AMENDED AND RESTATED SENIOR EXECUTIVE EMPLOYMENT AGREEMENT
Exhibit 10.3
AMENDED AND RESTATED SENIOR EXECUTIVE EMPLOYMENT AGREEMENT
This Amended and Restated Senior Executive Employment Agreement (the “Agreement”) is
entered into as of this 8th day of August, 2007 (the “Effective Date”) by and between Xxxx
X. Xxxxx (“Executive”) and Automotive Lease Guide (alg), Inc., a Delaware corporation
(“Employer”) with principal offices at 0000 Xxxxx Xxxxxx, Xxxxx 000, Xxxxx Xxxxxxx, XX,
00000.
WHEREAS, Executive and Employer are parties to a senior executive employment agreement, dated
as of May 25, 2005(the “Existing Employment Agreement”); and
WHEREAS, the parties hereto wish to amend and restate the Existing Employment Agreement
pursuant to this Agreement;
NOW, THEREFORE, in consideration of the promises and the agreements hereinafter set forth, the
parties hereto hereby agree that, upon the effectiveness of this Agreement, the Existing Employment
Agreement is hereby amended and restated in its entirety as follows:
Section 1. Term
Employer shall continue to employ Executive and Executive agrees to continue such employment,
upon the terms and conditions hereinafter set forth, from the Effective Date through and including
August 8, 2008 (the “Initial Term”). This Agreement shall renew automatically for
successive one year periods (each, a “Renewal Term”) unless one party gives notice to the
other party, in writing, at least sixty (60) days prior to the expiration of this Agreement (or any
renewal) of its desire to terminate the Agreement. The term of this Agreement, including the
Initial Term and any Renewal Term, shall be referred to herein as the “Term”.
Section 2. Executive’s Duties
(a) Executive shall be Chief Executive Officer of Employer and shall report directly to the
Board of Director’s of Employer (the “Board”) and the Employer’s Chief Executive Officer
and or President of DealerTrack Holdings, Inc. (“Parent”) or his designee. Executive shall
faithfully and diligently perform his duties at the direction of the Board, Parent’s Chief
Executive Officer, President, or his designee, to the best of Executive’s ability. Executive shall
(i) devote his best efforts, skill, and ability and full business time and attention to the
performance of the services customarily incident to such office, subject to vacations and sick
leave as provided herein and in accordance with Employer policy, (ii) carry out his duties in a
competent and professional manner; and (iii) generally promote the interests of Employer. Subject
to applicable law, Executive shall not knowingly participate in any activity that is detrimental to
the interests of Employer, Parent or any of their affiliates, including, without limitation, any
public criticism or disparagement of any type by Executive, through the media or otherwise, of
Employer or any of its affiliates or employees, except in connection with the exercise of
Executive’s rights against Employer or any of its affiliates.
(b) Executive agrees to abide by all policies applicable to senior executive officers of
Employer promulgated from time to time by Parent or Employer, as applicable, which policies are
enforced uniformly and applicable to all similar executives of Employer.
(c) Except for such business travel as may be incident to his duties hereunder, Executive
shall perform his duties at Employer’s offices at the address set forth in the preamble to this
Agreement or at such other location as may be approved by Employer.
Section 3. Compensation for Executive’s Services
In consideration of the duties and services to be performed by Executive pursuant to Sections
1 and 2 hereof, Executive shall receive:
(a) Salary. Executive shall earn salary (the “Salary”) at the annual rate of
Two Hundred Sixty Eight Thousand Dollars ($268,000) (the “Minimum Salary”), less all
applicable federal, state, and local tax withholdings. Such Salary shall be earned and shall be
payable in periodic installments in accordance with Employer’s payroll practices. During the Term,
the Board of Directors of Parent (the “Parent Board”) or the Compensation Committee of the
Parent Board (the “Compensation Committee”) will review the Salary annually and may in its
discretion increase the Salary, but may not reduce it during the Term unless Parent institutes
salary reductions across the board; provided, however, that in no event shall the Salary be reduced
below the Minimum Salary without Executive’s written consent.
(b) Bonus. For each fiscal year of Parent (each, a “Fiscal Year”), Executive
shall be entitled to receive a cash performance bonus (a “Bonus”) which shall be based on
the achievement of certain performance benchmarks by Parent and/or Employer during such Fiscal Year
which shall be determined by the Parent Board. The Parent Board shall review the target Bonus on
an annual basis and, in its sole discretion, may increase such target Bonus for any Fiscal Year.
The target Bonus shall not be decreased except in connection with company-wide bonus reductions.
The target Bonus for any Fiscal Year shall be at least fifty (50%) percent of the Salary for such
Fiscal Year. The Bonus for each Fiscal Year shall be paid, if at all, to Executive on a schedule
consistent with Employer’s bonus payments to its other similarly situated senior executive officers
by no later than two and one half (21/2) months following the end of such Fiscal Year. Executive
understands and agrees that the Bonus is established in part as an inducement for Executive to
remain employed by Employer and except as provided in Section 5(c) of this Agreement, or in the
Employer’s sole discretion, in the event that Executive’s employment is terminated prior to the end
of any Fiscal Year during the Term, then Executive shall not receive payment of any Bonus for such
year.
