EXHIBIT 10.54
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is made and entered into, at
Irvine, California, as of the 17th day of December, 2001, by and between
Autobytel Inc., a corporation duly organized under the laws of the State of
Delaware (the "Company"), with offices at 00000 XxxXxxxxx Xxxxxxxxx, Xxxxxx
Xxxxx, Xxxxxx, Xxxxxxxxxx 00000-0000, and Xxxxxxx Xxxxxxxx (hereinafter referred
to as the "Executive"), who resides at 00000 Xxxxxx'x Xxx, Xxxxxxxxx, Xxxxxxxxxx
00000.
RECITALS
WHEREAS, the Executive has been employed by the Company as Vice
Chairman.
WHEREAS, in recognition of the Executive's skill and dedication to the
Company, the Company wishes to employ the Executive as its President and Chief
Executive Officer.
WHEREAS, the Executive desires to be so employed by the Company, subject
to the following terms and conditions.
NOW, THEREFORE, in consideration of the mutual agreements contained
herein, and with reference to the above recitals, the parties hereby agree as
follows:
ARTICLE 1
TERM OF EMPLOYMENT
The Company hereby employs the Executive as President and Chief
Executive Officer and the Executive hereby accepts such employment by the
Company for a period of two (2) years (the "Term") commencing on December 5,
2001 (the "Commencement Date") and expiring on the second anniversary of the
Commencement Date (the "Termination Date"), which term shall automatically renew
for one year periods unless either party notifies the other of its election not
to renew at least one hundred eighty (180) days prior to the Termination Date or
any applicable anniversary of the Termination Date. Notwithstanding the above,
in the event of a Change of Control of the Company prior to the Termination Date
or any extension thereof and while the Executive remains employed by the
Company, the Term shall automatically extend for a period of two (2) years
commencing from the date of the Change of Control. For purposes of this
Agreement "Change of Control" means the occurrence of any of the following: (i)
the sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation but not including any underwritten public offering
registered under the Securities At of 1933 ("Public Offering")) in one or a
series of related transactions of all or substantially all of the assets of the
Company taken as a whole to any individual, corporation, limited liability
company, partnership or other entity (each a
"Person") or group of Persons acting together (each a "Group") (other than any
of the Company's wholly-owned subsidiaries or any Company employee pension or
benefits plan), (ii) the adoption of a plan relating to the liquidation or
dissolution of the Company, (iii) the consummation of any transactions
(including any stock or other purchase, sale, acquisition, disposition, merger,
consolidation or reorganization, but not including any Public Offering) the
result of which is that any Person or Group (other than any of the Company's
wholly-owned Subsidiaries, any underwriter temporarily holding securities
pursuant to a Public Offering or any Company employee pension or benefits plan),
becomes the beneficial owners of more than 40 percent (40%) of the aggregate
voting power of all classes of stock of the Company having the right to elect
directors under ordinary circumstances; or (iv) the first day on which a
majority of the members of the board of directors of the Company (the "Board")
are not individuals who were nominated for election or elected to the Board with
the approval of two-thirds of the members of the Board just prior to the time of
such nomination or election. During the Term and any extension thereof Company
shall cause Executive to be elected to the Board of Directors of Company
provided, however, upon the termination of employment, as provided for in
Article 6 hereof, Executive shall immediately resign from the Board of
Directors.
ARTICLE 2
DUTIES AND OBLIGATIONS
2.1 DUTIES. During the Term of this Agreement, the Executive shall: (i)
devote his full business time, attention and energies to the business of the
Company; (ii) shall use his best efforts to promote the interests of the
Company; (iii) shall perform such functions and services as President and Chief
Executive Officer as shall be directed by the Board; (iv) shall act in
accordance with the policies and directives of the Company; and (v) shall report
directly to the Board.
2.2 RESTRICTIONS. Except as provided in Section 9.2(i), the Executive
covenants and agrees that, while actually employed by the Company, he shall not
engage in any other business duties or pursuits whatsoever, or directly or
indirectly render any services of a business or commercial nature to any other
Person including, but not limited to, providing services to any business that is
in competition with or similar in nature to the Company, whether for
compensation or otherwise, without the prior written consent of the Board.
However, the expenditure of reasonable amounts of time for educational,
charitable, or professional activities shall not be deemed a breach of this
Agreement, if those activities do not materially interfere with the services
required under this Agreement, and such activities shall not require the prior
written consent of the Board. Notwithstanding anything herein contained to the
contrary, this Agreement shall not be construed to prohibit the Executive from
making passive personal investments or conducting personal business, financial
or legal affairs or other personal matters if those activities do not materially
interfere with the services required hereunder. In addition to the foregoing,
notwithstanding anything contained herein to the contrary, this Agreement shall
not be construed to prohibit the Executive from serving as a director or board
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member of any other corporation, company, or other business entity, subject to
the approval of the Board.
2.3 LOCATION. The principal location in which the Executive's services
are to be performed will be the Irvine, California area. The Executive shall not
be required to change such principal location in excess of fifty miles beyond
the geographic limits of Irvine, California, without his consent.
