Exhibit 10.177
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is entered into as of the
11th day of December 2001 by and between XXXXXX FARES ("Fares") and INSURANCE
AUTO AUCTIONS, INC., an Illinois corporation ("Company").
RECITALS
WHEREAS, the Company desires to employ Fares and Fares desires to be
employed by the Company upon the terms and conditions set forth below.
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, it is hereby agreed that:
1. EMPLOYMENT. The Company hereby employs Fares, and Fares hereby
accepts employment with the Company, as Chief Information Officer, whose duties
include overseeing the information technology aspects of the Company and its
affiliated companies. Fares shall be an executive of the Company and shall be
subject to the direction and control of the President and Chief Executive
Officer of the Company and the Board of Directors of the Company (the "Board").
Fares shall devote all of his business time and services to the business and
affairs of the Company. Fares shall also perform such other executive-level
duties consistent with his position as Chief Information Officer as may be
assigned to him from time to time by the Chief Executive Officer, including
serving as an officer and/or director of the Company's operating subsidiaries.
The duties and services to be performed by Fares hereunder shall be
substantially rendered at the Company's principal offices as determined by the
Board, except for reasonable travel on the Company's business incident to the
performance of Fares' duties.
2. COMPENSATION. As compensation for Fares' services provided
hereunder, the Company agrees to provide the following compensation:
2.1. BASE SALARY. While this Agreement is in effect, the Company
agrees to pay to Fares a base salary at the rate of $170,000 per annum
commencing on the date hereof ("Base Salary"). The Base Salary shall be subject
to annual review by the Board and any committee thereof ("Committee") or the
Compensation Committee and may be increased by the Board in their sole and
absolute discretion but may not be decreased. Such salary shall be payable to
Fares in such equal periodic payments as the Company generally pays its
employees, but in no event less frequently than monthly.
2.2. INCENTIVES. As additional compensation for performance of the
services rendered by Fares during the term of this Agreement, the Company will
pay to Fares, in cash, a performance bonus equal to thirty percent (30%) of
Fares' annual salary based upon the achievement of objectively quantifiable and
measurable goals and objectives which shall be determined, in advance. by the
Compensation Committee of the Board with respect to each fiscal year of the
Company. This amount is hereinafter referred to as "Incentive Compensation."
2.3. OPTIONS. The Company shall cause the Committee delegated by
the Board to administer the Option Plan (as defined below) to grant to Fares an
option to purchase 30,000 shares of the Company's common stock (the "Option").
The Option shall be granted under the Company's 1991 Stock Option Plan, as
amended (the "Option Plan"). The exercise price of the Option granted pursuant
to this Section 2.3 shall be equal to 100% of the fair market value of the
common stock on the close of business on the day before the day that Fares
becomes employed by the Company subject to the vesting and termination
provisions as describe below. The Option shall become exercisable in four equal
annual installments beginning on the first anniversary of the grant date, and,
except as provided below, shall be subject to the usual terms and conditions of
options issued pursuant to and in accordance with the Option Plan.
2.4. BENEFITS. During the term of his employment or for such time
as otherwise provided in this Agreement, Fares shall be entitled to participate
in such vacation, auto allowance, benefit plans, fringe benefits, life
insurance, medical and dental plans (beginning on the first of the month
following 30 days of employment), retirement plans and other programs as offered
from time to time by the Company and are described in the Company's employee
benefit handbooks. Fares shall be entitled to four weeks of paid vacation each
calendar year, subject to any limitations on carryover of unused vacation
generally applicable to employees. Fares shall be authorized to incur necessary
and reasonable travel, entertainment and other business expenses in connection
with his duties hereunder. In connection with expenses pursuant to this Section
2.4, the Company shall reimburse Fares for such expenses upon presentation of an
itemized account and appropriate supporting documentation, all in accordance
with the Company's generally applicable policies
2.5. INDEMNIFICATION. The Company shall indemnify Fares in
accordance with the terms of the Company's standard form of Indemnification
Agreement.
3. TERMINATION.
3.1. AT WILL NATURE OF EMPLOYMENT. Employment with the Company is
not for a specific term and can be terminated by Fares or the Company at any
time for any reason, with or without cause. Any contrary representations that
may have been made or that may be made to Fares are superseded by this
Agreement. In addition, this Agreement shall terminate by reason of Fares' death
or the substantial inability by Fares, by reason of physical or mental illness
or accident, to perform his regular responsibilities hereunder indefinitely or
for a period of one hundred eighty (180) days (a "Disability").
3.2. COMPANY'S OBLIGATIONS ON TERMINATION APART FROM A CHANGE OF
CONTROL.
