Execution Copy
CONSULTING AND EMPLOYMENT AGREEMENT
THIS CONSULTING AND EMPLOYMENT AGREEMENT dated as of January
1, 1998, between AutoBond Acceptance Corporation, a Texas corporation (the
"Company"), and Xxxxxx X. Xxxxxxxx, an individual (the "Executive"):
W I T N E S S E T H:
WHEREAS, the Company desires to retain the Executive for the
period of time set forth herein; and
WHEREAS, the Executive is willing to undertake the duties
hereinafter set forth and to be subject to the restrictions hereinafter
specified in exchange for the substantial inducements and incentives herein set
forth:
NOW, THEREFORE, the Company and the Executive agree as
follows:
1. Term. The Company hereby retains the Executive (a) as a
consultant to the Company for the period commencing on the date hereof and
continuing through and including January 31, 1998, and (b) as President of the
Company for the period commencing on February 1, 1998 and continuing until the
third anniversary of the date hereof (such periods collectively being
hereinafter sometimes called the "term of this Agreement"). The Executive
accepts such retention and employment and agrees to perform the services
specified herein, all upon the terms and conditions hereinafter stated.
2. Duties of Executive. The Executive shall serve the Company
as a consultant and shall report to the Board of Directors of the Company (the
"Board") and the Chief Executive Officer ("CEO") of the Company through and
including January 31, 1998. During such period, the Executive shall provide
consulting services to the Company regarding its executive, management and
administrative functions and requirements. From and after February 1, 1998, the
Executive shall serve the Company in the capacity of President and shall report
to, and be subject to the general direction of, the Board and the CEO of the
Company. During such period, the Executive shall perform the executive,
management and administrative duties of the President of the Company and such
other executive duties as are from time to time assigned to him by the Board or
the CEO and as are not inconsistent with the provisions thereof. In addition,
effective upon his employment as President of the Company on February 1, 1998,
the Executive shall resign his position as a non-employee member of the Board.
3. Time and Availability. The Executive shall devote his full
business time and attention to the business of the Company, and, except as may
be specifically permitted by the Company, shall not be engaged in any other
business activity during the term of this Agreement. The foregoing shall not be
construed as preventing the Executive from making passive investments in other
businesses or enterprises, provided, however, that such investments do not
require services on
the part of the Executive which would in any way impair the performance of his
duties under this Agreement, and does not violate Section 9 hereof.
4. Compensation. As compensation for the services the
Executive will provide to the Company hereunder and for the agreements of the
Executive set forth herein, the Company shall pay to the Executive a one-time
signing bonus of $100,000 and a salary of $200,000 (the "Base Pay") per full
calendar year of service completed. From time to time during the term of this
Agreement, the Executive's salary may be increased by, and at the sole
discretion of, the Board in which case the amount of such increased salary shall
thereafter be deemed to be the amount of Base Pay contracted for in this
Agreement. In addition to the Base Pay payable to the Executive hereunder, the
Executive shall be entitled to receive a performance bonus of up to $25,000 per
quarter, based upon criteria prepared by the Chief Executive Officer and
approved by the Compensation Committee ("Incentive Pay"):
The Executive shall also receive under the Company's 1996
Stock Option Plan options as follows: (a) as of the date hereof, an option to
purchase 100,000 shares ("Option A") of the Company's common stock and (b) on
December 1, 1998, an option to purchase 50,000 shares ("Option B") of the
Company's common stock. Such options shall have an exercise price per share
equal to the fair market value per share of the common stock on the date of
grant and shall become vested and exercisable to the extent of one-third of the
shares covered thereby on February 1, 1998 in the case of Option A and December
1, 1998 in the case of Option B, and each of the first two anniversaries
thereof, provided that the Executive is an employee of the Company on each such
date. Such options shall also be subject to the terms and conditions of the 1996
Stock Option Plan and shall be reflected in a standard stock option agreement
between the Company and the Executive as contemplated by such Plan. In addition,
the Board may grant the Executive compensation in the form of additional bonuses
or stock options or such other consideration as may be determined from time to
time in the sole discretion of the Board. The compensation set forth herein
shall be payable in accordance with the payroll and incentive compensation
policies of the Company in effect from time to time during the term of this
Agreement.
5. Benefits. During the portion of the term of this Agreement
from and after February 1, 1998, the Executive shall be entitled to participate
in all employee benefit plans and arrangements of the Company in the same manner
as other executive officers of the Company, subject to the terms and conditions
of such plans and arrangements.
