing and
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sale to end users of hardware, software, peripheral and associated
products for personal computers (other than a business that may from
time to time market or sell any of the foregoing on an incidental
basis and whose sales of the foregoing in any year do not exceed
five percent (5%) of its net sales or $10 million in the aggregate)
or (y) a business principally engaged at the time of Employee's
employment in the auction sale of goods or services to end users
over the Internet. This provision shall apply regardless of where
such Competitive Business is located. Nothing in this Agreement
shall be deemed to prevent the Employee from working for a business
that provides customized software or software as an integral part of
a database or other service relationship.
17. Indemnification: The rights provided to the Employee and the Company
under the Indemnification Agreement, which is attached hereto as
Exhibit D (the "Indemnification Agreement"), shall survive the
Employee's resignation. Any right to indemnification under the
Indemnification Agreement shall survive termination of the
Employee's employment by the Company.
18. References: The Employee agrees not to disparage the Company, and
the Company agrees not to disparage the Employee. With respect to
reference requests, the Company will provide only dates of
employment and position held. Reference requests will be directed to
Xxxxx Xxxxxxx, chairman, only. The Company shall give written
instructions to its Executive Committee, senior vice presidents and
other officers not to discuss the Employee's employment at the
Company unless there is a business necessity to do so and to refer
all unsolicited reference requests they receive with respect to the
Employee to the chairman. Either party may disclose the text of the
non-competition provisions of this Agreement to third parties.
19. Release by Employee. The Employee and his heirs, assigns and agents
release, waive, and discharge the Company, its directors, officers,
employees, subsidiaries, affiliates and agents (the "Released
Parties") from each and every claim, action or right of any sort,
known or unknown, arising on or before the Effective Date (as
hereafter defined).
a. The foregoing release includes, but is not limited to, any claim
of discrimination on the basis of wrongful termination, constructive
discharge, discharge in violation of public policy, race, sex,
religion, marital status, sexual orientation, national origin,
handicap or disability, age, veteran status, special disabled
veteran status, citizenship status, any other claim based on a
statutory prohibition; any claim arising out of or related to an
express or implied employment contract, any other contract affecting
terms and conditions of employment, or a covenant of good faith and
fair dealing; any tort claims and any
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personal gain with respect to any claim arising under the qui tam
provisions of the False Claims Act, 31 U.S.C. 3730.
b. Notwithstanding anything to the contrary contained in this
Agreement, this Release does not include any claim the Employee may
have against the Company for the Company's breach of this Agreement
or the Indemnification Agreement.
c. The Employee represents that he understands the foregoing
Agreement, that rights and claims under the Age Discrimination in
Employment Act of 1967, as amended, are among the rights and claims
against the Company he is releasing, and that he understands that he
is not releasing any rights or claims arising after the Effective
Date.
20. Release by Company. The Company, releases, waives and discharges the
Employee, his heirs, successors and assigns, from each and every
claim, action or right of any sort, known or unknown, arising on or
before the Effective Date (as hereafter defined).
a. This release includes, but is not limited to, any claim of breach
of contract, breach of fiduciary duty, defamation, unjust
enrichment, any claim arising out of or related to an express or
implied employment contract, any other contract affecting terms or
conditions of employment, or a covenant of good faith and fair
dealing, and any tort claims.
b. Notwithstanding anything to the contrary contained in this
Agreement, this Release does not include any claim the Company may
have against the Employee for civil or criminal fraud in connection
with the Employee's employment, the procurement of this Agreement or
otherwise, the commitment of a crime and/or the Employee's breach of
this Agreement.
21. Covenant Not To Xxx. The Employee agrees never to xxx any of the
Released Parties, or cause any of the Released Parties to be sued,
regarding any matter within the scope of the release set forth in
Section 19 above. The Company agrees never to xxx, or cause the
Employee to be sued, regarding any matter within the scope of the
release set forth in Section 20 above. If one party is determined by
a court of competent jurisdiction to have violated this provision by
suing or causing the other party (or Released Party) to be sued, the
party found to have violated this provision agrees to pay all costs
and expenses of defending against the suit incurred by the other
party (or Released Party), including
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reasonable attorneys' fees together with any damages and liabilities
to the other party (or Released Party) resulting from such suit.