ARTICLE 3
COMPENSATION
3.1 BASE SALARY. As compensation for the services to be rendered by the
Executive pursuant to this Agreement, the Company hereby agrees to pay the
Executive a base salary equal to at least Three Hundred Twenty-Five Thousand
Dollars ($325,000.00) for the first year of the Term of this Agreement and Three
Hundred Fifty Thousand Dollars ($350,000.00) for the second year of the Term of
this Agreement, which rate shall be reviewed by the Board at least annually and
may be increased (but not reduced) by the Board in such amounts as it deems
appropriate. The base salary shall be paid in substantially equal bimonthly
installments, in accordance with the normal payroll practices of the Company.
3.2 BONUSES. The Board may, in its sole discretion, provide the
Executive with the opportunity to earn an annual bonus for each fiscal year of
the Company, occurring in whole or in part during the Term. The annual bonus, if
any, payable to the Executive shall be equal to up to fifty percent (50%) of the
Executive's then current base salary, based on such criteria as may be
established by the Board, in its sole discretion, from time to time. The
Executive shall participate in all other short term and long term bonus or
incentive plans or arrangements in which other senior executives of the Company
are eligible to participate from time to time. Any bonus shall be paid as
promptly as practicable following the end of the preceding fiscal year. The
provisions of this Section 3.2 shall be subject to the provisions of Section
3.4.
3.3 WITHHOLDING. The Company shall have the right to deduct or withhold
from the compensation due to the Executive hereunder any and all sums required
for federal income and employee social security taxes and all state or local
income taxes now applicable or that may be enacted and become applicable during
the Term.
3.4 RIGHT TO SEEK APPROVAL. The Company may provide for shareholder
approval of any performance based compensation provided herein and may provide
for the compensation committee to establish any applicable performance goals and
determine whether such performance goals have been met.
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ARTICLE 4
EMPLOYEE BENEFITS
4.1 BENEFITS. The Company agrees that the Executive shall be entitled to
all ordinary and customary perquisites afforded generally to executive employees
of the Company (except to the extent employee contribution may be required under
the Company's benefit plans as they may now or hereafter exist), which shall in
no event be less than the benefits afforded to the Executive on the date hereof
and generally to the other executive employees of the Company as of the date
hereof or from time to time, but in any event shall include any qualified or
non-qualified pension, profit sharing and savings plans, any death benefit and
disability benefit plans, life insurance coverages, any medical, dental, health
and welfare plans or insurance coverages and any stock purchase programs that
are approved in writing by the Board, in its sole discretion, on terms and
conditions at least as favorable as provided to the Executive on the date hereof
and other senior executives of the Company as of the date hereof or from time to
time.
4.2 VACATION. The Executive shall be entitled to four (4) weeks of paid
vacation for each full calendar year of his employment hereunder, which, to the
extent unused in any given year, may be carried over in accordance with the
policies of the Company then in effect. Notwithstanding anything to the
contrary, however, the Executive shall not be entitled to carry over any unused
vacation for a period exceeding two (2) years provided, however, that any such
unused vacation time which is not allowed to be carried over shall be cashed out
by the Company according to its value at the time of such payment. Subject to
the limitations set forth in this Section, the Executive shall carry over any
accrued unused vacation he has earned during his employment with Xxxxxxx.xxx,
Inc. through the time of the Commencement Date.
4.3 AUTOMOBILE. The Executive shall be entitled to a car allowance of
One Thousand Five Hundred Dollars ($1,500.00) per month during the Term.
ARTICLE 5
BUSINESS EXPENSES
5.1 EXPENSES. The Company shall pay or reimburse the Executive for all
reasonable and authorized business expenses incurred by the Executive during the
Term; such payment or reimbursement shall not be unreasonably withheld so long
as said business expenses have been incurred for and promote the business of the
Company and are normally and customarily incurred by employees in comparable
positions at other comparable businesses in the same or similar market.
Notwithstanding the above, the Company shall not pay or reimburse the Executive
for the costs of any membership fees or dues for private clubs, civic
organizations, and similar organizations or entities, unless such organizations
and the fees and costs associated therewith have first been approved in writing
by the Board, in its sole discretion.
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5.2 TRAVEL COSTS. The Company shall reimburse the Executive for expenses
incurred with business-related travel. Notwithstanding the above, the Company
shall not pay or reimburse the Executive for the costs of any business-related
airline travel to the extent such costs exceed the cost of Business Class
unless, at the time of travel, Business Class is not available, in which case
the travel may be by First Class.
5.3 RECORDS. As a condition to reimbursement under this Article 5, the
Executive shall furnish to the Company adequate records and other documentary
evidence required by federal and state statutes and regulations for the
substantiation of each expenditure. The Executive acknowledges and agrees that
failure to furnish the required documentation may result in the Company denying
all or part of the expense for which reimbursement is sought.
