EXHIBIT 10.4 JAMES E. MINARIK SALE BONUS AGREEMENT

 

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                                                                    EXHIBIT 10.4

 

 

                                JAMES E. MINARIK

                              SALE BONUS AGREEMENT

 

      THIS SALE BONUS AGREEMENT (this "Agreement"), is made and entered into as

of December 7, 2004, between DEI HOLDINGS, INC. (the "Company") and JAMES E.

MINARIK (the "Executive").

 

                                    Recitals

 

      A. The Executive and Directed Electronics, Inc., a subsidiary of the

Company ("DEI"), have entered into an Amended and Restated Employment Agreement,

dated as of January 1, 2004 (the "Employment Agreement").

 

      B. Pursuant to a recapitalization of the Company, effective as of June 17,

2004, (i) the Company paid a special dividend to its shareholders, and (ii) in

connection with such dividend, the Company paid to Executive $1,280,007 pursuant

to that certain Third Amended and Restated Equity Participation Right Agreement,

dated as of January 1, 2004, between the Company and the Executive (the "Prior

Agreement").

 

      C. On or about September 17, 2004, certain Company shareholders

contributed $6.0 million additional equity to the Company in connection with an

acquisition.

 

      D. The parties are entering into this Agreement for the purpose of (i)

providing the Executive an incentive to increase the value of the Company by

granting him the right to receive a percentage of the proceeds received by the

Company's shareholders as a result of certain liquidity events, and (ii)

terminating the Prior Agreement.

 

      E. The parties' intent is that upon specified liquidity events, the

Company pay to the Executive a percentage of the proceeds distributable to

common holders (not warrant holders) as follows:

 

            (i)   the Executive shall not receive any percentage of the net

                  proceeds necessary to "repay" a "base equity amount" equal to

                  the sum of (x) the $6.0 million of equity contributed in

                  September 2004, plus (y) any additional equity contributed

                  after the date hereof, together with a 12% annual "preferred

                  return" on such additional equity;

 

            (ii)  the Executive shall receive 2.25% of the next $79,774,798 of

                  net proceeds above the base equity amount, up to a maximum of

                  $1,794,933 (i.e., 2.25% of such proceeds amount, which,

                  together with the $102,443,890 previously paid as a special

                  dividend to the Company's shareholders, equals $182,218,688,

                  or four times such shareholders' initial equity investment of

                  $45,554,672);

 

            (iii) if the net proceeds are more than $79,774,798 but less than

                  $83,750,000 above the base equity amount, the Executive shall

                  receive (x) 2.5% of such excess proceeds, up to $99,380 (i.e.,

                  2.5% of $3,975,202), plus (y) 0.25% of the first $136,664,016

                  (i.e., $182,218,688 less the $45,554,672 initial equity

                  investment), or $341,660;

 

            (iv)  as a result, if there are $83,750,000 of net proceeds

                  distributable to common holders in excess of the base equity

                  amount, the Executive shall receive $2,235,973 (i.e.,

                  $1,794,933 plus $99,380 plus $341,660); and

 

            (v)   the Executive shall receive 5% of all net proceeds

                  distributable to common holders in excess of the sum of (x)

                  the base equity amount, plus (y) $83,750,000.

 

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      F. Attached as Annex A are certain examples showing the payment due the

Executive under various sale scenarios.

 

                                    Agreement

 

      NOW THEREFORE, intending to be legally bound, the parties hereby agree as

follows.

 

      1. Definitions. Capitalized terms used herein and not otherwise defined

shall have the meanings ascribed to such terms in the Employment Agreement. In

addition, the following terms when used in this Agreement have the meanings set

forth below:

 

            (a) "Base Equity Amount" shall mean an amount equal to the sum of

(i) $6,000,000, plus (ii) the Preferential New Equity Amount.

 

            (b) "Initial Gain Share Payment" shall mean an amount equal to 2.25%

of the first $79,774,798 of Net Equity Proceeds, if any, up to a maximum of