SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
AMENDMENT NO. 1
(Mark one)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended February 1, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to Commission file number 0-15991
INTELLIGENT ELECTRONICS, INC.
(Exact name of registrant as specified in its charter)
Pennsylvania 23-2208404
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
411 Eagleview Boulevard, Exton, PA 19341
(Address of principal executive offices, including zip code)
(610)458-5500
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 Par Value
[Title of Class]
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes _X_ No __
The aggregate market value of the voting stock held by non-affiliates of
the registrant as of April 8, 1997:
Common Stock, $.01 Par Value - $102,635,172
The number of shares outstanding of the issuer's common stock as of April
8, 1997:
Common Stock, $.01 Par Value - 36,049,641
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. [ ]
<PAGE>
<PAGE>
The following items were to be incorporated by reference from the Proxy
Statement for the 1997 Annual Shareholders' Meeting of Intelligent
Electronics, Inc. (the "Company") and are now filed by this Amendment
No. 1 on Form 10-K/A to the Company's Annual Report on Form 10-K.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT
The following table sets forth certain information regarding the
directors of the Company. Information regarding the executive officers of
the Company can be found in Item 1 of the Company's Form 10-K filed on May
2, 1997.
Term Expires at
Name Age Annual Meeting in
------------------------------------------------------
Roger J. Fritz 68 1997
Arnold S. Hoffman 61 1997
Michael A. Norris 46 1997
John A. Porter 52 1997
Barry M. Abelson 51 1998
William E. Johnson 55 1998
William L. Rulon-Miller 48 1998
Christopher T.G. Fish 54 1999
Gregory A. Pratt 48 1999
Richard D. Sanford 53 1999
Roger J. Fritz has been a director of the Company since its
incorporation in 1982. For more than five years, Mr. Fritz has been
President of Organization Development Consultants of Naperville, Illinois,
an organizational development/management consulting firm.
Arnold S. Hoffman has been a director of the Company since August
1985. In January 1992, Mr. Hoffman became a Senior Managing Director of
Legg Mason Wood Walker Incorporated, an investment banking firm ("Legg
Mason"). From September 1990 to that date, Mr. Hoffman was Chairman of the
Middle Market Group, L.P., an investment banking firm. Mr. Hoffman also
serves on the Board of Directors of SunSource L.P.
Michael A. Norris joined the Company in August 1996 as President of
the Company and Chief Executive Officer of its Reseller Network.
Mr. Norris was appointed a director of the Company in September 1996.
Prior to joining the Company, Mr. Norris held various executive positions
at Compaq Computer Corporation since July 1992, the most recent as Vice
President of North American Sales. Prior to that, Mr. Norris held the
position of Executive Vice President for Murata Business Systems from 1988
through July 1992.
John A. Porter has been a director of the Company since May 1994. Mr.
Porter has been Vice Chairman of WorldCom, Inc. (formerly LDDS/Metro Media
Communications), a long-distance carrier, since the fall of 1993. From
1988 until its merger with Metro Media Communications in 1993, he served as
Chairman of LDDS. Mr. Porter is the president and sole shareholder of PM
Restaurant Group, Inc., which filed a petition under Chapter 11 of the U.S.
Bankruptcy Code in March 1995. Mr. Porter also serves on the Board of
Directors of Uniroyal Technology Corporation and XLConnect Solutions, Inc.,
an 80%-owned subsidiary of the Company ("XLConnect").
Barry M. Abelson has been a director of the Company since January
1989. In May 1992, he joined the law firm of Pepper, Hamilton & Scheetz
LLP, Philadelphia, Pennsylvania, as a partner. Prior thereto, Mr. Abelson
had been a partner of the law firm of Braemer Abelson & Hitchner,
Philadelphia, Pennsylvania (and its predecessor firms). Mr. Abelson also
serves on the Board of Directors of Covenant Bank for Savings and
XLConnect.
William E. Johnson has been a director of the Company since November
1994. He has been President of William E. Johnson Associates, a private
investment company, since 1993. From 1986 to 1992, Mr. Johnson served as
Chairman and CEO of Scientific Atlanta, a telecommunications company, and
serves on the Board of Directors of XLConnect.
William L. Rulon-Miller serves as Senior Vice President and
Co-Director of Corporate Finance for Janney Montgomery Scott Inc., an
investment banking firm with which he has held several positions since
1979. Mr. Rulon-Miller was a director of the Company from April 1983 until
December 1986, and was re-elected to the Board in November 1987. Mr.
Rulon-Miller also serves on the Board of Directors of Mothers Work, Inc.
Christopher T.G. Fish has been a director of the Company since its
incorporation in 1982. For more than five years, Mr. Fish has been a
principal of Sprint Investments, S.A., an investor company which is a
holder of the Company's Common Stock. Mr. Fish resides in the Channel
Islands, U.K. and is a citizen of the United Kingdom.
Gregory A. Pratt has been a director of the Company since May 1994.
Mr. Pratt joined the Company in March 1992 as Executive Vice President and
was appointed to the position of President and Chief Operating Officer
shortly thereafter. Mr. Pratt resigned as President and Chief Operating
Officer and was elected Executive Vice President in April 1996. Mr. Pratt
resigned as the Company's Executive Vice President on December 6, 1996.
Since that time, Mr. Pratt has been President and Chief Executive Officer
of Pratt Capital Advisors, Inc., a private investment company.
Richard D. Sanford has been the Company's Chairman and Chief
Executive Officer since he founded the Company in May 1982. Mr. Sanford
was named President of the Company in April 1996, a position which he
relinquished when Mr. Norris joined the Company in August 1996. Mr.
Sanford is also the Chairman of the Board of Directors of XLConnect.
PAGE
<PAGE>
BOARD OF DIRECTORS AND COMMITTEES
The Company's Board of Directors held sixteen meetings during the
year ended February 1, 1997 ("fiscal 1996"). During fiscal 1996, each
incumbent member of the Board attended at least 75% of the aggregate
meetings of the Board and its Committees for which he is a member, except
Messrs. Johnson, Porter and Alex A.C. Wilson, a former director of the
Company.
The Board of Directors has established Audit, Compensation and Stock
Option, and Executive Committees to devote attention to specific subjects
and to assist in the discharge of its responsibilities. The functions of
those committees, their current members and the number of meetings held
during fiscal 1996 are described below. The Board of Directors has not
established a Nominating Committee.
Audit Committee. The Audit Committee is currently composed of
Messrs. Fish, Fritz, Johnson, Hoffman, Porter and Rulon-Miller. The
functions of the Audit Committee include the recommendation and selection
of independent accountants, the review of audit results and the evaluation
of internal accounting procedures of the Company. There were two meetings
of the Audit Committee during fiscal 1996.
Compensation and Stock Option Committee. The Compensation and
Stock Option Committee is currently composed of Messrs. Fritz, Hoffman,
Johnson, Porter and Rulon-Miller. The Compensation and Stock Option
Committee is responsible for determining the annual salary, bonus and
incentive compensation of the Company's executive officers and, on the
basis of recommendations received from executive officers, awarding
incentive compensation in the form of stock options to the Company's
employees generally. The Report of the Compensation and Stock Option
Committee is included later in this Form 10-K/A. The Compensation and
Stock Option Committee held four meetings and acted by written consent two
times during fiscal 1996.
Executive Committee. The Executive Committee is currently composed
of Messrs. Abelson, Fish, Fritz, Hoffman, Johnson, Porter, Rulon-Miller and
Sanford, and has the authority of the Board of Directors in the management
of the business and affairs of the Company, subject to applicable legal
limitations. The Executive Committee did not meet during fiscal 1996.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's directors and officers, and persons who own more
than 10% of a registered class of the Company's equity securities, to file
initial reports of ownership and reports of changes in ownership with the
Securities and Exchange Commission. Such persons are required by
Securities and Exchange Commission regulation to furnish the Company with
copies of all Section 16(a) forms they file. Based solely on its review of
the copies of such forms received by it with respect to fiscal 1996, or
written representations from certain reporting persons, the Company
believes that all filing requirements applicable to its directors, officers
and persons who own more than 10% of a registered class of the Company's
equity securities have been met and were filed on a timely basis, except
that a Form 4 was filed late by Mr. Johnson in connection with the purchase
of shares of Common Stock in February 1996.