ARTICLE 6
TERMINATION OF EMPLOYMENT
6.1 TERMINATION FOR CAUSE. The Company may, during the Term, without
notice to the Executive, terminate this Agreement and discharge the Executive
for Cause, whereupon the respective rights and obligations of the parties
hereunder shall terminate; provided, however, that the Company shall immediately
pay the Executive any amount due and owing pursuant to Articles 3, 4, and 5,
prorated to the date of termination. As used herein, the term "for Cause" shall
refer to the termination of the Executive's employment as a result of any one of
the following: (i) any conviction of, or pleading of nolo contendere or guilty
by, the Executive for any misdemeanor involving moral turpitude which if
committed at the work place or in connection with employment would have
constituted violation of Company policy or felony; (ii) any willful misconduct
of the Executive which has a materially injurious effect on the business or
reputation of the Company; (iii) the gross dishonesty of the Executive which has
a materially injurious effect on the business or reputation of the Company; or
(iv) a material failure to consistently discharge his duties under this
Agreement which failure continues for thirty (30) days following written notice
from the Company detailing the area or areas of such failure other than such
failure resulting from his Disability as defined below. For purposes of this
Section 6.1, no act or failure to act, on the part of the Executive, shall be
considered "willful" if it is done, or omitted to be done, by the Executive in
good faith or with reasonable belief that his action or omission was in the best
interest of the Company. The Executive shall have the opportunity to cure any
such acts or omissions (other than item (i) above) within thirty (30) days of
the Executive's receipt of a notice from the Company finding that, in the good
faith opinion of the Company, the Executive is guilty of acts or omissions
constituting "Cause".
6.2 TERMINATION WITHOUT CAUSE. Anything in this Agreement to the
contrary notwithstanding, the Company shall have the right, at any time in its
sole discretion, to terminate this Agreement without Cause upon not less than
thirty (30) days prior written notice to the Executive. The term "Termination
Without Cause" shall mean the termination of the Executive's employment for any
reason other than those expressly
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set forth in Section 6.1, or no reason at all, and shall also mean the
Executive's decision to terminate this Agreement by reason of any act, decision
or omission by the Company or the Board that: (A) materially modifies, reduces,
changes, or restricts the Executive's salary, bonus opportunities, options or
other compensation benefits or perquisites, or the Executive's authority,
functions, or duties as President and Chief Executive Officer and/or his
position as a member of the Board; (B) deprives the Executive of his title(s)
and/or position(s) of President or Chief Executive Officer or member of the
Board; (C) relocates the Executive without his consent from the Company's
offices at 00000 XxxXxxxxx Xxxxxxxxx, Xxxxxx, Xxxxxxxxxx 00000-0000 to any other
location in excess of fifty (50) miles beyond the geographic limits of Irvine,
California, or (D) involves or results in any failure by the Company to comply
with any provision of this Agreement, other than an isolated, insubstantial and
inadvertent failure not occurring in bad faith and which is remedied by the
Company promptly after receipt of notice thereof given by the Executive (each a
"Good Reason"). In the event the Company or the Executive shall exercise the
termination right granted pursuant to this Section 6.2, the Company shall,
within thirty (30) days of notice of termination to or from the Executive (as
the case may be), begin to pay to the Executive the base salary of the Executive
in each of twenty-four (24) months following the exercise of such termination
right; provided, however, that for purposes of calculating the payment pursuant
to this sentence, the Executive's base salary year shall be the highest rate in
effect during the Term as it may be extended hereunder. The Company also shall
(i) continue to provide to the Executive and his beneficiaries, at its sole
cost, the insurance coverages referred to in Section 4.1, and (ii) within thirty
(30) days of notice of termination to or from the Executive, pay to the
Executive in lump single lump-sum payment the aggregate cost of the benefits
(other than insurance coverages) under Section 4.1, in each case to the extent
he would have received such insurance coverages and benefits had he remained
employed by the Company for twenty-four (24) months following such termination.
6.3 TERMINATION FOR DEATH OR DISABILITY. The Executive's employment
shall terminate automatically upon the Executive's death during the Term. If the
Company determines in good faith that the Disability (as defined below) of the
Executive has occurred during the Term, it shall give written notice to the
Executive of its intention to terminate his employment. In such event, the
Executive's employment with the Company shall terminate effective on the 30th
day after receipt of such notice by the Executive, provided that, within the
thirty (30) days after such receipt, the Executive shall not have returned to
full-time performance of his duties.
For purposes of this Agreement, "Disability" shall mean the
inability of the Executive to perform his duties to the Company on account of
physical or mental illness or incapacity for a period of one hundred and eighty
(180) consecutive calendar days, or for a period of two hundred ten (210)
calendar days, whether or not consecutive, during any three hundred sixty-five
(365) day period. The Company hereby agrees that at all times prior to the
Termination Date or any extension thereof, the Company shall provide Executive
with disability insurance coverage which is substantially comparable to the
coverage the Company provides to Executive on the date hereof.
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6.4 TERMINATION WITHOUT GOOD REASON. Anything in this Agreement to the
contrary notwithstanding, the Executive shall have the right, at any time in his
sole discretion, to terminate this Agreement without Good Reason upon not less
than thirty (30) days prior written notice to the Company. In the event the
Executive voluntarily terminates his employment hereunder other than for Good
Reason, the respective rights and obligations of the parties hereunder shall
terminate; provided, however, that the Company shall immediately pay the
Executive any amount due and owing pursuant to Articles 3, 4 and 5, prorated to
the date of termination.
