Document:

Patent License Agreement

 

Exhibit 10.18

PATENT LICENSE AGREEMENT

This PATENT LICENSE AGREEMENT (the “Agreement”), made and entered into as of June 29, 2005
(the “Effective Date”) by and between Tumbleweed Communications Corp., a Delaware
corporation with its principal offices located at 700 Saginaw Drive, Redwood City, California 94063
(fax: 650-216-2001) (“Licensor”), and CyberGuard Corporation, a Florida corporation with its
principal offices located at 350 SW 12th Avenue, Deerfield Beach, Florida 33442 (fax:
(954) 375-3501) (“Licensee”). Licensor and Licensee are sometimes referred to herein individually
as a “Party” and collectively as the “Parties.”

RECITALS

     WHEREAS, Licensor is the owner of certain United States patents as herein identified;

     WHEREAS, Licensee desires to obtain, and Licensor is willing to grant Licensee, a
non-exclusive license as hereinafter defined and subject to all the terms and conditions of this
Agreement;

     NOW, THEREFORE, in consideration of the promises and the mutual covenants hereinafter set
forth, the Parties agree as follows:

AGREEMENT

	A.	 	Definitions.

     Capitalized terms shall have the following definitions, unless elsewhere defined in the body
of the Agreement:

	 	1.	 	“Licensed Product” means any of Licensee’s past,
present and future software products, including updates and upgrades, that fall
within the scope of one or more claims of the Licensed Patents.
	 
	 	2.	 	“Licensed Patents” means United States Patent Nos.
6,609,196 and 6,393,568 and any continuations, divisionals, reissues,
reexaminations, or foreign counterpart patents that may issue with respect to
the aforesaid patents.
	 
	 	3.	 	“Territory” means the world.

	B.	 	License Grant.

	 	1.	 	Licensor hereby grants to Licensee a personal, non-exclusive
license under the Licensed Patents, to make, use, sell, offer for sale, import
and/or export the Licensed Product within the Territory during the Term,
without rights of sublicense (except that Licensee shall have the limited

 

 

	 	 	 	right to sublicense to any of its customers the right to use the Licensed
Patents solely to the extent needed to use the Licensed Products of the
Licensee), subject to the terms and conditions of this Agreement.

	 	2.	 	This Agreement does not give, and shall not be construed to
give, Licensee any express or implied rights in any intellectual property of
Licensor other than as expressly granted herein, including but not limited to
the right to sell products, other than the Licensed Products, that infringe on
the Licensed Patents.
	 
	 	3.	 	This Agreement and the rights granted to Licensee hereunder may be assigned
in whole, but not in part, upon prior written notice from Licensee to Licensor.
This Agreement and the rights granted to Licensee hereunder may not, however
be sublicensed by Licensee without the prior written approval of Licensor,
except as provided in section B.1 above. Any assignment, sublicense or other
transfer contrary to the terms of the Agreement shall be null and void, and
Licensor may at its option immediately terminate this Agreement and all rights
granted to Licensee hereunder by written notice to Licensee.
	 
	 	4.	 	Licensee acknowledges the validity and enforceability of the Licensed
Patents. To the fullest extent permissible under applicable law, in the event
Licensee elects to challenge the validity of the Licensed Patents, for example,
by initiating reexamination, or declaratory judgment actions, or any other type
of court action, or any other legal or administrative proceeding, including
opposition proceedings in foreign patent offices, or other foreign patent
office administrative proceedings or foreign court actions, Licensor will have
the right to immediately terminate the license granted herein.

	C.	 	Payment of License Fee.

	 	1.	 	Nonrefundable Payment. In consideration of the license
granted herein, Licensee shall pay to Licensor the nonrefundable fee (“License
Fee”) set forth on Exhibit A by wire transfer on or before July 31, 2005 and
shall issue a purchase order reflecting the foregoing on or before June 30,
2005. All payments shall be made by wire transfer to

Silicon Valley Bank

3003 Tasman Drive

Santa Clara, CA 95054

Phone: 408-654-7400

Account #3300045171

ABA # 121140399

For the credit of Tumbleweed Communications

(TIN: 94-3336053).

