Document:

exv10w2

 

Exhibit 10.2

CONSULTING AGREEMENT

          THIS AGREEMENT is made as of the 12th  day of January, 2007 (“Effective
Date”), by and between Scott Pettit, an individual residing at 1435 Semar Court, Mt.
Prospect, Illinois 60056 (“Consultant”), and Insurance Auto Auctions, Inc., an
Illinois corporation (the “Company”).

          IN CONSIDERATION of the mutual covenants and promises herein contained, Consultant and the
Company hereby agree as follows:

          1. Consulting Term. For the period commencing on the Effective Date and continuing
for a period ending on the third anniversary of such date, unless sooner terminated in accordance
with the terms of this Agreement (the “Consulting Term”), the Company shall hire
Consultant, and Consultant shall work for the Company as a consultant and shall perform such
consulting services as shall be determined from time to time by the Company. Notwithstanding the
foregoing, the Company and Consultant may terminate this Agreement at any time and from time to
time upon written notice to the other as provided in Section 12 hereof; provided, however, that in
the event this agreement is terminated by the Company or the Consultant obtains employment or a
consulting engagement with a third party during the Consulting Term, the Company shall be obligated
to continue to pay Consultant his Consulting Fee until the end of the Consulting Term. It is
understood and agreed that during the Consulting Term, Consultant shall devote his business time,
effort, skill and attention to the Company’s affairs as reasonably directed; provided, however,
that in the event Consultant obtains employment and/or other consulting engagements with third
parties during the Consulting Term, the consulting services provided by Consultant shall be
appropriately adjusted by mutual agreement of the Company and the Consultant and, in any event, the
Company shall be obligated to continue to pay Consultant his Consulting Fee until the end of the
Consulting Term.

          2. Consulting Fee. During the Consulting Term, the Company shall pay Consultant the
amount of $433,100 per year (the “Consulting Fee”). Such Consulting Fee shall be payable
to Consultant no less frequently than monthly. The Consultant shall continue to participate in the
Company’s benefit plans (excluding any Company automobile allowance plan or
arrangement)1, subject to the respective terms of such plans and applicable law.
Furthermore, the Company shall reimburse the Consultant for all reasonable out-of-pocket expenses
incurred by Consultant on behalf of the Company in connection with such consulting services
performed by Consultant; provided, however, that no items of cost or expense shall be incurred
without the prior approval of the Company, or which are inconsistent with the Company’s
then-standard

 

			
	1	 	The Company’s automobile allowance is
excluded because the amount of the annual auto allowance currently received by
Mr. Pettit is included in the annual consulting fee amount.

 

 

criteria for reimbursing expenses and all items of cost and expense shall be supported by
vouchers, receipts, or other appropriate documentation consistent with the Company’s practices.

          3. Treatment of Equity. Notwithstanding Section 4 of the Non-Qualified Stock Option
Agreement between Axle Holdings, Inc. and the Consultant dated May 25, 2005 (the “Option
Agreement”), as of the Effective Date (i) Consultant shall be fully vested in all Service
Options (as such term is defined in the Option Agreement) granted to Consultant pursuant to the
Option Agreement and such Service Options shall remain exercisable until the earlier of the Normal
Expiration Date (as such term is defined in the Option Agreement) or the end of the maximum time
period permissible under Section 409A of the Internal Revenue Code of 1986, as amended, and any
guidance promulgated thereunder (“Section 409A”) beyond which such Service Options would be
treated as nonqualified deferred compensation for purposes of Section 409A and (ii) all Exit
Options (as such term is defined in the Option Agreement) granted to Consultant pursuant to the
Option Agreement shall remain outstanding and shall become exercisable, if at all, on the date of a
Vesting Event (as such term is defined in the Option Agreement), provided that such Exit Options
shall terminate and be canceled at the end of the maximum time period permissible under Section
409A beyond which such Exit Options would be treated as nonqualified deferred compensation for
purposes of Section 409A if such time period ends prior to the occurrence of a Vesting Event.
Notwithstanding Article VIII of the Amended and Restated Limited Liability Company Agreement of
Axle Holdings II, LLC (the “LLC Agreement”), as of the Effective Date all Override Units
(as such term is defined in the LLC Agreement) granted to Consultant shall remain outstanding and
expire and be forfeited on the 10th anniversary of the issuance of such Override Units.