6.5 TERMINATION PRIOR TO OR FOLLOWING A CHANGE OF CONTROL.
Notwithstanding the foregoing:
(a) in the event the employment of the Executive is terminated
during the first twelve (12) months following, a Change of Control either (i) by
the Executive for Good Reason or (ii) by the Company other than for Cause,
Disability or death, then, the provisions of Section 6.2 shall not apply, and
the Company shall, within thirty (30) days of notice of termination to the
Executive, pay to the Executive in a single lump-sum payment the base salary
that the Executive would have received if he had remained employed by the
Company for two (2) years (calculated at the highest base salary rate during the
Term). In addition, the Company shall continue for two (2) years to provide the
Executive and his beneficiaries, at its sole cost, the insurance coverage
provided in Section 4.1. For purposes of this Section 6.5, "Term" shall be the
period of time of this Agreement as defined by Article 1, which includes any
extension thereof by reason of a Change of Control prior to the Termination
Date.
(b) if, within six (6) months following the delivery of a notice of
termination to or from the Executive in accordance with Section 6.2, a Change in
Control occurs, the Company shall, within thirty (30) days following the date of
such Change in Control, pay to the executive an amount equal to (x) minus (y)
where (x) is equal to the benefits the Executive is entitled to receive pursuant
to Section 6.5 and (y) is equal to the benefits the Executive is entitled to
receive pursuant to Section 6.2.
6.6 OPTIONS. As further consideration for the services rendered by the
Executive during the Term, the Executive is being granted stock options to
purchase shares of the Company's common stock pursuant to the stock option
agreements of even date herewith. Anything in this Agreement to the contrary
notwithstanding, upon the Executive's termination under this Article 6, the
Company's obligations with respect to any stock option to purchase shares of the
Company's common stock granted to the Executive shall be determined by the terms
and conditions of such option as set forth in the Executive's written option
agreement regarding such option. The parties hereto expressly acknowledge that
any and all options previously granted to Executive by the Company shall remain
in full force and effect in accordance with their respective terms. Without
limitation, such options include those Options referenced in Article 10.1 of the
Employment Agreement between Executive and Company dated August 14, 2001
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("Initial Agreement"), the options referenced in Exhibit A to the Initial
Agreement and all stock options which have been granted to Executive under
either the 1999 or the 2000 Stock Option Plans and all Employee Stock Option
Agreements dated August 14, 2001, or as otherwise may be applicable.
ARTICLE 7
PARACHUTE TAX INDEMNITY
7.1 GROSS-UP PAYMENT.
(a) If it shall be determined that any amount paid, distributed or
treated as paid or distributed by the Company to or for the benefit of the
Executive (whether paid or payable or distributed or distributable pursuant to
the terms of this Agreement, any stock option agreement between Executive and
the Company or otherwise, but determined without regard to any additional
payments required under this Article 7) (a "Payment") would be subject to the
excise tax imposed by Section 4999 of the the Internal Revenue Code of 1986, as
amended (the "Code") or any interest or penalties are incurred by the Executive
with respect to such excise tax (such excise tax, together with any such
interest and penalties, being hereinafter collectively referred to as the
"Excise Tax"), then the Executive shall be entitled to receive an additional
payment (a "Gross-Up Payment") in an amount such that after payment by the
Executive of all federal, state and local taxes (including any interest or
penalties imposed with respect to such taxes), including without limitation, any
income taxes (including any interest or penalties imposed with respect thereto)
and Excise Tax imposed on the Gross-up Payment, the Executive retains an amount
of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments,
provided, however, that in no event will the amount of the Gross-Up Payment
payable pursuant to this Article 7 exceed One Million Dollars ($1,000,000.00).
(b) The determinations of whether and when a Gross-Up Payment is
required under this Article 7 shall be made by independent tax counsel (the "Tax
Counsel") based on its good faith interpretation of applicable law. The amount
of such Gross-Up Payment and the valuation assumptions to be utilized in
arriving at such determination shall be made by an independent nationally
recognized accounting firm (the "Accounting Firm") which shall provide detailed
supporting calculations both to the Company and the Executive within 15 business
days of the receipt of notice from the Executive that there has been a Payment,
or such earlier time as is requested by the Company. The Tax Counsel and
Accounting Firm shall initially be appointed by the Company after consultation
in good faith with the Executive and subject to the approval of the Executive
(which approval shall not be unreasonably withheld), provided, however, that if
the potential amount of the Gross-Up Payment (but for the limit in Section
7.1(a)) could exceed One Million Dollars ($1,000,000.00), the Executive shall
have the opportunity to appoint a new Tax Counsel and Accounting Firm after
consultation in good faith with the Company. If the Tax Counsel and Accounting
Firm selected by the Company determine that the amount of the Gross-Up Payment
is less than
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One Million Dollars ($1,000,000.00), but Executive provides an opinion of a
second independent Tax Counsel that the Gross-Up Payment (but for the limit- in
Section 7.1(a)) could be greater than One Million Dollars ($1,000,000.00), then
Executive shall be entitled to appoint the Tax Counsel and the Accounting Firm
after consultation in good faith with the Company and subject to the approval of
the Company (which approval shall not be unreasonably withheld). All fees and
expenses of any Tax Counsels and Accounting Firms referred to above shall be
borne by the Company. Any Gross-Up Payment, as determined pursuant to this
Article 7, shall be paid by the Company to the Executive within ten (10) days of
the receipt of the Accounting Firm's determination. Any determinations by the
Tax Counsel and Accounting Firm shall be binding upon the Company and the
Executive, provided, however, if it is later determined that there has been an
underpayment of Excise Tax and that Executive is required to make an additional
Excise Tax payment(s) on any Payment or Gross-Up Payment, the Company shall
provide a similar full gross-up on such additional liability , subject to the
overall One Million Dollars ($1,000,000.00) limit set forth in Section 7.1(a).