(a) NO OBLIGATIONS OTHER THAN AS REQUIRED BY LAW FOR VOLUNTARY
TERMINATION OR CAUSE. The Company shall have no obligations to pay Fares any
severance payments or continue to cover Fares and/or his beneficiaries under the
Company's health plan (other than as required by law) if this Agreement is
terminated for any of the following reasons:
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(i) VOLUNTARY TERMINATION. Fares voluntarily terminates this Agreement;
or
(ii) CAUSE. The Company terminates Fares' employment at any time during
the term of this Agreement for Cause. For purposes of this Agreement, "Cause"
shall mean:
(A) the willful and continued failure of Fares
to perform substantially his duties with the Company or one of
its affiliates (other than any such failure resulting from
incapacity due to medically documented illness or injury), 30
days after a written demand for substantial performance is
delivered to Fares by the Board which specifically identifies
the manner in which the Board believes that Fares has not
substantially performed his duties; or
(B) the willful engaging by Fares in illegal
conduct or misconduct, which is injurious to the Company,
in each case as determined in the good faith opinion of the Board.
(b) DEATH AND DISABILITY OBLIGATIONS. If this Agreement is
terminated due to death or disability, the Company shall pay to Fares (or his
legal representatives as the case may be) the specific obligations as set forth
below:
(i) DEATH. Fares' employment shall terminate
automatically upon Fares' death. If Fares' employment under this
Agreement is terminated by reason of his death, the Company's sole
obligation to Fares' legal representatives shall be to pay or cause to
be paid, within thirty (30) days of the Date of Termination (as
hereinafter defined), to such person or persons as Fares shall have
designated for that purpose in a notice filed with the Company, or, if
no such person shall have been so designated, to his estate, the amount
of Fares' Accrued Obligations (as hereinafter defined). Any amounts
payable under this Section 3.2(b)(i) shall be exclusive of and in
addition to any payments or benefits which Fares' widow, beneficiaries
or estate may be entitled to receive pursuant to any pension plan,
profit sharing plan, any employee benefit plan, equity incentive plan
or life insurance policy maintained by the Company.
(ii) DISABILITY. If the Disability of Fares occurs, the
Company may give to Fares written notice in accordance with Section 6.1
of this Agreement of its intention to terminate Fares' employment. In
such event, Fares' employment with the Company shall terminate
effective on the 30th day after receipt of such notice by Fares (the
"Disability Effective Date"), unless within the 30-day period after
such receipt, Fares returns to full-time performance of his duties. The
Company's sole obligation to Fares shall be payment of Accrued
Obligations (as hereinafter defined) and the timely payment or
provision of other benefits, including disability and other benefits
provided by the Company to disabled executives and/or their families in
accordance with such Company plans, programs, practices and policies
relating to disability, if any.
(c) OBLIGATIONS FOR ALL OTHER TERMINATION REASONS. For any other
reason, upon the termination of this Agreement and Fares' employment hereunder
apart from a Change of Control, the Company shall pay to Fares an amount equal
to the sum of (i) Fares' annual base salary at the
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time Fares' employment is terminated; plus (ii) Fares' average annual bonus
received over the eight (8) fiscal quarters of the Company immediately preceding
Company's fiscal quarter during which Fares' employment is terminated, without
exceeding Fares' target bonus for Company's fiscal year during which Fares'
employment is terminated, provided, however, that Fares shall receive his target
bonus if he is terminated within his first eight (8) fiscal quarters with the
Company; plus (iii) Fares' auto allowance for the Company's fiscal year during
which Fares' employment is terminated. In addition, the Company shall provide,
at Company's expense, continued coverage for Fares and his beneficiaries for a
period extending through the earlier of the date Fares begins any subsequent
full-time employment for pay and the date that is one (1) year after Fares'
termination of employment, under the Company's health plan covering Fares and
Fares' beneficiaries, provided that Fares properly elects coverage pursuant to
Title I, Part 6 of the Employee Retirement Income Security Act of 1974, as
amended ("COBRA").
3.3. COMPANY'S OBLIGATIONS ON TERMINATION DUE TO A CHANGE OF
CONTROL.
(a) DEFINITIONS.
