EXHIBIT 10.4
CHANGE OF CONTROL AGREEMENT
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This Change of Control Agreement is dated as of June 23, 1997 and is
between Merisel, Inc., a Delaware corporation (the "Company"), Merisel Americas,
Inc., a Delaware corporation ("Americas"), and Xxxxx X. Xxxxxxx ("Executive").
The Company and Americas desire to employ Executive. Accordingly,
Executive, the Company and Americas desire to set forth the terms and conditions
governing Executive's employment by the Company and Americas following a Change
of Control (as defined below). Accordingly, Executive, the Company and
Americas hereby agree as follows:
1. DEFINITIONS. For purposes of this Agreement, the following terms shall
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have the meanings set forth below:
(a) "Base Salary" shall mean Executive's annual base salary as in effect
on the business day preceding a Change of Control or as the same may be
increased thereafter from time to time, exclusive of any bonus or incentive
compensation, benefits (whether standard or special), automobile allowances,
relocation or tax equalization payments, pension payments or reimbursements for
professional services.
(b) The "Company" shall mean Merisel, Inc., a Delaware corporation, and
each of its successor enterprises that result from any merger, consolidation,
reorganization, sale of assets or otherwise. As used herein, the term "Americas"
shall also include each successor enterprise of Merisel Americas, Inc. that
results from any merger, consolidation, reorganization, sale of assets or
otherwise.
(c) An "Americas Change of Control" shall have occurred if (i) any person,
corporation, partnership, trust, association, enterprise or group, other than
the Company, shall become the beneficial owner, directly or indirectly, of
outstanding capital stock of Americas possessing at least 50% of the voting
power (for the election of directors) of the outstanding capital stock of
Americas, or (ii) there shall be a sale of all or substantially all of
Americas's assets or Americas shall merge or consolidate with another
corporation and the stockholders of Americas immediately prior to such
transaction do not own, immediately after such transaction, stock of the
purchasing or surviving corporation in the transaction (or of the parent
corporation of the purchasing or surviving corporation) possessing more than 50%
of the voting power (for the election of directors) of the outstanding capital
stock of that corporation, which ownership shall be measured without regard to
any stock of the purchasing, surviving or parent corporation owned by the stock
holders of Americas before the transaction. A " Company Change of Control"
shall have occurred if (i) any person, corporation, partnership, trust,
association, enterprise or group shall become the beneficial owner, directly or
indirectly, of outstanding capital stock of the Company possessing at least 50%
of the voting power (for the election of directors) of the outstanding capital
stock of the Company, or (ii) there shall be a sale of all or substantially all
of the Company's assets or the Company shall merge or consolidate with another
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corporation and the stockholders of the Company immediately prior to such
transaction do not own, immediately after such transaction, stock of the
purchasing or surviving corporation in the transaction (or of the parent
corporation of the purchasing or surviving corporation) possessing more than 50%
of the voting power (for the election of directors) of the outstanding capital
stock of that corporation, which ownership shall be measured without regard to
any stock of the purchasing, surviving or parent corporation owned by the
stockholders of the Company before the transaction, or (iii) within one year
following a transaction in which the holders of the Company's 12.5% Senior Notes
due 2004 (the "Senior Notes") exchange all or a substantial portion of the
Senior Notes for Common Stock of the Company, Xxxxxx X. Xxxxxxxxxx is terminated
by the Company's Board of Directors as Chief Executive Officer of the Company or
the Company breaches its employment agreement with Xx. Xxxxxxxxxx in any
material respect. A "Change of Control" shall be the first to occur of a Company
Change of Control or an Americas Change of Control. It is expressly understood
that, for purposes of this Section 1(c), the holders of indebtedness of the
Company or its subsidiaries shall not be deemed to constitute a "group" solely
by virtue of their roles as debtholders or by exercising their rights with
respect thereto.
(d) "Covered Termination" shall mean any cessation of the Executive's
employment by the Company that occurs after a Change of Control other than as a
result of (i) Termination for Cause, (ii) Executive's death or permanent
disability, or (iii) Executive's resignation without Good Reason (as hereinafter
defined).
(e) A resignation by Executive shall be with "Good Reason" if after a
Change of Control (i) there has been a material reduction in Executive's job
responsibilities from those that existed immediately prior to the Change of
Control, it being understood that a mere change in title alone shall not
constitute a material reduction in Executive's job responsibilities, (ii)
without Executive's prior written approval, the Company requires Executive to be
based anywhere other than the Executive's then current location, it being
understood that required travel on the Company's business to an extent
consistent with Executive's business travel obligation prior to the Change of
Control does not constitute "Good Reason", (iii) there is a reduction in
Executive's Base Salary, except that an across-the-board reduction in the
salary level of all of the Company's Executives in the same percentage amount as
part of a general salary level reduction shall not constitute "Good Reason," or
(iv) a successor to all or substantially all of the business and assets of the
Company fails to furnish Executive with the assumption agreement required by
Section 7 hereof.
(f) "Termination for Cause" shall mean if the Company terminates
Executive's employment for any of the following reasons: Executive misconduct
(misconduct includes physical assault, insubordination, falsification or
misrepresentation of facts on company records, fraud, dishonesty, willful
destruction of company property or assets, or harassment of another associate by
Executive in violation of the Company's policies); excessive absenteeism; abuse
of sick time; or Executive's conviction for or a plea of nolo contendere by
Executive to a felony or any crime involving moral turpitude.