(c) For purposes of any determinations made by any Tax Counsel and
Accounting Firm acting under Section 7.1(b):
(i) All Payments and Gross-Up Payments with respect to Executive
shall be deemed to be "parachute Payments" under Section
280G(b) (2) of the Code and to be "excess parachute payments"
under Section 280G(b) (1) of the Code that are fully subject
to the Excise Tax under Section 4999 of the Code, except to
the extent (if any) that such Tax Counsel determines in
writing in good faith that a Payment in whole or in part does
not constitute a "parachute payment" or otherwise is not
subject to Excise Tax;
(ii) The value of any non-cash benefits or deferred or delayed
payments or benefits shall be determined in a manner
consistent with the principles of Section 280G of the Code;
and
(iii) Executive shall be deemed to pay federal, state and local
income taxes at the actual maximum marginal rate applicable to
individuals in the calendar year in which the Gross-Up Payment
is made, net of any applicable reduction in federal income
taxes for any state and local taxes paid on the amounts in
question.
7.2 CLAIMS AND PROCEEDINGS. The Executive shall notify the Company in
writing of any Excise Tax claim by the Internal Revenue Service (or any other
state or local taxing authority) that, if successful, would require the payment
by the Company of a Gross-Up Payment. Such notification shall be given as soon
as practicable but no later than twenty (20) business days after the Executive
is informed in writing of
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such claim and shall apprise the Company of the nature of such claim and the
date on which such claim is to be paid. The Executive shall not pay such claim
prior to the expiration of the 30-day period following the date on which it
gives such notice to the Company (or such shorter period ending on the date that
any payment of taxes with respect to such claim is due). If the Company notifies
the Executive in writing prior to the expiration of such period that it desires
to contest such Excise Tax claim, the Executive shall: (i) give the Company any
information reasonably requested by the Company relating to such claim; (ii)
take such action in connection with contesting such claim as the Company shall
reasonably request in writing from time to time, including, without limitation,
accepting legal representation with respect to such claim by an attorney
reasonably selected by the Company after consultation in good faith with
Executive and subject to approval by Executive (which approval shall not be
unreasonably withheld) under the circumstances set forth in Section 7.1; (iii)
cooperate with the Company in good faith in order to effectively contest such
claim; and (iv) permit the Company to participate in any proceeding relating to
such claim; provided, however, that the Company shall bear and pay directly all
costs and expenses (including additional interest and penalties) incurred in
connection with such contest and shall indemnify and hold the Executive
harmless, on an after-tax basis, from any Excise Tax or income tax (including
interest and penalties with respect thereto) imposed as a result of such
representation and payment of costs and expense. Without limitation of the
foregoing provisions of this Article 7, if the Gross-Up Payment payable
hereunder (determined on the basis of the amount being contested), together with
any previous Gross-Up Payment made by the Company to the Executive hereunder
(collectively the "Aggregate Gross-Up Payment"), would not exceed One Million
Dollars ($1,000,000.00) (determined without regard to the One Million Dollars
($1,000,000.00) limit in Section 7.1(a)), the Company shall control the Excise
Tax portion of any proceedings taken in connection with such contest and, at its
sole option, may pursue or forego any and all administrative appeals,
proceedings, hearings and conferences with the taxing authority in respect of
such Excise Tax claim and may, at its sole option, either direct the Executive
to pay the tax claimed and xxx for a refund or contest the Excise Tax claim in
any permissible manner, and the Executive agrees to prosecute such contest to a
determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company shall
determine. If the Company directs the Executive to pay such Excise Tax claim and
xxx for a refund, the Company shall advance the amount of such payment to the
Executive, on an interest-free basis, and shall indemnify and hold the Executive
harmless, on an after-tax basis, from any Excise Tax or income tax (including
interest and penalties) imposed with respect to such advance or with respect to
any imputed income with respect to such advance; and provided, however, that any
Company-directed extension of the statute of limitations relating to payment of
taxes for the Executive's taxable year with respect to which such contested
Excise Tax amount is claimed to be due shall be effective only if it can be and
is limited to the contested Excise Tax liability. Notwithstanding anything to
the contrary herein, the Executive shall control the settlement or contest, as
the case may be, of all non-Excise Tax issues and of any Excise Tax issues with
respect to which the Aggregate Gross-Up Payment payable hereunder (but for the
limit in Section 7.1(a)) would exceed One Million Dollars ($1,000,000.00).