(i) For purposes of this Agreement, a "Change of
Control" shall mean:
(A) the acquisition by any individual,
entity or group (within the meaning of Section
13(d)(3) or 14(d)(2) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act")) (for the
purposes of this Section 3.3, a "Person") of
beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of 50% or
more of the voting power of the then outstanding
voting securities of the Company entitled to vote
generally in the election of directors (the
"Outstanding Company Voting Securities"); provided,
however, that for purposes of this subsection (a),
any acquisition by any employee benefit plan (or
related trust) sponsored or maintained by the Company
or any corporation controlled by the Company shall
not constitute a Change of Control; or
(B) individuals who, as of the date hereof,
constitute the Board (the "Incumbent Board") cease
for any reason to constitute at least a majority of
the Board; provided, however, that any individual
(other than an individual whose initial assumption of
office occurs as a result of an actual or threatened
solicitation of proxies or consents by or on behalf
of a Person other than the Board) who becomes a
director subsequent to the date hereof whose election
or nomination for election was approved by a vote of
at least a majority of the directors then comprising
the Incumbent Board shall be considered as though
such individual were a member of the Incumbent Board;
or
(C) consummation of a reorganization, merger
or consolidation or sale or other disposition of all
or substantially all of the assets of the Company (a
"Business Combination") unless, following such
Business Combination, (i) all or substantially all of
the individuals and entities who were the beneficial
owners of the Outstanding Company Voting Securities
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immediately prior to such Business Combination
beneficially own, directly or indirectly, more than
50% of the voting power of the then outstanding
voting securities entitled to vote generally in the
election of directors, as the case may be, of the
corporation resulting from such Business Combination
(including, without limitation, a corporation which
as a result of such transaction owns the Company or
all or substantially all of the Company's assets
either directly or through one or more subsidiaries)
in substantially the same proportions as their
ownership, immediately prior to such Business
Combination of the Outstanding Company Voting
Securities and (ii) at least a majority of the
members of the board of directors of the corporation
resulting from such Business Combination were members
of the Incumbent Board at the time of the execution
of the initial agreement, or of the action of the
Board, providing for such Business Combination; or
(D) approval by the shareholders of the
Company of a complete liquidation or dissolution of
the Company.
(ii) For purposes of this Agreement, "affiliated
companies" shall include any company controlled by,
controlling or under common control with the Company.
(iii) For purposes of this Agreement, "Involuntary
Termination" shall mean Fares' voluntary termination following
(A) a change in Fares' position with the Company which
materially reduces Fares' level of responsibility, (B) a
reduction in Fares' Base Salary, or (C) a change in Fares'
place of employment, which is more than seventy-five (75)
miles from Fares' place of employment prior to the change,
provided and only if such change or reduction is effected
without Fares' written concurrence.
(iv) For purposes of this Agreement, "Date of
Termination" shall mean (A) if Fares' employment is terminated
by the Company for Cause, or by Fares, the date of receipt of
the Notice of Termination or any later date specified therein,
as the case may be, (B) if Fares' employment is terminated by
the Company for other than for Cause or Disability, the date
on which the Company notifies Fares of such termination and
(C) if Fares' employment is terminated by reason of death or
disability, the date of death of Fares or the Disability
Effective Date, as the case may be.
(v) For purposes of this Agreement, "Accrued
Obligations" shall mean the sum of (A) Fares' Base Salary
through the Date of Termination to the extent not theretofore
paid, (B) the greater of (I) the product of (x) any Incentive
Compensation paid to or deferred by Fares for the fiscal year
preceding the fiscal year in which Fares' Date of Termination
occurs (annualized in the event that Fares was not employed by
the Company for the whole of such fiscal year) and (y) a
fraction, the numerator of which is the number of days in the
current fiscal year through the Date of Termination, and the
denominator of which is 365 and (II) the average of the past
three (3) years' annual bonuses, provided, however, that Fares
shall receive his target bonus if he is terminated within his
first eight (8) fiscal quarters with the Company (such greater
amount being the "Highest Annual Bonus") and (C) any
compensation previously deferred by Fares (together with any
accrued interest or earnings thereon)
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and any accrued vacation pay, in each case to the extent not
theretofore paid. Notwithstanding the foregoing, in no event
will Fares be entitled to a duplication of any Incentive
Compensation payments.
(b) SEVERANCE BENEFITS FOR TERMINATION WITHIN TWO (2)
YEARS OF A CHANGE OF CONTROL. If Fares' employment with the Company
terminates by reason of Fares' Involuntary Termination (as defined in
Section 3.3(a)(iii) above) or termination by the Company without Cause
(as defined in Section 3.2(a)(ii)) above) within two (2) years of the
effective date of the Change of Control, Fares shall be entitled to
receive the following:
(i) Company must pay Fares an amount equal to
150% of the sum of (A) Fares' Base Salary and (B) his Highest
Annual Bonus;
(ii) Company shall also pay Fares any Accrued
Obligations; and
(iii) Company shall provide, at its expense,
continued coverage of Fares and Fares' beneficiaries for
eighteen (18) months after the Date of Termination or until
Fares commences any full-time employment, whichever comes
first, under the Company's health plan covering Fares and
Fares' beneficiaries, provided, however, that Fares properly
elects coverage pursuant to COBRA.
