Exhibit 10.9
SEPARATION AGREEMENT
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THIS SEPARATION AGREEMENT ("Agreement") is made this 11th day of
September, 1997, by and between Xxxxxxx X. Xxxxxx ("Xxxxxx"), an individual
who resides at _______________________________________________, as well
as each and every dependent, heir, executor, legal representative and
assign of Xxxxxx, and INTELLIGENT ELECTRONICS, INC. ("IE"), a business
corporation existing under the laws of the Commonwealth of Pennsylvania,
having its corporate headquarters at Exton, Pennsylvania, together with
each and every of its predecessors, successors (by merger or otherwise),
parent, subsidiaries, affiliates, divisions, directors, officers, employees
and agents, whether present or former, including XLConnect Solutions, Inc.
This Agreement also constitutes an amendment to the employment letter
dated August 8, 1996 between Xxxxxx and IE (the "Employment Letter").
WHEREAS, the parties reached an agreement in principle in July 1997
concerning the resignation of Xxxxxx as President of IE and CEO of the
Reseller Network Division of IE and the termination of his employment with
IE.
WHEREAS, Xxxxxx and IE desire to part on an amicable basis.
WHEREAS, the parties are entering into this Agreement in order to more
fully set forth the parties' agreements and understandings regarding
Xxxxxx' resignation as an officer and the termination of his employment.
NOW THEREFORE, in consideration of the mutual promises hereinafter set
forth, Xxxxxx and IE acting of their own free will and intending to be
legally and irrevocably bound, hereby agree as follows:
1. Employment Termination. Xxxxxx agrees that his employment with
IE will terminate on September 30, 1997 (the "Separation Date"). The
parties acknowledge that effective August 27, 1997, Xxxxxx resigned from
all positions as a director, officer, trustee or otherwise with IE and its
subsidiaries and affiliates, except that Xxxxxx has not resigned as a
member of the Board of Directors of IE. Upon termination of his employment
with IE, Xxxxxx shall be entitled to receive the benefits set forth in this
Agreement as and when required in accordance with the terms hereof. Until
termination of Xxxxxx' employment, Xxxxxx will continue to perform services
relating to transitional issues in connection with IE's former Reseller
Network Division and XLSource Division, which were sold in July 1997.
2. Salary Continuation. Commencing on the Separation Date, IE
agrees to pay Xxxxxx, as salary continuation, at the rate of his current
base annual salary of Four Hundred Seventy Five Thousand, for fifteen (15)
months following Xxxxxx' Separation Date ("Severance Period"). This salary
continuation will be paid in equal bi-weekly installments in the same
manner and subject to all required federal, state and local tax
withholdings as is the case with Xxxxxx' current salary.
3. Medical and Dental Benefits Continuation. During the Severance
Period, IE will provide Xxxxxx and his family full coverage under the IE
group medical and dental programs subject to the terms of the medical and
dental plans. Any required employee contribution to the medical plan
premium will be deducted from Xxxxxx' monthly salary continuation payments
during such period. Xxxxxx' statutory rights under COBRA to continue
participation in IE's group medical coverage for a period of up to eighteen
(18) months, at his own cost, shall begin immediately following the
termination of medical and dental coverage paid for by IE. IE's obligation
to continue to pay for medical coverage, and any corresponding deduction
from Xxxxxx' salary continuation payments, will cease if Xxxxxx becomes
eligible to participate in a comparable medical and dental plan with a new
employer. In this case, Xxxxxx agrees to immediately notify IE by written
notice to IE's Chief Financial Officer.
4. Stock Options. Xxxxxx' IE stock options will continue to vest in
accordance with their original terms and conditions through August 27,
2006, notwithstanding the termination of Xxxxxx' employment with IE. If
the Inherent Value (as defined in Section 5) as of September 30, 1997 is
greater than zero, then all IE stock options then held by Xxxxxx which are
not yet fully vested will become fully vested. If the Inherent Value as
of January 30, 1999 is greater than zero, then all IE stock options and
XLConnect stock options then held by Xxxxxx will become fully vested.