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The Executive shall be entitled to settle or contest, as the case may be, any
non-Excise Tax issue raised by the Internal Revenue Service or any other taxing
authority, so long as such action does not have a material adverse effect on an
Excise Tax contest being pursued by and under the control of the Company.
7.3 REFUNDS. If, after the Executive's receipt of an amount advanced by
the Company pursuant to this Article 7 for payment of Excise Taxes, the
Executive files an Excise Tax refund claim and receives any refund with respect
to such claim, the Executive shall (subject to the Company's complying with the
requirements of this Article 7) except as provided below, promptly pay to the
Company the amount of any such refund of Excise Tax (together with any interest
paid or credited thereon, but after any and all taxes applicable thereto), plus
the amount (after any and all taxes applicable-thereto) of the refund (if any is
applied for and received) of any income tax paid by Executive with respect to
and as a result of his prior receipt of any previously paid Gross-Up Payment
indemnifying Executive with respect to any such Excise Tax later so refunded. In
the event Executive files for a refund of the Excise Tax and such request would,
if successful, require Executive to refund any amount to the Company pursuant to
this provision, then Executive shall be required to seek a refund of the Income
Tax portion of any corresponding Gross-Up Payment so long as such refund request
would not have a material adverse effect on Executive (which determination shall
be made by independent tax counsel selected by Executive after good faith
consultation with the Company and subject to approval of the Company, which
approval shall not be unreasonably withheld). Notwithstanding the above,
Executive shall have no obligation to pay any portion of any such tax refund(s)
to the Company if and to the extent that the Excise Tax to which such refund
relates was not eligible for a Gross-Up Payment by reason of the One Million
Dollars ($1,000,000.00) limit in Section 7.1(a). For this purpose, if the total
Excise Tax paid with respect to Executive exceeds the maximum amount eligible
for Gross-Up Payment coverage by reason of the One Million Dollars
($1,000,000.00) limit in Section 7.1(a), any subsequent Excise Tax refunds shall
first be applied against the portion of any Excise Tax payments that are not
covered by the Gross-Up Payments provided under this Article 7. If, after the
Executive's receipt of an amount advanced by the Company pursuant to this
Article 7, a determination is made that the Executive shall not be entitled to
any refund with respect to such claim and the Company does not notify the
Executive in writing of its intent to contest such denial of refund prior to the
expiration of thirty (30) days after such determination, then such advance shall
be forgiven and shall not be required to be repaid and the amount of such
advance shall offset, to the extent thereof, the amount of the Gross-Up Payment
required to be paid.
7.4 GROSS UP INCREASES. References to "One Million Dollars
($1,000,000.00)" in Sections 7.1 through 7.3 of this Article 7 shall be
automatically increased on each of the first four (4) six month anniversaries of
the date hereof by Five Hundred Thousand Dollars ($500,000.00) so that on
December 17, 2003 such references will be "Three Million Dollars
($3,000,000.00)". In no event shall such references exceed Three Million Dollars
($3,000,000.00).
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ARTICLE 8
NO MITIGATION OR OFFSET; INSURANCE
8.1 NO MITIGATION OR OFFSET. The Executive shall not be required to seek
other employment or to reduce any severance benefit payable to him under Article
6, and no severance benefit shall be reduced on account of any compensation
received by the Executive from any other employment or source except that the
Company's obligation to provide insurance shall be reduced to the extent that
reasonably comparable insurance is provided by an employer to Executive and his
dependents, without further cost to Executive than the cost Executive bears for
such Company-provided insurance on the date of termination as a result of any
subsequent employment of Executive. The Company's obligation to pay severance
benefits under this Agreement shall not be reduced by any amount owed by the
Executive to the Company.
8.2 INDEMNIFICATION, INSURANCE.
(a) If the Executive is a party or is threatened to be made a party
to any threatened, pending, or completed claim, action, suit or proceeding, or
appeal therefrom, whether civil, criminal, administrative, investigative or
otherwise, because he is or was an officer, director or employee of the Company,
or at the express request of the Company is or was serving, for purposes
reasonably understood by him to be for the Company, as a director, officer,
partner, employee, agent or trustee (or in any other capacity of an association,
corporation, general or limited partnership, joint venture, trust or other
entity), the Company shall indemnify the Executive against any reasonable
expenses (including attorneys' fees and disbursements), and any judgments, fines
and amounts paid in settlement incurred by him in connection with such claim,
action, suit, proceeding or appeal therefrom to the extent such expenses,
judgments, fines and amounts paid in settlement were not advanced by the Company
on his behalf pursuant to subsection (b), to the fullest extent permitted under
Delaware law. The Company shall provide Executive with D&O insurance coverage at
least as favorable to Executive as what the Company maintains as of the date
hereof or such greater coverage as the Company may maintain from time to time
thereafter; provided, however, that in no event shall the Company be required to
spend a greater amount on such coverage than it does as of the Commencement
Date. In addition to his rights hereunder, if Executive becomes a Director of
the Company he shall receive the benefit of any and all rights of indemnity
provided to any Company Director pursuant to Company practice, policy,
agreement, Bylaws, Certificate of Incorporation or otherwise.