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	 	2.	 	Default Royalty Payments. [This section has
intentionally been deleted.]
	 
	 	3.	 	Annual Royalty Payment Alternative to Default Royalty
Payments. [This section has intentionally been deleted.]
	 
	 	4.	 	Option to Convert to a Fully-Paid-Up License. [This section
has intentionally been deleted.]
	 
	 	5.	 	Late Payments, Recordkeeping, and Audits. Any amount not paid when
due shall thereafter accrue daily interest at an annual rate of 2% over the
prime rate or the maximum rate allowable by law, whichever is less.

	D.	 	Maintenance, Use and Enforcement of Patent Rights.

	 	1.	 	Licensor shall be under no obligation to file, prosecute or
maintain any patent rights, including the Licensed Patents in any given
country.
	 
	 	2.	 	Licensee shall promptly notify Licensor if in the ordinary
course of its business Licensee obtains actual and non-confidential knowledge
that any third party is infringing the Licensed Patents. Licensee shall
provide to Licensor the information Licensee has in support of such belief.

	E.	 	Representations and Warranties.

	 	1.	 	Licensor.

	 	(a)	 	Organization. Licensor is a corporation
duly organized, validly existing and in good standing under the law of
the state of its incorporation as set forth in the first recital
paragraph of this Agreement.
	 
	 	(b)	 	Authorization; Validity of Agreement;
Licensor’s Action. Licensor has the corporate power and authority
to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and
performance by Licensor of this Agreement, and the consummation by it
of the transactions contemplated hereby, have been duly authorized and
no other corporate action on the part of Licensor is necessary to
authorize the execution and delivery by Licensor of this Agreement and
the consummation by it of the transactions contemplated hereby. This
Agreement has been duly executed and delivered by Licensor and,
assuming due and valid authorization, execution and delivery hereof by
Licensee, is a valid and binding obligation of Licensor, enforceable
against Licensor in accordance with its terms, except

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	 	 	 	that (i) such enforcement may be subject to applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws, now or
hereafter in effect, affecting creditors’ rights generally, and (ii)
the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding therefore may be
brought.

	 	(c)	 	Consents and Approvals; No Violations.
Neither the execution, delivery or performance of this Agreement by
Licensor nor the consummation by Licensor of the transactions
contemplated hereby nor compliance by Licensor with any of the
provisions hereof shall (i) conflict with or result in any breach of
any provision of the certificate of incorporation or by-laws or similar
organizational documents of Licensor, (ii) require on the part of
Licensor any filing with, or permit, authorization, consent or approval
of, any governmental entity, (iii) result in a violation or breach of,
or constitute (with or without due notice or lapse of time or both) a
default (or give rise to any right of termination, cancellation or
acceleration) under, any of the terms, conditions or provisions of any
material note, bond, mortgage, indenture, lease, license, contract,
agreement or other instrument or obligation to which Licensor is a
party or by which it or any of its properties or assets may be bound or
(iv) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to Licensor or any of its properties or assets;
excluding from the foregoing clauses (ii) (iii) or (iv) any acts
omissions that would not, individually or in the aggregate, have a
material adverse change in, or effect on, the business, financial
condition or operations of Licensor.
	 
	 	(d)	 	Disclaimers. Nothing herein shall
constitute a representation or warranty by Licensor (i) as to the scope
of the Licensed Patents, or (ii) that the Licensed Patents are valid or
enforceable, or (iii) that the exercise of the rights granted hereunder
does not and will not infringe upon the proprietary rights of any third
party. Nothing herein shall constitute (i) an undertaking to bring or
prosecute actions or suits against any third party for infringement, or
(ii) a grant or creation by implication, estoppel, or otherwise, of any
license or right under any patents (other than the Licensed Patents) of
Licensor or any third party.