(c) Additional Compensation. Without limiting the amounts otherwise set forth in this
Agreement, Executive shall receive a payment each month (the “Additional Compensation”) in
arrears from the Effective Date of this Agreement until the Note described in Section 3(d) below is
issued, based on the following formula:
[ $1,200,000 (the “Face Amount”) ] x [the prime interest rate, as published
in the Wall Street Journal as of the Effective Date, plus 1%, up to an aggregate
maximum rate of 7%) (the “Interest Rate”)] / 12
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(d) Additional Bonus. As an additional inducement for Executive to remain employed by
Employer, Executive shall be eligible to receive an additional bonus (the “Additional
Bonus”), less all applicable federal, state and local tax withholdings, as follows:
| (1) | If in any calendar year ending on or before December 31, 2009 (y) the revenue from sales of Employer products and Chrome Systems Corporation (“Chrome”) products (“ALG/Chrome Revenues”) for such year equals or exceeds $50.0 million (the “ALG/Chrome Revenue Milestone”) and (z) the EBITDA Ratio for the ALG/Chrome business for such year equals or exceeds the EBITDA Ratio of the Parent business as a whole (exclusive of the ALG/Chrome business), then Parent shall promptly issue to Executive a note in the principal amount of $1,200,000 on the terms described in (d)(3) below (the “Note”). “EBITDA Ratio” shall mean the ratio of the earnings before interest, taxes, depreciation, and amortization for the respective business in question divided by the revenue from such business. | ||
| (2) | If ALG/Chrome Revenues for the year ending December 31, 2009 equal 70% of the ALG/Chrome Revenue Milestone, and (d)(1)(z) above occurs for that year, Parent shall issue to Executive a Note in the principal amount of $600,000. If ALG/Chrome Revenues for the year ending December 31, 2009 are greater than 70% of the ALG/Chrome Revenue Milestone, but less than 100% of such milestone and (d)(1)(z) above occurs, then Parent shall issue to Executive a Note in the principal amount of (x) $600,000 plus (y) $20,000 for each additional $500,000 of ALG/Chrome Revenues for the year ending December 31, 2009 in excess of 70% of the ALG/Chrome Revenue Milestone and less than 100% of the ALG/Chrome Revenue Milestone. For the avoidance of doubt, there will be no additional $20,000 (or portion thereof) added to the principal of the Note for each incremental additional ALG/Chrome Revenues for the year ending December 31, 2009 of less than $500,000. For example, if ALG/Chrome Revenues for the year ending December 31, 2009 are $36,200,000, then an additional amount of $40,000 (i.e., $20,000 x2) shall be added to the principal amount of the Note for a total principal amount of $640,000. | ||
| (3) | The Note will provide that (w) it shall bear interest at the Interest Rate, (x) interest accrued on the Note will be paid to the Executive monthly, (y) it will be payable in full on June 30, 2010, and (z) it may be prepaid without penalty at any time in Parent’s sole discretion. |
| (i) | Within 90 days following each of the years ending December 31, 2006, 2007, 2008 and 2009, Parent shall deliver to Executive Parent’s calculation, with reasonable |
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| supporting detail (the “Parent’s Calculation”) of ALG/Chrome Revenues or Employer Revenues, as the case may be, and the applicable EBITDA Ratios (collectively, the “Financial Milestones”) for the preceding calendar year. | |||
| (ii) | If Executive disagrees with the Parent’s Calculation, the Executive may, within 30 days after delivery of the Parent’s Calculation, deliver a notice to Parent disagreeing with any portion of the Parent’s Calculation for such year (the “Objection Notice”). The Objection Notice shall specify in reasonable detail those items or amounts as to which Executive disagrees. If Executive does not deliver an Objection Notice during such time period or Executive indicates agreement with the Parent’s Calculation, then the Parent’s Calculation shall be the agreed upon amounts for the Financial Milestones for such applicable period. | ||
| (iii) | If Executive shall have delivered the Objection Notice within the 30 day period referred to in clause (ii) above, then Parent and Executive shall, during the 30 days following such delivery, use their good faith efforts to reach agreement on the disputed items or amounts in order to determine the Financial Milestones. If Parent and Executive are unable to reach agreement during such period, they shall promptly thereafter cause a mutually acceptable independent public accounting firm (the “Accounting Referee”) to review the disputed items or amounts for the purpose of calculating the Financial Milestone(s) in dispute. The Accounting Referee may request additional supporting detail from the Parent pertaining to the portion of the Parent’s Calculation identified by Executive in the Objection Notice. Within ten (10) days after delivery of such additional detail, the Executive may supplement the Objection Notice to add any disputes newly discovered by the Executive from the additional detail, but only if such item in dispute could not reasonably have been ascertained from the supporting detail provided by Parent with the Parent Calculation. The Objection Notice may be supplemented only once. In making such calculation, the Accounting Referee shall consider only those items or amounts in the Parent’s Calculation as to which the Executive has disagreed and which are specifically identified in reasonable notice in the Objection Notice, as supplemented, if applicable. The Accounting Referee shall deliver to Parent and Executive, as promptly as practicable, a written report setting forth its calculation of the items or amounts in dispute. Such report |
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| shall be final and binding upon Parent and Executive, absent manifest error or willful misconduct. The cost of such review and report shall be borne (x) by Executive, if Parent’s calculation of the Financial Milestone(s) in dispute is closer to the Accounting Referee’s determination than Executive’s calculation thereof, (y) by Parent, if the reverse is true and (z) except as provided in (x) or (y) above, equally by Executive and Parent. |