          4. Independent Contractor. From and after the Effective Date, Consultant agrees that
he shall be an independent contractor of the Company and shall not take any action which would
interfere with contractual relationships of the Company or any affiliate of the Company with
customers, suppliers, employees or others, any action which disparages or diminishes the reputation
of the Company or any affiliate of the Company. Accordingly, Consultant shall be responsible for
payment of all taxes, including Federal, State, and local taxes arising out of Consultant’s
activities in accordance with this Agreement.

          5. Non-Disclosure. From and after the Effective Date, Consultant shall not disclose
to any person, association, firm, corporation or other entity (other than the Company or any
affiliate of the Company) in any manner, directly or indirectly, any such information or data,
excepting only use of such data or information (i) as is required by applicable law or (ii) as is
at the time generally known to the public and which did not become generally known through the
breach of any provision of paragraphs 4 or 5 hereof by Consultant.

          6. Inventions and Creations. Any inventions or discoveries conceived or made by
Consultant, while performing services under the Agreement shall belong to the Company, and
Consultant agrees to disclose to the Company the details of such inventions or discoveries and upon
request execute and deliver to any assignee designated by the Company all Consultant’s rights,
title and interest therein or thereto, including any right which may exist to

 

 

secure United States and foreign patents thereon and the right to use and enjoy such
inventions or discoveries without further payment to Consultant other than the consideration
mentioned above. Further, all works eligible for copy right protection produced by the Consultant
in whatever media during the term of this Agreement, shall belong entirely to the Company.
Consultant agrees to assign and does hereby assign to the Company all of Consultant’s worldwide
right, title and interest in and to such work and all rights of copyright therein.

          7. Indemnification. Each party agrees to release, protect and save the other, its
agents, servants and employees, harmless from and against all loss, damage, cost and expense
resulting from death or injury to, or loss of, destruction of or damage to property of the other,
which may be caused in any manner, while engaged in the performance of work or services under this
Agreement or incident thereto, except to the extent caused by the indemnified party’s negligence or
willful act.

          8. Successors and Assigns. This Agreement shall be binding on and inure to the
benefit of Consultant, his heirs, executors, administrators, and other legal representatives and
shall be binding on and inure to the benefit of the Company and its successors and assigns. The
failure of either party at any time or from time to time to require performance of the other
party’s obligations under this Agreement shall in no manner affect the right to enforce any
provision of this Agreement at a subsequent time, and the waiver of any rights arising out of any
breach shall not be construed as a waiver of any rights arising out of any subsequent or prior
breach.

          9. Enforceability. The parties have attempted to limit the scope of the covenants
set forth in this Agreement to the extent necessary. The parties recognize, however, that
reasonable people may differ in making such determination. Consequently, the parties hereby agree
that if the scope and duration of such covenants would, but for this provision, be deemed by a
court of competent authority to be unreasonable or otherwise unenforceable, such court may modify
such covenants to the extent that such court determines to be necessary in order to grant
enforcement thereof as so modified.

          10. Construction. Whenever the context of this Agreement requires, words used in the
singular shall be construed to mean and include the plural and vice versa, and pronouns of any
gender shall be deemed to include and designate the masculine, feminine, or neuter gender.

          11. Amendments and Waivers. No amendment, modification or waiver of any provision of
this Agreement shall be effective unless the same shall be in writing and signed by Consultant and
the Company.

          12. Notices. All notices, requests, demands and other communications required or
permitted under the Agreement shall be deemed to have been duly given and made if in writing and
served either by personal delivery to the party for whom it is intended or one business day after
having been dispatched by a nationally recognized overnight courier service

 

 

bearing the address shown below for, or such other address as may be designated in writing
hereafter by, such party; (i) if to Consultant, the address set forth on the first page of this
Agreement, (ii) if to the Company, to Insurance Auto Auctions, Inc., 2 Westbrook Corporate Center,
Suite 500, Westchester, Illinois 60154, Attention: General Counsel.