Item 11. EXECUTIVE COMPENSATION
The following table sets forth certain information concerning the
compensation paid during the years ended February 1, 1997, February 3, 1996
("fiscal 1995"), and January 28, 1995 ("fiscal 1994"), to the Company's
Chief Executive Officer and each of the Company's six other most highly
compensated executive officers based on salary and bonus earned during
fiscal 1996 (the "named executive officers").
<PAGE>
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long-term
Compensation
Awards
-----------
Securities
Name and Principal Fiscal Annual Compensation Underlying All Other
Position(1) Year Salary($) Bonus($) Options(#)(2) Compensation($)(3)
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <S> <C>
Richard D. Sanford 1996 $500,000 $350,000 -- $ 442,758
Chairman of the 1995 850,000 0 500,000 453,879
Board and Chief 1994 850,000 0 -- 496,945
Executive Officer
Michael A. Norris 1996(4) 193,654 125,000 750,000 243,843
President and Chief
Executive Officer of
the Reseller Network
Gregory A. Pratt 1996 256,410 166,667 -- 84,423
Executive Vice President(5) 1995 500,000 0 200,000 8,024
1994 500,000 30,000 -- 3,178
Mark R. Briggs 1996 470,208 0 -- 14,761
Assistant to the Chairman(6) 1995 325,000 0 140,000 4,500
1994 325,000 38,500 50,000 3,792
Timothy D. Cook 1996 300,385 0 150,000 39,789
Senior Vice President 1995 250,000 67,500 100,000 1,251
1994(7) 76,923 90,000 100,000 0
Thomas J. Coffey 1996 340,385 100,000 150,000 2,019
Senior Vice President, 1995(8) 177,846 100,000 100,000 0
Treasurer and Chief
Financial Officer
Kathleen R. Mayo 1996 140,769 2,500 44,000 3,574
Secretary(9) 1995 111,798 0 19,000 1,848
1994 113,752 37,148 5,000 1,825
</TABLE>
______________________________________________________________
(1) In each instance, the position indicated is the position held by the
executive officer on the last day of fiscal 1996 or, in the case of
executive officers not employed by the Company on such date, the final
position held by such executive officer with the Company.
(2) The amounts included in this column for fiscal 1996 includes stock
options repriced on March 4, 1996 (Mr. Coffey, 100,000; Mr. Cook,
100,000 and Ms. Mayo, 19,000).
(3) Except as indicated below, the amount included in the column for
fiscal 1996 represent the matching contribution under the Company's
401(k) Plan (Mr. Sanford, $4,750, Mr. Pratt, $1,000, Mr. Briggs,
$1,219, Mr. Cook, $2,019, Mr. Coffey, $2,019 and Ms. Mayo, $3,574),
director's fees (Mr. Sanford, $7,500 and Mr. Pratt, $6,500),
reimbursement of relocation expenses and related tax gross-up (Mr.
Norris, $243,843 and Mr. Cook, $37,770) and severance payments (Mr.
Pratt, $76,923 and Mr. Briggs, $13,542). The Company is a party to
"split dollar" life insurance agreements with a trust established by
Mr. Sanford (of which Mr. Abelson, a member of the Board of Directors,
is the trustee) under which the trust pays the portion of the premiums
attributable to the term life insurance component of permanent life
insurance policies insuring the life of Mr. Sanford and owned by the
trust, and the Company pays the balance of the premiums. Upon the
termination of the agreements or Mr. Sanford's death, all premiums
previously advanced by the Company under the policies are required to
be repaid by the trust. The Company retains an interest in the
policies' cash values and excess death benefits to secure the trust's
repayment obligation. Included in the amounts shown for Mr. Sanford
in fiscal 1996, 1995 and 1994 are amounts representing the value of
the premium payments by the Company in such years, projected on an
actuarial basis assuming that Mr. Sanford retires at age 65 and the
agreements are then terminated. In addition, in fiscal 1994, the
Company entered into a deferred compensation agreement with Mr.
Sanford which provides for the Company to credit $716,715 annually for
Mr. Sanford's account for five years commencing in fiscal 1994,
together with interest at an annual rate of 7%, compounded annually.
All credited amounts will be paid to Mr. Sanford in five equal annual
installments commencing in fiscal 1999. In the event of his death,
disability, termination by the Company without cause or a change of
control of the Company, all amounts not yet credited for future
periods will be credited and all credited amounts will be paid to Mr.
Sanford.
(4) Mr. Norris began his employment with the Company on August 27, 1996.
See "Employment and Severance Agreements."
(5) On December 6, 1996, Mr. Pratt resigned his position as Executive Vice
President. See "Employment and Severance Agreements."
(6) Mr. Briggs resigned as Assistant to the Chairman on December 31, 1996.
See "Employment and Severance Agreements."
(7) Mr. Cook began his employment with the Company on October 10, 1994.
See "Employment and Severance Agreements."
(8) Mr. Coffey began his employment with the Company on July 3, 1995.
See "Employment and Severance Agreements."
(9) Ms. Mayo resigned as Secretary on March 31, 1997.
<PAGE>
<PAGE>
OPTION GRANTS DURING FISCAL 1996
The following table provides information related to options to purchase
Common Stock which were granted to the named executive officers during
fiscal 1996.
<TABLE>
<CAPTION> Potential Realizable
Value at Assumed
Annual Rates of Stock
Individual Grants Price Appreciation for
% of Total Option Terms
Options Granted Exercise or
Options to Employees in Base Price Expiration
Name Granted Fiscal Year Per Share Date 5% (1) 10% (1)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <S>
Richard D. Sanford -- -- -- -- -- --
Michael A. Norris 750,000(2) 17.2% $7.00 8/27/06 $ 3,301,697 $ 8,367,148
Gregory A. Pratt -- -- -- -- -- --
Mark R. Briggs -- -- -- -- -- --
Timothy D. Cook 100,000(3) 2.3% 8.00 10/10/04 217,536 718,288
50,000(4) 1.1% 6.50 4/24/06 204,391 517,966
Thomas J. Coffey 100,000(5) 2.3% 8.00 7/3/05 254,367 827,496
50,000(6) 1.1% 6.6875 3/4/06 210,287 532,908
Kathleen R. Mayo (7) 3,000 0.1% 8.00 12/5/01 2,568 10,725
1,000 * 8.00 3/10/03 1,418 5,052
5,000 0.1% 8.00 2/25/04 9,356 31,545
10,000 0.2% 8.00 6/8/05 25,085 81,691
25,000 0.6% 6.6875 3/4/06 105,143 266,454
_______________________
* Less than 0.1%
</TABLE>
(1) The potential realizable value portion of the foregoing table
illustrates value that might be realized upon exercise of the options
immediately prior to the expiration of their term, assuming the
specified compounded rates of appreciation of the Company's Common
Stock over the term of the options.
(2) The options are exercisable in four equal annual installments
beginning August 27, 1997.
(3) The options were originally granted on October 10, 1994 and were
repriced on February 25, 1995 and March 4, 1996. The original vesting
schedule was retained and the options are exercisable in five equal
annual installments beginning October 10, 1995.
(4) The options are exercisable in five equal annual installments
beginning April 24, 1997.
(5) The options were originally granted on July 3, 1995 and were repriced
on March 4, 1996. The original vesting schedule was retained and the
options are exercisable in five equal annual installments beginning
July 3, 1996.
(6) The options are exercisable in five equal annual installments
beginning March 4, 1997.
(7) The options were canceled on April 30, 1997.