| (4) | If Parent sells or disposes of some or all of the assets of Employer or Chrome or does not collect fair market value for the products/services of Employer or Chrome because said products/services were sold as part of a bundle of products/services offered by Parent, the terms of this Section 3(d) will be adjusted equitably in the manner described under similar circumstances in that Asset Purchase Agreement, dated May 25, 2005, by and among Automotive Lease Guide (alg), LLC, ALG, Executive and other parties (the “Purchase Agreement”). |
(e) Equity. In connection with Executive’s employment, Executive has been and may
continue to be granted stock options (“Stock Options”) to purchase equity securities of
Parent pursuant to the terms of DealerTrack Holdings, Inc. 2001 Stock Option Plan, effective as of
August 10, 2001, as amended (“Stock Option Plan”) or may be granted Stock Options or other
equity based awards pursuant to the terms of the DealerTrack Holdings, Inc. 2005 Incentive Award
Plan, effective as of May 26, 2005, as amended (the “2005 Incentive Award Plan”), or any
other successor equity incentive plans (collectively, the “Stock Incentive Plans”). Except
as otherwise provided herein, the terms of the Stock Options shall be governed by the Stock
Incentive Plans. Executive shall be credited with twenty-four (24) months accelerated vesting of
his Stock Options upon termination of Executive’s employment by: (1) Employer without Cause (as
defined below); or (2) Executive for Good Reason (as defined below). Executive shall be credited
with thirty-six (36) months accelerated vesting of his Stock Options upon a Change of Control
(defined below). Executive shall be credited with full acceleration and vesting of his Stock
Options upon the earlier of: (1) the elimination of Executive’s position or a termination of
Executive’s employment, in either event, within twelve (12) months after a Change of Control; (2) a
material negative change in Executive’s compensation or responsibilities within twelve (12) months
after a Change of Control; or (3) the requirement that Executive be based at a location which is
more than fifty (50) miles from Employer’s offices at the address set forth in the preamble to this
Agreement within twelve (12) months after a Change of Control. Anything in the Stock Incentive
Plans to the contrary notwithstanding, if Executive’s employment is terminated by Executive with
Good Reason or by Employer without Cause, or under circumstances described above which would result
in certain accelerated vesting of any unvested Stock Options held by Executive, the unexercised
portion of any Stock Options held by Executive will not terminate until the twelve (12) month
anniversary of the date of termination of Executive’s employment. In the event Employer elects to
grant equity based awards other than Options, such grants shall, where appropriate, be subject to
equivalent acceleration provisions as set forth in this Section 3(c). For purposes hereof, a
“Change of Control” shall mean and includes each of the following:
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(i) A transaction or series of transactions (other than an offering of shares of Parent
to the general public through a registration statement filed with the Securities and
Exchange Commission) whereby any “person” or related “group” of “persons” (as such terms are
used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended)
(other than the Parent, any of its subsidiaries, an employee benefit plan maintained by the
Parent or any of its subsidiaries or a “person” that, prior to such transaction, directly or
indirectly controls, is controlled by, or is under common control with, the Parent) directly
or indirectly acquires beneficial ownership (within the meaning of Rule 13d-3 under the
Securities Exchange Act of 1934, as amended) of securities of the Employer or Parent
possessing more than 50% of the total combined voting power of the Employer’s or Parent’s
securities outstanding immediately after such acquisition; or
(ii) During any period of two consecutive years, individuals who, at the beginning of
such period, constitute the Parent Board together with any new director(s) (other than a
director designated by a person who shall have entered into an agreement with the Company to
effect a transaction described in Section 3(c)(i) or Section 3(c)(iii)) whose election by
the Parent Board or nomination for election by the Parent’s stockholders was approved by a
vote of at least two-thirds of the directors then still in office who either were directors
at the beginning of the two-year period or whose election or nomination for election was
previously so approved, cease for any reason to constitute a majority thereof; or
(iii) The consummation by the Employer or Parent (whether directly involving the
Employer or Parent or indirectly involving the Employer or Parent through one or more
intermediaries) of (x) a merger, consolidation, reorganization, or business combination or
(y) a sale or other disposition of all or substantially all of the Employer’s or Parent’s
assets in any single transaction or series of related transactions or (z) the acquisition of
assets or stock of another entity, in each case other than a transaction:
(A) Which results in the Employer’s or Parent’s voting securities outstanding
immediately before the transaction continuing to represent (either by remaining
outstanding or by being converted into voting securities of the Employer or Parent
or the person that, as a result of the transaction, controls, directly or
indirectly, the Employer or Parent or owns, directly or indirectly, all or
substantially all of the Employer’s or Parent’s assets or otherwise succeeds to the
business of the Employer or Parent (the Employer or Parent or such person, the
“Successor Entity”)) directly or indirectly, at least a majority of the
combined voting power of the Successor Entity’s outstanding voting securities
immediately after the transaction, and
(B) After which no person or group beneficially owns voting securities
representing 50% or more of the combined voting power of the Successor Entity;
provided, however, that no person or group shall be treated for purposes of this
Section 3(c)(iii) as beneficially owning 50% or more of combined voting power of the
Successor Entity solely as a result of the voting power held in the Employer or
Parent prior to the consummation of the transaction; or
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(iv) The Employer’s or Parent’s stockholders approve a liquidation or dissolution of
the Employer or Parent.