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	 	2.	 	Licensee.

	 	(a)	 	Organization. Licensee is a duly
organized, validly existing and in good standing under the law of the
jurisdiction of its incorporation as set forth in the first recital
paragraph of this Agreement.
	 
	 	(b)	 	Authorization; Validity of Agreement;
Licensee’s Action. Licensee has the corporate power and authority
to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and
performance by Licensee of this Agreement, and the consummation by it
of the transactions contemplated hereby, have been duly authorized and
no other corporate action on the part of Licensee is necessary to
authorize the execution and delivery by Licensee of this Agreement and
the consummation by it of the transactions contemplated hereby. This
Agreement has been duly executed and delivered by Licensee and,
assuming due and valid authorization, execution and delivery hereof by
Licensor, is a valid and binding obligation of Licensee, enforceable
against Licensee in accordance with its terms, except that (i) such
enforcement may be subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws, now or hereafter in
effect, affecting creditors’ rights generally, and (ii) the remedy of
specific performance and injunctive and other forms of equitable relief
may be subject to equitable defenses and to the discretion of the court
before which any proceeding therefore may be brought.
	 
	 	(c)	 	Consents and Approvals; No Violations.
Neither the execution, delivery or performance of this Agreement by
Licensee nor the consummation by Licensee of the transactions
contemplated hereby nor compliance by Licensee with any of the
provisions hereof shall (i) conflict with or result in any breach of
any provision of the certificate of incorporation or by-laws or similar
organizational documents of Licensee, (ii) require on the part of
Licensee any filing with, or permit, authorization, consent or approval
of, any governmental entity, (iii) result in a violation or breach of,
or constitute (with or without due notice or lapse of time or both) a
default (or give rise to any right of termination, cancellation or
acceleration) under, any of the terms, conditions or provisions of any
material note, bond, mortgage, indenture, lease, license, contract,
agreement or other instrument or obligation to which Licensee is a
party or by which it or any of its properties or assets may be bound or
(iv) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to Licensee or any of its

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	 	 	 	properties or assets, excluding from the foregoing clauses (ii), (iii)
or (iv) where the failure to obtain such permits, authorizations,
consents or approvals or to make such filings, or the existence of
such violations, breaches or defaults, would not, individually or in
the aggregate, have a material adverse change in, or effect on, the
business, financial condition or operations of Licensee.

	F.	 	Publicity.

	 	1.	 	Publicity. The Parties agree that Licensor may list on
its website the Licensee as a licensee of the Licensed Patents, provided,
however, that the terms of this Agreement shall remain Confidential Information
(as defined below in Section I (“Confidentiality”).

	G.	 	Term and Termination.

	 	1.	 	This Agreement shall commence and become effective as of the
Effective Date and, unless terminated prior thereto in accordance with the
terms hereof, shall terminate upon expiration of the last to expire of the
Licensed Patents (the “Term”) or earlier, as set forth in Section G.2,
below.
	 
	 	2.	 	This Agreement may be terminated as follows:

	 	(a)	 	Either Party may terminate this Agreement
immediately by giving notice to the other Party in the event the other
Party fails to perform any of its obligations hereunder or otherwise
breaches any of its representations or warranties or fails to perform
any of its covenants in this Agreement (other than with respect to the
payment of money which must be cured within ten (10) days of notice
thereof) and the notified Party fails to cure such breach within thirty
(30) days after notice from the notifying Party.
	 
