<PAGE>
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.
<PAGE>
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
$1,794,933.
(c) "Net Equity Proceeds" shall mean an amount equal to the
remainder of (i) the Proceeds Available for
Distribution to Shareholders, less
(ii) the Base Equity Amount.
(d) "Preferential New Equity Amount" shall mean the dollar amount
of
equity contributions to the Company
subsequent to the date hereof, which amount
shall increase at a rate of twelve percent
(12%) per annum from the date of each
applicable equity issuance through the date
of consummation of the Sale Event.
(e) "Proceeds Available for Distribution to Shareholders" shall
mean
the total gross proceeds and other
consideration actually paid to or received by
the holders of the Company's equity
securities (in their capacity as such) other
than holders of the Company's currently
outstanding warrants in connection with
a Sale Event and after payment of all debt,
all transaction expenses (including
all payments under this Agreement other
than the Third Gain Share Payment), and
all proceeds payment due to holders of the
Company's currently outstanding
warrants, including, without limitation,
(i) cash, and (ii) notes, securities
and other property. Non-cash consideration
shall be valued as follows: (x)
publicly traded securities shall be valued
at the average of their closing
prices (as reported in the Wall Street
Journal) for the ten trading days prior
to the closing of the Sale Event, and (y)
any other non-cash consideration shall
be valued at the fair market value thereof
as determined in good faith by the
Board and the Executive.
(f) "Sale Event" shall mean:
(i) the sale of all, or substantially all, of DEI's
consolidated assets in any single
transaction or series of related transactions;
or
(ii) the sale, or series of related sales, of common stock of
the Company or DEI possessing the ordinary
voting power (on a fully-di