The Parent Board or its designee shall have full and final authority, which shall be exercised in
its discretion, to determine conclusively whether a Change of Control of the Employer or Parent has
occurred, and the date of the occurrence of such Change of Control and any incidental matters
relating thereto.
(f) Benefits. Employer shall provide Executive with the right to participate in and
receive benefits from all life, accident, disability, medical and pension plans, and all similar
benefits as are from time to time in effect and are generally made available to similar situated
senior executive officers of Employer. The amount and extent of benefits to which Executive is
entitled shall be governed by the specific benefit plan, as it may be amended from time to time.
(g) Expenses. Employer shall promptly reimburse Executive for reasonable expenses for
cellular telephone usage, entertainment, travel, meals, lodging and similar items incurred in the
conduct of Employer’s business. Such expenses shall be reimbursed in accordance with Employer’s
expense reimbursement policies and guidelines.
(h) Vacation; Sick Leave. During the Term, Executive shall be entitled to four weeks
(4) weeks vacation per year, paid holidays, sick leave, and similar benefits, to be earned and used
in accordance with Employer’s policy and procedure for other similarly situated senior executive
officers.
(i) Modification. Employer reserves the right to modify, suspend or discontinue any
and all of the above plans, practices, policies and programs referenced in Sections 3(f) and (g) at
any time in its discretion without recourse by Executive so long as such action is taken generally
with respect to other similarly situated senior executive officers. Any such modification,
suspension or discontinuance of the plans, practices and policies referenced in Section 3(g) will
not apply to otherwise reimbursable expenses incurred by Executive prior to any such modification,
suspension or discontinuance.
Section 4. Termination of Employment
(a) Resignation. Executive may voluntarily terminate his employment with Employer, at
any time, with or without Good Reason, upon written notice to Employer.
(b) Termination. Employer may terminate Executive’s employment at any time, with or
without Cause, upon written notice to Executive.
(c) Death or Disability. Executive’s employment shall terminate immediately upon
Executive’s death. In the event Employer, in good faith, determines that Executive is unable to
perform the functions of his position due to a Disability (as defined below), it may notify
Executive in writing of its intention to terminate Executive’s employment and Executive’s
employment with Employer shall terminate effective on the thirtieth (30th) day after receipt of
such notice by Executive. For the purposes of this Agreement, “Disability” shall mean a
physical or mental impairment that substantially limits a major life activity of Executive and
renders Executive unable to perform the essential functions of his position even with reasonable
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accommodation (that does not impose an undue hardship on Employer), and which has lasted at
least (i) sixty (60) consecutive days, (ii) the balance of Executive’s entitlement to leave, if
any, under the Family and Medical Leave Act, or other similar statute or (iii) the balance of any
election period under the Employer’s long term disability program (without regard to whether
Executive is awarded benefits under such program), whichever is longer.
(d) Cause. Employer may immediately terminate Executive’s employment for
“Cause” by giving written notice to Executive. For purposes of this Agreement,
“Cause” shall mean:
| (1) | Executive’s commission of an act of fraud or embezzlement upon Employer or any of its affiliates; or | ||
| (2) | Executive’s commission of any willful act intended to injure the reputation, business, or any business relationship of Employer or any of its affiliates; or | ||
| (3) | Executive is found by a court of competent jurisdiction to have committed a felony; or | ||
| (4) | the refusal or failure of Executive to perform Executive’s duties with Employer in a competent and professional manner that is not cured by Executive within ten (10) business days after a written demand therefor is delivered to Executive by the Board which specifically identifies the manner in which the Board believes that Executive has not substantially performed Executive’s duties; provided, further, however, that if the Board, in good faith, determines that the refusal or failure by Executive is egregious in nature or is not susceptible of cure, then no cure period shall be required hereunder; or | ||
| (5) | the refusal or failure of Executive to comply with any of his material obligations under this Agreement (including any exhibit hereto) that is not cured by Executive within ten (10) business days after a written demand therefor is delivered to Executive by the Board which specifically identifies the manner in which the Board believes Executive has materially breached this Agreement; provided, further, however, that if the Board, in good faith, determines that the refusal or failure by Executive is egregious in nature or is not susceptible of cure, then no cure period shall be required hereunder. |
(e) Good Reason. Executive may terminate his employment for “Good Reason,” by
delivering written notice of such termination (“Employer Default Notice”) to Employer
within sixty (60) days of the occurrence of any of the following events, each of which shall
constitute Good Reason: (i) Employer’s material breach of any provision of this Agreement, the
Stock Incentive Plans or any agreements thereunder, which has not been cured
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within the allotted time; (ii) a material reduction of Executive’s then current title, status,
authority, responsibility or duties or the assignment to Executive of any duties materially
inconsistent with Executive’s then current position; (iii) any material reduction in Executive’s
salary or benefits; (iv) the failure of any successor entity to assume the terms of this Agreement
upon any Change of Control; (v) the relocation of Executive to a facility or location more than
fifty (50) miles from Employer’s principal offices at the address set forth in the preamble to this
Agreement; or (vi) the failure of Employer to renew this Agreement upon the expiration of the
Initial Term or any Renewal Term. The Employer Default Notice shall specify the reason for
Executive’s belief that an event constituting Good Reason has occurred. Notwithstanding the
foregoing, any material breach of this Agreement by Employer, or other event constituting Good
Reason, shall not constitute Good Reason if any such breach or other event is cured or corrected by
Employer within thirty (30) days following delivery to Employer of the Employer Default Notice.
