December 8, 1997
Xx. Xxxxxxx X. Xxxx, Xx.
0000 Xxxxxxxxx Xxxx
Xxxxxxxxxx, Xxxxxxxx 00000
Dear Chip:
This agreement will serve to confirm the terms and conditions under which
we will accept your resignation as President, Chief Executive Officer and member
of the Board of Directors.
1. Resignations. Effective October 27, 1997 (hereinafter the "Resignation Date")
you have resigned as President and Chief Executive Officer and any other
officerships of Micro Warehouse, Inc. or any of its affiliates, sister companies
or subsidiaries (hereinafter "the Company"). Effective as of the date hereof,
you will resign as member of the Board of Directors of the Company by tendering
a letter of resignation substantially in the form appended hereto as Schedule A.
2. Employment Agreement. Your employment agreement with the Company made as of
the 4th day of September, 1996 has been terminated as of the Resignation Date.
Except for compensation previously paid to you or otherwise described in this
agreement, you shall not be eligible to receive any bonus or incentive
compensation or any other compensation for 1997 or any other period.
3. COBRA Benefits. For a period not to exceed six (6) months subsequent to the
Resignation Date, the Company agrees to pay directly or reimburse you for the
COBRA payments required to maintain your current health insurance coverage
through the Company. You acknowledge that the Company will have no obligation to
pay directly or reimburse you for any COBRA payments attributable to any period
of time after you are eligible to receive health insurance benefits with any new
employer nor, in any event, for any payments due more than 6 months subsequent
to the Resignation Date.
4. Stock Options. Schedule B sets forth stock options granted to you which have
already vested and which may be exercised by you on or prior to April 27, 1999.
Schedule B also sets forth stock options granted to you which as of the date of
this agreement have not yet vested. We confirm that out of the total unvested
options, you, although no longer an officer, director or employee of the
Company, will retain rights in (a) 83,333 of them so labeled on Schedule B which
will vest on March 4,
1998 pursuant to their original terms and conditions, (b) 125,000 of them so
labeled on Schedule B which will vest on October 14, 1998 pursuant to their
original terms and conditions and (c) 83,333 of them so labeled on Schedule B
which will vest on March 4, 1999 pursuant to their original terms and
conditions. All of such options referred to in (a), (b) and (c) above may be
exercised by you on or prior to April 27, 1999. In the event of a "Change of
Control" (as such term is defined in a resolution of the Company's Board of
Directors with respect to accelerated vesting of options dated April 16, 1997
(the "April 16, 1997 Board Resolution")) of the Company at any time on or
between the date hereof and June 10, 1998, you shall be entitled to one year
accelerated vesting of options as if you had remained a director of the Company
until June 10, 1998 pursuant to the April 16, 1997 Board Resolution.
Notwithstanding the foregoing, in the event the independent certified public
accountants of the acquiring or merging entity in a Change of Control
transaction are unwilling to provide a "pooling opinion" because of your
retention of rights in options described in this Paragraph 4 (i.e. such
retention will prevent the Change of Control from being accounted as a pooling
of interests under APB Opinion Number 16 or any successor or related regulation
or interpretation), such retention of rights in options shall become null and
void and of no further force or effect. Further and notwithstanding the
foregoing, in the event the independent certified public accountants of the
acquiring or merging entity in a Change of Control transaction are unwilling to
provide a "pooling opinion" because of the acceleration of your rights in
options described in this Paragraph 4 (i.e. such acceleration will prevent the
Change of Control from being accounted as a pooling of interests under APB
Opinion Number 16 or any successor or related regulation or interpretation),
such acceleration shall not occur and you shall continue to have such option
rights but without any rights of acceleration. Except as specifically set forth
in this Paragraph 4 and subject to the following sentence, all other options
reflected as not vested on Schedule B are hereby deemed forfeited and of no
further force or effect as of June 10, 1998. You will, however, retain rights to
such options reflected on Schedule B as being forfeited in the event that you
are rehired as President and/or Chief Executive Officer (or other senior
executive position) of the Company by the Board of Directors of the Company at
any time prior to June 10, 1998. You will not be eligible to receive any further
stock options or otherwise participate in any deferred compensation programs.