(b) Provided that the Executive shall first have agreed to in
writing to repay such amounts advanced if it is determined by an arbitrator or
court of competent jurisdiction that the Executive was not entitled to
indemnification, upon the written request of the Executive specifying the amount
of a requested advance and the intended use thereof, the Company shall indemnify
Executive for his expenses (including attorneys' fees and disbursements),
judgments, fines and amounts paid in settlement incurred by him in connection
with such claim, action, suit, proceeding or appeal whether
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civil, criminal, administrative, investigative or otherwise, in advance of the
final disposition of any such claim, action, suit, proceeding or appeal
therefrom to the fullest extent permitted under Delaware law.
ARTICLE 9
RESTRICTIVE COVENANTS
9.1 COVENANT NOT TO DISCLOSE CONFIDENTIAL INFORMATION. During the Term
and following termination of this Agreement, the Executive agrees that, without
the Company's prior written consent, he will not use or disclose to any person,
firm, association, partnership, entity or corporation, any confidential
information concerning: (i) the business, operations or internal structure of
the Company or any division or part thereof; (ii) the customers of the Company
or any division or part thereof; (iii) the financial condition of the Company or
any division or part thereof; and (iv) other confidential information pertaining
to the Company or any division or part thereof, including without limitation,
trade secrets, technical data, marketing analyses and studies, operating
procedures, customer and/or inventory lists, or the existence or nature of any
of the Company's agreements or agreements of any division thereof (other than
this Agreement and any other option or compensation related agreements
involving, the Executive); provided, however, that the Executive shall be
entitled to disclose such information: (i) to the extent the same shall have
otherwise become publicly available (unless made publicly available by the
Executive); (ii) during, the course of or in connection with any actual or
potential litigation, arbitration, or other proceeding based upon or in
connection with the subject matter of this Agreement; (iii) as may be necessary
or appropriate to conduct his duties hereunder, provided the Executive is
acting, in good faith and in the best interest of the Company; (iv) as may be
required by law or judicial process or (v) if the information is generally known
to personnel in Executive's trade or business.
9.2 COVENANT NOT TO COMPETE. The Executive acknowledges that he has
established and will continue to establish favorable relations with the
customers, clients and accounts of the Company and will have access to trade
secrets of the Company. Therefore, in consideration of such relations and to
further protect trade secrets, directly or indirectly, of the Company, the
Executive agrees that during the Term and for a period of one (1) year from the
date of termination of the Executive, the Executive will not, directly or
indirectly, without the express written consent of the Board:
(i) own or have any interest in or act as an officer, director,
partner, principal, employee, agent, representative,
consultant or independent contractor of, or in any way assist
in, any business which is engaged, directly or indirectly, in
any business competitive with the Company in those automotive
markets and/or automotive products lines in which the Company
competes within the United States at any time
13
during the Term, or become associated with or render services
to any person, firm, corporation or other entity so engaged
("Competitive Businesses"); provided, however, that the
Executive may own without the express written consent of the
Company not more than two percent (2%) of the issued and
outstanding securities of any company or enterprise whose
securities are listed on a national securities exchange or
actively traded in the over the counter market;
(ii) solicit clients, customers or accounts of the Company for, on
behalf of or otherwise related to any such Competitive
Businesses or any products related thereto; or
(b) solicit any person who is or shall be in the employ or service
of the Company to leave such employ or service for employment with the Executive
or an affiliate of the Executive.
Notwithstanding the foregoing, if any court determines that the
covenant not to compete, or any part thereof, is unenforceable because of the
duration of such provision or the geographic area or scope covered thereby, such
court shall have the power to reduce the duration, area or scope of such
provision to the extent necessary to make the provision enforceable and, in its
reduced form, such provision shall then be enforceable and shall be enforced.
The Company shall pay and be solely responsible for any attorney's fees,
expenses, costs and court or arbitration costs incurred by Executive in any
matter or dispute between Executive and the Company which pertains to this
Article 9 if the Executive prevails in the contest in whole or in part.
9.3 SPECIFIC PERFORMANCE. Recognizing that irreparable damage will
result to the Company in the event of the breach or threatened breach of any of
the foregoing, covenants and assurances by the Executive contained in Sections
9.1 and 9.2, and that the Company's remedies at law for any such breach or
threatened breach may be inadequate, the Company and its successors and assigns,
in addition to such other remedies which may be available to them, shall be
entitled to an injunction to be issued by any court of competent jurisdiction
ordering compliance with this Agreement or enjoining and restraining the
Executive, and each and every person, firm or company acting in concert or
participation with him, from the continuation of such breach. The obligations of
the Executive and rights of the Company pursuant to this Article 9 shall survive
the termination of this Agreement. The covenants and obligations of the
Executive set forth in this Article 9 are in addition to and not in lieu of or
exclusive of any other obligations and duties the Executive owes to the Company,
whether expressed or implied in fact or law.