22. Opportunity To Cure: This Agreement is final and binding. If the
Employee breaches any of his obligations under this Agreement, the
Company shall give him written notice of such breach and an
opportunity to cure such breach (if such breach can be cured) of
thirty (30) days, after such time if such breach remains uncured,
the Company shall have the right, among other things, to discontinue
payments to be made hereunder. All notices hereunder shall be
effective upon delivery by hand or by certified or overnight mail to
the most recent address for the Employee provided by the Employee in
writing to the general counsel of the Company. The Employee shall
provide like notice and opportunity to cure for any Company breach
hereunder by giving written notice and a ten (10) business day
opportunity to cure with respect to any breach of an obligation to
pay money or to take actions with respect to stock options hereunder
and a thirty (30) day opportunity to cure any other breach hereunder
to the general counsel, which notice shall be effective upon
delivery by hand or by certified or overnight mail to 000
Xxxxxxxxxxx Xxxxxx, Xxxxxxx, Xxxxxxxxxxx 00000, or the most recent
address for the Company provided in writing to the Employee.
This Agreement is not to be construed as an admission that the
Employee or the Company acted wrongfully in any way.
23. Confidentiality: The terms and conditions of this Agreement are
confidential and shall not be disclosed to any person other than
those who must perform tasks to effect the Agreement.
Notwithstanding the foregoing, either party may disclose any term of
this Agreement (i) to any governing authority if disclosure is
required to comply with applicable law, or (ii) to either party's
attorneys, accountants or advisors with whom a fiduciary
relationship has been established.
24. Revocation: The Employee may revoke this Agreement in writing within
seven (7) days of signing it (the "Revocation Period"). This
Agreement will not take effect until the Effective Date. If the
Employee revokes this Agreement, all of its provisions shall be void
and unenforceable. The Effective Date (the "Effective Date") of this
Agreement shall be the day after the end of the Revocation Period.
25. Attorneys' Fees: The Company agrees to pay all reasonable attorneys'
fees and costs associated with the negotiation and drafting of this
Agreement including reasonable attorneys' fees and costs of
Employee.
26. Severability: In the event that any provision or portion of this
Agreement is determined to be invalid or unenforceable for any
reason, in whole or in part, the
-15-
remaining provisions of this Agreement will be unaffected thereby
and will remain in full force and effect to the fullest extent
permitted by law.
27. Modification: This Agreement constitutes the entire understanding
between the Employee and the Company. The parties have not relied on
any oral statements that are not included in this Agreement. Any
modifications to this Agreement must be in writing and signed by the
Employee and an authorized employee or agent of the Company.
28. Choice Of Law: This Agreement shall be construed, interpreted and
applied in accordance with the law of the State of Connecticut.
29. Waiver. Delay or failure of any party to insist on strict
performance or observance of any provision of this Agreement or to
exercise any rights or remedies hereunder shall not be deemed a
waiver. Any waiver shall be effective only if in writing and signed
by the waiving party.
THE PARTIES ACKNOWLEDGE THAT THEY UNDERSTAND THE ABOVE AGREEMENT INCLUDING THE
RELEASE OF ALL CLAIMS EXCEPT AS SPECIFICALLY EXCEPTED. THE PARTIES UNDERSTAND
THAT THEY ARE WAIVING UNKNOWN CLAIMS AND THEY DO SO INTENTIONALLY.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their duly authorized representatives as of the day and year first
above written.
MICRO WAREHOUSE, INC. XXXXXXX X. XXXXXXX
By: /s/ Xxxxx Xxxxxxx /s/ Xxxxxxx X. Xxxxxxx
------------------------------ -----------------------------
Name: Xxxxx Xxxxxxx
Title: Chief Executive Officer
Date: October 19, 1998 Date: October 7, 1998
---------------------------- ------------------------
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EXHIBIT A
Incentive Plan for the Year 1998
The Targets with respect to the 1998 Incentive Plan shall be based upon
the projected operating profit for the Company as described in the Company's
1998 Worldwide Plan dated March 13, 1998 (the "Plan"). The Plan includes a
separate projected operating profit for all U.S. operations and a separate
projected operating profit for the consolidated international operations. In
determining the Target Bonus amount, if any, 80% of said amount shall be
attributable to and based upon the Plan's projected operating profit for all
U.S. operations and 20% shall be attributable to and based upon the Plan's
projected operating profit for the consolidated international operations. With
respect to said 20%, the Target shall also be considered achieved in full if:
(i) all or a material number of the international subsidiaries are sold or
otherwise disposed of during 1998; or
(ii) the international subsidiaries on a consolidated basis have an
operating profit for the year ending December 31, 1998.