(f) Continuing Obligations. Executive acknowledges and agrees that any termination
under this Section 4 is not intended, and shall not be deemed or construed, to affect in any way
any of Executive’s covenants and obligations contained in Sections 6, 7, and 8 hereof, which shall
continue in full force and effect beyond such termination for any reason.
Section 5. Termination Obligations
(a) Resignation. If Executive’s employment is terminated voluntarily by Executive
without Good Reason, Executive’s employment shall terminate without further obligations to
Executive other than for payment of the sum of any unpaid Salary determined by the Parent Board and
reimbursable expenses and vacation accrued and owing to Executive prior to the termination. The
sum of such amounts shall hereinafter be referred to as the “Accrued Obligations,” which
shall be paid to Executive or Executive’s estate or beneficiary within thirty (30) days of the date
of termination. If Executive voluntarily terminates his employment without Good Reason and within
(30) days of such termination, Employer determines that it would have had Cause to terminate
Executive pursuant to Section 4(d), Executive shall be deemed to have been terminated for Cause and
the terms of Section 5(b) shall apply.
(b) Cause. If Executive’s employment is terminated by Employer for Cause, this
Agreement shall terminate without further obligations to Executive other than for the timely
payment of Accrued Obligations. If it is subsequently determined by an arbitrator, pursuant to
Section 19 hereof, that Employer did not have Cause for termination, then Employer’s decision to
terminate shall be deemed to have been made without Cause and the terms of Section 5(c) shall
apply.
(c) By Employer Other than for Cause; Death or Disability; By Executive for Good
Reason.
(1) If (A) Employer terminates Executive’s employment for (x) a reason other than Cause, or
(y) due to Executive’s death or Disability, or (B) Executive terminates his employment for Good
Reason, Employer shall have no further obligations to Executive other than for (i) the payment of
Accrued Obligations, (ii) severance pay in an amount equal to twelve (12) months of Salary and
payable within thirty (30) days of the Severance
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Commencement Date; provided, however, that in the event that Executive’s termination of
employment is within twelve (12) months after a Change of Control, such severance pay shall be
increased to an amount equal to twenty four (24) months of Salary, (iii) a pro rata bonus
calculated based on multiplying the percentage of the year Executive worked for Employer during the
year of his termination by Executive’s target Bonus for such year and payable within thirty (30)
days of the Severance Commencement Date, (iv) the reimbursement of premiums otherwise payable by
Executive pursuant to COBRA for a period of up to 12 months, or until Executive no longer is
eligible for COBRA continuation coverage, whichever is earlier, (v) the Additional Bonus, payable,
if any, as set forth in Section 3(d) above, and (vi) the Additional Compensation, payable as set
forth in Section 3(c) above until the earlier of June 30, 2010 or the Note is issued.. For purposes
of this Section 5, “Severance Commencement Date” shall mean (x) if any stock of Parent or
its affiliates is publicly traded on an established securities market or otherwise and the Parent
Board (or its delegate) determines that as of the date of termination of Executive’s employment
that the Executive is a “key employee” (within the meaning of Section 416(i) of the Internal
Revenue Code of 1986, as amended (the “Code”), as interpreted in accordance with Section
409A of the Code and Department of Treasury regulations and other interpretive guidance issued
thereunder) and that Section 409A of the Code applies with respect to payments to Executive
pursuant to Section 5(c)(1)(ii) and (iii), the six-month anniversary of the date of the Executive’s
“separation from service” (within the meaning of section 409A of the Code); or (y) if the Parent
Board (or its delegate) determines that Executive is not such a “key employee” as of date of
Executive’s termination of employment (or that Section 409A of the Internal Revenue Code does not
apply with respect to payments to the Executive pursuant to Section 5(c)(1)(ii) and (iii)), the
date of Executive’s termination of employment. The payments described in this Section 5(c)(1)(i)
shall be made within thirty (30) days of the date of Executive’s termination of employment.
(2) If Executive terminates his employment for Good Reason and it is subsequently determined
by an arbitrator, pursuant to Section 20 hereof, that Executive did not have Good Reason for
termination, then Executive’s decision to terminate for Good Reason shall be deemed to have been a
voluntary resignation, the terms of Section 5(a) shall apply, and all monies paid to Executive
pursuant to this Section 5(c)(1), except for those monies paid pursuant to Section 5(c)(1)(i),
shall be immediately returned to Employer.
(3) The amounts payable pursuant to Section 5(c)(1) shall be the only amounts Executive shall
receive for termination in accordance with this Section 5(c); provided, however, that no amounts
shall be payable pursuant to this section 5(c) on or following the date Executive breaches any of
Sections 7, 8 or 9 of this Agreement.
(d) Release. Notwithstanding anything to the contrary contained herein, no severance
payments required hereunder shall be made by Employer until such time as Executive shall execute a
general release for the benefit of Employer and its affiliates in a form satisfactory to Employer.