5. Stock Value Guarantee Payment. This Section 5 supersedes and
replaces the fifth paragraph of the Employment Letter relating to the
payment of up to $1.7 million in connection with Xxxxxx' options to
purchase common stock of IE. The net amount of the payment required to be
made by IE to Xxxxxx under this Section 5 is herein referred to as the
"Stock Value Guarantee Payment." For purposes of this Section 5, the "fair
market value" as of a specified date shall be deemed to be the average of
the closing price per share of IE common stock on the five trading days
ending on the last trading day prior to the specified date.
As long as Xxxxxx is an employee of IE on September 30, 1997 or was
previously terminated by the Company without cause (as defined in the
Employment Letter), IE will pay Xxxxxx, on September 30, 1997, an amount
(the "First Installment") equal to one-half of the excess of $1.7 million
over the product of (a) 750,000 (corresponding to the number of IE stock
options granted to Xxxxxx) and (b) the excess of the fair market value (as
of September 30, 1997) over the exercise price of Xxxxxx' IE stock options
(such excess being herein referred to as the "Inherent Value"). So long as
Xxxxxx was entitled to receive the First Installment pursuant to the
preceding sentence, then on January 30, 1999, IE will pay Xxxxxx an amount,
equal to the excess of $1.7 million over the First Installment (such excess
being herein referred to as the "Option Payment Balance"), which amount
shall be further reduced (but not below zero) by the Realized Value (as
defined below) (the "Second Installment").
For purposes hereof, the "Realized Value" shall mean the sum of the
amounts described in paragraphs (a) through (e) below, as reduced by the
net amount of any taxes which Xxxxxx was, is, or will be, obligated to pay
as a result of the exercise of stock options or the sale or other
disposition of shares described in said paragraphs (a) through (e):
a. The excess of the product of the fair market value (as of
January 30, 1999) of the IE common stock underlying Xxxxxx' IE options or
acquired on exercise of stock options, and retained by Xxxxxx as of January
30, 1999, over the aggregate exercise price of such options.
b. The excess of the product of the fair market value (as of
January 30, 1999) of any XLConnect common stock acquired on exercise of
stock options and retained by Xxxxxx as of January 30, 1999, over the
aggregate exercise price of such options.
c. The value of any proceeds received by Xxxxxx on or prior to
January 30, 1999 from any sale or other disposition of IE options, together
with the excess of the value of any proceeds received by Xxxxxx on or prior
to January 30, 1999 from any sale or other disposition of any shares of IE
common stock (acquired on exercise of stock options) over the exercise
price paid by Xxxxxx for such shares;
d. The excess of the value of any proceeds received by Xxxxxx
on or prior to January 30, 1999 from any sale or other disposition of any
shares of XLConnect common stock (acquired on exercise of stock options)
over the exercise price paid by Xxxxxx for such shares;
e. The value of any distributions or dividends received by
Xxxxxx on or prior to January 30, 1999 on IE common stock (acquired on
exercise of stock options) and XLConnect common stock (acquired on exercise
of stock options);
In the event that the Realized Value exceeds the Option Payment
Balance, then Xxxxxx agrees to pay to IE on January 30, 1999 the amount of
such excess (but in no event more than the amount of the First
Installment).
All references to options to purchase XLConnect common stock in this
Agreement shall be deemed to refer only to options which are held by Xxxxxx
as of the date hereof and not to any XLConnect options which may be granted
to Xxxxxx after the date hereof.