XXXXXXX XXXXXXX EXHIBIT B
0 XXXXXXXX XXXXX
XXXXXXXXXX, XX 00000
Micro Warehouse, Inc. OPTIONEE STATEMENT Run Date 07/24
As of 07/24/98 Page No.
Date of Type of Grant Options Options Option Date of Options Available
Grant Granted Outstanding Price Expir. Vested For Exercise
------- ------------- ------- ----------- ------ ------- ------- ------------
01/13/93 NON-QUAL 30,000 20,500 $9.7800 01/13/03 20,500 (Current) 20,500
06/21/93 NON-QUAL 58,000 58,000 $11.3800 06/21/03 58,000 (Current) 58,000
01/23/97 NON-QUAL 3,000 3,000 $12.6250 01/23/07 1,500 (Current) 1,500
1,500 on 07/19/99
1/23/97 NON-QUAL 20,000 20,000 $12.6250 01/23/07 4,000 (Current) 4,000
4,000 on 1/23/99
4,000 on 01/23/00
4,000 on 01/23/01
4,000 on 01/23/02
02/26/98 NON-QUAL 100,000 100,000 $13.6900 2/26/08 0 (Current) 0
33,334 on 12/31/98
33,333 on 12/31/99
33,333 on 12/31/00
------- ------- ------
Shares 211,000 201,500 84,000
EXHIBIT C
List of Life Insurance Policies
EXHIBIT D
INDEMNIFICATION AGREEMENT
This agreement ("Agreement") is made as of this 1st day of January,
1994 between Micro Warehouse, Inc., a Delaware corporation (hereinafter referred
to as the "Corporation") and Xxxxxxx Xxxxxxx (hereinafter referred to as
"Indemnitee").
WITNESSETH:
WHEREAS, Indemnitee is an officer of Micro Warehouse, Inc., and in
such capacity is performing a valuable service to the Corporation; and
WHEREAS, the Board of Directors of the Corporation has adopted
by-laws, providing for the indemnification of the officers, directors, agents
(as hereinafter defined) and employees of the Corporation to the maximum extent
authorized by Section 145 of the Delaware General Corporation Law; and
WHEREAS, Section 145(f) of the Delaware General Corporation Law
allows for the indemnification of officers, directors, agents and employees of
the Corporation by means of indemnification agreements such as contemplated
herein; and
WHEREAS, in order to thereby induce Indemnitee to serve or to
continue to serve the Corporation, the Corporation has determined and agreed to
enter into this Agreement with Indemnitee.
NOW, THEREFORE, in consideration of Indemnitee's service or
continued service as a director or officer of the Corporation after the date
hereof, the parties hereto agree as follows:
1. Definitions
(a) The term "Agent" means any person who is or was a
director, officer, employee or other agent of the Corporation or a subsidiary of
the Corporation; or is or was serving at the request of, for the convenience of,
or to represent the interests of, the Corporation or a subsidiary of the
Corporation as a director, officer, employee or agent of another entity or
enterprise; or was a director, officer, employee or agent of a predecessor
corporation of the Corporation or a subsidiary (as hereinafter defined) of the
Corporation, or was a director, officer, employee or agent of another enterprise
at the request of, for the convenience of, or to represent the interests of such
predecessor corporation.
(b) The term "Expenses" means all direct and indirect costs of
any type or nature whatsoever (including without limitation, all attorneys'
fees, costs of investigation and
related disbursements) incurred by the Indemnitee in connection with the
investigation, settlement, defense or appeal of a claim or proceeding (as
hereinafter defined) covered hereby or establishing or enforcing a right to
indemnification under this Agreement.
(c) The term "Proceeding" means any threatened, pending or
completed claim, suit or action, whether civil, criminal, administrative,
investigative or otherwise.