<PAGE>
AGGREGATED OPTION EXERCISES DURING FISCAL 1996 AND
OPTION VALUES AT FEBRUARY 1, 1997
The following table provides information related to options to
purchase Common Stock which were exercised by the named executive officers
during fiscal 1996 and the number and value of options held on February 1,
1997.
<TABLE>
<CAPTION>
Value of Unexercised
Number of Unexercised In-the-Money
Options/SARs Options/SARs
Shares Acquired Value at FY-End (#) at FY-End ($)(2)
Name on Exercise(#) Realized($)(1) Exercisable Unexercisable Exercisable Unexercisable
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Richard D. Sanford 0 0 460,000 40,000 0 0
Michael A. Norris 0 0 0 750,000 0 0
Gregory A. Pratt 0 0 245,000 105,000 0 0
Mark R. Briggs 10,000 $8,750 56,000 74,000 0 0
Timothy D. Cook 0 0 40,000 110,000 0 0
Thomas J. Coffey 0 0 20,000 130,000 0 0
Kathleen R. Mayo 0 0 7,600 36,400 0 0
</TABLE>
(1) Represents the difference between the exercise price and the market
value on the date of exercise.
(2) Value based on the closing price of $4.25 per share on January 31, 1997.
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
TEN-YEAR OPTION REPRICING
The following table provides information related to options to
purchase Common Stock of the Company, which were repriced for executive
officers during fiscal 1995 and fiscal 1996.
Number of
Securities Market Value Exercise Length of
Underlying of Stock Price at New Original Option
Options at Time of Time of Exercise Term at Time
Name Date Repriced(#) Repricing($) Repricing($) Price($) of Repricing
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <S>
Richard D. Sanford 02/25/95 450,000 $9.75 $22.875 $13.25 8 years 267 days
Gregory A. Pratt 02/25/95 50,000 9.75 15.00 13.25 8 years 13 days
02/25/95 100,000 9.75 24.875 13.25 8 years 300 days
Mark R. Briggs 02/25/95 30,000 9.75 15.50 13.25 6 years 283 days
02/25/95 10,000 9.75 15.00 13.25 8 years 13 days
02/25/95 50,000 9.75 24.00 13.25 9 years 0 days
Timothy D. Cook 03/04/96 100,000 6.6875 13.25 8.00 8 years 220 days
02/25/95 100,000 9.75 16.25 13.25 9 years 228 days
Thomas J. Coffey 03/04/96 100,000 6.6875 13.375 8.00 9 years 121 days
Kathleen R. Mayo(1) 03/04/96 3,000 6.6875 13.25 8.00 5 years 276 days
03/04/96 1,000 6.6875 13.25 8.00 7 years 6 days
03/04/96 5,000 6.6875 13.25 8.00 7 years 358 days
03/04/96 10,000 6.6875 13.125 8.00 9 years 96 days
02/25/95 3,000 9.75 15.50 13.25 6 years 238 days
02/25/95 1,000 9.75 15.00 13.25 8 years 13 days
02/25/95 5,000 9.75 24.00 13.25 9 years 0 days
Stephanie D. Cohen(2) 03/04/96 8,000 6.6875 10.375 8.00 5 years 276 days
03/04/96 20,000 6.6875 13.25 8.00 4 years 327 days
03/04/96 60,000 6.6875 13.25 8.00 5 years 276 days
03/04/96 5,000 6.6875 13.25 8.00 7 years 6 days
03/04/96 50,000 6.6875 9.25 8.00 9 years 62 days
02/25/95 20,000 9.75 14.125 13.25 5 years 335 days
02/25/95 60,000 9.75 15.50 13.25 6 years 283 days
02/25/95 5,000 9.75 15.00 13.25 8 years 13 days
</TABLE>
___________________________
(1) Ms. Mayo resigned as the Company's Secretary on March 31, 1997.
(2) In conjunction with assuming the duties of Executive Vice President
and Chief Financial Officer of XLConnect Solutions, Inc., an 80%-owned
subsidiary of the Company, Ms. Cohen ceased serving as the Company's
Vice President, Secretary and Treasurer on May 16, 1996.
<PAGE>
<PAGE>
DIRECTOR COMPENSATION
Directors received $500 for each Board meeting attended during fiscal
1996. Directors are also reimbursed for expenses in attending Board
meetings. There was no additional compensation for participation in or
attendance at Committee meetings.
EMPLOYMENT AND SEVERANCE AGREEMENTS
In connection with Mr. Pratt's assumption of the position of Executive
Vice President of the Company in April 1996, Mr. Pratt entered into an
employment agreement with the Company. The agreement provided for Mr.
Pratt to receive a base annual salary of $300,000, together with an annual
bonus of at least $200,000 if certain performance objectives are achieved.
Mr. Pratt resigned from the Company on December 6, 1996. Mr. Pratt's
employment agreement: (i) requires the Company to pay Mr. Pratt $500,000 in
12 monthly installments during the one-year period following termination
("Severance Payment"); and (ii) prohibits Mr. Pratt from competing with the
Company and from soliciting the Company's employees while Mr. Pratt remains
a member of the Board. In addition, Mr. Pratt has been retained to perform
certain consulting services which may result in additional compensation
from the Company in an amount not yet determined.
In March 1996, Mr. Briggs entered into an agreement with the Company
providing for the termination of his employment effective September 30,
1996 and for certain payments and other benefits to be provided by the
Company to Mr. Briggs following the termination of his employment. This
agreement was amended in September 1996 to: (i) extend the termination date
to December 31, 1996; and (ii) to provide for a one-time payment in an
amount equal to $100,000 and a payment of $20,000 for each of certain
acquisitions entered into by the Company. The amended agreement provides
that for a period of 18 months following the termination of his employment,
Mr. Briggs will continue to receive payment equal to his current base
annual salary of $325,000, participate in the Company's medical program,
and vest in his stock options. During such 18-month period, Mr. Briggs is
prohibited from working for certain of the Company's competitors,
soliciting the Company's customers and suppliers, or employing or retaining
the Company's employees.
In March 1996, Mr. Coffey entered into an employment agreement with
the Company. The agreement provides for Mr. Coffey to receive a base
annual salary of $350,000, with a minimum bonus of $100,000 for fiscal
1996. The agreement also provides that if the Company terminates Mr.
Coffey's employment without cause on or before April 1, 1999, the Company
will be obligated to continue to pay Mr. Coffey's base annual salary plus
all benefits then in effect until April 1, 1999, provided that in the event
such termination occurs before April 1, 1998, the amount of total
compensation in excess of $350,000 included in such severance payments will
be reduced by all compensation earned by Mr. Coffey from all sources from
the date of such termination until March 31, 1999. The agreement also
provides that if Mr. Coffey's base annual compensation for fiscal 1997 is
less than $450,000 and he voluntarily terminates his employment after the
Company files its Annual Report on Form 10-K for that fiscal year, then the
Company will be obligated to continue to pay Mr. Coffey's base annual
salary plus all benefits then in effect until April 1, 1999.
In April 1997, Mr. Coffey's employment agreement was replaced by an
agreement pursuant to which Mr. Coffey agreed that his employment with the
Company will terminate on May 15, 1997 or upon the filing of the Company's
Form 10-K for fiscal 1996 with the Securities and Exchange Commission,
whichever occurs first (the "Separation Date"). The Separation Date has
been extended upon mutual agreement of Mr. Coffey and the Company. Mr.
Coffey can terminate his employment at any time by giving the Company two
weeks written notice. The Company has agreed to pay Mr. Coffey, as salary
continuation, a sum equal to $525,000 during the 18 months following the
Separation Date (the "Severance Period"), subject to acceleration upon a
change of control of the Company and certain other events. In addition,
Mr. Coffey will receive up to $20,000 for outplacement services and certain
legal expenses. Mr. Coffey will be entitled to receive medical benefits
during the Severance Period, unless he is covered by a new employer. Mr.