You also agree that any such stock options that you retain pursuant to this
agreement will continue to be subject to the terms and conditions of the
agreements under which the applicable stock options were granted to you unless
the terms of such agreements conflict with this agreement in which case this
agreement shall prevail. Notwithstanding the foregoing, in the event, prior to
June 10, 1998, there are changes made to the terms and conditions of options
previously granted to members of the Board of Directors which increase or expand
the rights of such board members in connection with such options, you shall be
entitled to receive pari passu the benefits of such changes in connection with
your options.
5. Rescission of Stock Purchase Loan. You and the Company agree to hereby
rescind the transaction which took place on or about September 4, 1996 whereby
the Company loaned you One
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Million Four Hundred Thousand Dollars ($1,400,000.00) in order to purchase Fifty
Thousand (50,000) of the Company's common shares (the "Shares") from the
Company. Promptly after the date hereof, you shall deliver to the Company the
original stock certificate (Number MWC 1329) evidencing your ownership of the
Shares together with an executed, undated stock power transferring the Shares
from you to the Company. You hereby authorize the Company to date said Stock
Power, register the Shares in its name, and, at its option, to retire or sell
them. Upon receipt of the original certificate MWC 1329 and Stock Power, the
Company will surrender to you the original canceled Secured Note dated September
4, 1996 securing the loan to purchase the Shares and will return to you the
interest payments that you have made to the Company on the loan in the amount of
$46,848.28. You acknowledge that the foregoing agreed rescission of the stock
purchase transaction resolves any dispute with respect to your eligibility to
participate as a class member in the consolidated class action litigation
against the Company currently pending in the Federal District Court for the
District of Connecticut and you are not eligible to participate as a class
member by reason of your rescinded ownership of said Shares.
6. Indemnification. We confirm that the Indemnification Agreement between you
and the Company dated as of October 14, 1996 is in full force and effect.
7. Release. (a) As consideration for the Company to enter into this agreement
and as consideration for the covenants contained herein, subject to the
immediately following sentence, you irrevocably and unconditionally release,
remit, acquit and forever discharge the Company, its officers, directors,
shareholders, agents, employees, representatives, attorneys, parents, divisions,
subsidiaries, affiliates, related companies or entities, successors and assigns
and the officers, executives, directors, shareholders, agents and employees of
any and all of the Company's parents, divisions, subsidiaries, affiliates,
related companies or entities or successors (separately or collectively, the
"Released Parties"), jointly and individually, from any and all claims, charges,
complaints, expenses and causes of action of any nature or kind whatsoever,
known or unknown, which you, your heirs, successors or assigns have or may have
against the Released Parties based upon, related to or arising out of your
employment with the Company or your service as a member of the Board of
Directors of the Company through the date hereof, including, but not limited to,
claims, charges, complaints, liabilities, losses, obligations, demands, damages,
costs, expenses and causes of action relating to the terms, conditions,
commencement, duration or termination of your employment, or claims of
discrimination under any federal, state or local law, rule, regulation or common
law, whether such claims are past or present, whether they arise from equity,
common law or statute, and whether they arise from labor laws or discrimination
laws, such as the Age Discrimination in Employment Act, as amended, Title VII of
the Civil Rights Act of 1964, 42 U.S.C. ss.1981, the Equal Pay Act, as amended,
the Americans with Disabilities Act, or any other federal, state or local law,
rule or regulation. This release is intended to cover all possible relief,
including, but not limited to, reinstatement, wages, back pay, front pay,
vacation pay, bonuses or incentive compensation, supplemental or other
retirement benefits,
3
perquisites, compensatory damages, punitive damages, damages for pain or
suffering, and attorneys' fees, provided, however, that nothing in this
agreement will limit or otherwise affect any right you may have to
indemnification under the Company's Articles of Incorporation, By Laws or any
insurance policy in effect as of the termination of your employment with the
Company or pursuant to Article 6 hereof. In addition, if the Company complies
with its obligations hereunder, you agree you will not be entitled to any
benefit from any claim or proceeding filed by you or on your behalf with any
agency or court which is within the scope of this agreement or which goes to the
validity of any provision of this agreement.