(c) SEVERANCE BENEFITS FOR TERMINATION AFTER THE SECOND
YEAR FOLLOWING A CHANGE OF CONTROL. If Fares is terminated after the
second year following a Change of Control, the Company's obligations
are as set forth in Section 3.2 of this Agreement.
(d) STOCK OPTIONS AFTER A CHANGE OF CONTROL. Subject to
Section 2.3 of this Agreement, all Fares' outstanding stock options to
purchase Company common stock shall accelerate and become fully
exercisable.
3.4. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY; EXCISE TAX
GROSS-UP. A "Gross-Up Payment" (as defined below) shall be made to Fares when
payments of compensation payable to Fares on termination of employment in
connection with a Change of Control, including, without limitation, the vesting
of an option or other non-cash benefit or property, whether pursuant to the
terms of any applicable plan, arrangement or agreement with the Company or any
of its affiliated companies (the "Total Payments") would trigger a tax imposed
on Fares under Section 4999 of the Internal Revenue Code of 1986, as amended
(the "Excise Tax").
For purposes hereof, the Gross-Up Payment shall mean a payment to Fares
in such amount as is necessary to ensure that the net amount retained by Fares,
after reduction for any Excise Tax (including any penalties or interest thereon)
on the Total Payments and any federal, state and local income or employment tax
and Excise Tax on the Gross-Up Payment provided for by this Section 3.4, but
before reduction for any federal, state or local income or employment tax on the
Total Payments, shall be equal to the Total Payments.
3.5. EXCLUSIVE BENEFITS. If more than one benefit due to
termination becomes payable under Sections 3.2 or Section 3.3, the greatest of
such benefits shall become payable to the exclusion of all other such benefits
and shall be in lieu of any other severance or similar benefits
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that would otherwise be payable under any other agreement, plan, program or
policy of the Company. Notwithstanding anything in the prior sentence to the
contrary, Fares shall be entitled to benefits and incentives under all benefit
plans and equity incentive plans, policies and programs (except as expressly
excluded herein, including, without limitation, Section 2.3 of this Agreement)
according to the terms of such benefit plans and equity incentive plans,
policies and programs as in effect from time to time, including any acceleration
of vesting provisions in the Company's option plans, including any benefits
under the Executive Severance Plan for Officers.
4. INVENTIONS AND CREATIONS. Fares agrees that all inventions,
discoveries, improvements, ideas and other contributions (collectively
"Inventions") whether or not copyrighted or copyrightable, patented or
patentable, or otherwise protectable in law, which are conceived, made,
developed or acquired by Fares, either individually or jointly, during his
employment with the Company or any of its subsidiaries, and which relate in any
manner to the business of the Company or any of its subsidiaries, shall belong
to the Company and Fares does hereby assign and transfer to the Company his
entire right, title and interest in the Inventions. Fares agrees to promptly and
fully disclose the Inventions to the Company, in writing if requested by the
Company, and to execute and deliver any and all lawful application, assignment
and other documents which the Company requests for protecting the Inventions in
the United States or any other country. The Company shall have the full and sole
power to prosecute such applications and to take all other action concerning the
Inventions, and Fares will cooperate fully within a lawful manner, at the
expense of the Company, in the preparation and prosecution of all such
applications and in any legal actions and proceedings concerning the Inventions.
The provisions of this Section 4 shall survive the termination of this
Agreement.
5. NON-COMPETITION; NON-SOLICITATION; CONFIDENTIAL INFORMATION.
5.1. NON-COMPETITION AGREEMENT. Fares hereby acknowledges and
agrees that the Company actively engages in its business throughout all of North
America. Accordingly, Fares agrees that during the Non-Competition Period (as
defined below), Fares will not, directly or indirectly, whether as a partner,
officer, shareholder, advisor, employee or otherwise, promote, participate,
become employed by, or engage in any activity or other business similar to the
Company's business or any entity engaged in a business competitive with the
Company's business in any state within the United States as well as in Canada or
Mexico. If Fares fails to comply with the provisions of this Section 5.1, the
Company may, in addition to pursuing all other remedies available to the Company
under law or in equity as a result of such breach, cease payment of all
severance benefits under Section 3. For purposes hereof, "Non-Competition
Period" shall mean the period commencing on the date hereof and ending eighteen
(18) months after the later of the termination of Fares' employment hereunder or
Fares' submission of his resignation, or removal of Fares as Chief Information
Officer of the Company and the Company's payment and provision of Change of
Control severance benefits pursuant to Section 3.3.