Coffey's stock options will continue to vest in accordance with their
terms during the Severance Period.
In May 1996, Mr. Cook entered into an employment agreement with the
Company. The agreement provides for Mr. Cook to receive a base annual
salary of $300,000 and reflects the grant to Mr. Cook of options to
purchase 50,000 shares of Common Stock on April 24, 1996. The agreement
provides that if Mr. Cook's employment is terminated by the Company without
cause: (i) the Company will be required to pay Mr. Cook his base annual
salary as in effect at the time of termination in 12 monthly installments
during the one-year period following termination and (ii) Mr. Cook will be
prohibited from working for certain of the Company's competitors and from
soliciting the Company's employees during such period. For purposes of
this agreement, Mr. Cook's employment will be considered to have been
terminated by the Company without cause if, following a change in control
of the Company, Mr. Cook voluntarily terminates his employment as a result
of a reduction in his base salary or a material reduction in his duties or
responsibilities.
In April 1997, Mr. Cook entered into another agreement with the
Company providing for his retention as an executive until the earlier of a
sale of the Indirect Business and July 31, 1997 or, at the option of the
Company and subsequent to certain conditions, September 15, 1997 (the
"Retention Period"). During the Retention Period, the Company is required
to pay Mr. Cook an annual base salary of $300,000. In addition, if Mr.
Cook remains with the Company through the Retention Period, he will be
entitled to a $150,000 bonus. Furthermore, pursuant to the agreement, Mr.
Cook earned a $100,000 bonus upon the execution of the Acquisition
Agreement and will earn an additional $100,000 bonus if the Sale of the
Indirect Business is completed before October 31, 1997. If Mr. Cook
remains employed by the Company through the Retention Period, Mr. Cook will
receive as salary continuation his base salary of $300,000 for the 12 month
period following the subsequent termination of his employment with the
Company, other than a termination by the Company with cause. If Mr. Cook
is employed by an acquiring company, such salary continuation will cease on
April 30, 1998.
In August 1996, Mr. Norris entered into an employment agreement with
the Company. The agreement provides for Mr. Norris to receive a base
annual salary of $475,000, with an opportunity to receive a bonus of up to
an additional $250,000 per year. Mr. Norris also received reimbursement of
his relocation expenses, unused country club dues and private school
tuition and related tax gross-up. In addition, the Company has agreed to
pay for the premiums on Mr. Norris' life insurance policy. The Company
also agreed to reimburse Mr. Norris for any interest expense incurred, for
a period of one year, in connection with a loan the proceeds of which are
used to purchase stock options granted by his former employer. Pursuant to
the agreement, Mr. Norris received options to purchase 750,000 shares of
the Company's Common Stock, with an exercise price of $7.00 per share (the
"Initial Options"). These Initial Options are exercisable in four equal
installments, commencing August 27, 1997. The agreement also provides that
if Mr. Norris is employed by the Company on January 30, 1999 or the Company
terminates Mr. Norris' employment without cause on or before January 30,
1999, the Company is obligated to pay a bonus up to $1,700,000, less any
proceeds from the exercise of the Initial Options, based on the price of
the Company's Common Stock on January 30, 1999 compared to the exercise
price of the Initial Options. Upon termination without cause, Mr. Norris'
stock options will continue to vest in accordance with their terms. The
agreement provides that for a period of 12 months following the termination
of his employment without cause within the first 36 months of his
employment, Mr. Norris will continue to receive payment equal to his then-
current base salary.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Arnold S. Hoffman, a member of the Compensation and Stock Option
Committee, is a Senior Managing Director of Legg Mason, an investment
banking firm that provides advisory services to the Company. Legg Mason
provided financial advisory services to the Company and rendered the
fairness opinion to the Board of Directors in connection with the proposed
Sale of the Indirect Business.
William L. Rulon-Miller, a member of the Compensation and Stock Option
Committee, is a Senior Vice President and Co-Director of Corporate Finance
for Janney Montgomery Scott Inc. ("JMS"), an investment banking firm that
provides advisory services to the Company. JMS rendered fairness opinions
to the Board of Directors in connection with certain transactions in fiscal
1996 and provided investment advisory services in connection with the
issuance of the Company's Series B Convertible Preferred Stock in fiscal
1996.
STOCK PERFORMANCE CHART
The following chart compares the yearly percentage change in the
cumulative total shareholder return on the Company's Common Stock during
the five fiscal years ended February 1, 1997, with the cumulative total
return on the S&P Mid Cap 400 Index and a peer index comprised of seven
companies. The comparison assumes $100 was invested on February 1, 1992
(with dividends reinvested), in the Company's Common Stock, the S&P Mid Cap
400 Index and a composite index, weighted by market capitalization, of the
following seven companies: Compucom Systems, Inc., Dataflex Corporation,
Government Technology Services, Inc., Inacom Corp., Merisel, Inc.,
MicroAge, Inc., and Tech Data Corporation. Ameridata Technologies, Inc.,
which was a part of the Company's peer group index for fiscal 1995, was
purchased by a third-party and is no longer a publicly-traded company.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
AMONG THE COMPANY, S&P MID-CAP 400, AND PEER GROUP
MEASUREMENT PERIOD INTELLIGENT
FISCAL YEAR ENDED: PEER GROUP MID-CAP 400 ELECTORNICS
JANUARY 1992 $100.00 $100.00 $100.00
JANUARY 1993 122.65 111.34 69.46
JANUARY 1994 186.87 128.23 148.30
JANUARY 1995 99.86 122.08 53.54
JANUARY 1996 106.28 160.50 27.99
JANUARY 1997 154.51 195.66 25.04
<PAGE>
<PAGE>
COMPENSATION AND STOCK OPTION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
The Compensation and Stock Option Committee (the "Committee") for
fiscal 1996 consisted of five non-employee directors. The Committee is
responsible for determining the annual salary, bonus and incentive
compensation of the Company's executive officers and, on the basis of
recommendations received from executive officers, awarding incentive
compensation in the form of stock options to the Company's employees
generally. This report describes the policies of the Committee in
establishing the principal components of executive compensation for fiscal
1996.
The Committee's compensation policies for executive officers reflect a
commitment to attract and retain quality executives, to provide incentives
to the executives to achieve performance objectives that enhance
shareholder value and to reward executives for operational excellence. The
Committee believes that its policies are best served by a compensation
program that provides executives a competitive base salary, annual
incentive bonuses in amounts that reflect achievement of prescribed
financial targets and long-term incentives in the form of stock options.
In establishing compensation for executive officers, the Committee
considers industry data generally, the Company's financial performance and
industry position and the recommendations of the Chairman of the Board and
Chief Executive Officer. The Committee exercises judgment and discretion
in the information and analyses it reviews and considers.
In fiscal 1996, the Committee determined to reduce the base salary of
Richard D. Sanford, the Chairman and Chief Executive Officer, to $500,000.
In contrast with fiscal 1995, Mr. Sanford was also entitled to receive a
bonus of up to $1 million based on the price of the Company's Common Stock
at the end of fiscal 1996 as compared to fiscal 1995. Although the initial
bonus criterion was not met, the Committee determined to pay Mr. Sanford a
$350,000 bonus in recognition of his contributions to the Company during
the fiscal year, including the employment of a new president for the
Company and the successful completion by XLConnect of its initial public
offering.
In fiscal 1996, the Committee approved the reduction of the exercise
price, to $8.00 per share, of outstanding stock options having exercise
prices in excess of $8.00 per share, held by currently-active employees,
except certain executive officers. The Committee concluded that the
decline in the market price of the Company's Common Stock had frustrated
the purpose of these options (i.e., to attract and retain the employees'
services and to provide incentives for them to exert maximum efforts for
the Company's success), and that it was important to reduce the exercise
price of these options so as to reinstitute the incentive originally
intended to be afforded by the options. The terms of the repricings with
respect to options held by certain executive officers are described in the
table captioned "Ten-Year Option Repricing" set forth above.
