EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement"), is dated as
of August 19, 1996 and is between Merisel, Inc. (the
"Company"), a Delaware corporation (the "Company" or
"Merisel"), and Xxxxx X. Xxxxxx ("Executive").
The Company and Executive desire to set forth the terms
and conditions governing Executive's employment by the
Company. Accordingly, Executive and Merisel hereby agree as
follows:
1. Term of Employment. Executive and Merisel agree
that Executive shall be employed by Merisel and shall serve
in the capacities of Chief Financial Officer and Senior
Vice President of the Company, under the terms and
conditions of this Agreement commencing as of August __,
1996 and continuing for a three year period (such three year
period is referred to herein as the "Employment Term") or
until termination of Executive's employment pursuant to this
Agreement, and subject to renewal for additional periods as
may be mutually agreed by the Company and Executive. The
original term and any renewal terms of this Agreement may be
sooner terminated as provided herein.
2. Scope of Duties. Executive shall undertake and
assume the responsibility of performing for and on behalf of
Merisel those duties as shall be consistent with the
positions of Chief Financial Officer and Senior Vice
President of the Company. Executive shall report to either
the Chairman of the Board, the Chief Executive Officer or
the President of the Company, as determined by the Company.
Executive covenants and agrees that at all times during the
term of this Agreement, he shall devote his substantially
full-time and best efforts to the execution of his duties
pursuant hereto.
3. Compensation. As compensation for services
rendered pursuant to this Agreement, Merisel shall pay to
Executive, in installments customary with Merisel's standard
payroll periods, base annual compensation of $225,000
during the Employment Term, provided that the Board of
Directors (the "Board') may, in its sole discretion,
increase such base annual compensation as merited by the
performance of Executive. Merisel shall deduct from all
payments paid to Executive under this Agreement any required
amount for applicable income tax withholding or any other
required taxes or contributions.
4. Bonus and Additional Benefits. In addition to the
compensation to be paid to Executive pursuant to Section 3,
Merisel shall pay, reimburse or otherwise confer the
following items of benefit to Executive:
4.1 During the Employment Term, Executive shall be
eligible to receive an annual bonus of $125,000 based on the
Company's financial performance (the "Bonus Amount"). One
quarter of the Bonus Amount shall be earned and paid
following each fiscal quarter in which Executive achieves
his financial/ performance objectives for that quarter,
which financial/ performance objectives shall be determined
from time to time by officer to whom Executive reports and
Executive. Whether or not such objectives are achieved, one
eighth of the Bonus Amount shall be guaranteed to Executive
for each of the third and fourth fiscal quarters of 1996.
4.2 Effective August 19, 1996, the Company granted
Executive a nonqualified stock option (the "Option") to
purchase 75,000 shares of the Company's Common Stock under
the Company's 1991 Stock Option Plan. The Option is
governed by the Option Agreement issued to Executive.
4.3 In the event there is a Successful Restructuring
(as defined below) of the Company's outstanding indebtedness
and as a part of that Successful Restructuring there is a
Dilution Event (as defined below), then upon completion of
such Successful Restructuring, Company shall pay Executive a
bonus of $125,000; provided, however, that in that case of
an out-of-court Successful Restructuring one half of such
bonus shall be paid when all of the documents evidencing
such restructuring are signed by the Company's and its
subsidiaries lenders and the remaining half of such bonus
shall be paid upon completion of such Successful
Restructuring. As used herein, an "out-of-court Successful
Restructuring" shall mean a restructuring of the Company's
and its subsidiaries' obligations under (a) that certain
Revolving Credit Agreement, as amended and restated as of
April 12, 1996, among Merisel Americas, Inc. Merisel Europe,
Inc. and Merisel, Inc. and the lenders party thereto, (b)
those certain Amended and Restated 8.58% Senior Notes issued
by Merisel Americas, Inc., (c) those certain 11.28%
Subordinated Notes, issued by Merisel Americas, Inc. and
(d) those certain 12 1/2% Senior Notes due 2004, issued by
the Company, that involves a restructuring of the maturity
dates, interest rates and covenants thereunder in such a
manner as to permit the Company to operate outside of the
control of its creditors for a period of at least one year
and does not contemplate further restructuring of such
obligations during such one year period, which "Successful
Restructuring" shall be deemed completed upon the completion
of such one year period. In addition, if a petition has
been filed pursuant to Section 301 or 303 (or any other
applicable Section) of the Bankruptcy Code with respect to
the Company, confirmation of a plan of reorganization shall
be deemed to be the completion of an "in-court Successful
Restructuring" under this Agreement. "Dilution Event" shall
mean the issuance by the Company in connection with a
Successful Restructuring of 3,000,000 or more shares of its
Common Stock or of warrants, options or rights containing
the right to purchase or subscribe for 3,000,000 or more
shares of the Common Stock of the Company or securities
convertible into or exchangeable therefor, in each case
excluding (a) options issued under the Company's 1991
Employee Stock Option Plan, as the same may be amended, and
under the Company's 1992 Stock Option Plan for Nonemployee
Directors, as the same may be amended and (b) stock issued
upon exercise of options outstanding or issued under the
Company's existing stock option plans as the same may be
amended from time to time.