Such general release shall not apply to (i) Executive’s rights under any Stock Incentive Plan award
agreements or (ii) Executive’s rights, as applicable, to indemnification under Employer’s or
Parent’s charter or bylaws, any indemnification agreement or applicable law.
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(e) Equity Compensation Awards. Except as expressly provided herein, except for the
provisions of Section 3(e) of this Agreement, the terms of the Stock Incentive Plans and any
related award agreements and/or notice of grant shall govern the termination, vesting, and/or
exercise of Executive’s stock options or other equity awards upon the termination of Executive’s
employment for any reason.
(f) Exclusive Remedy. Executive agrees that the payments set forth in this Agreement
shall constitute the exclusive and sole remedy for any termination of Executive’s employment and
Executive covenants not to assert or pursue any other remedies, at law or in equity, with respect
to this Agreement.
(g) Termination of Executive’s Office. Following the termination of Executive’s
employment for any reason, Executive shall hold no further office or position with Employer or any
of its affiliates.
Section 6. Parachute Payments.
(a) If it is determined by a nationally recognized United States public accounting firm
selected by the Employer and approved in writing by the Executive (which approval shall not be
unreasonably withheld) (the “Auditors”) that any payment or benefit made or provided to the
Executive in connection with this Agreement or otherwise (including without limitation any Stock
Option or other equity based award vesting) (collectively, a “Payment”), would be subject
to the excise tax imposed by Section 4999 of the Code (the “Parachute Tax”), then the
Employer shall pay to the Executive, prior to the time the Parachute Tax is payable with respect to
such Payment, an additional payment (a “Gross-Up Payment”) in an amount such that, after
payment by the Executive of all taxes (including any Parachute Tax) imposed upon the Gross-Up
Payment, the Executive retains an amount of the Gross-Up Payment equal to the Parachute Tax imposed
upon the Payment. The amount of any Gross-Up Payment shall be determined by the Auditors, subject
to adjustment, as necessary, as a result of any Internal Revenue Service position. For purposes of
making the calculations required by this Agreement, the Auditors may make reasonable assumptions
and approximations concerning applicable taxes and may rely on reasonable, good faith
interpretations concerning the application of Sections 280G and 4999 of the Code, provided that the
Auditors’ determinations must be made with substantial authority (within the meaning of Section
6662 of the Code).
(b) The federal tax returns filed by the Executive (and any filing made by a consolidated tax
group which includes the Employer) shall be prepared and filed on a basis consistent with the
determination of the Auditors with respect to the Parachute Tax payable by the Executive. The
Executive shall make proper payment of the amount of any Parachute Tax, and at the request of the
Employer, provide to the Employer true and correct copies (with any amendments) of his federal
income tax return as filed with the Internal Revenue Service, and such other documents reasonably
requested by the Employer, evidencing such payment. If, after the Employer’s payment to the
Executive of the Gross-Up Payment, the Auditors determine in good faith that the amount of the
Gross-Up Payment should be reduced or increased, or such determination is made by the Internal
Revenue Service, then within ten (10) business days of such determination, the Executive shall pay
to the Employer the amount of any such reduction, or the Employer shall pay to the Executive the
amount of any such increase; provided, however,
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that in no event shall the Executive have any such refund obligation if it is
determined by the Employer that to do so would be a violation of the Xxxxxxxx-Xxxxx Act of 2002, as
it may be amended from time to time; and provided, further, that if the Executive has prior thereto
paid such amounts to the Internal Revenue Service, such refund shall be due only to the extent that
a refund of such amount is received by the Executive; and provided, further, that (i) the fees and
expenses of the Auditors (and any other legal and accounting fees) incurred for services rendered
in connection with the Auditor’s determination of the Parachute Tax or any challenge by the
Internal Revenue Service or other taxing authority relating to such determination shall be paid by
the Employer and (ii) the Employer shall indemnify and hold the Executive harmless on an after-tax
basis for any interest and penalties imposed upon the Executive to the extent that such interest
and penalties are related to the Auditor’s determination of the Parachute Tax or the Gross-Up
Payment. Notwithstanding anything to the contrary herein, the Executive’s rights under this
Section 6 shall survive the termination of his employment for any reason and the termination or
expiration of this Agreement for any reason.
Section 7. Restrictions Respecting Confidential Information
Executive hereby covenants and agrees that, during his employment and thereafter, Executive
will not, under any circumstance, disclose in any way any Confidential Information (as defined
below) to any other person other than (i) at the direction of and for the benefit of Employer, (ii)
to his attorney or other advisers in connection with Executive’s enforcement of his rights
hereunder, provided such individuals or entities agree to be bound by the confidentiality
restrictions herein contained, and if such Confidential Information is relevant to such enforcement
action, to the court or arbitrator, as applicable, subject to a protective order. For the purposes
of the foregoing, “Confidential Information” means any information pertaining to the
assets, business, creditors, vendors, manufacturers, customers, data, employees, financial
condition or affairs, formulae, licenses, methods, operations, procedures, reports, suppliers,
systems and technologies of Employer and its affiliates, including (without limitation) the
contracts, patents, trade secrets and customer lists developed or otherwise acquired by Employer
and its affiliates; provided, however, that Confidential Information shall exclude any information
that was, is, or becomes publicly available other than through disclosure by Executive or any other
person known to Executive to be subject to confidentiality obligations to Employer. All
Confidential Information is and will remain the sole and exclusive property of Employer and its
affiliates. Following the termination of his employment, Executive shall return all documents and
other tangible items containing Confidential Information to Employer, without retaining any copies,
notes or excerpts thereof.