Repayment of Certain Amounts. In the event that after January 30,
1999 and on or prior to November 27, 2000, Xxxxxx receives (i) any
distributions or dividends on IE common stock (acquired on exercise of
stock options) or XLConnect common stock (acquired on exercise of options),
or (ii) any proceeds from any sale or other disposition of Xxxxxx' IE or
XLConnect options or shares of IE or XLConnect common stock (acquired on
exercise of stock options) and the aggregate of such proceeds exceed the
sum of (x) the Realized Value, and (y) in the case of the sale or other
disposition of shares, the exercise price paid by Xxxxxx on exercise of the
options underlying such shares, Xxxxxx agree to repay to IE, promptly upon
receipt of such proceeds and promptly from time to time as future proceeds
are received, all such proceeds up to an amount not exceeding the following
amount: (a) the First Installment, plus (b) the Second Installment, minus
(c) the net amount of any taxes which Xxxxxx was, is or will be obligated
to pay as a result of Xxxxxx' receipt of the First Installment and the
Second Installment, plus (d) the net amount of any tax benefit which Xxxxxx
receives by reason of the repayment by Xxxxxx to IE pursuant to this
paragraph.
6. Other Benefits. IE agrees to extend to Xxxxxx the following
additional benefits:
a. IE will provide Xxxxxx its executive relocation package as
utilized in his move to Denver, CO, and IE will provide Xxxxxx with a tax
gross-up related to this relocation package. IE will cover any loss in
equity associated with the sale of Xxxxxx' current principal residence
located in Denver. Said loss in equity will be calculated as the excess of
the purchase price paid by Xxxxxx for the residence over the gross sales
price of the residence as sold by Xxxxxx in a bona fide sale to an
unrelated third party.
b. Until the earlier of the expiration of the Severance Period
or the occurrence of a Change of Control, IE will continue to pay the
premiums on the $1 million life insurance policy currently in force
insuring Xxxxxx' life.
c. Until the earlier of the expiration of the Severance Period,
the occurrence of a Change of Control or the expiration of the car lease
currently in force, Xxxxxx will continue to have the right to retain use of
his current executive automobile currently leased for his use by the
Company, at Company expense.
d. The obligation of IE to bonus Xxxxxx certain interest charges
as set forth on page two of the Employment Letter is hereby terminated and
is of no further force or effect.
7. Bonus Payment. On the Separation Date IE agrees to pay Xxxxxx
the sum of $125,000 in cash, representing one-half of his maximum 1997
bonus entitlement. Xxxxxx will thereafter not be entitled to receive any
further bonus payments.
8. Acceleration of Salary Continuation and Stock Value Guarantee
Payment. In the event either:
a. a Change of Control (as defined below) occurs after the date
hereof, whether before or after the Separation Date; or
b. IE at any time hereafter has either insignificant assets
(defined as consolidated total assets of less than $100 million at the end
of any quarterly reporting period commencing after the date hereof) or
insignificant operations (defined as consolidated revenues during any
quarterly reporting period commencing after the date hereof of less than
$75 million) or insignificant tangible net worth (defined as consolidated
shareholders' equity less goodwill of less than $20 million or at the end
of any quarterly reporting period commencing after the date hereof); then
(1) the salary continuation payments and the Stock Value
Guarantee Payment not yet paid to Xxxxxx pursuant to this Agreement shall
be accelerated so that Xxxxxx shall receive, within fifteen (15) business
days of such event, a lump sum payment equal to the balance of salary
continuation payments and the balance of the Stock Value Guarantee Payment
which Xxxxxx would have received had such acceleration not taken place; and
(2) all IE stock options and XLConnect stock options then
held by Xxxxxx which are not yet fully vested will become fully vested.
For purposes of calculating the Second Installment of the Stock Value
Guarantee Payment under this Section, all references to January 30, 1999 in
the definition of "Realized Value" will be replaced by the date of the
Change of Control.