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4.4 Company will reimburse Executive for the cost of
Executive's COBRA payments under Executive's former
employer's health insurance plans until Executive is
eligible for coverage under Company's health insurance
plans. 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.
4.5 Company shall reimburse Executive for the premium
cost of term life insurance coverage, $1 million face value,
up to a maximum amount of $2,000 per year.
4.4 In addition, Executive shall be eligible to
participate in all other benefit programs and plans that may
be afforded to senior management of the Company. Merisel
shall make contributions to such plans and arrangements on
behalf of Executive as shall be required or consistent with
the terms and conditions of such plans. Such plans and
programs may included, by way of example, deferred
compensation, group insurance benefits, long-term or
permanent disability insurance and major medical coverage.
Executive shall be entitled, during the Employment Term, to
vacation time with compensation and time off with
compensation on account of illness or injury, in accordance
with the Company's written policies for employees in effect
from time to time.
5. Termination of Employment.
5.1 Notice. Executive may resign or Merisel may
terminate Executive's employment in either case prior to the
expiration of the Employment Term, upon 30 days written
notice by Executive or Merisel, as the case may be, to the
other party. Upon any such resignation or termination,
Merisel shall promptly pay Executive all salary and other
compensation, including amounts payable, if any, under
Section 3 and any unused vacation pay, earned by him through
the effective date of such termination or resignation.
5.2 Termination following a Sale. If there is a
Covered Termination (as defined below) within one year
following a Sale of the Company, then in addition to the
amounts due under Section 5.1:
(a) Company shall make a lump sum payment to Executive
within two weeks of the effective date of the Covered
Termination equal to (i) one and a half (1.5) times
Executive's annual base salary as then in effect plus (ii)
one and a half (1.5) times the average of the annual
performance bonus received by the Executive over the three
year period preceding the effective date of the Covered
Termination (excluding from such calculation however, any
performance bonus that was paid on a guaranteed basis and
was not earned as a result of achievement of financial/
performance criteria);
(b) Company will reimburse Executive for the cost of
Executive's COBRA payments under Company's health insurance
plans for a period of 18 months following such Covered
Termination. The amount of such reimbursement will be
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grossed up so that Executive will receive an amount equal to
the COBRA payments, after taking into account all applicable
taxes; and
(c) Any remaining unvested portion of the Option shall
vest.
5.3 Termination by Company. If there is a Covered
Termination at any time other than within one year
following a Sale of the Company, then in addition to the
amounts due under Section 5.1:
(a) Company shall make a lump sum payment to Executive
within two weeks of the effective date of the Covered
Termination equal to (i) Executive's annual base salary as
then in effect plus (ii) the average of the annual
performance bonus received by the Executive over the three
year period preceding the effective date of the Covered
Termination (excluding from such calculation however, any
performance bonus that was paid on a guaranteed basis and
was not earned as a result of achievement of financial/
performance criteria); and
(b) Company will reimburse Executive for the cost of
Executive's COBRA payments under Company's health insurance
plans for a period of 12 months following such 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.
.
5.4 Voluntary Resignation by Executive. In the event
that Executive resigns without Good Reason (as defined
below) prior to the expiration of the Employment Term,
then, at the time the resignation is effective, all benefits
and payments provided for hereunder shall terminate, and,
without limiting the foregoing, Executive shall not be
entitled to any severance payment other than amounts due
under Section 5.1.
5.5 Definitions. (a) A "Sale" of Merisel shall have
occurred if (i) any person, corporation, partnership, trust,
association, enterprise or group (collectively, an "Entity")
shall become the beneficial owner, directly or indirectly,
of outstanding capital stock of Merisel possessing at least
50% of the voting power (for the election of directors) of
the outstanding capital stock of Merisel, or (ii) there
shall be a sale of all or substantially all of Merisel's
assets or Merisel shall merge or consolidate with another
corporation and the stockholders of Merisel 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 Merisel before the transaction.