5.2. NON-SOLICITATION AGREEMENT. During the term of this Agreement
and for a period of eighteen (18) months thereafter, Fares shall not, directly
or indirectly, individually or on behalf of any Person (as defined below)
solicit, aid or induce (a) any then current employee of the Company to leave the
Company in order to accept employment with or render services for Fares or such
Person or (b) any customer, client, vendor, lender, supplier or sales
representative of the Company
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or similar persons engaged in business with the Company to discontinue the
relationship or reduce the amount of business done with the Company. "Person"
means any individual, a partnership, a corporation, an association, a limited
liability company, a joint stock company, a trust, a joint venture, an
unincorporated organization, a governmental entity, or any department, agency or
political subdivision thereof, or an accrediting body.
5.3. CONFIDENTIAL INFORMATION. Fares acknowledges and agrees that
he is in possession of and will be exposed to during the course of, and incident
to, his employment by and affiliations with the Company, Confidential
Information (as defined herein) relating to the Company and its affiliated
companies. For purposes hereof, "Confidential Information" shall mean all
proprietary or confidential information concerning the business, finances,
financial statements, properties and operations of the Company and its
affiliated companies, including, without limitation, all customer and
prospective customer and supplier lists, know-how, trade secrets, business and
marketing plans, techniques, forecasts, projections, budgets, unpublished
financial statements, price lists, costs, computer programs, source and object
codes, algorithms, data, and other original works of authorship, along with all
information received from third parties and held in confidence by the Company
and its affiliated companies (including, without limitation, personnel files and
employee records). During the Non-Competition Period and at all times
thereafter, Fares will hold the Confidential Information in the strictest
confidence and will not disclose or make use of (directly or indirectly) the
Confidential Information or any portion thereof to or on behalf of himself or
any third party except (a) as required in the performance of his duties as an
employee, director or shareholder of the Company, (b) as required by the order
of any court or similar tribunal or any other governmental body or agency of
appropriate jurisdiction; provided, that Fares shall, to the extent practicable,
give the Company prior written notice of any such disclosure and shall cooperate
with the Company in obtaining a protective order or such similar protection as
the Company may deem appropriate to preserve the confidential nature of such
information. The foregoing obligations to maintain the Confidential Information
shall not apply to any Confidential Information, which is, or, without any
action by Fares, becomes generally available to the public. Upon termination of
any employment or consulting relationship between the Company and Xxxxx, Xxxxx
shall promptly return to the Company all physical embodiments of the
Confidential Information (regardless of form or medium) in the possession of or
under the control of Fares.
5.4. SCOPE OF RESTRICTION. The parties have attempted to limit the
scope of the covenants set forth in Section 5 to the extent necessary. The
parties recognize, however, that reasonable people may differ in making such
determination. Consequently, the parties hereby agree that if the scope and
duration of such covenants would, but for this provision, be deemed by a court
of competent authority to be unreasonable or otherwise unenforceable, such court
may modify such covenants to the extent that such court determines to be
necessary in order to grant enforcement thereof as so modified.
5.5. REMEDIES. The parties hereto recognize that the Company will
suffer irreparable injury in the event of a breach of the terms of Section 5 by
Fares. In the event of a breach of the terms of Section,5, the Company shall be
entitled, in ADDITION to any other remedies and damages available and without
proof of monetary or immediate damage, to a temporary and/or permanent
injunction, without the necessity of posting a bond, to restrain the violation
of Section 5. by Fares
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or any Persons acting for or in concert with him. Such remedy, however, shall be
cumulative and nonexclusive and shall be in addition to any other remedy, which
the parties may have.
5.6. COMMON LAW OF TORTS OR TRADE SECRETS. The parties agree that
nothing in this Agreement shall be construed to limit or negate the common law
of torts or trade secrets where it provides the Company with broader protection
than that provided herein.
5.7. SURVIVAL OF SECTION 5. The provisions of Section 5 shall
survive the termination of Fares' employment and the termination of this
Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
INSURANCE AUTO AUCTIONS, INC.
By: /s/ Xxxxxx X. X'Xxxxx
---------------------------------------
Name: Xxxxxx X. X'Xxxxx
Title: President and Chief Executive Officer
/s/ Xxxxxx Fares
---------------------------------
Xxxxxx Fares
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