For the purposes of this Agreement a "Change of Control" of IE shall
be deemed to have occurred upon the earliest of the following events:
(a) Any "person," as such term is defined under Section
3(a)(9) and 13(d) of the Exchange Act, who is not an affiliate of IE on the
date hereof, becomes a "beneficial owner," as such term is used in Rule
13d-3 under the Exchange Act, of more than 50% of IE's common stock;
(b) Upon the distribution by IE of all or substantially
all of its assets to its shareholders pursuant to a plan of liquidation; or
(c) IE consummates a merger, consolidation, other form of
business combination or a sale of all or substantially all of its assets,
unless the business of IE is continued following any such transaction by a
resulting entity (which may be but need not be, IE) and the shareholders of
IE immediately prior to such transaction (the "Prior Shareholders") hold,
directly or indirectly, a majority of the voting power of the resulting
entity.
In the event Xxxxxx becomes entitled to receive any amounts under this
Section 8, then Xxxxxx will become obligated to repay certain amounts in
accordance with the provisions set forth under the caption "Repayment of
Certain Amounts" in Section 5 hereof, provided that any reference to
January 30, 1999 therein will be replaced by the date of the Change of
Control.
9. Confidentiality:
x. Xxxxxx agrees that he will not disclose or use for his
direct or indirect benefit or the direct or indirect benefit of any third
party, any Confidential Information (as hereinafter defined) of IE. In
general, "Confidential Information" means any and all proprietary
information of IE, whether any information relating to computer codes or
instructions (including source and object code listings, logic algorithms,
subroutines, modules or other subparts of computer programs and related
documentation, including program notation); computer processing systems and
techniques, concepts, layouts, flowcharts, specification, know-how, and
associated programmer, user or other manuals or other like textual
materials (including any other data and materials used in performing
Xxxxxx' duties); all computer input and outputs (regardless of the media on
which stored or located); hardware and software configurations; designs,
interfaces, research, processes, inventions, products, methods; marketing,
sales and distribution, data, methods , plans and efforts; IE's
relationship with actual and prospective customers, contractors and
suppliers; IE's relationship with actual financial and banking
institutions, creditors, or vendors; any other materials prepared by Xxxxxx
or other employees in the course of, relating to or arising out of their
employment, or prepared by any other contractor for IE or its customers:
and any other materials that have not been made available to the general
public.
x. Xxxxxx agrees that he will, effective on Separation Date:
(I) discontinue all use of Confidential Information; (ii) return to IE all
material furnished by IE that contains Confidential Information; (iii)
erase or destroy and Confidential Information contained in computer memory
or data storage apparatus under the ownership or control of Xxxxxx; and
(iv) remove Confidential Information from any software under the ownership
or control of Xxxxxx that incorporates or uses Confidential Information in
whole or in part.
x. Xxxxxx agrees to return to IE on the Separation Date, or
earlier termination of employment, any documents, records, notebooks, files
correspondence, reports, memorandum, personal property owned by IE, or any
other documents and material whatsoever relating to the business of the
Company. He also agrees that he will not make, retain, remove or
distribute any copies of the foregoing. IE agrees that Xxxxxx can purchase
at agreed upon prices IE's equipment being used by him including the
laptop, desktop, Officefax, chair and work top at his residence.