6. Expenses. During the term of this Agreement, the Company
shall pay or reimburse the Executive, upon submission of an appropriate
statement by him documenting such expenses as required by the Internal Revenue
Code, for all reasonable out-of-pocket expenses for entertainment, travel,
meals, hotel accommodations and the like incurred by him in the interest of the
business of the Company and in accordance with such procedures as may be
established by the Board.
7. Termination.
(a) Death. If the Executive should die during the
term of this Agreement, the Company shall have no further
obligation hereunder to the Executive, his spouse or his
estate except to pay to the Executive's spouse, if she should
survive him, or the
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Executive's estate if his spouse shall not survive him, the
Base Pay accrued through the end of the month in which the
Executive's death occurred. All such payments to the
Executive's spouse or estate shall be made in the same manner
and at the same times as the Base Pay would have been paid to
the Executive had he not died.
(b) Disability. If, during the term of this
Agreement, the Executive shall be prevented from performing
his duties hereunder by reason of disability, and such
disability shall continue for a period of six months, then the
Company, upon 30 days' prior written notice to the Executive,
may terminate this Agreement at any time after the expiration
of such six-month period. For purposes of this Agreement, the
Executive shall be deemed to have become disabled when the
Board, upon the advice of a licensed physician (mutually
approved by the Company and the Executive or the
representative of the Executive in the event of his inability
to approve), shall have determined that the Executive has
become physically or mentally incapable (excluding infrequent
and temporary absences due to ordinary illness) of performing
his duties under this Agreement. If the Company terminates
this Agreement, then the Company shall have no further
obligation to the Executive except to pay to the Executive, or
in the event of his subsequent death, to his spouse if she
should survive him or to his estate if his spouse shall not
survive him, the Base Pay accrued through the end of the month
in which the Executive's disability occurred. All such
payments to the Executive or his spouse or estate shall be
made in the same manner and at the same times as the Base Pay
would have been paid to the Executive had he not become
disabled.
(c) Termination by Executive. If the Executive
voluntarily terminates this Agreement, then the Company shall
have no further obligation to the Executive except to pay to
the Executive the Base Pay accrued through the date on which
the Executive terminated this Agreement. Such payment to the
Executive shall be made in the same manner and at the same
times as the Base Pay would have been paid to the Executive
had he not terminated this Agreement.
(d) Discharge for Cause. Notwithstanding any other provision
of this Agreement, if prior to the expiration of the term of
this Agreement the Executive shall be discharged by the
Company for cause, then this Agreement shall automatically
terminate (except for the provisions of Sections 8, 9 and 11
which shall continue in effect), and upon such termination,
the Company shall have no further obligation to the Executive
except that the Company shall pay to the Executive an amount
equal to the Executive's Base Pay accrued to the date of such
termination. For purposes of this Agreement, a discharge for
cause shall mean a discharge resulting from a good faith
determination by the Company (after the Executive has been
given notice of such intended termination and, if the reasons
for such termination can be cured, a period of 10 days to cure
such reasons) that the Executive (i) has been convicted of a
crime involving fraud, theft or embezzlement or of any other
crime involving moral turpitude, (ii) has failed or refused to
follow reasonable policies or directives established by the
Board of Directors, (iii) has persistently failed to attend to
his duties hereunder, (iv) has committed acts amounting to
gross negligence or willful
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misconduct to the substantial detriment of the Company, or (v)
has willfully breached any material term or provision of this
Agreement. Such payment to the Executive shall be made in the
same manner and at the same times as the Base Pay would have
been paid to the Executive had this Agreement not been
terminated.
(e) Termination by the Company. Subject to the terms
of the Severance Agreement, dated the date hereof (the
"Severance Agreement"), between the Executive and the Company,
the Executive's employment with the Company may be terminated
prior to the expiration of this Agreement for any reason and
the Company shall have no further obligation hereunder to the
Executive, his spouse or his estate except to pay to the
Executive, to his spouse if she should survive him, or to his
estate if his spouse shall not survive him, his Base Pay for
the remainder of the year in which such termination occurs.
All such payments to the Executive, his spouse or estate shall
be made in the same manner and at the same times as the Base
Pay would have been paid to the Executive had his employment
not been terminated.
8. Confidentiality.
(a) Acknowledgment. The Executive agrees and
acknowledges that in the course of rendering services to the
Company and its Clients (as defined below) he will have access
to and will become acquainted with confidential information
about the professional, business and financial affairs of the
Company, the Company's direct or indirect subsidiaries (for
purpose of Sections 8 and 9 herein, the term Company shall
include any of the Company's direct or indirect subsidiaries),
the Company's strategy and procedures and the Company's
Clients, and may in the future contribute to such information.