          13. Counterparts. This Agreement may be executed in multiple counterparts, each of
which shall be deemed an original, but all of which taken together shall be one and the same
instrument.

          14. Resolution of Disputes; Arbitration. Should a dispute arise concerning this
Agreement, its interpretation or termination, or Consultant’s engagement with the Company, either
party may request a conference with the other party to this Agreement and the parties shall meet to
attempt to resolve the dispute. Failing such resolution within thirty (30) days of ether party’s
request for a conference, the Company and Consultant shall endeavor to select an arbitrator who
shall hear the dispute. In the event the parties are unable to agree on an arbitrator, Consultant
and Company shall request the American Arbitration Association (“AAA”) to submit a list of
nine (9) names of persons who could serve as an arbitrator. The Company and Consultant shall
alternately remove names from this list (beginning with the party which wins a flip of a coin)
until one person remains and this person shall serve as the impartial arbitrator. The arbitration
shall be conducted in accordance with the National Rules for the Resolution of Employment Disputes
as promulgated by the AAA. The decision of the arbitrator shall be final and binding on both
parties. Each party shall bear equally all costs of the arbitrator. The arbitrator shall only have
authority to interpret, apply or determine compliance with the provisions set forth in this
Agreement, but shall not have the authority to add to, detract from or otherwise alter the language
of this Agreement.

          15. Governing Law. This Agreement shall be construed and enforced in accordance
with, and all questions concerning the construction, validity, interpretation and performance of
this Agreement shall be governed by the laws of the State of Illinois without giving effect to the
provisions thereof regarding conflict of laws.

[This space intentionally left blank.]

 

 

          IN WITNESS WHEREOF, the parties hereto have executed or caused to be executed this instrument
on the day first above written.

Signed in the presence of:

	 	 	 	 	 
	 	 	/s/ Scott Pettit
	 	 	 
	 	 	Scott Pettit
	 
	 	 	 	 
	 	 	Insurance Auto Auctions, Inc.
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Thomas C. O’Brien
	 

	 	 	 	 
	 

	 	 	 	Thomas C. O’Brien
	 
	 	 	 	 
	 

	 	Its:
	 	President & CEO

Solely with respect to Section 3 hereof:

	 	 	 	 	 
	 	 	Axle Holdings, Inc.
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Thomas C. O’Brien
	 

	 	 	 	 
	 

	 	 	 	Thomas C. O’Brien
	 
	 	 	 	 
	 

	 	Its:
	 	President & CEO

Solely with respect to Section 3 hereof:

	 	 	 	 	 
	 	 	Axle Holdings II, LLC
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Thomas C. O’Brien
	 

	 	 	 	 
	 

	 	 	 	Thomas C. O’Brien
	 
	 	 	 	 
	 

	 	Its:
	 	President & CEOexv10w3

 

Exhibit 10.3

EMPLOYMENT AGREEMENT

     THIS EMPLOYMENT AGREEMENT (this “Agreement”) is entered into as of the 10th day of January
2007 by and between ERIC LOUGHMILLER (“Loughmiller”) and INSURANCE AUTO AUCTIONS, INC., an Illinois
corporation (“Company”).

RECITALS

     WHEREAS, the Company desires to employ Loughmiller and Loughmiller desires to maintain
employment with the Company upon the terms and conditions set forth below.

     NOW, THEREFORE, in consideration of the foregoing and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, it is hereby agreed
that:

     1. Employment. The Company hereby employs Loughmiller, and Loughmiller hereby accepts
employment with the Company, as Sr. Vice President and Chief Financial Officer, whose duties
include overseeing all financial and accounting matters of the Company and its affiliated companies
as determined by the Chief Executive Officer. Loughmiller shall be an executive officer of the
Company and shall be subject to the direction and control of the President and Chief Executive
Officer of the Company and the Board of Directors of the Company (the “Board”). Loughmiller shall
devote all of his business time and services to the business and affairs of the Company.
Loughmiller shall also perform such other executive-level duties consistent with his position as
Sr. Vice President and Chief Financial Officer as may be assigned to him from time to time by the
Chief Executive Officer, including serving as an officer and/or director of the Company’s operating
subsidiaries. The duties and services to be performed by Loughmiller hereunder shall be
substantially rendered at the Company’s principal offices as determined by the Board, except for
reasonable travel on the Company’s business incident to the performance of Loughmiller’s duties.