(d) "Subsidiary" means any corporation of which more than 10%
of the outstanding voting securities is owned directly or indirectly by the
Corporation, and one or more Subsidiaries, taken as a whole.
2. Maintenance of Liability Insurance.
(a) The Corporation hereby covenants and agrees to each
Indemnitee that, so long as such Indemnitee shall continue to serve as an Agent
of the Corporation and thereafter so long as the Indemnitee shall be subject to
any claim or Proceeding by reason of the fact that the Indemnitee was an Agent
of the Corporation or in connection with such Indemnitee's acts as such an
Agent, the Corporation, subject to paragraph 2(b), shall obtain and maintain or
cause to be obtained and maintained in full force and effect directors' and
officers' liability insurance ("D&O Insurance") in reasonable amounts from
established and reputable insurers, but no less than the amounts currently in
effect on the date hereof.
(b) Notwithstanding the foregoing, the Corporation shall have
no obligation to obtain or maintain D&O Insurance if the Corporation determines
in good faith that the premium costs for such insurance are disproportionate to
the amount of coverage provided after giving effect to exclusions.
3. Mandatory Indemnification. The Corporation shall defend,
indemnify and hold harmless each Indemnitee:
(a) Third Party Actions. If the Indemnitee is a person who was
or is a party or is threatened to be made a party to any Proceeding (other than
an action by or in the right of the Corporation) by reason of the fact that such
Indemnitee is or was an Agent of the Corporation, or by reason of anything done
or not done by the Indemnitee in any such capacity, against any and all Expenses
and liabilities of any type whatsoever (including, but not limited to,
judgments, fines, ERISA excise taxes or penalties, and amounts paid in
settlement) incurred by him or her in connection with the investigation,
defense, settlement or appeal of such Proceeding, so long as the Indemnitee
acted in good faith and in a manner he or she reasonably believed to be in or
not opposed to the best interests of the Corporation, or, with respect to any
criminal action or Proceeding, had reasonable cause to believe his or her
conduct was not unlawful.
(b) Derivative Actions. If the Indemnitee is a person who was
or is a party or is threatened to be made a party to any Proceeding by or in the
right of the Corporation
2
by reason of the fact that he or she is or was an Agent of the Corporation, or
by reason of anything done or not done by him or her in any such capacity,
against any amounts paid in settlement of any such Proceeding and all other
Expenses incurred by him or her in connection with the investigation, defense,
settlement or appeal of such Proceeding if he or she acted in good faith and in
a manner he or she reasonably believed to be in or not opposed to the best
interests of the Corporation; except that no indemnification under this
subparagraph shall be made, and the Indemnitee shall repay all amounts
previously advanced by the Corporation, in respect of any claim, issue or matter
for which such person is judged to be liable to the Corporation by a court of
competent jurisdiction due to misconduct in the performance of his or her duties
to the Corporation, unless and only to the extent that the court in which such
Proceeding was brought shall determine that such person is fairly and reasonably
entitled to indemnity.
(c) Actions Where Indemnitee is Deceased. If the Indemnitee is
a person who was or is a party or is threatened to be made a party to any
Proceeding by reason of the fact that he or she is or was an Agent of the
Corporation, or by reason of anything done or not done by him or her in any such
capacity, and prior to, during the pendency of, or after completion of, such
Proceeding, the Indemnitee shall die, then the Corporation shall defend,
indemnify and hold harmless the estate, heirs and legatees of the Indemnitee
against any and all Expenses and liabilities incurred by or for such persons or
entities in connection with the investigation, defense, settlement or appeal of
such Proceeding on the same basis as provided for the Indemnitee in paragraphs
3(a) and 3(b) above.
The Expenses and liabilities covered hereby shall be net of any payments by D&O
Insurance carriers or others.
4. Partial Indemnification. If an Indemnitee is found under
paragraph 3(b), 7 or 10 hereof not to be entitled to indemnification for all of
the Expenses relating to a Proceeding, the Corporation shall indemnify the
Indemnitee for any portion of such Expenses not specifically precluded by the
operation of such paragraph 3(b), 7 or 10.