	 	(b)	 	If Licensee makes an assignment for the benefit
of creditors, or shall generally not pay its debts as they become due,
or files a petition commencing a voluntary case under the Bankruptcy
Reform Act of 1978, 11 U.S.C. Section 101 et seq., as amended or any
successor thereto or any foreign laws of similar effect (the
“Bankruptcy Code”), or shall be adjudicated an insolvent, or
shall file any petition or answer seeking for itself any
reorganization, arrangement, composition, readjustment, liquidation,
dissolution, or similar relief under any present or future statute, law
or regulations, foreign or domestic, or shall file any answer admitting
or shall fail to deny the material allegations of such petition filed
against it for such relief, or consent to the filing of any such
petition or shall seek or consent to or acquiesce in the

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	 	 	 	appointment of any agent, trustee, receiver, custodian, liquidator
or similar officer for it or of all or any substantial part of its
assets or properties, or its directors or majority stockholders
shall take any action authorizing any of the foregoing or looking to
its dissolution or liquidation, or it shall cease doing business as
a going concern, or an order for relief shall be entered against it
under any part of the Bankruptcy Code, or if, within sixty (60) days
after the filing of any petition or the commencement of any
proceeding against either Party seeking any reorganization,
arrangement, composition, readjustment, liquidation, dissolution or
similar relief under the Bankruptcy Code or any other present or
future statute, law or regulation, foreign or domestic, such
proceeding shall not have been dismissed, or a decree or order of a
court having competent jurisdiction shall have been entered
approving as properly filed any such petition, or if, within sixty
(60) days after the appointment, without the consent or acquiescence
of such Party, of any agent, trustee, receiver, custodian,
liquidator or similar officer for it or of all or any substantial
part of its properties, such appointment shall not have been
vacated, then this Agreement shall automatically, without notice or
any further act or deed of any Party, terminate and be of no further
force or effect, except, in the case of the bankruptcy of Licensee
only, that any and all liabilities and obligations of the Parties at
the time outstanding under or in connection with this Agreement, if
any, shall automatically, without notice or any creditors act or
deed of any Party, become due and payable.

	 	(c)	 	If either (i) a court of competent jurisdiction
issues a final ruling that the Licensed Patents are invalid and the
time for appeal of such ruling has expired without appeal, or (ii) a
court of competent jurisdiction issues a final ruling that the Licensed
Patents are invalid and Licensor has exhausted all its appeals without
such final ruling being reversed, set aside, or stayed, then Licensor
shall promptly notify Licensee, and Licensee shall have the right to
terminate this Agreement upon thirty (30) days written notice to
Licensor.

	H.	 	Effect of Expiration or Termination.

	 	1.	 	Upon the expiration or termination of this Agreement, neither
Licensee nor its permitted franchisees, sublicensees, distributors, receivers,
representatives, agents, successors or assigns shall have any rights under the
Licensed Patents and shall forthwith discontinue any activity covered by the
Licensed Patents and irrevocably release and disclaim any right or interest in
or to the Licensed Patents.

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	 	2.	 	The following provisions shall survive any expiration or
termination of this Agreement: (a) any provision that plainly indicates it is
intended to survive; (b) the obligation to pay any amount that would otherwise
be due and payable on or before June 30, 2005; and (c) Sections D
(“Maintenance, Use and Enforcement of Patent Rights”), H (“Effect of Expiration
or Termination”), I (“Confidentiality”), J (“Bankruptcy”), and K
(“Miscellaneous”).
	 
	 	3.	 	Neither party shall incur any liability whatsoever for any
damage, loss or expenses of any kind suffered or incurred by the other arising
from or incident to any termination or expiration of this Agreement which
complies with the terms of the Agreement. Without limiting the foregoing,
neither party shall be entitled to any damages on account of prospective
profits or anticipated sales. This Agreement is not automatically renewable,
and each party waives the benefit of any law or regulation providing
compensation arising from the failure to renew this Agreement and each party
represents and warrants that such waiver is irrevocable and enforceable by the
other party.
	 
	 	4.	 	In no event shall Licensee be entitled to any refund (in whole
or in part) of any fee paid pursuant to Section C.1 (“Nonrefundable Payment”).