     2. Compensation. As compensation for Loughmiller’s services provided hereunder, the Company
agrees to provide the following compensation:

     2.1. Base Salary. While this Agreement is in effect, the Company agrees to pay to Loughmiller
a base salary at the rate of $260,000 per annum commencing on the date hereof (“Base Salary”). The
Base Salary shall be subject to annual review by the Board and any committee thereof (“Committee”)
or the Compensation Committee and may be increased by the Board in their sole and absolute
discretion but may not be decreased. Such salary shall be payable to Loughmiller in such equal
periodic payments as the Company generally pays its employees, but in no event less frequently than
monthly.

 

 

     2.2. Incentives. As additional compensation for performance of the services rendered by
Loughmiller during the term of this Agreement, the Company will pay to Loughmiller, in cash, a
performance bonus equal to seventy-five percent (75%) of Loughmiller’s annual salary based upon the
achievement of objectively quantifiable and measurable goals and objectives which shall be
determined, in advance, by the Compensation Committee of the Board with respect to each fiscal year
of the Company. This amount is hereinafter referred to as “Incentive Compensation.”

     2.3. Options. The Company shall cause the Committee delegated by the Board to administer the
Option Plan (as defined below) to grant to Loughmiller shares of the Company’s common stock (the
“Option”), to be determined. The Option shall be granted under the Axle Holdings, Inc. Stock
Incentive Plan, as may be amended from time to time (the “Stock Incentive Plan”). The exercise
price of the Option granted pursuant to this Section 2.3 shall be equal to 100% of the fair
market value of the common stock on the close of business on the day that the grant becomes
effective, subject to the vesting and termination provisions as described below. The Option shall
become exercisable in four equal annual installments beginning on the first anniversary of the
grant date, and, except as provided below, shall be subject to the usual terms and conditions of
options issued pursuant to and in accordance with the Option Plan.

     2.4. Benefits. During the term of his employment or for such time as otherwise provided in
this Agreement, Loughmiller shall be entitled to participate in such vacation, auto allowance,
benefit plans, fringe benefits, life insurance, medical and dental plans (beginning on the first
day of employment), retirement plans and other programs as are offered from time to time by the
Company and are described in the Company’s employee benefit handbooks. Loughmiller shall be
entitled to four weeks of paid vacation each calendar year, subject to any limitations on carryover
of unused vacation generally applicable to employees. Loughmiller shall be authorized to incur
necessary and reasonable travel, entertainment and other business expenses in connection with his
duties hereunder. In connection with expenses pursuant to this Section 2.4, the Company
shall reimburse Loughmiller for such expenses upon presentation of an itemized account and
appropriate supporting documentation, all in accordance with the Company’s generally applicable
policies.

     2.5. Indemnification. The Company shall indemnify Loughmiller in accordance with the terms of
the Company’s standard form of Indemnification Agreement.

     3. Termination.

     3.1. At Will Nature of Employment. Employment with the Company is not for a specific term and
can be terminated by Loughmiller or the Company at any time for any reason, with or without cause.
Any contrary representations that may have been made or that may be made to Loughmiller are
superseded by this Agreement. In addition, this Agreement shall terminate by reason of
Loughmiller’s death or the substantial inability of

 

 

Loughmiller, by reason of physical or mental illness or accident, to perform his regular
responsibilities hereunder indefinitely or for a period of one hundred eighty (180) days (a
“Disability”).