Section 8. Proprietary Matters
Executive expressly understands and agrees that any and all improvements, inventions,
discoveries, processes, or know-how that are generated or conceived by Executive during the Term
(collectively, the “Inventions”) will be the sole and exclusive property of Employer, and Executive
will, whenever requested to do so by Employer (either during the Term or thereafter), execute and
assign any and all applications, assignments and/or other instruments and do all things which
Employer may deem necessary or appropriate in order to apply for, obtain, maintain, enforce and
defend patents, copyrights, trade names or trademarks of the United States or of foreign countries
for said Inventions, or in order to assign and convey or otherwise make
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available to Employer the sole and exclusive right, title, and interest in and to said
Inventions, applications, patents, copyrights, trade names or
trademarks; provided, however, that pursuant to California Labor Code Section 2872 and any successor thereto, the
provisions of this
Section 8 shall not apply to an Invention that fully under the provisions of California Labor Code
Section 2870 (and any successor thereto) which provides:
“Any provision in an employment agreement which provides that an employee shall
assign, or offer to assign, any of his or her rights in an invention to his or her
employer shall not apply to an invention that the employee developed entirely on his
or her own time without using the employer’s equipment, supplies, facilities, or
trade secret information except for those inventions that either: (1) Relate at the
time of conception or reduction to practice of the invention to the employer’s
business, or actual or demonstrably anticipated research or development of the
employer; or (2) Result from any work performed by the employee for the employer.”
Executive shall promptly communicate and disclose to Employer all Inventions conceived,
developed or made by him during his employment by Employer, whether solely or jointly with others,
and whether or not patentable or copyrightable, (a) which relate to any matters or business of the
type carried on or being developed by Employer, or (b) which result from or are suggested by any
work done by him in the course of his employment by Employer. Executive shall also promptly
communicate and disclose to Employer all material other data obtained by him concerning the
business or affairs of Employer in the course of his employment by Employer.
Section 9. Nonsolicitation
(a) Executive agrees that during his employment with Employer and for a period of two (2)
years following the termination of his employment for any reason, he will not actively solicit for
employment, consulting or any other arrangement any employee of Employer or any of its present or
future affiliates (while an affiliate).
(b) Executive agrees that during his employment with Employer and for a period of two (2)
years following the termination of his employment for any reason, he will not influence or attempt
to influence customers of Employer or any of its present or future affiliates, either directly or
indirectly, to divert their business to any Competitor.
(c) The restrictions contained in this Section 9 are necessary for the protection of the
business and goodwill of Employer and are considered by Executive to be reasonable for such
purpose. Further, Executive represents that these restrictions will not prevent him from earning a
livelihood during the restricted period.
(d) This Section 9 shall survive the termination or expiration of this Agreement.
Section 10. Equitable Relief
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Executive acknowledges and agrees that Employer will suffer irreparable damage which cannot be
adequately compensated by money damages in the event of a breach, or threatened breach, of any of
the terms and provisions of Sections 7, 8 and 9 of this Agreement, and that, in the event of any
such breach, or threatened breach, Employer will not have an adequate remedy at law. It is
therefore agreed that Employer, in addition to all other such rights, powers, privileges and
remedies that it may have, shall be entitled to injunctive relief, specific performance or such
other equitable relief as Employer may request to enforce any of those terms and provisions and to
enjoin or otherwise restrain any act prohibited thereby, and Executive will not raise and hereby
waives any objection or defense that there is an adequate remedy available at law. Notwithstanding
the provisions of Section 20 of this Agreement, Executive agrees that Employer shall be entitled to
seek such injunctive relief, without bond, in a court of competent jurisdiction and Executive
hereby consents to the jurisdiction of the state and federal courts of Los Angeles for purposes of
such an action. Executive agrees that any claim he may have against Employer or any of its
affiliates shall not constitute a defense against the issuance of any such equitable relief. The
foregoing shall not constitute a waiver of any of Employer’s rights, powers, privileges and
remedies against or in respect of a breaching party or any other person or thing under this
Agreement, or applicable law.
Section 11. Notice
Any notice, request, demand or other communication hereunder shall be in writing, shall be
delivered by hand or sent by registered or certified mail or by reputable overnight delivery
service, postage prepaid, to the addressee at the address set forth below (or at such other address
as shall be designated hereunder by written notice to the other party hereto) and shall be deemed
conclusively to have been given when actually received by the addressee.
All notices and other communications hereunder shall be addressed as follows:
If to Executive at the address set forth in the Employer’s
payroll records.
payroll records.
If to Employer:
With a copy to:
or to such other address as either party shall have furnished to the other in writing in accordance
herewith.
Section 12. Legal Counsel
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In entering into this Agreement, the parties represent that they have relied upon the advice
of their attorneys, who are attorneys of their own choice, and that the terms of this Agreement
have been completely read and explained to them by their attorneys, and that those terms are fully
understood and voluntarily accepted by them.
Section 13. Section and Other Headings
The section and other headings contained in this Agreement are for reference purposes only and
shall not affect the meaning or interpretation of this Agreement.
