SETTLEMENT AGREEMENT AND AMENDMENT TO EMPLOYMENT AGREEMENT

             This Settlement Agreement and Amendment to Employment Agreement
(the “Agreement”) is entered into as of December 9, 2009 between SED
INTERNATIONAL HOLDINGS, INC., a Georgia corporation (“SED”) and Jean Diamond, an
individual resident of the State of Georgia (the “Employee”). Defined terms used
herein and not otherwise defined have the meanings ascribed to them in the
Amended and Restated Employment Agreement, dated January 15, 2008, between SED
and the Employee (the “Employment Agreement”).

             WHEREAS, SED and Employee are parties to the Employment Agreement
which provides for the terms of Employee’s employment with SED; and

             WHEREAS, Employee desires to resign and, in connection with such
resignation, to amend the Employment Agreement; and

             WHEREAS, SED and Employee wish to settle, compromise, and resolve
any and all disputes relating to Employee’s resignation and her employment with
SED and to amend the Employment Agreement correspondingly.

NOW, THEREFORE, in consideration of the above recitals and of the promises,
agreements and conditions hereof, and further good and valuable consideration
the receipt and legal sufficiency of which are hereby acknowledged, Employee and
SED agree as follows:

1.          Employee hereby resigns as Chief Executive Officer of SED (including
any applicable subsidiaries of SED) effective on December 9, 2009 (the
“Effective Date”). However, Employee will provide services to SED as a senior
management consultant until June 21, 2010 to assist and consult with Jonathan
Elster, and/or such other person who is designated by the Board, who assumes the
responsibilities of Chief Executive Officer of SED (the “New CEO”), all as
requested by the Board of Directors of SED (the “Board”). During the period from
December 9, 2009 to June 21, 2010, the New CEO will be responsible for and have
full authority relating to SED’s operational decisions. SED and Employee
anticipate that Employee’s non-director services performed for SED pursuant to
this paragraph, if any, will be in an amount that is less than twenty percent of
the average time that Employee devoted to performing non-director services for
SED during the thirty-six months preceding the Effective Date.

2.          Employee shall have the use of her current office from the Effective
Date through and including June 21, 2010. On a part-time basis (a maximum of 10
hours weekly), Employee shall be entitled to utilize the secretarial and
administrative services of Barbara Gay from the Effective Date through June 21,
2010, subject to Ms. Gay’s other corporate duties. If Ms. Gay departs SED during
that time period, Employee shall be entitled to utilize the secretarial and
administrative services of another suitable SED employee. SED will not deny to
Employee the use of her office or Barbara Gay until June 21, 2010 for any reason
except if the Board and the New CEO determine that Employee is disrupting the
day-to-day operations of SED. Notwithstanding anything to the contrary herein,
SED’s obligations under this paragraph 2 shall be subject to the Employee’s
continued and binding obligation under the Agreement and General Release, dated
an even date, attached as Exhibit B hereto (the “Agreement and General
Release”).

3.          On June 21, 2010, SED shall pay to Employee the lump sum payment
required by Section 4(c) of the Employment Agreement in the amount of U.S. One
Million Six Hundred Thousand dollars and no cents ($1,600,000.00)(the
“Termination Amount”), subject to a reduction in the amount of U.S. Sixty Four
Thousand Eight Hundred dollars ($64,800.00) pursuant to paragraph 5 of this
Agreement. SED may not avoid paying the Termination Amount to Employee for
“Cause” as that term is defined in the Employment Agreement, or for any other
reason. The Termination Amount is not subject to forfeiture, and Employee shall
not have any obligation to re-pay any portion of the Termination Amount to SED
with respect to director’s compensation, in whatever form received, earned by
her subsequent to the Effective Date.

4.          Employee will remain a member of the Board through her current term
which expires at the annual

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meeting of stockholders for the fiscal year ending June 30, 2011. Beginning on
the Effective Date, SED shall pay a director’s fee to the Employee in a
pro-rated amount equivalent to the annual fees and benefits that SED provides to
its other outside directors. For subsequent years that Employee remains on the
Board, SED shall pay a director’s fee to Employee that is equal to the annual
fees and benefits that SED pays to its other outside directors.

5.          SED shall allow Employee to have continued use of the 2008
Mercedes-Benz S550 automobile provided to Employee pursuant to Section 3(c) of
the Employment Agreement until such time that it transfers title to such
vehicle, on June 21, 2010, to Employee. The Kelly Bluebook value of such vehicle
as of the Effective Date, using the private party pricing report and assuming
that the vehicle is in “good condition,” as indicated in the latest edition of
the Kelly Bluebook prior to such date, shall be deducted from the Termination
Amount when paid in accordance with paragraph 3 of this Agreement.