(b) The releases under this Paragraph 7 are intended to cover all possible
rights, obligations and liabilities, including any such rights, obligations or
liabilities based upon, relating to or arising from any claim which goes to the
validity of any provision of this agreement, other than a claim for any breach
of this agreement.
(c) You acknowledge that you have been given a period of at least 21 days to
review and consider this agreement before signing it, and that you understand
that you may use as much of the 21-day period as you wish prior to signing. You
also acknowledge that you obtained independent legal counsel in connection with
reviewing this agreement.
8. Covenant Not to Compete. (a) In consideration for the Company's undertakings
described in this agreement and the payments set forth in sub-paragraph (b)
hereinbelow, you hereby covenant and agree that for a period of three (3) months
subsequent to the Resignation Date (the "Non-Compete Period"), you 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 you from (i) performing services for a Competitive Business if such
Competitive Business is also engaged in other lines of business and if your
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
Business. The term "Competitive Business" shall mean and include any business or
activity that is substantially the same as any business or activity conducted by
the Company, regardless of where such Competitive Business is located.
(b) In partial consideration for the Covenant not to Compete in sub-paragraph
8(a) hereinabove the Company shall make three payments to you in the gross
amount of $60,651.00 (Sixty Thousand
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Six Hundred and Fifty One Dollars) each (less any taxes required to be
withheld). The initial payment shall be made within 5 business days after this
agreement is fully executed and the two subsequent payments shall be made on or
before December 27, 1997 and January 27, 1998.
9. Confidential Information. You acknowledge that the Company would be damaged
if your knowledge with respect to the business of the Company was disclosed to
or utilized by parties other than the Company. Accordingly, you covenant and
agree that you 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 you and relates to such
matters as budget and forecasts, customer mailing lists, data base management
techniques, pricing and credit techniques, marketing techniques, research and
development activities, sources of product, 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 you from third parties without restrictions on
disclosure.
10. Covenant Not to Solicit Employees. Unless you receive the prior written
consent of the Company you hereby covenant and agree that during the Non-Compete
Period you shall not, for or on behalf of any person or business, directly or
indirectly, as owner, officer, director, stockholder, partner, associate,
consultant, manager, advisor, representative, employee, agent, creditor or
otherwise, attempt to solicit any person who has been an employee of the Company
at any time during your period of employment with the Company and who is
employed by the Company at the time of the solicitation.
11. Company Representation. The Company hereby represents, based on
representations of Xxxxx Xxxxxxx, Xxxxx Xxxxxx, Xxxxxx Xxxxx, Xxxxxxxxx
Xxxxxxxx, Xxxxx X. Xxx, Xxxx Xxxxxx and Xxxxx Xxxxxx, that at the date hereof
the Company has no actual knowledge of any claims or causes of action of any
nature or kind whatsoever against you except that no representation is made with
respect to any claim of the Company for disclosure of confidential or
proprietary information. You agree that in the event of a breach of this
Paragraph 11 your claims, if any, may be asserted only against the Company and
not any of the individuals listed above.
12. Assignment. This agreement is not assignable, except that the Company may
assign it to any successor of substantially all of the Company's business or
assets. This agreement will be binding upon, and inure to the benefit of, the
parties and their successors and assigns.
13. Partial Invalidity. If any provision of this agreement is held to be
invalid, void or unenforceable, the remaining provisions shall continue in full
force without being impaired or invalidated in any way.
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14. Governing Law. This agreement will be governed by the laws of the State of
Connecticut, without giving effect to the conflict of laws principles thereof.
15. Entire Agreement. This agreement reflects the complete agreement between the
parties with respect to the subject matter hereof, and there are no written or
oral understandings, promises or agreements directly or indirectly related to
this letter agreement or the subject matter hereof that are not incorporated
herein.
16. Revocation Period. For a period of seven (7) calendar days following your
execution of this agreement, you may revoke this agreement. This agreement will
not become effective or enforceable to release any claims or rights which you
may have under the Age Discrimination in Employment Act until this revocation
period has expired. This agreement also will not become effective or enforceable
with respect to any obligations that the Company may have hereunder until this
revocation period has expired. You acknowledge and agree that if the Company
satisfies any obligations hereunder that otherwise would have arisen during this
revocation period as soon as practicable after the revocation period has
expired, such action will constitute timely satisfaction of such obligations
hereunder. You also acknowledge and agree that the benefits to you of the
covenants contained herein, including, but not limited to, payments hereunder,
are provided to you in exchange for the promises in this agreement, are not
normally available under Company policy or practice to employees whose
employment is terminated and provide for the payments of amounts to which you
might not otherwise be entitled.