	I.	 	Confidentiality.

	 	1.	 	In connection with the performance of this Agreement, Licensor
and Licensee may gain access to certain confidential or proprietary information
(collectively, “Confidential Information”) of the other Party and its
affiliates, including, but not limited to, business plans, proposed
advertising, designs, sales records, financial data and manufacturer’s
know-how, and the terms of this Agreement. Recognizing that such Confidential
Information represents valuable assets and property of Licensor or the
disclosing Party, respectively, and the harm that may befall such Party if any
Confidential Information is disclosed, the recipient agrees to hold all such
Confidential Information in strict confidence and not to use or otherwise
disclose any Confidential Information of the other party to any third party.
The obligations of confidentiality, non-use and non-disclosure created herein
shall survive the expiration or termination of this Agreement. Upon the
expiration or termination of this Agreement, all tangible items embodying any
Confidential Information of either Party shall be returned to the other Party
immediately upon written request.
	 
	 	2.	 	The obligations of confidentiality created herein shall not
apply:

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	 	(a)	 	to information which comes into the public
domain, provided it did not come into the public domain through the
disclosure by the receiving Party or by disclosure by a party not
authorized to make the disclosure;
	 
	 	(b)	 	to information which was in the receiving
Party’s possession prior to its disclosure (but not pursuant to any
confidentiality agreement or obligation), or was later disclosed to the
receiving Party by a third party who is lawfully in possession of such
and, to the receiving Party’s knowledge, was under no obligation to
keep such information confidential;
	 
	 	(c)	 	to information which is required to be
disclosed by law or any court order, but only to the extent so required
and only upon prior notice to the other Party hereto and cooperation
with such other Party in contesting the disclosure order and/or seeking
a protective order to limit the scope of the disclosure; and
	 
	 	(d)	 	to information which a Party may be required to
disclose in order to enforce a Party’s rights under this Agreement or
in any litigation between the Parties regarding the terms of this
Agreement, subject to notice to the other Party and the opportunity to
seek a protective order.

	 	3.	 	Neither Party shall release to any third party or publish in
any way any non-public information with respect to the terms of this Agreement
without the prior written consent of the other Party, which consent shall not
be unreasonably withheld. Either party may apply for injunctive relief in the
event of a breach of this section I (“Confidentiality”). Nothing contained in
this paragraph shall prohibit either Party from filing this Agreement as may be
required by the rules and regulations of the Securities and Exchange
Commission, national securities exchanges or the Nasdaq National Market,
provided the disclosing Party discloses only the minimum information required
to be disclosed in order to comply with such requirements, including requesting
confidential treatment of this Agreement (after reasonable consultation with
the other Party, which the parties understand and agree, solely for purposes of
this section I.3. of the Agreement, may require a period of up to five business
days) and filing this Agreement in redacted form.

	J.	 	Bankruptcy.

	 	1.	 	Notwithstanding the provisions of Section B.3, in the event
that it is determined by any court or bankruptcy trustee that this Agreement
may be assumed or assigned in connection with a case commenced by or

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	 	 	 	against either Party under the Bankruptcy Code, Licensor and Licensee hereby
acknowledge that adequate assurance of future performance under this
Agreement (within the meaning of the Bankruptcy Code) shall include,
inter alia, adequate assurance:

	 	(a)	 	that any and all amounts due from Licensee to
Licensor under or pursuant to this Agreement shall be duly and timely
paid, and all breaches cured;
	 
	 	(b)	 	that the assumption or assignment of this
Agreement will not result in the breach by either Party or their
affiliates of any provision in any other license, contract, or
agreement relating to the Licensed Patents or otherwise;
	 
	 	(c)	 	that any person or entity that assumes this
Agreement or to which this Agreement is assigned shall fully and
faithfully assume, observe and comply with all of the covenants,
requirements and restrictions provided for under this Agreement and
that termination rights for breach of this Agreement shall continue to
apply without change; and
	 
	 	(d)	 	that the value of the Licensed Patents to
Licensor shall not be reasonably likely to diminish by reason of the
assumption or assignment of this Agreement.