5. Mandatory Advancement of Expenses. Until a determination to the
contrary under paragraph 7 hereof is made and unless the provisions of paragraph
10 apply, the Corporation shall advance all Expenses incurred by each Indemnitee
in connection with the investigation, defense, settlement or appeal of any
Proceeding to which the Indemnitee is a party or is threatened to be made a
party covered by the indemnification in paragraph 3 hereof. As a condition to
such advance, each Indemnitee shall, at the request of the Corporation,
undertake in a manner satisfactory to the Corporation to repay such amounts
advanced if it shall ultimately be determined by an order of a court that the
Indemnitee is not entitled to be indemnified by the Corporation by the terms
hereof or under applicable law. Subject to paragraph 6 hereof, the advances to
be made hereunder shall be paid by the Corporation to the Indemnitee within
twenty (20) days following delivery of a written request by
3
the Indemnitee to the Corporation, which request shall be accompanied by
vouchers, invoices and similar evidence documenting the amounts requested.
6. Indemnification Procedures.
(a) Promptly after receipt by the Indemnitee of notice of the
commencement or threat of any Proceeding covered hereby, the Indemnitee shall
notify the Corporation of the commencement or threat thereof, provided that any
failure to so notify shall not relieve the Corporation of any of its obligations
hereunder, except to the extent that such failure or delay increases the
liability of the Corporation hereunder.
(b) If, at the time of the receipt of a notice pursuant to
paragraph 6(a) above, the Corporation has D&O Insurance in effect, the
Corporation shall give prompt notice of the Proceeding or claim to its insurers
in accordance with the procedures set forth in the applicable policies. The
Corporation shall thereafter take all necessary or desirable action to cause
such insurers to pay all amounts payable as a result of such Proceeding in
accordance with the terms of such policies and the Indemnitee shall not take any
action (by waiver, settlement or otherwise) which would adversely affect the
ability of the Corporation to obtain payment from its insurers.
(c) If the Corporation shall be obligated to pay the Expenses
of any Indemnitee, the Corporation shall assume the defense of the Proceeding to
which the Expenses relate and shall deliver a notice of assumption to the
Indemnitee. The Corporation will not be liable to the Indemnitee under this
Agreement for any fees of counsel incurred after delivery of such notice with
respect to such Proceeding or any costs of settlement not approved in advance in
writing by the Corporation, provided that (i) the Indemnitee shall have the
right to employ his or her own counsel in any such Proceeding at the
Indemnitee's expense, and (ii) if (1) the employment of counsel by the
Indemnitee has been previously authorized by the Corporation, (2) the Indemnitee
shall have provided the Corporation with an opinion of counsel stating that
there is a strong argument that a conflict of interest exists between the
Corporation and the Indemnitee in the conduct of any such defense, or (3) the
Corporation shall not have assumed the defense of such Proceeding, the fees and
Expenses of Indemnitee's counsel shall be at the expense of the Corporation.
7. Determination of Right to Indemnification.
(a) To the extent an Indemnitee has been successful on the
merits or otherwise in defense of any Proceeding, claim, issue or matter covered
hereby, the Indemnitee need not repay any of the Expenses advanced in connection
with the investigation, defense or appeal of such Proceeding.
4
(b) If paragraph 7(a) is inapplicable, the Corporation shall
remain obligated to indemnify the Indemnitee, and the Indemnitee need not repay
Expenses previously advanced, unless the Corporation, by contested motion before
a court of competent jurisdiction, obtains preliminary or permanent relief
suspending or denying the obligation to advance or indemnification for Expenses.
(c) Notwithstanding a determination by a court that the
Indemnitee is not entitled to indemnification with respect to a specific
Proceeding, the Indemnitee shall have the right to apply to the Court of
Chancery of Delaware for the purpose of enforcing the Indemnitee's right to
indemnification pursuant to this Agreement.
(d) Notwithstanding any other provision in this Agreement to
the contrary, the Corporation shall indemnify the Indemnitee against all
Expenses incurred by the Indemnitee in connection with any Proceeding under
paragraph 7(b) or 7(c) above and against all Expenses incurred by the Indemnitee
in connection with any other Proceeding between the Corporation and the
Indemnitee involving the interpretation or enforcement of the rights of the
Indemnitee under this Agreement unless a court of competent jurisdiction finds
that the material claims and/or defenses of the Indemnitee in any such
Proceeding were frivolous or made in bad faith.