17. Confidentiality and Intent to be Bound. The terms and conditions of this
agreement are confidential and must not be disclosed to any person other than
those who must perform tasks to effect the agreement. Notwithstanding the
foregoing, the Company and you may disclose any term of this agreement, after
prior written notice to the other party that disclosure is about to take place,
(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. In addition, nothing
contained herein shall be construed to prohibit either party from disclosing the
terms and conditions of this agreement to its attorneys, accountants or
bookkeepers or to any other person with whom a fiduciary relationship has been
established. Both parties have read this agreement, have had the opportunity to
consult with counsel, fully understand the agreement's terms and conditions, and
enter this agreement freely, voluntarily and intending to be legally bound
hereby.
18. Enforcement of Agreement. You hereby acknowledge and agree that your
obligations under Paragraphs 8, 9 and 10 are a material part of the
consideration for this agreement and for the payments from the Company to you
under Paragraph 8(b), that your failure to satisfy any of such obligations could
cause irreparable harm to the Company and that the damages caused by such
failure would be
6
uncertain and difficult to measure. You further acknowledge and agree that the
Company may seek injunctive relief to prevent your failure or further failure to
satisfy any of such obligations, in addition to all other rights, remedies and
claims that it may have under this agreement, at law or in equity.
19. No Waiver. No failure on the part of either party at any time to require the
performance by the other party of any term hereof shall be taken or held to be a
waiver of such term or in any way affect such party's right to enforce such
term, and no waiver on the part of either party of any term hereof shall be
taken or held to be a waiver of any other term hereof or the breach thereof.
If you agree to and accept the terms and conditions of this agreement,
please sign both copies hereof in the space provided below, retain one copy for
your records and return the other copy to the undersigned.
Very truly yours,
MICRO WAREHOUSE, INC.
By:/s/ Xxxxx Xxxxxxx
-----------------------
Name: Xxxxx Xxxxxxx
Title: President and Chief Executive Officer
Agreed to and accepted on the date first above written:
/s/ Xxxxxxx X. Xxxx, Xx.
-------------------------
Xxxxxxx X. Xxxx, Xx.
Date Signed: December 8, 1997
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SCHEDULE A TO
LETTER AGREEMENT WITH XXXXXXX X. XXXX, XX.
DATED AS OF DECEMBER 8, 1997
FORM OF RESIGNATION LETTER
Effective immediately, I, Xxxxxxx X. Xxxx, Xx., hereby resign as a member
of the Board of Directors of Micro Warehouse, Inc. and any of its affiliates,
sister companies or subsidiaries.
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SCHEDULE B TO
LETTER AGREEMENT WITH XXXXXXX X. XXXX, XX.
DATED AS OF DECEMBER 8, 1997
Stock options already granted to you and already vested which may be exercised
pursuant to Paragraph 4 on or prior to April 27, 1999.
125,000 options at an exercise price of $25.00 per share granted per agreement
dated September 4, 1996.
Stock options already granted to you in which you will retain rights subject to
Paragraph 4 which may be exercised subject to Paragraph 4 on or prior to April
27, 1999.
83,333 options at an exercise price of $12.625 per share which will vest on
March 4, 1998 granted per resolutions of the Board of Directors dated January
23, 1997.
125,000 options at an exercise price of $25.00 per share which will vest on
October 14, 1998 granted per agreement dated September 4, 1996.
83,333 options at an exercise price of $12.625 per share which will vest on
March 4, 1999 granted per resolutions of the Board of Directors dated January
23, 1997.
Stock options deemed forfeited and of no further force or effect as of June 10,
1998 subject to Paragraph 4.
250,000 options at an exercise price of $25.00 per share granted per agreement
dated September 4, 1996.
333,334 options at an exercise price of 12.625 per share granted per resolutions
of the Board of Directors dated January 23, 1997.
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