	 	2.	 	Any person or entity to which this Agreement is assigned
pursuant to the provisions of the Bankruptcy Code shall be deemed without
further act or deed to have assumed all of the obligations arising under this
Agreement on and after the date of such assignment. Any such assignee shall
upon demand execute and deliver to Licensor or Licensee, as the case may be, an
instrument confirming such assumption.

	K.	 	Miscellaneous.

	 	1.	 	Notice. All notices required or permitted by this
Agreement to be given to a Party shall be in writing and shall be deemed to be
duly given if hand delivered or sent by overnight courier or mailed by
certified or registered mail, return receipt requested, provided that a copy is
also sent by facsimile transmission, in each case to the address set forth in
the first recital paragraph of this Agreement, and in each case marked
“Attention: General Counsel or CFO.” Either Party may change the address to
which such notice and communications shall be sent by written notice to the
other Party, provided that any notice of change of address shall be effective
only upon receipt.

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	 	2.	 	Governing Law. This Agreement shall be deemed to be a
contract made under the laws of the State of California and shall be governed
by and construed in accordance with the laws of such State, as if both Parties
were residents of such State.
	 
	 	3.	 	Entire Agreement. This Agreement sets forth the entire
agreement and understanding between the Parties hereto relating in any way to
the Licensed Patents and to any other subject matter contained herein and
merges all prior discussions between them, and such prior agreements are hereby
terminated. Neither Party shall be bound by any obligations, covenants, terms,
conditions, representations or warranties other than as expressly stated in
this Agreement, and this Agreement may not be amended or modified except by a
written instrument signed by the Party against whom such modification or
amendment is to be enforced. In the event of any inconsistency between a
provision of this Agreement any provision in any prior agreement, the provision
of this Agreement shall prevail.
	 
	 	4.	 	Time of the Essence. All time limits stated in this
Agreement are of the essence to this Agreement.
	 
	 	5.	 	Relationship of the Parties. Nothing herein contained
shall be construed to constitute the Parties hereto as partners or as joint
venturers, or either as an employee or agent of the other.
	 
	 	6.	 	Service of Process. With respect to this Agreement,
service of process may be made by any means permitted by applicable law or via
the notice provisions in Section K.1 hereof.
	 
	 	7.	 	Headings. The headings in this Agreement are for the
convenience of the Parties only and shall not affect the meaning or
interpretation of this Agreement or any provisions thereof.
	 
	 	8.	 	Waiver. No waiver by either Party, whether expressed
or implied, of any provision of this Agreement, or of any breach or default
thereof, shall constitute a continuing waiver of such provision, breach or
default or a waiver of any other provision, breach or default of this
Agreement.
	 
	 	9.	 	Binding Agreement. Except as otherwise provided
herein, this Agreement shall be binding upon and inure to the benefit of the
Parties, and their permitted successors and assigns.
	 
	 	10.	 	Invalid or Unenforceable Clauses. In the event that
any one or more of the clauses contained in this Agreement shall be declared
invalid or unenforceable by a final order or judgment of any court, the
Agreement

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	 	 	 	shall be construed to contain a modified version of such clause which
reflects the intent of the Parties to the maximum extent which is valid or
enforceable. If such modification is not reasonably practicable, then this
Agreement shall be construed as if it did not contain such invalid or
unenforceable clause and shall, in all other respects, remain in full force
and effect.

	 	11.	 	Counterparts. This Agreement may be executed in
counterparts, and each counterpart shall have the same force and effect as an
original and shall constitute an effective, binding agreement on the part of
each of the undersigned.
	 
	 	12.	 	U.S. Dollars. All dollar amounts set forth in this
Agreement and any exhibit hereto are in U.S. dollars.
	 
	 	13.	 	Third Party Beneficiaries. The subsidiaries of
Licensee are third party beneficiaries of this Agreement.

[The remainder of this page is intentionally blank.]