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(g) "Expiration Date" shall mean July 31, 1999.
2. AT-WILL EMPLOYEE. Subject to the express provisions of this Agreement,
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the Company shall have no obligation to retain or continue Executive as an
employee and Executive's employment status as an "at-will" employee of Company
is not affected by this Agreement.
3. CHANGE OF CONTROL COVERED TERMINATION. If a Change of Control shall
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occur on or before the Expiration Date and if a Covered Termination shall occur
within one year after the Change of Control, then: (A) on the effective date of
such Covered Termination, the Company or Americas shall make a lump sum payment
to Executive equal to (i) twelve (12) months of Executive's Base Salary plus
(ii) an amount equal to one times the annual performance bonus received by the
Executive during the year preceding the effective date of the Covered
Termination; and (B) the Company or Americas will reimburse Executive for the
cost of Executive's COBRA payments (at the level of coverage, including
dependent care coverage, as in effect immediately prior to such Covered
Termination) under the Company's health insurance plans for a twelve (12) month
period following the date of the Covered Termination. The amount of such
reimbursement will be grossed up so that Executive will receive an amount equal
to the COBRA payments, after taking into account all applicable taxes. The
payments to be made to Executive upon a Covered Termination are in addition to
the payments made to employees by the Company upon termination in the ordinary
course, such as reimbursement for business expenses and vacation pay through the
date of termination. The obligations of the Company and Americas hereunder shall
be joint and several.
4. WITHHOLDING. The Company or Americas, as applicable, shall deduct from
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all payments paid to Executive under this Agreement any required amounts for
social security, federal and state income tax withholding, federal or state
unemployment insurance contributions, and state disability insurance or any
other required taxes.
5. BENEFIT REDUCTION. In the event any payments are required to be made
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pursuant to Section 3 hereof, the first dollar amount of such payments shall be
reduced to the extent necessary to assure that the payments that are received
pursuant to the terms and conditions of this Agreement which are "parachute
payments" under Internal Revenue Code Section 280G (or any successor section)
and the Department of Treasury regulations issued thereunder do not exceed the
maximum amount which may be paid hereunder without such amounts being treated as
an "excess parachute payment" under such section.
6. MITIGATION. Executive shall have no obligation to mitigate the amount
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of any payment provided for in this Agreement by seeking employment or
otherwise.
7. EXECUTIVE'S OBLIGATIONS. In exchange for the Company or Americas
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providing the above described benefits to Executive, Executive agrees that prior
to
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receiving any severance compensation from Company or Americas in respect of
such Covered Termination, whether under this Agreement or otherwise, Executive
will execute and deliver to the Company a Release and a Confidentiality
Agreement, each substantially in the form provided to Executive with this
Agreement.
8. ASSUMPTION AGREEMENT. The Company or Americas will require any
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successor (whether direct or indirect, by purchase, merger consolidation or
otherwise) to all or substantially all of the business and assets of the Company
or Americas, as the case may be, expressly to assume and agree to perform this
Agreement in the same manner and to the same extent that the Company or Americas
would be required to perform it whether or not such succession had taken place.
9. ARBITRATION. Any dispute that may arise between you and the Company
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and/or Americas in connection with or relating to this Agreement, including any
monetary claim arising from or relating to this Agreement, will be submitted to
final and binding arbitration in Los Angeles, California, in accordance with the
rules of the American Arbitration Association ("AAA") then in effect. Such
arbitration shall proceed before a single arbitrator who shall be selected by
the mutual agreement of the parties. If the parties are unable to agree on the
selection of an arbitrator, such arbitrator shall be selected in accordance with
the Employment Dispute Resolution Rules and procedures of the AAA. The decision
of the the arbitrator, including determination of the amount of any damages
suffered, shall be conclusive, final and binding on such arbitrating parties,
their respective heirs, legal representatives, successors, and assigns. Each
party to any such arbitration proceeding shall bear her or his own attorney's
fees and costs in connection with any such arbitration and each party shall pay
half of all costs associated with the arbitration including the arbitrator's
fees.
10. MISCELLANEOUS. This Agreement shall be binding upon and inure to the
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benefit of Company, Americas and Executive; provided that Executive shall not
assign any of Executive's rights or duties under this Agreement without the
express prior written consent of the Company. This Agreement sets forth the
parties' entire agreement with regard to the subject matter hereof. No other
agreements, representations, or warranties have been made by either party to the
other with respect to the subject matter of this Agreement. This Agreement may
be amended only by a written agreement signed by the parties hereto. This
Agreement shall be governed by and construed in accordance with the laws of the
State of California. Any waiver by either party of any breach of any provision
of this Agreement shall not operate as or be construed as a waiver of any
subsequent breach. If any legal action is necessary to enforce the terms of
this Agreement, the prevailing party shall be entitled to reasonable attorneys'
fees in addition to any other relief to which that party may be entitled.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement, as of
the day and year first written above.
MERISEL, INC. XXXXX X. XXXXXXX
By: /s/ XXXXXX X. XXXXXXXXXX /s/ XXXXX X. XXXXXXX
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Name: Xxxxxx X. Xxxxxxxxxx
Title: Chief Executive Officer
MERISEL AMERICAS, INC.
By: /s/ XXXXXX X. XXXXXXXXXX
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Name: Xxxxxx X. Xxxxxxxxxx
Title: Chief Executive Officer
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