10. Waiver and Release of Claims.
x. Xxxxxx Release. Xxxxxx completely releases, relinquishes,
waives and forever discharges IE, its officers, directors, employees,
agents, subsidiaries and affiliates, and their respective successors and
assigns, from all manner of actions, causes of action, suits, debts, dues,
accounts, bonds, covenants, contracts, agreements, judgments, claims, and
demands whatsoever, in law or equity, known or unknown, in tort, contract,
by statute, negligence (whether by contribution or indemnification) or any
other basis for relief, compensatory, punitive, or other damages, expenses
(including attorney's fees), reimbursement or costs of any kind which
Xxxxxx ever had, now has or may have, for or by reason of any cause, matter
or thing whatsoever, arising out of or in any way related to Xxxxxx'
employment with IE and its subsidiaries and affiliates, his membership of
any of the Board of Directors of IE or any of its subsidiaries or
affiliates, or the termination of any such employment and membership;
provided however, that nothing contained herein shall release IE from its
obligations under this Agreement. Xxxxxx agrees that he has executed this
Release on his own behalf, and also on behalf of his heirs, agents,
representatives, successors and assigns. This release includes, but is not
limited to, a release of any rights or claims he may have under:
(1) The Age Discrimination in Employment Act (ADEA), which
prohibits age discrimination in employment;
(2) Title VII of the Civil Rights Act of 1964; as amended by
the Civil Rights Act of 1991, which prohibits discrimination in employment
based on race, color, national origin, religion or sex;
(3) The Americans with Disabilities Act (ADA), which
prohibits discrimination on the basis of a covered disability;
(4) The Employer Retirement and Income Security Act (ERISA),
which prohibits discrimination on the basis of entitlement to certain
benefits;
(5) Any other federal, state or local laws or regulations
prohibiting employment discrimination;
(6) Breach of any express or implied contract claims;
(7) Wrongful termination or any other tort claims, including
claims for attorney's fees whether based on common law, or otherwise.
Xxxxxx understands, however, that by signing this Release, he does not
waive rights to (i) claims arising under any applicable worker's
compensation laws; (ii) any claims which the law states may not be waived;
and (iii) his vested rights under the regular employment benefit plans of
IE, in effect as of the date of this Agreement.
b. IE Release. IE hereby completely remises, releases,
relinquishes, waives and forever discharges Xxxxxx and his dependents,
heirs, executors, agents, legal representatives, successors and assigns, of
and from all manner of actions, causes of action, suits, debts, dues,
accounts, bonds, covenants, contracts, agreements, judgments, claims and
demands whatsoever, in law or equity, known or unknown, in tort, contract,
by statute, negligence (whether by contribution or indemnification) or any
other basis for relief, compensatory, punitive or other damages, expenses
(including attorney's fees), reimbursements or costs of any kind which IE
ever had, now has or may have, for or by reason of any cause, matter or
thing whatsoever, arising out of or in any way related to his employment
with IE and its subsidiaries and affiliates, his membership of any of the
Board of Directors of IE or any of its subsidiaries or affiliates, or the
termination of any such employment and membership; provided however, that
nothing contained herein shall release Xxxxxx from his obligations under
this Agreement. IE agrees that it has executed this Release on its own
behalf, and also on behalf of its subsidiaries, affiliates, divisions,
successors (by merger or otherwise) and assigns, including XLC.
11. Indemnification. To the extent permitted by law, IE agrees to
defend, indemnify and hold Xxxxxx harmless against any threatened or
pending actions or proceedings, whether brought by a third party or as a
derivative action, by reason of the fact that Xxxxxx was an officer or
representative of IE acting within the scope of his employment.
12. Cooperation in Defending Legal Actions. Xxxxxx understands that
he will not in the future voluntarily assist any individual or entity in
preparing, commencing or prosecuting any action or proceeding against IE
its directors, officers, employees, or affiliates, including but not
limited to, any administrative agency claims, charges or complaints and/or
lawsuits against IE, its directors, officers, employees or affiliates, or
to voluntarily participate or cooperate in any such action or proceeding,
except as such agreement is specifically prohibited by statute. Xxxxxx
also agrees that he will cooperate with and assist IE in its defense or
prosecution of any such action or proceeding. This Agreement shall not
preclude Xxxxxx from testifying in such an action or proceeding if he is
compelled to do so pursuant to a subpoena or other court order. However,
Xxxxxx expressly agrees that he will provide written notice addressed to
the attention of Xxxxx X. Xxxxxxx, Esquire, Xxxxxx Xxxxxxxx & Xxxxxx, LLP,
0000 Xxx Xxxxx Xxxxxx, Xxxxxxxxxxxx, XX 00000 (fax no. 000-000-0000) if he
should receive, by service or otherwise, a notice, subpoena or other court
order or any other written request seeking or requiring him to testify or
otherwise participate in or assist in any action or proceeding against IE,
such notice to be so provided within 24 hours of each such receipt by
Xxxxxx or anyone acting on his behalf.