Section 162(m) of the Internal Revenue Code imposes a $1 million limit
on the allowable tax deduction of compensation paid by a publicly-held
corporation to its chief executive officer and its other four most highly
compensated officers employed at year-end, subject to certain pre-
established objective performance-based exceptions. The Committee takes
Section 162(m) into account when formulating its compensation policies
for the Company's executive officers and to comply with Section 162(m), if
and where the Committee determines compliance to be practicable and in the
best interests of the Company and its shareholders.
William L. Rulon-Miller
Roger J. Fritz
William E. Johnson
Arnold S. Hoffman
John A. Porter
PAGE
<PAGE>
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
PRINCIPAL SHAREHOLDERS AND HOLDINGS OF OFFICERS AND DIRECTORS
The following table sets forth the number and percentage of shares of
Common Stock which, according to information supplied to the Company, are
beneficially owned by: (i) each person who is the beneficial owner of more
than 5% of the Common Stock; (ii) each of the directors and the nominees
for directorship of the Company individually; (iii) the Company's Chief
Executive Officer and each of the Company's four other most highly
compensated executive officers for fiscal 1996; and (iv) all current
directors and officers of the Company as a group. Under rules of the
Securities and Exchange Commission, a person is deemed to be the beneficial
owner of Common Stock with respect to which such person has or shares
voting power or investment power. A person is also deemed to be the
beneficial owner of shares of Common Stock as of a given date with respect
to which such person has the right to obtain voting or investment power
within 60 days of such given date, such as upon the exercise of options or
warrants. Unless otherwise indicated, the information in the following
table is as of May 7, 1997.
Percentage
Amount and Nature of Shares
of Beneficial Outstanding
Name of Beneficial Owner Ownership(1) (if 1% or greater)
- ------------------------------------------------------------------------------
Barry M. Abelson 419,279 (2) 1.2%
Mark R. Briggs 78,100 (3) --
Thomas J. Coffey 50,100 --
Timothy D. Cook 54,000 --
Christopher T. G. Fish 718,020 (4) 2.0%
Roger J. Fritz 60,004 --
Arnold S. Hoffman 6,000 --
William E. Johnson 40,000 --
Kathleen R. Mayo 200 (5) --
Michael A. Norris -- --
John A. Porter 50,000 --
Gregory A. Pratt 310,000 --
William L. Rulon-Miller 14,136 --
Richard D. Sanford 3,678,166 (6) 10.0%
Wellington Management Company 1,868,200 (7) 5.1%
Lazard Freres & Co. LLC 1,894,480 (8) 5.2%
All directors and current officers
as a group (12 persons) 5,151,588 (9) 13.8%
_________________________________
(1) The number of shares of Common Stock indicated in this table as
beneficially owned by the following individuals includes the
respective number of shares purchasable upon the exercise of stock
options which are exercisable within 60 days of May 7, 1997: Mr.
Briggs, 78,000; Mr. Coffey, 50,000; Mr. Cook, 50,000; Mr. Johnson,
20,000; Mr. Porter, 30,000; Mr. Pratt, 310,000; Mr. Sanford, 470,000;
and all directors and current officers as a group, 930,000.
(2) Includes 71,710 shares held in a trust (the beneficiary of which is a
child of Mr. Sanford) of which Mr. Abelson and Mr. Fish are
co-trustees; 128,262 shares held by Mr. Abelson as custodian for the
benefit of two children of Mr. Sanford; and 176,407 shares held by two
charities established by Mr. Sanford, of which Mr. Abelson is a
director or trustee. Mr. Abelson disclaims beneficial ownership as to
the shares held by the trust and charities and as custodian.
(3) Mr. Briggs resigned as the Company's Assistant to the Chairman on
December 31, 1996.
(4) Includes 612,310 shares owned by Sprint Investments, S.A. The sole
shareholder of Sprint Investments, S.A. is a trust, the beneficiaries
of which are the wife and children of Mr. Fish. Also includes 71,710
shares held in a trust (the beneficiary of which is a child of Mr.
Sanford) of which Mr. Fish and Mr. Abelson are co-trustees (as to
which shares Mr. Fish disclaims beneficial ownership) and 4,000 shares
held as custodian and in the name of Mr. Fish's daughter.
(5) Ms. Mayo resigned as the Company's Secretary on March 31, 1997.
(6) Includes 176,407 shares held by two charities established by Mr.
Sanford, of which Mr. Sanford is a director or trustee. Mr. Sanford
disclaims beneficial ownership as to the shares held by the charities.
(7) The information with respect to Wellington Management Company was
reported on a Schedule 13-G filed by Wellington Management Company
with the Securities and Exchange Commission on January 24, 1997, a
copy of which was received by the Company and relied upon in making
this disclosure. The address of Wellington Management Company is 75
State Street, Boston, Massachusetts, 02109.
(8) The information with respect to Lazard Freres & Co. LLC was reported
on a Schedule 13-G filed by Lazard Freres & Co. LLC with the
Securities and Exchange Commission on February 14, 1997, a copy of
which was received by the Company and relied upon in making this
disclosure. The address of Lazard Freres & Co. LLC is 30 Rockefeller
Plaza, New York, New York, 10020.
(9) Excludes shares owned by Mr. Briggs and Ms. Mayo, who are no longer
employed by the Company.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Barry M. Abelson is a partner in the law firm of Pepper, Hamilton &
Scheetz LLP, which provides legal services to the Company. The Company
believes that the fees charged by Pepper, Hamilton & Scheetz LLP are
comparable to those charged by other law firms for comparable services.
Arnold S. Hoffman is a Senior Managing Director of Legg Mason, an
investment banking firm that provides services to the Company. Legg Mason
provided financial advisory services to the Company and rendered the
fairness opinion to the Board of Directors in connection with the proposed
Sale of the Indirect Business. The Company believes that the fees charged
by Legg Mason are comparable to those charged by other investment banking
firms for comparable services.
William L. Rulon-Miller, a member of the Compensation and Stock Option
Committee, is a Senior Vice President and Co-Director of Corporate Finance
for Janney Montgomery Scott Inc. ("JMS"), an investment banking firm that
provides advisory service to the Company. JMS rendered fairness opinions
to the Board of Directors in connection with certain transactions in fiscal
1996 and provided investment advisory services in connection with the
issuance of the Company's Series B Convertible Preferred Stock in fiscal
1996.
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
INTELLIGENT ELECTRONICS, INC.
Date: June 2, 1997 /s/ Thomas J. Coffey
------------------------------------------
Thomas J. Coffey, Chief Financial
Officer, Treasurer, Senior Vice President,
Principal Accounting Officer
<PAGE>
<PAGE>
EXHIBIT INDEX
10.1 Retention Agreement between the Company and Timothy D. Cook dated
February 2, 1997.
10.2 Separation and Confidentiality Agreement between the Company and
Thomas J. Coffey dated April 16, 1997.
Exhibit 10.1
RETENTION AGREEMENT
-------------------
This RETENTION AGREEMENT ("Agreement") is made as of February 2, 1997 by
and between Timothy D. Cook, (hereinafter "Cook") an individual who resides
at _____________________________________________________, as well as each
and every dependent, heir executor, legal representative and assign of Cook,
and INTELLIGENT ELECTRONICS, INC. ("hereinafter "IE"), a business corporation
existing under the laws of the Commonwealth of Pennsylvania, having its
corporate headquarters at Exton, Pennsylvania.
WHEREAS, IE is examining various strategic alternatives including but
not limited to the potential disposition of its indirect reseller business
and IE desires that Cook commit to remain in IE's employ at least through the
earlier of a possible "sale" (defined below) of IE's indirect reseller
business or July 31, 1997 (the "Retention Period"), provided, however, that
the Retention Period can be extended at the election of IE to a date or dates
not later than September 15, 1997 if, on July 31, 1997, IE has entered into a
definitive agreement for the possible "sale" and continues thereafter to use
its best efforts to complete the closing thereunder.