Section 14. Governing Law
This Agreement has been executed and delivered, and shall be governed by and construed in
accordance with the applicable laws pertaining, in the State of California, without regard to
conflicts of laws principles.
Section 15. Severability
In the event that any term or provision of this Agreement shall be finally determined to be
superseded, invalid, illegal or otherwise unenforceable pursuant to applicable law by a
governmental authority having jurisdiction and venue, that determination shall not impair or
otherwise affect the validity, legality or enforceability, to the maximum extent permissible by
law, (a) by or before that authority of the remaining terms and provisions of this Agreement, which
shall be enforced as if the unenforceable term or provision were deleted, or (b) by or before any
other authority of any of the terms and provisions of this Agreement.
Section 16. Counterparts
Section 17. This Agreement may be executed in two counterpart copies of the entire document or
of signature pages to the document, each of which may be executed by one of the parties hereto, but
all of which, when taken together, shall constitute a single agreement binding upon both of the
parties hereto.
Section 18. Benefit
This Agreement shall be binding upon and inure to the benefit of the respective parties hereto
and their legal representatives, successors and assigns. Insofar as Executive is concerned, this
Agreement, being personal, cannot be assigned; provided, however, that should Executive become
entitled to payment pursuant to Section 5 hereof, he may assign his rights to such payment to his
legal representatives, successors, and assigns. Without limiting the generality of the foregoing,
all representations, warranties, covenants and other agreements made by or on behalf of Executive
in this Agreement shall inure to the benefit of the successors and assigns of Employer.
Section 19. Modification
This Agreement may not be amended or modified other than by a written agreement executed by
all parties hereto.
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Section 20. Entire Agreement
Except as provided in Section 5(e) hereof, this Agreement contains the entire agreement of the
parties and supersedes all other representations, warranties, agreements and understandings, oral
or otherwise, among the parties with respect to the matters contained herein, including any prior
employment agreements between Executive and Employer or any affiliate of Employer. Nothing in this
Agreement shall be deemed to affect in any way the term or enforceability of that certain Unfair
Competition and NonSolicitation Agreement by and between Employer which agreement shall remain in
full force and effect.
Section 21. Arbitration
(a) Executive agrees that any dispute or controversy arising out of, relating to, or in
connection with this Agreement or the termination thereof, or the interpretation, validity,
construction, performance, breach, or termination thereof, shall be settled by expedited, binding
arbitration to be held in Los Angeles, California in accordance with the National Rules for the
Resolution of Employment Disputes then in effect of the American Arbitration Association (the
“Rules”). The arbitrator may grant injunctions or other relief in such dispute or
controversy. The decision of the arbitrator shall be final, conclusive and binding on the parties
to the arbitration. Judgment may be entered on the arbitrator’s decision in any court having
jurisdiction. The arbitrator may award the prevailing party its reasonable attorney’s fees.
(b) The arbitrator shall apply California law to the merits of any dispute or claim, without
reference to rules of conflicts of law. The arbitration proceedings shall be governed by federal
arbitration law and by the Rules, without reference to state arbitration law.
(c) EXECUTIVE HAS READ AND UNDERSTANDS THIS SECTION, WHICH DISCUSSES ARBITRATION. EXECUTIVE
UNDERSTANDS THAT BY SIGNING THIS AGREEMENT, EXECUTIVE IS AGREEING TO SUBMIT ANY CLAIMS ARISING OUT
OF, RELATING TO, OR IN CONNECTION WITH THIS AGREEMENT, OR THE INTERPRETATION, VALIDITY,
CONSTRUCTION, PERFORMANCE, BREACH OF TERMINATION THEREOF, TO BINDING ARBITRATION, AND THAT THIS
ARBITRATION CLAUSE CONSTITUTES A WAIVER OF EXECUTIVE’S RIGHT TO A JURY TRIAL AND RELATES TO THE
RESOLUTION OF ALL DISPUTES RELATING TO ALL ASPECTS OF THE EMPLOYER/EMPLOYEE RELATIONSHIP INCLUDING,
BUT NOT LIMITED TO, STATUTORY DISCRIMINATION CLAIMS.
Section 22. Representations and Warranties of Executive
In order to induce Employer to enter into this Agreement, Executive represents and warrants to
Employer, to the best of his knowledge after the review of his personnel files, that: (a) the
execution and delivery of this Agreement by Executive and the performance of his obligations
hereunder will not violate or be in conflict with any fiduciary or other duty, instrument,
agreement, document, arrangement or other understanding to which Executive is a party or by which
he is or may be bound or subject; and (b) Executive is not a party to any instrument, agreement,
document, arrangement or other understanding with any person (other
16
than Employer) requiring or restricting the use or disclosure of any confidential information
or the provision of any employment, consulting or other services.
Section 23. Waiver of Breach
Except as may specifically provided herein, the failure of a party to insist on strict
adherence to any term of this Agreement on any occasion shall not be considered a waiver or deprive
that party of the right thereafter to insist upon strict adherence to that term or any term of this
Agreement. Any waiver hereto must be in writing.
[signature page follows]
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IN WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement as of the
date first written above.
| EXECUTIVE: | ||||||
| Xxxx X. Xxxxx | ||||||
| EMPLOYER: | ||||||
| Automotive Lease Guide (alg), Inc. | ||||||
| By: | ||||||
| Name: | ||||||
| Title: | ||||||
| Date: | ||||||
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