(b) "Covered Termination" shall mean any
termination of the Executive's employment by the Company
that occurs prior to completion of the Employment Term other
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than as a result of (i) Termination for Cause, (ii)
Executive's death or permanent disability, or (iii)
Executive's resignation without Good Reason.
(c) A resignation by Executive shall be with "Good
Reason" if after a Sale of the Company, (A) there has been a
material reduction in Executive's job responsibilities from
those that existed immediately prior to the Sale, (B)
without Executive's prior written approval, the Company
requires Executive to be based anywhere other than the
Executive's then current location, or (C) 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 8 hereof.
(d) "Termination for Cause" shall mean if the Company
terminates Executive's employment for any of the following
reasons: Executive misconduct (misconduct shall mean
physical assault, falsification or misrepresentation of
facts on company records, fraud, dishonesty, creating or
contributing to unsafe working conditions, willful
destruction of company property or assets, or harassment of
another Associate by Executive); or Executive conviction for
or a plea of nolo contendere by Executive to a felony or to
any crime involving moral turpitude.
6. Mitigation. Executive shall have no obligation to
mitigate the amount of any payment provided for in this
Agreement by seeking employment or otherwise, unless the
Company in its sole discretion determines that Executive's
choice of new employer following a Covered Termination is
detrimental to the Company. Executive shall not be entitled
to payment hereunder if Executive's employment ceases as a
result of Executive's death or permanent disability.
7. Executive's Obligations.
7.1 Executive agrees that during the Employment Term
and for the Benefit Period (as defined below), Executive
will not directly or indirectly (a) engage in; (b) own or
control any debt equity, or other interest in (except as a
passive investor of less that 5% of the capital stock or
publicly traded notes or debentures of a publicly held
company); or (c) (1) act as director, officer, manager,
employee, participant or consultant to or (2) be obligated
to or connected in any advisory business enterprise or
ownership capacity with, any of Tech Data Corp., Xxxxxx
Micro, Inc., Computer 2000 AG (C2000), Intelligent
Electronics, Inc., MicroAge, Inc., Inacom Corp., Compucom,
Entex Information Services, Inc. or Vanstar Corp. or with
any subsidiary, division or successor of any of them or with
any entity that acquires, whether by acquisition, merger or
otherwise, any significant amount of the assets or
substantial part of any of the business of any of them. As
used herein, "Benefit Period" shall mean either the 180 day
period following Executive's receipt of payment under
Section 5.3 or the 365 day period following Executive's
receipt of payment under Section 5.2.
7.2 During the term of this Agreement, or if longer,
the Benefit Period, Executive will not, on behalf of any
business enterprise other than the Company and its
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subsidiaries, solicit the employment of or hire any person
that is or was employed by the Company or any of its
subsidiaries at any time on or after January 1, 1995.
7.3 Within two weeks of the effective date of a Covered
Termination, and prior to receiving any severance
compensation from Company in respect of such Covered
Termination, whether under this Agreement or otherwise,
Executive will execute and deliver to Company a Release and
a Confidentiality Agreement, each substantially in the form
provided to Executive with this Agreement, with such changes
as Company might request.
7.4 In the event of any breach by Executive of the
restrictions contained in this Agreement, Company shall have
no further obligation to compensate Executive hereunder and
Executive acknowledges that the harm to Company cannot be
reasonably or adequately compensated in damages in any
action at law. Accordingly, Executive agrees that, upon any
violation of such restrictions, Company shall be entitled to
preliminary and permanent injunctive relief in addition to
any other remedy, without the necessity of proving actual
damages.
8. Assumption Agreement. In the event of a Sale of the
Company, the Company will require any successor (whether
direct or indirect, by purchase, merger consolidation or
otherwise) to all or substantially all of the business and
assets of the Company, expressly to assume and agree to
perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it
whether or not such succession had taken place.
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9. Miscellaneous. This Agreement shall be binding
upon and inure to the benefit of Company, its successors and
assigns and to Executive; provided that Executive shall not
assign any of Executive's rights or duties under this
Agreement without the express prior written consent of
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 both parties.
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.
WHEREOF, the parties hereto have executed this
Agreement, as of the day and year first written above.
MERISEL, INC.
By:_______________________
Xxxxxx X. Xxxxxxxxxx, Chief Executive Officer
"EXECUTIVE"
__________________________
Xxxxx X. Xxxxxx
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