WHEREAS, Cook is willing to commit to remain in IE's employ as Chief
Operating Officer, Reseller Network Division for the Retention Period.
NOW THEREFORE, in consideration of the mutual promises hereinafter set
forth, Cook and IE, acting of their own free will and intending to be legally
and irrevocably bound, hereby agree as follows:
1. RETENTION PERIOD. Cook agrees to remain in the employ of IE as Chief
Operating Officer, Reseller Network Division (hereinafter "RND") for the
Retention Period. Unless otherwise mutually agreed to between IE and Cook, at
the end of the Retention Period Cook agrees to resign from all positions with
IE and his employment with IE shall be terminated. During the Retention
Period, and through any extension of this Agreement, unless Cook is
terminated for cause (defined below) or a possible sale (defined below) is
concluded, IE will pay Cook an annual base salary of $300,000 in equal semi-
monthly installments in the same manner and subject to the appropriate
federal, state and local tax withholdings. l E agrees that the base salary
will not be reduced during his continued employment in his present job.
2. RETENTION BONUS. In addition to the base salary, and provided that Cook
remains as an employee through the Retention Period, unless terminated for
cause (defined below) Cook shall be entitled to receive a "Retention Bonus"
of $150,000,("Minimum Bonus") in semi-monthly installments of $25,000 per
month, beginning February 2, 1997 and continuing through July 31, 1997. The
Retention Bonus will be paid in part and accrued in part on a monthly basis
based on the following schedule:
Month Paid Accrued
February $6,250 $ 18,750
March 8,750 16,250
April 11,250 13,750
May 13,750 11,250
June 16,250 8,750
July 18,750 6,250
TOTALS 75,000 75,000
The accrued Retention Bonus will be paid in a single lump sum on September
15, 1997, subject to appropriate withholding and provided Cook is still
employed on the expiration of the Retention Period. In the event of a
possible sale (defined below) of RND prior to the expiration of the Retention
Period, then the total Retention Bonus of $150,000 less amounts previously
paid in cash, will be paid within two weeks of the closing date of the
transaction.
3. SALE BONUS. In recognition of his efforts to assist in the possible sale
(defined below) of RND, IE will pay Cook a "Sale Bonus" of $100,000, minus
applicable tax withholdings, if a definitive agreement for the sale is
executed on or before the expiration of the Retention period. In addition, in
the event a "Sale Bonus" is payable, IE agrees to pay Cook an additional
$100,000 if IE closes or completes a possible sale of RND prior to October
31, 1997; this amount will be paid within 30 days after the closing of the
sale. Cook acknowledges that there is no assurance that a sale will take
place.
4. TITLE AND RESPONSIBILITIES. IE agrees to retain Cook's title as Chief
Operating Officer, Reseller Network Division, reporting to the President,
during the Retention Period. IE and Cook agree that the basic
responsibilities of Cook's job will not change during the Retention Period,
however, IE reserves the right to assign additional responsibilities as
necessary to maintain business operations.
5. SALARY CONTINUATION. Upon the termination of Cook's employment and
provided Cook has met and continues to meet the conditions and obligations
set out in this Agreement, IE agrees to pay Cook as "Salary Continuation" a
sum equal to his annual base salary of $300,000, payable in equal semimonthly
installments and subject to appropriate tax withholdings, for a twelve-month
period ("Severance Period") following termination of his employment with IE,
unless IE ceases to operate or Cook voluntarily accepts employment with the
acquiring company during the Severance Period. If IE ceases to operate during
the Severance Period, IE will pay Cook the remaining balance of his Salary
Continuation in a lump sum, payable upon the cessation of operations. In the
event that Cook accepts employment with an acquiring company, then this
Salary Continuation will cease on April 30, 1998. If IE and Cook agree to
extend his employment past the Retention Period, this Salary Continuation
will begin after his eventual termination of employment with IE. IE will have
no obligation to pay a Salary Continuation if Cook is terminated for cause as
defined in Paragraph 10, below.
6. MEDICAL BENEFIT CONTINUATION. During the Severance Period, IE agrees to
provide Cook full coverage under the Company's comprehensive group medical
benefits program, subject to the terms of the plan. Any required employee
contribution to the medical plan will be deducted from Cook's Salary
Continuation payments. In addition, IE agrees that all of the benefits that
are to be provided to Cook pursuant to this Agreement will be provided to his
heirs in the event of his death during the period in which such benefits are
being provided. Cook's 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 at the termination of such twelve month period.
IE's obligation to continue medical coverage will cease if Cook becomes
eligible to participate in a comparable medical plan with a new employer. In
this case, Cook agrees immediately to notify IE by written notice to W.
Evelyn Walker, Vice President of Human Resources, or her successor.
7. HEALTH CLUB CONTINUATION. During the Severance Period, IE agrees to pay
the Company's portion of fees related to Health Club Membership in the
Greenwood Athletic Club for Cook. Any required employee deduction will be
deducted from Cook's Salary Continuation payments. If Cook ceases his
membership in the Greenwood Athletic Club, then IE has no further obligation
to continue the Company's portion of membership payments on his behalf.
8. STOCK OPTIONS. IE agrees that Cook will, for the period during which Cook
is receiving Salary Continuation payments, continue to vest in his IE stock
options in accordance with the terms of his stock option agreements. Cook's
rights under the terms of his stock options shall remain exercisable up to
and including thirty (30) days after his last Salary Continuation payment.
9. PRECONDITION. It is specifically agreed that Cook shall only be entitled
to the remainder of the cash payments and the total accrued portion of the
Retention Bonus; Sale Bonus; Salary; Salary Continuation; Medical Benefit or
Health Club Continuation; option vesting; and the other benefits provided in
this Agreement if he remains employed by IE until the end of the Retention
Period. However, if Cook's employment is terminated before the end of the
Retention Period by IE for any reason other than for cause or in the event of
a possible sale, as defined in Paragraph 10 below, Cook shall be entitled to
the Retention Bonus; Sale Bonus; Salary; Salary Continuation; Medical and
Health Club Continuation; option vesting; and other benefits of the Agreement
and shall also be bound by the full terms of this Agreement.
10. DEFINITION OF TERMS. For the purpose of this Agreement, "cause" shall
mean Cook's commission of a felony, gross negligence, fraud or material
failure to use his best efforts to perform his duties to the Company, which
material failure continues for a period of 30 days after written notice
thereof from the Company to Cook. As used herein, the term "sale" shall mean
the closing of a transaction(s) that transfers ownership of all or
substantially all of the assets or revenue-based operations of RND to a
successor company.
11. CONFIDENTIALITY.
(a) Cook 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; specifications; know-how; any associated programmer,
user, or other manuals or other like textual materials (including any other
data and materials use din performing Cook's duties); all computer inputs 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; any other materials prepared by Cook 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.
(b) Cook agrees that he will, effective the date of his employment
termination: (i) discontinue all use of Confidential Information; (ii) return
to IE all material furnished by IE that contains Confidential Information;
(iii) erase or destroy any Confidential Information contained in computer
memory or data storage apparatus under the ownership or control of Cook; and
(iv) remove Confidential Information from any software under the ownership or
control of Cook that incorporates or uses Confidential Information in whole
or in part.
(c) Cook agrees to return to IE on the effective date of his
employment termination, 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 any of the foregoing.
12. CONFIDENTIALITY OF TERMS. Cook agrees that the terms of this Agreement
shall remain completely confidential, and he will not hereafter disclose any
information concerning this Agreement to anyone except: (a) his family; (b)
his personal attorney, if any; (c) his personal financial and/or tax
advisors; (d) taxing authorities and (e) as otherwise may be required by law
or court order. Cook further understand that such information may be
disclosed to the aforementioned individuals only on the condition that such
individuals in turn agree to keep such information completely confidential,
and not disclose it to others, except as may otherwise be required by law or
court order.