8. Certificate of Incorporation and By Laws. The Corporation agrees
that the Certificate of Incorporation and By Laws of the Corporation in effect
on the date hereof shall not be amended to reduce, limit, hinder or delay (i)
the rights of the Indemnitee granted hereby or (ii) the ability of the
Corporation to indemnify the Indemnitee as required hereby. The Corporation
further agrees that it shall exercise the powers granted to it under its
Certificate of Incorporation, its By Laws and by applicable law to indemnify any
Indemnitee to the fullest extent possible as required hereby. The Corporation
further covenants and agrees that Articles 9 and 10 of the Corporation's
Certificate of Incorporation shall not be amended in a manner (i) adverse to any
Indemnitee or (ii) inconsistent with the benefits granted to the Indemnitee
hereby.
9. Witness Expenses. The Corporation agrees to reimburse each
Indemnitee for all Expenses, including attorneys' fees and travel costs,
incurred by such Indemnitee in connection with being a witness, or if an
Indemnitee is threatened to be made a witness, with respect to any Proceeding,
by reason of his serving or having served as an Agent of the Corporation.
10. Exceptions. Notwithstanding any other provision herein to the
contrary, the Corporation shall not be obligated pursuant to the terms of this
Agreement:
(a) Claims Initiated by Indemnitee. To indemnify or advance
expenses to the Indemnitee with respect to Proceedings or claims initiated or
brought voluntarily by the Indemnitee and not by way of defense (other than
Proceedings brought to establish or enforce a right to indemnification under
this Agreement or the provisions of the Corporation's Certificate
5
of Incorporation or By Laws unless a court of competent jurisdiction determines
that each of the material assertions made by the Indemnitee in such Proceeding
was not made in good faith or was frivolous).
(b) Unauthorized Settlements. To indemnify the Indemnitee
under this Agreement for any amounts paid in settlement of a Proceeding covered
hereby without the prior written consent of the Corporation to such settlement.
11. Non-exclusivity. This Agreement is not the exclusive arrangement
between the Corporation and any Indemnitee regarding the subject matter hereof
and shall not diminish or affect any other rights which each Indemnitee may have
under any provision of law, the Corporation's Certificate of Incorporation or By
Laws, under other agreements, or otherwise.
12. Continuation after Term. Each Indemnitee's rights hereunder
shall continue after the Indemnitee has ceased acting as a director or Agent of
the Corporation and the benefits hereof shall inure to the benefit of the heirs,
executors and administrators of each Indemnitee.
13. Interpretation of Agreement. This Agreement shall be interpreted
and enforced so as to provide indemnification to the Indemnitee to the fullest
extent now or hereafter permitted by law.
14. Severability. If any provision or provisions of this Agreement
shall be held to be invalid, illegal or unenforceable, (i) the validity,
legality and enforceability of the remaining provisions of the Agreement shall
not in any way be effected or impaired thereby, and (ii) to the fullest extent
possible, the provisions of this Agreement shall be construed or altered by the
court so as to remain enforceable and to provide the Indemnitee with as many of
the benefits contemplated hereby as are permitted under law.
15. Counterparts, Modification and Waiver. This Agreement may be
signed in counterparts. This Agreement constitutes a separate agreement between
the Corporation and each Indemnitee and may be supplemented or amended as to an
Indemnitee only by a written instrument signed by the Corporation and such
Indemnitee, with such amendment binding only the Corporation and the signing
Indemnitee(s). All waivers must be in a written document signed by the party to
be charged. No waiver of any of the provisions of this Agreement shall be
implied by the conduct of the parties. A waiver of any right hereunder shall not
constitute a waiver of any other right hereunder.
6
IN WITNESS WHEREOF, the parties hereby have caused this agreement to
be duly executed as of the day and year first above written.
MICRO WAREHOUSE, INC.
By /s/ Xxxxx Xxx
------------------------
Xxxxx X. Xxx, Its
Executive Vice President
Hereunto Duly Authorized
---------------------------
Xxxxxxx Xxxxxxx
7