As used in this Agreement, the term "Clients" refers to any
entity in the sub-prime automobile financing or refinancing
business with which the Company conducts business. The
Executive agrees and acknowledges that the Company is engaged
in a highly competitive business, and that the success of the
Company in the marketplace depends upon its good will and
reputation for providing exemplary services to its Clients by
developing innovative, aggressive, cutting-edge and/or novel
methods of financing or refinancing the purchase of
automobiles in the sub-prime market, and arranging financing
for companies that are in the business of financing the
purchase of automobiles in the sub-prime market. The Executive
recognizes that in order to guard the legitimate interests of
the Company it is necessary for the Company to protect all
such confidential information, good will and reputation.
(b) Proprietary Information. In the course of his
service to the Company, the Executive may have access to and
may help create confidential information, including, but not
limited to: the identity of proposed transactions or the
parties thereto, the status of negotiations concerning
proposed transactions, forecasts, budgets, pricing
information, Company developed methods of operation, risk
management strategies and procedures, Client lists, lists of
contact persons at Clients, specialized know-how developed by
the Company, business documents or information, marketing
data, trade secrets, personnel rosters, including the
identity, qualifications and/or salary scale of any consultant
or other Company employee, and other information generated by
the
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Company or arising in connection with the Company's
business the disclosure of which would give an advantage to
the Company's competitors or Clients. Such information shall
hereinafter be called "Proprietary Information" and shall
include any and all items enumerated in the preceding sentence
which come within the scope of the business activities of the
Company as to which the Executive has had or may have access,
whether previously existing, now existing or arising
hereafter, whether or not conceived or developed by others or
by the Executive alone or with others during the period of his
service to the Company, and whether or not conceived or
developed during regular working hours. "Proprietary
Information" shall not include (a) any information which is in
the public domain during the period of service by the
Executive, provided such information is not in the public
domain as a consequence of disclosure by the Executive in
violation of this Agreement or by any other person who was
contractually obligated not to disclose such information and
(b) any information not considered confidential information by
similar enterprises operating in the sub-prime automobile
finance industry.
(c) Fiduciary Obligations. The Executive agrees and
acknowledges that Proprietary Information belongs solely to
the Company and is of critical importance to the Company and
that a use or disclosure of the Proprietary Information in
violation of this Section 8 may seriously and irreparably
impair and damage the Company's businesses. The Executive
therefore agrees, while he is a consultant to or employee of
the Company, and at all times thereafter, (a) to keep all
Proprietary Information in a fiduciary capacity for the sole
benefit of the Company and (b) not to use the Proprietary
Information for the benefit of the Executive or any other
person or entity.
(d) Non-Disclosure. The Executive shall not disclose,
directly or indirectly (except as required by law), any
Proprietary Information to any person other than (a) the
Company, (b) Executives of the Company that the Executive
reasonably believes have been authorized to receive such
information, (c) such other persons to whom the Executive has
been instructed to make disclosure by the Board, or (d) the
Executive's counsel so long as such counsel agrees to keep all
Proprietary Information confidential (in the case of clause
(b) only to the extent required in the course of the
Executive's service to the Company). At the termination of his
service hereunder, the Executive shall deliver to the Company
all notes, letters, documents and records which may contain
Proprietary Information which are then in his possession or
control and shall not retain or use any copies or summaries
thereof.
9. Non-Competitive and Non-Solicitation.
(a) Non-Competition Covenant. The Executive
acknowledges and agrees that (a) in order for the Company to
further ensure that the Proprietary Information will be used
solely for the benefit of the Company and not for the benefit
of the Executive or any other person or entity and (b) in
consideration of the Company entering into this Agreement, the
Executive has agreed not to compete with the Company to the
extent provided in this Section. The Executive covenants and
agrees
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that during the Restricted Covenant Period (as that terms
is defined below), the Executive shall not, whether for
his own account or for any other person or organization other
than the Company, (a) manage, operate, control, assist
(directly or indirectly), or participate in the management,
operation or control of, (b) serve as a director, officer,
partner, manager, employee or consultant of, or own more than
five percent of the outstanding voting securities of, or (c)
lease property to any enterprise which, within the Restricted
Area (as that term is defined below), carries on the business
of financing or refinancing the purchase of automobiles in the
subprime market or arranging financing for companies that are
in the business of financing the purchase of automobiles in
the sub-prime market. The Executive further agrees that,
during the Restrictive Covenant Period and within the
Restricted Area, he shall not knowingly call upon, solicit,
divert, attempt to solicit or divert, or conduct or carry on
any business with any of the former Clients, current Clients
or potential Clients of the Company known to the Executive
(including for this purpose only those former Clients who were
Clients during the last twelve (12) months of his service to
the Company), without in each case obtaining the prior written
consent of the Company, which consent will not be unreasonably
withheld.