13. WAIVER AND RELEASE OF CLAIMS. Cook completely releases, relinquishes,
waives and discharges IE, its predecessors, successors (by merger or
otherwise), parents, subsidiaries, affiliates, divisions, officers,
directors, employees and agents, whether present or former, from all claims,
liabilities, demands and causes of action, known or unknown, filed or
contingent, which he may have or claim to have against IE as of the date of
the signing of this Release arising out of or in any way related to his
employment with the Company or the termination of that employment. Cook
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:
(a) the Age Discrimination in Employment Act (ADEA), which
prohibits age discrimination in employment.
(b) Title VII of the Civil Rights Act of 1964, as emended by the
Civil Rights Act of 1991, which prohibits discrimination in employment based
on race, color, national origin, religion or sex;
(c) the Americans with Disabilities Act (ADA, which prohibits
discrimination on the basis of a covered disability;
(d) the Employer Retirement and Income Security Act (ERISA), which
prohibits discrimination on the basis of entitlement to certain benefits;
(e) any other federal, state or local laws or regulations
prohibiting employment discrimination; (f) breach of any express or implied
contract claims;
(g) wrongful termination or any other ton claims, including claims
for attorney's fees, whether based on common law, or otherwise.
Cook understands, however, that by signing this release, he does not waive
rights to: (a) claims arising under any applicable worker's compensation
laws; (b) any claims which the law states may not be waived; and (c) his
vested rights under the regular employment benefit plans of the Company, in
effect as of the date of this Agreement.
14. COOPERATION IN DEFENDING LEGAL ACTIONS. Cook 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. Cook also agrees that he
will cooperate with and assist IE in its defense of any such action or
proceeding, subject to reimbursement of reasonable out-of pocket expenses.
This Agreement shall not preclude Cook from testifying in such an action or
proceeding if he is compelled to do so pursuant to a subpoena or other court
order. However, Cook expressly agrees that he will provide written notice
addressed to the attention of Barry M. Abelson, Esquire, Pepper, Hamilton &
Scheetz, LLP, 3000 Two Logan Square, Philadelphia PA 19103 (Fax No: 215-981-
4750) 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 48 hours of each such
receipt by Cook or anyone acting on his behalf.
15. 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 Denver, Colorado under, and in accordance with, the rules and
procedures of the American Arbitration Association. In any such arbitration
proceeding, the prevailing party shall be entitled to an award of reasonable
attorney's fees.
16. ENFORCEMENT. All remedies at law and equity shall be available for the
enforcement of this Agreement. This Agreement may be pleaded as a full bar to
the enforcement of any claim in any way related to or arising out of Cook's
employment with IE and/or the termination thereof.
17. OPPORTUNITY TO REVIEW. Cook hereby acknowledges that he is acting of his
own free will, that he has been afforded sufficient time to 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.
18. INDEMNIFICATION: To the extent permitted by law, IE agrees to defend,
indemnify and hold Cook harmless against any threatened or pending action or
proceedings, whether brought by a third party or as a derivative action, by
reason of the fact that Cook was an officer or representative of IE.
19. DISPARAGING REMARKS. Each party agrees to refrain from making disparaging
remarks concerning the other.
20. 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 provisions, and that it
shall be binding upon the respective parties as well as their heirs,
executors, successors, administrators and assigns. 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 Cook.
IN WITNESS WHEREOF, Cook and IE each acknowledge that they are
acting on 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 set forth below.
/s/ Michael A. Norris Date 4/3/97
- ----------------------------------------------------- -------------------
Michael A. Norris, President, Intelligent Electronics
/s/ Timothy D. Cook Date 4/3/97
- ----------------------------------------------------- ------------------
Timothy D. Cook
/s/ Steven M. Kawalick Date 4/3/97
- ----------------------------------------------------- ------------------
Witness
Exhibit 10.2
SEPARATION AND CONFIDENTIALITY AGREEMENT
THIS SETTLEMENT AGREEMENT ("Agreement") is made by and between Thomas
J. Coffey ("Coffey"), an individual who resides at ______________________
______________, as well as each and every dependent, heir, executor,
legal representative and assign of Coffey, 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.
WHEREAS, the parties intend that Coffey's employment as Senior Vice
President and Chief Financial Officer with IE will terminate on May
15, 1997, or the date when IE files its Form 10-K for the fiscal year ended
on February 1, 1997 with the Securities and Exchange Commission, whichever
is earlier ("Separation Date").
WHEREAS, Coffey and IE desire to part on an amicable basis.
NOW THEREFORE, in consideration of the mutual promises hereinafter set
forth, Coffey and IE acting of their own free will and intending to be
legally and irrevocably bound, hereby agree as follows:
1. Employment Termination. Coffey agrees that his employment with IE
will terminate on May 15, 1997, or upon the filing of IE's Form 10-K for
the fiscal year ended on February 1, 1997 with the Securities and Exchange
Commission, whichever occurs first. Upon the Separation Date of his
employment, Coffey agrees to resign from all positions with IE. IE and
Coffey may mutually agree to have Coffey remain as an employee of IE beyond
the Separation Date. If Coffey elects to remain as an IE employee beyond
the Separation Date, he may, in his sole and absolute discretion, elect at
any time after the Separation Date to terminate his employment with IE by
providing IE with at least two (2) weeks written notice. Upon such
subsequent termination of his employment with IE, Coffey shall be entitled
to receive all of the benefits set forth in this Agreement as if the
Separation Date were the date of Coffey's actual termination of his
employment with IE.
2. Salary Continuation. On the Separation Date and provided Coffey
has met and continues to meet the conditions and obligations set out in
this Agreement, IE agrees to pay Coffey, as salary continuation, a sum
equal to his current base salary of Five Hundred Twenty Five Thousand
Dollars ($525,000) for eighteen (18) months following Coffey's Separation
Date ("Severance Period"). This salary continuation will be paid in equal
bi-weekly installments in the same manner and with the same federal, state
and local tax withholdings as Coffey's current salary.
3. Medical Benefit Continuation. For an eighteen (18) month period
following Coffey's Separation Date ("Severance Period"), IE will provide
Coffey and his family full coverage under the IE group medical program
subject to the terms of the medical plan. Any required employee
contribution to the medical plan premium will be deducted from Coffey's
monthly salary continuation payments during Severance Period. Coffey's
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 Coffey's
Severance Period. IE's obligation to continue medical coverage will cease
if Coffey becomes eligible to participate in a comparable medical plan with
a new employer. In this case, Coffey agrees to immediately notify IE by
written notice to W. Evelyn Walker, Vice President of Human Resources. Upon
notification of becoming eligible to participate in a comparable medical
plan, any deductions then being made from Coffey's salary continuation
payments will cease immediately.
4. Stock Options. IE agrees that Coffey will, up to and including
Separation Date and during the Severance Period, continue to vest in his
stock options in accordance with the terms of his stock option agreements.
Coffey' s rights under the terms of his stock options shall remain
exercisable up to and including 30 days after the end of the Severance
Period. Coffey agrees that he no longer has any rights to options he may
have had with XLConnect, Inc.
5. Other Benefits. IE agrees to extend to Coffey the following
additional benefits:
a. IE will provide executive outplacement services to Coffey for a
maximum of six (6) months following his Separation Date, with a maximum
payment to an outplacement firm of Thirteen Thousand Five Hundred Dollars
($13,500).
b. IE will provide a maximum reimbursement of $7,500 to Coffey for
reasonable expenses incurred by Coffey to seek legal counsel regarding this
Agreement.