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ARTICLE 10
GENERAL PROVISIONS
10.1 FINAL AGREEMENT. This Agreement is intended to be the Final,
complete and exclusive agreement between the parties relating to the employment
of the Executive by the Company and all prior or contemporaneous understandings,
representations and statements, oral or written, are merged herein. Except with
regard to (a) the options granted to the Executive in accordance with Section
6.6 and (b) any Xxxxxxx.xxx, Inc. options to purchase common stock held by
Executive, which will be allowed to vest according to their terms, including the
terms of the Xxxxxxx.xxx, Inc. Change of Control Benefit Plan and the certain
letter to Executive dated January 16, 2001, pertaining thereto, this Agreement
supersedes all of Executive's compensation agreements with Xxxxxxx.xxx, Inc. and
Executive expressly acknowledges that he is not and will not be entitled to any
severance payments under any Xxxxxxx.xxx, Inc. agreement or change of control
plan. No modification, waiver, amendment, discharge or change of this Agreement
shall be valid unless the same is in writing and signed by the party against
which the enforcement thereof is or may be sought.
10.2 NO WAIVER. No waiver, by conduct or otherwise, by any party of any
term, provision, or condition of this Agreement, shall be deemed or construed as
a further or continuing waiver of any such term, provision, or condition nor as
a waiver of a similar or dissimilar condition or provision at the same time or
at any prior or subsequent time.
10.3 RIGHTS CUMULATIVE. The rights under this Agreement, or by law or
equity, shall be cumulative and may be exercised at any time and from time to
time. No failure by any party to exercise, and no delay in exercising, any
rights shall be construed or deemed to be a waiver thereof, nor shall any single
or partial exercise by any party preclude any other or future exercise thereof
or the exercise of any other right.
10.4 NOTICE. Except as otherwise provided in this Agreement, any notice,
approval, consent, waiver or other communication required or permitted to be
given or to be served upon any person in connection with this Agreement shall be
in writing. Such notice shall be personally served, sent by telegram, tested
telex, fax or cable, or sent prepaid by either registered or certified mail with
return receipt requested or Federal Express and shall be deemed given (i) if
personally served or by Federal Express, when delivered to the person to whom
such notice is addressed, (ii) if given by telegram, telex, fax or cable, when
sent, or (iii) if given by mail, two (2) business days following deposit in the
United States mail. Any notice given by telegram, telex, fax or cable shall be
confirmed in writing), by overnight mail or Federal Express within forty-eight
(48) hours after being sent. Such notices shall be addressed to the party to
whom such notice is to be given at the party's address set forth below or as
such party shall otherwise direct.
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If to the Company: xxxxxxxxx.xxx inc.
00000 XxxXxxxxx Xxxxxxxxx
Xxxxxx, Xxxxxxxxxx 00000-0000
Facsimile: (000) 000-0000
Attn: General Counsel
If to the Executive: Xxxxxxx Xxxxxxxx
00000 Xxxxxxx Xxx
Xxxxxxxxx, Xxxxxxxxxx 00000
With a copy to: Xxxxx X. Xxxxxxx
Xxxxxxxx, Xxxxxxxxxx & Xxxxx
000000 Xxxxxxx Xxxxxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
10.5 SUCCESSORS. The terms and conditions of this Agreement shall inure
to the benefit of and be binding upon the successors and assigns of the parties
hereto.
10.6 GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with the laws of the State of California, without giving effect to
the principles of conflict of laws thereof, except that the indemnification
provisions of Section 8.2 shall be governed by Delaware law without regard to
conflict of law principles.
10.7 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which shall
constitute one instrument.
10.8 SEVERABILITY. The provisions of this Agreement are agreed to be
severable, and if any provision, or application thereof, is held invalid or
unenforceable, then such holding shall not affect any other provision or
application.
10.9 CONSTRUCTION. As used herein, and as the circumstances require, the
plural term shall include the singular, the singular shall include the plural,
the neuter term shall include the masculine and feminine genders, and the
feminine term shall include the neuter and the masculine genders.
10.10 ARBITRATION. Any controversy or claim arising out of, or related
to, this Agreement, or the breach thereof, shall be settled by binding
arbitration in the City of Irvine, California, in accordance with the employment
arbitration rules then in effect of the American Arbitration Association, and
the arbitrator's decision shall be binding and final, and judgment upon the
award rendered may be entered in any court having jurisdiction thereof. Each
party hereto shall pay its or their own expenses incident to the negotiation,
preparation and resolution of any controversy or claim arising out of, or
related to, this Agreement, or the breach thereof; provided, however, the
Company shall pay and be solely responsible for any attorneys' fees and expenses
and court or arbitration costs incurred by the Executive as a result of a claim
brought by either the Executive or
16
the Company alleging that the other party breached or otherwise failed to
perform this Agreement or any provision hereof to be performed by the other
party if the Executive prevails in the contest in whole or in part.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
Autobytel Inc.
By: /s/ Xxxxxxx Xxxxx
-------------------------
Name: Xxxxxxx Xxxxx
------------------------
Title: Chairman
-----------------------
/s/ Xxxxxxx X. Xxxxxxxx
-----------------------------
Xxxxxxx X. Xxxxxxxx
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