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     IN WITNESS WHEREOF, the Parties hereto have duly executed this Agreement as of the date and
year first above written.

	 	 	 	 	 
	 	Tumbleweed Communications Corp.

 	 
	 	By:  	 /s/
 	 
	 	 	Name:  	

	 	 	Title:  	

	 
	 	CyberGuard Corporation

 	 
	 	By:  	 /s/
 	 
	 	 	Name:  	

	 	 	Title:  	

13

 

	 	 	 	 	 

Exhibit A

License Fee: [confidential portion omitted and filed separately with the Securities and
Exchange Commission]

14<PAGE>
                                                                   EXHIBIT 10.20

                           SUMMARY OF COMPENSATION FOR
               NON-EMPLOYEE DIRECTORS AND NAMED EXECUTIVE OFFICERS

NON-EMPLOYEE DIRECTOR COMPENSATION SUMMARY

Annual Retainer
$10,800
Additional $5,000 for serving as chair of the audit committee
Retainers are payable in cash in equal, quarterly installments in arrears

Board and Committee Meeting Fees
$500 per meeting for each Board of Directors meeting attended
Additional $500 per meeting for each Board committee meeting attended that is
not held on the same day as a Board of Directors meeting

Annual Equity Award
500 shares of restricted stock are awarded to all non-employee directors (other
than Gerald J. Ford and Donald J. Edwards) pursuant to the 2002 Long Term
Incentive Plan of First Acceptance Corporation (the "Company"), on the date of
each annual meeting of the Company's stockholders.

NAMED EXECUTIVE OFFICER COMPENSATION SUMMARY

Current salaries for named executive officers:

<Table>
<Caption>
Name                             Title                                         Salary
----                             -----                                         ------
<S>                              <C>                                           <C>
Stephen J. Harrison              President and Chief Executive Officer         $500,000

Thomas M. Harrison, Jr.          Executive Vice President and Secretary        $300,000

Charles D. Hamilton              Senior Vice President, Chief Financial        $206,000
                                 Officer and Treasurer

William R. Pentecost             Chief Information Officer                     $191,650

Michael J. Bodayle               Chief Financial Officer - Insurance           $165,000
                                 Company Operations
</Table>

Under the terms of their respective employment agreements, Stephen J. Harrison
is entitled to receive an annual bonus equal to up to 100% of his base salary
and Thomas M. Harrison, Jr. is entitled to receive an annual bonus equal to up
to 50% of his base salary, based upon such executives' attainment of
performance-based objectives set forth in their respective employment
<PAGE>

agreements for the calendar year ending December 31, 2004, and for each calendar
year thereafter as established by the Company's Board of Directors. On May 5,
2005, the Compensation Committee (the "Compensation Committee") of the Board of
Directors of the Company approved bonus targets for the period from January 1,
2005 through June 30, 2005 for Stephen J. Harrison and Thomas M. Harrison, Jr.
pursuant to the terms of their respective employment agreements. The
Compensation Committee determined that bonuses for Stephen J. Harrison and
Thomas M. Harrison, Jr. during this six-month period would be based 50% upon the
attainment of certain targets for income before income taxes by USAuto Holdings,
Inc. and its subsidiaries (which constitutes the Company's insurance
operations), and would be based 50% upon qualitative factors to be considered by
the Compensation Committee.

The other named executive officers of the Company receive bonuses as determined
in the discretion of the Compensation Committee.

The named executive officers may also receive stock options pursuant to the
Company's stockholder-approved 2002 Long Term Incentive Plan as determined in
the discretion of the Compensation Committee.

                             ADDITIONAL INFORMATION

The foregoing information is summary in nature. Additional information regarding
director and named executive officer compensation will be provided in the
Company's Proxy Statement to be filed in connection with the Company's Annual
Meeting of Stockholders to be held on November 10, 2005.

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