(b) Non-Solicitation of Employees. The Executive
further agrees that during the Restrictive Covenant Period, he
will not directly or indirectly, solicit the employment or
engagement as a consultant of any person who was an employee
of or a consultant to the Company at any time during the last
twelve months of the Executive's service with the Company, or
hire such employee or engage as a consultant any such person,
unless in each case the Executive obtains the prior written
consent of the Company.
(c) Definitions. For the purposes of Section 9.1, the
term "Restricted Covenant Period" shall mean the period
commencing on the date hereof and terminating on the date 12
months after the Executive's service to the Company ends. For
the purposes of this Section 9, the term "Restricted Area"
shall mean the State of Texas.
(d) No Conflicting Agreement. The Executive
represents and warrants to the Company that he is not bound by
the provisions of any agreement with a current or former
employer which would prohibit or limit the Executive's ability
to render services to the Company as herein provided. The
Executive further represents to the Company that in the course
of rendering services hereunder he will not divulge to the
Company any proprietary information of any other party to whom
the Executive owes an obligation of non-disclosure.
10. Vacations. The Executive shall be entitled each year to a
vacation of four weeks, during which time his compensation shall be paid in
full. Each vacation shall be taken during a period of time to be mutually agreed
upon by the parties.
11. Intellectual Property. The Executive hereby agrees that
any and all copyrights, patents, trademarks, patent or trademark applications,
copyrights, franchises, licenses, permits, rights
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(including, without limitation, rights to software and rights to trade secrets
and proprietary information, processes and know-how) and other authorizations
(collectively, the "Rights") which he develops either alone or in collaboration
with other consultants to or employees of the Company during the term of this
Agreement shall belong exclusively to the Company and, if requested, he will
execute any deeds, bills of sale, assignments, assurances, or any other actions
or things necessary or desirable to vest, perfect, or confirm of record or
otherwise in the Company its rights, title, or interest in, to, or under any of
the Rights.
12. Notices. All notices, requests, consents and other
communications under this Agreement shall be in writing and shall be deemed to
have been delivered on the date personally delivered or on the date mailed,
postage prepaid, by certified mail, return receipt requested, if addressed to
the respective parties as follows:
If to Executive: 0000 Xxxxxxxx Xxxxx
Xxxxxxx, XX 00000
If to the Company AutoBond Acceptance Corporation
000 Xxxxxxxx Xxxxxx, 0xx Xxxxx
Xxxxxx, Xxxxx 00000
Either party hereto may designate a different address by providing written
notice of such new address to the other party hereto.
13. Specific Performance. The Executive acknowledges that a
remedy at law for any breach or attempted breach of Section 8, 9 or 11 of this
Agreement will be inadequate, agrees that the Company shall be entitled to
specific performance and injunctive and other equitable relief in case of any
such breach or attempted breach, and further agrees to waive any requirement for
the securing or posting of any bond in connection with the obtaining of any such
injunctive or any other equitable relief.
14. Severability. In case any term, phrase, clause, paragraph,
section, restriction, covenant or agreement contained in this Agreement shall be
held to be invalid or unenforceable, the same shall be deemed, and it is hereby
agreed that the same are meant, to be severable, and shall not defeat or impair
the remaining provisions hereof.
15. Waiver. The waiver by the Company of a breach of any
provision of this Agreement by the Executive shall not operate or be construed
as a waiver of any subsequent or continuing breach of this Agreement by the
Executive.
16. Assignment. This Agreement may not be assigned by the
Executive. Neither the Executive nor his spouse or estate shall have any right
to commute, encumber or dispose of any right to receive payments hereunder, it
being agreed that such payments and the right thereto are nonassignable and
nontransferable.
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17. Binding Effect. Subject to the provisions of Section 16,
this Agreement shall be binding upon and inure to the benefit of the parties
hereto, the Executive's heirs and personal representatives, and the successors
and assigns of the Company.
18. Entire Agreement. This Agreement and the Severance
Agreement embody the entire agreement and understanding between the parties
hereto with respect to the matters covered hereby.
19. Amendment. This Agreement may be amended only by an
instrument in writing executed by the parties hereto.
20. Governing Law. This Agreement shall be construed and
enforced in accordance with and governed by the law of the State of Texas.
21. Survival. The provisions of this Section 8, 9 and 11 shall
survive until the termination of this Agreement, regardless of the fact that the
Company will no longer be obligated to continue to make payments to the
Executive hereunder.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date and year first above written.
AUTOBOND ACCEPTANCE
CORPORATION
By
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XXXXXX X. XXXXXXXX
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