You'd better also plan and execute a... "due diligence" with your business/technology, before and during termination. This fellow has to know termination is a possibility, and while he continues to work there -- and given the attitude he's already expressed -- who knows what "mines"/"bombs"/"trapdoors" he may be putting in place.

Maybe he's not that sort of fellow. But... he already slept with your wife. And... he's not willing to take the initiative and bow out gracefully, now that this is known.