13. Announcements and Non-Disparagement. The parties hereby agree
that all public disclosure regarding the reasons for the termination of
Xxxxxx' employment and other positions with the Company shall be agreed
upon between the parties in advance, which agreement will not be
unreasonably withheld. Each party agrees not to make any comments
inconsistent with any agreed upon language. Each party further agrees not
to disparage the other with respect to matters arising prior to the date of
the execution of this Agreement or to disclose or otherwise identify any
matters which may be detrimental to the other which occurred prior to the
date of the execution of this Agreement. It is further agreed that
inquiries for references by prospective employers shall be directed to
Xxxxxxx Xxxxxxx, whose comments shall be positive in nature and not
inconsistent with the provisions of this paragraph.
14. Arbitration of Disputes Under this Agreement. The parties agree
that any and all disputes arising out of the performance or breach of this
Agreement or any promise or covenant herein shall be resolved by submission
to arbitration in Philadelphia, PA under, and in accordance with, the rules
and procedures of the American Arbitration Association. In any such
proceeding, the prevailing party shall be entitled to an award of
reasonable attorney's fees, costs and expenses. It is expressly agreed
that no amounts will be withheld from any amounts due during the Severance
Period unless an appropriate court order has been obtained.
15. Governing Law; Enforcement. This agreement shall be governed by
and construed and enforced under the laws of the Commonwealth of
Pennsylvania. All remedies at law and equity shall be available for the
enforcement of this Agreement incorporated by reference herein. This
Agreement may be pleaded as a full bar to the enforcement of nay claim in
any way related to or arising out of Xxxxxx' employment with IE and/or the
termination thereof.
16. Opportunity to Review and Right to Revoke. Xxxxxx hereby
acknowledges that he is acting on his own free will, that he has been
afforded ample opportunity to read and review the terms of this Agreement,
that he has had an opportunity to seek the advise of counsel, and that he
is voluntarily entering into this Agreement with full knowledge of its
respective provisions and effects. Xxxxxx also acknowledges that he has
seven (7) days following his signing of this Agreement to revoke this
Agreement in which case IE will have no obligation to make any payment to
him hereunder, and as a condition to any such revocation, any payment
already made hereunder by IE to Xxxxxx will be returned by Xxxxxx to IE.
17. Contractual Effect. The parties understand and acknowledge that
the terms of this Agreement are contractual and not a mere recital.
Consequently, they expressly consent that this Agreement shall be given
full force and effect according to each and all of its express terms and
provision, and that it shall be binding upon the respective parties as well
as their heirs, executors, successors, administrators and assigns including
XLC. The parties further acknowledge that this Agreement, including the
recitals, sets forth the entire agreement and understanding of the parties
relating to its subject matter, and supersedes and merges all prior and
contemporaneous agreements, negotiations and understandings between the
parties, both oral and written. No change or modification to the Agreement
will be binding unless it is in writing and signed by both IE and Xxxxxx.
IN WITNESS WHEREOF, Xxxxxx and IE each acknowledge that they are
acting of their own free will, that they have had a sufficient opportunity
to read and review the terms of this Agreement, they have each received the
advice of their respective counsel with respect hereto, and that they have
voluntarily caused the execution of this Agreement and by reference herein
as of the day and year first set forth above.
/s/ Xxxxxxx X. Xxxxxx /s/ Xxxxx Xxxxxx
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Xxxxxxx X. Xxxxxx Witness
On behalf of INTELLIGENT ELECTRONICS, INC.:
By: /s/ Xxxxxxx X. Xxxxxxx Attest: /s/ Xxxxxxxx X. Xxxxx
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Xxxxxxx X. Xxxxxxx Name: Xxxxxxxx X. Xxxxx
Chairman of the Board, Title: Executive Assistant
Chief Executive Officer and
President