6.          SED shall continue to lease the building located at 4916 North Royal
Atlanta Drive, Tucker, Georgia 30084 through its current term expiring on
September 30, 2011 pursuant to the terms of the existing lease.

7.          On June 21, 2010, SED shall pay all legal fees in connection with
the preparation of this Agreement, the Agreement and General Release and related
documents including, a fee to Caldwell & Watson, LLP, up to a maximum of
$15,000.

8.          Employee shall take any and all actions necessary or requested by
SED to convey her shares of SED International de Colombia Ltda and Intermaco
S.R.L. without receiving any additional consideration.

9.          Except as may be required by law, neither Employee nor SED,
including its officers, directors, affiliated entities, successors or assigns,
shall make any untruthful, derogatory, disparaging or defamatory statement about
the other party, or about SED’s products or services, to any third party;
provided, however, that SED shall neither be prohibited from disclosing the fact
of Employee’s resignation so long as such disclosure is factual and not
materially beyond, or materially inconsistent with, the disclosure in the press
release, in the form attached hereto as Exhibit A, nor shall SED be prohibited
from providing factually accurate information to its employees that in good
faith is necessary for the proper conduct of operations. On or after December
11, 2009, SED will issue a press release in the form attached hereto as Exhibit
A.

10.          (a) Subject to the terms of this Agreement, SED, on behalf of
itself and on behalf of its agents, officers, directors, employees,
shareholders, successors, assigns, and other legal representatives, releases and
forever discharges Employee (individually and in any other capacity), as well as
her agents, attorneys, assigns, and other legal representatives (collectively
the “SED Releasees”), from any and all debts, claims, demands, liabilities,
assessments, actions or causes of action, whether in law or in equity, whether
direct or indirect, whether presently known or unknown, which SED had, now has,
may have had, or may claim to have against the SED Releasees, prior to and as of
the Effective Date of this Agreement.

               (b) Subject to the terms of this Agreement, Employee, on behalf
of herself and on behalf of her agents, assigns, and other legal
representatives, releases and forever discharges SED, as well as its directors,
officers, affiliated entities, agents, attorneys, successors, assigns, and other
legal representatives (collectively the “Employee Releasees”), from any and all
debts, claims, demands, liabilities, assessments, actions or causes of action,
whether in law or in equity, whether direct or indirect, whether presently known
or unknown, which Employee had, now has, may have had, or may claim to have
against the Employee Releasees, prior to and as of the Effective Date of this
Agreement.

11.          Neither SED, nor any of its officers or directors, nor Employee
shall (a) be plaintiffs in any class or derivative actions against the other
party, or pay for or otherwise support the bringing of any such litigation
arising out of any action, inaction, or event occurring on or before the
Effective Date, or (b) cause the U.S. Securities & Exchange Commission or other
administrative agency to take any action against the Employee, SED, or any of
its other directors or affiliates arising out of any action, inaction, or event
occurring on or before the Effective Date.

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12.          This Agreement shall be governed in all respects, including as to
validity, interpretation and effect, by the laws of the State of Georgia.

13.          Except as amended by this Agreement, the terms and provisions of
the Employment Agreement shall continue in full force and effect.

14.          On the Effective Date, Employee shall deliver to SED an executed
copy of the Agreement and General Release.

15.          This Agreement contains a release of claims for damages which may
not be known by the parties. Each party hereto is represented by counsel, has
fully read and understands this Agreement, and consents to it. By executing this
Agreement, each party acknowledges that it fully understands and voluntarily
accepts the benefits, risks, and obligations of this Agreement and waives any
future claim based on an assertion that it has not fully read or completely
understood this Agreement.

               IN WITNESS WHEREOF, the Agreement has been executed by the
parties on the dates set forth below.

 

 

 

 

 

Dated: as of December 9, 2009

 

SED INTERNATIONAL HOLDINGS, INC.

 

 

 

 

 

 

By: 

/s/ Jonathan Elster

 

 

 

 

 

 

 

 

    Jonathan Elster, President

 

 

 

 

 

Dated: as of December 9, 2009

 

EMPLOYEE:

 

 

 

 

 

 

/s/ Jean A. Diamond

 

 

 

 

 

 

     Jean A. Diamond

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