6. Precondition. It is specifically agreed that Coffey shall only be
entitled to salary continuation, medical coverage, option vesting, and the
other benefits provided in this Agreement if he remains employed by IE until
at least the earlier of either May 15, 1997, or the filing of IE's Form 10-K
for the fiscal year ended on February 1, 1997 with the Securities and Exchange
Commission. However, if Coffey's employment is terminated by IE before the
agreed Separation Date for any reason other than for Cause as defined in
Paragraph 7 below, Coffey shall be entitled to the salary continuation and
other benefits of this Agreement and shall also be bound by the full terms of
this Agreement.
7. Termination for Cause. In the event Coffey is terminated for cause as
defined in this paragraph before the agreed Separation Date, IE shall not be
obligated to provide the salary continuation or other benefits set out in
this Agreement. "Cause" shall include each of the commission of a crime
willful misconduct, material neglect of duties and gross negligence.
8. Resignation for Good Reason. Coffey shall be entitled to terminate
his employment with IE at any time prior to Separation Date upon prior
written notice to IE for good reason. For purposes of this Agreement, "Good
Reason" shall mean (a) any material reduction in the scope of Coffey's
responsibilities or creation by IE of intolerable working conditions for
Coffey (Coffey acknowledges that his current working conditions are not
intolerable); (b) any material breach by IE of the terms of this Agreement;
or (c) any Change of Control in IE. In the event of Coffey's resignation for
Good Reason Coffey shall be entitled to payment of base compensation and
accrued benefits through the date of termination of employment, plus all of
the other benefits set forth in this Agreement as if Coffey had terminated
his employment on the Separation Date in accordance with the terms of this
Agreement. For purposes of this Agreement, a Change of Control of IE shall be
deemed to have occurred upon the earliest of the following events:
(1) 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 Voting Stock.
(2) Upon the distribution by IE of all or substantially all of its
assets pursuant to a plan of liquidation; or
(3) 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.
9. Acceleration of Salary Continuation Payments. In the event of a
Change of Control in IE (as defined in paragraph 8 above) at any time before
or after the Separation Date or as a result of which IE has neither
significant assets (defined as total assets of less than $100 million at any
time) nor significant operations (defined as revenues during any quarterly
reporting period of less than $100 million) or tangible net worth (total
shareholders' equity less goodwill) of less than $20 million, the salary
continuation payments due to Coffey pursuant to the terms of this Agreement
shall be accelerated so that Coffey shall receive within fifteen (15)
business days of either such event a lump sum payment equal to the balance of
salary continuation payments Coffey would have received over the remaining
Severance Period.
10. Confidentiality:
a. Coffey 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, specifications, know-how, any associated programmer,
user or other manuals or other like textual materials (including any other
data and materials used in performing Coffey's duties); all computer inputs
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 Coffey 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.
b. Coffey agrees that he will, effective on Separation Date or earlier
termination of employment: (i) discontinue all use of Confidential
Information; (ii) return to IE all material furnished by IE that contains
Confidential Information; (iii) erase or destroy any Confidential Information
contained in computer memory or data storage apparatus under the ownership or
control of Coffey; and (iv) remove Confidential Information from any software
under the ownership or control of Coffey that incorporates or uses
Confidential Information in whole or in part.
c. Coffey 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 Coffey can purchase at agreed
upon prices IE's equipment being used by him including the laptop computer,
the facsimile machine and printer at his residence.
11. Confidentiality of Terms. Coffey agrees that the terms of this
Separation and Confidentiality Agreement shall remain completely
confidential, and he will not hereafter disclose any information concerning
this Agreement and the General Release to anyone except: (a) his spouse and
family; (b) his personal attorney, if any: (c) his personal financial and/or
tax advisors; (d) taxing authorities and (e) as otherwise may be required by
law or court order. Coffey further understands that such information may be
disclosed to the aforementioned individuals only on the condition that such
individuals in turn agree to keep such information completely confidential,
and not disclose it to others, except as may otherwise be required by law or
court order. Coffey agrees not to disclose his intent to resign to any
persons other than executive officers and member of the Board of Directors of
IE prior to May 15, 1997, or upon the filing of IE's Form 10-K for the fiscal
year ended on February 1, 1997 with the Securities and Exchange Commission,
whichever occurs first. After his Separation Date, or earlier termination of
employment, and in response to any inquiries by employees of IE or third
parties concerning any of the terms of this Agreement, his employment or the
termination thereof, Coffey agrees to state only that he resigned his
employment to pursue other interests. IE and Coffey will agree on any press
release or other public disclosures relative to his departure including
wording in IE's Proxy statement.
12. Waiver and Release of Claims. Coffey completely releases,
relinquishes, waives and forever discharges IE, its officers, directors,
employees, agents, 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 Coffey every 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 Coffey's employment with IE and its subsidiaries
and affiliates, his membership of any of IE's Boards of Directors or the
termination of employment and membership; provided however, that nothing
contained herein shall release IE from its obligations under this Agreement.
Coffey 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:
a. The Age Discrimination in Employment Act (ADEA), which prohibits
age discrimination in employment;
b. 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;
c. The Americans with Disabilities Act (ADA), which prohibits
discrimination on the basis of a covered disability;
d. The Employer Retirement and Income Security Act (ERISA), which
prohibits discrimination on the basis of entitlement to certain benefits;
e. Any other federal, state or local laws or regulations prohibiting
employment discrimination;
f. Breach of any express or implied contract claims;
g. Wrongful termination or any other tort claims, including claims for
attorney's fees whether based on common law, or otherwise.
Coffey understands, however, that by signing this Release, he does not waive
rights to (a) claims arising under any applicable worker's compensation laws;
(b) any claims which the law states may not be waived and (c) his vested
rights under the regular employment benefit plans of IE, in effect as of the
date of this Agreement.
IE hereby completely remises, releases, relinquishes, waives and forever
discharges Coffey 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 on any of their Boards of Directors or the
termination of that employment and membership; provided however, that nothing
contained herein shall release Coffey 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.
13. Indemnification. To the extent permitted by law, IE agrees to
defend, indemnify and hold Coffey 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 Coffey was an officer or representative of
IE acting within the scope of his employment.
14. Cooperation in Defending Legal Actions. Coffey 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. Coffey also agrees
that he will cooperate with and assist IE in its defense of any such action
or proceeding. This Agreement shall not preclude Coffey from testifying in
such an action or proceeding if he is compelled to do so pursuant to a
subpoena or other court order. However, Coffey expressly agrees that he will
provide written notice addressed to the attention of Barry M. Abelson
Esquire, Pepper Hamilton & Sheetz, LLP, 3000 Two Logan Square, Philadelphia,
PA 19103 (Fax No. 215-981-4750) 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 Coffey or anyone acting on his
behalf.
15. Announcements and Non-Disagreement. The parties hereby agree that
all public disclosure regarding the reasons for the termination of Coffey's
employment and other positions with the Company shall be agreed upon between
the parties in advance, which agreement will not be unreasonably withheld and
shall be consistent with Paragraph 11. 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
Michael Norris, whose comments shall be positive in nature and not
inconsistent with the provisions of this paragraph.
16. 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.
17. 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 any claim in any way related to or arising
out of Coffey's employment with IE and/or the termination thereof.
18. Opportunity to Review and Right to Revoke. Coffey 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 advice of counsel, and that he is
voluntarily entering into this Agreement with full knowledge of its
respective provisions and effects. Coffey also acknowledge 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.
19. 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 provisions, and
that it shall be binding upon the respective parties as well as their heirs,
executors, successors, administrators and assigns. 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 agreement,
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 Coffey.
IN WITNESS WHEREOF, Coffey 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 set forth below.
/s/ Thomas J. Coffey /s/ W. E. Walker
- -------------------------------- --------------------------
Thomas J. Coffey Witness
Dated: 4/16/97
----------------
On behalf of INTELLIGENT ELECTRONICS, INC.:
By: /s/ Richard D. Sanford /s/ W. E. Walker
----------------------------- ---------------------------
Witness
Title: CEO
-------------------------
Date: 4/16/97
--------------------------