     3.2. Company’s Obligations on Termination Apart from a Change of Control.

          (a) No Obligations Other Than as Required by Law for Voluntary Termination or Cause. The
Company shall have no obligations to pay Loughmiller any severance payments or continue to cover
Loughmiller and/or his beneficiaries under the Company’s health plan (other than as required by
law) if this Agreement is terminated for any of the following reasons:

     (i) Voluntary Termination. Loughmiller voluntarily terminates this Agreement;
or

     (ii) Cause. The Company terminates Loughmiller’s employment at any time
during the term of this Agreement for Cause. For purposes of this Agreement,
“Cause” shall mean:

     (A) the willful and continued failure of Loughmiller to perform
substantially his duties with the Company or one of its affiliates (other
than any such failure resulting from incapacity due to medically documented
illness or injury), 30 days after a written demand for substantial
performance is delivered to Loughmiller by the Board which specifically
identifies the manner in which the Board believes that Loughmiller has not
substantially performed his duties; or

     (B) the willful engaging by Loughmiller in illegal conduct or
misconduct which is injurious to the Company,

in each case as determined in the good faith opinion of the Board.

          (b) Death and Disability Obligations. If this Agreement is terminated due to death or
Disability, the Company shall pay to Loughmiller (or his legal representatives as the case may be)
the specific obligations as set forth below:

     (i) Death. Loughmiller’s employment shall terminate automatically upon
Loughmiller’s death. If Loughmiller’s employment under this Agreement is
terminated by reason of his death, the Company’s sole obligation to Loughmiller’s
legal representatives shall be to pay or cause to be paid, within thirty (30) days
of the Date of Termination (as hereinafter defined), to such person or persons as
Loughmiller shall have

 

 

designated for that purpose in a notice filed with the Company, or, if no such
person shall have been so designated, to his estate, the amount of Loughmiller’s
Accrued Obligations (as hereinafter defined). Any amounts payable under this
Section 3.2(b)(i) shall be exclusive of and in addition to any payments or
benefits which Loughmiller’s widow, beneficiaries or estate may be entitled to
receive pursuant to any pension plan, profit sharing plan, any employee benefit
plan, equity incentive plan or life insurance policy maintained by the Company.

     (ii) Disability. If the Disability of Loughmiller occurs, the Company may
give to Loughmiller written notice in accordance with Section 6.1 of this
Agreement of its intention to terminate Loughmiller’s employment. In such event,
Loughmiller’s employment with the Company shall terminate effective on the
30th day after receipt of such notice by Loughmiller (the “Disability
Effective Date”), unless within the 30-day period after such receipt, Loughmiller
returns to full-time performance of his duties. The Company’s sole obligation to
Loughmiller shall be payment of Accrued Obligations (as hereinafter defined) and
the timely payment or provision of other benefits, including disability and other
benefits provided by the Company to disabled executives and/or their families in
accordance with such Company plans, programs, practices and policies relating to
disability, if any.

          (c) Obligations for All Other Termination Reasons. For any other reason, upon the termination
of this Agreement and Loughmiller’s employment hereunder apart from a Change of Control, the
Company shall pay to Loughmiller an amount equal to the sum of (i) Loughmiller’s annual base salary
at the time Loughmiller’s employment is terminated; plus (ii) Loughmiller’s average annual bonus
received over the eight (8) fiscal quarters of the Company immediately preceding Company’s fiscal
quarter during which Loughmiller’s employment is terminated, without exceeding Loughmiller’s target
bonus for Company’s fiscal year during which Loughmiller’s employment is terminated, provided,
however, that Loughmiller shall receive his target bonus if he is terminated within his first eight
(8) fiscal quarters with the Company; plus (iii) Loughmiller’s auto allowance for the Company’s
fiscal year during which Loughmiller’s employment is terminated. In addition, the Company shall
provide, at Company’s expense, continued coverage for Loughmiller and his beneficiaries for a
period extending through the earlier of the date Loughmiller begins any subsequent full-time
employment for pay and the date that is one (1) year after Loughmiller’s termination of employment,
under the Company’s health plan covering Loughmiller and Loughmiller’s beneficiaries, provided that
Loughmiller properly elects coverage pursuant to Title I, Part 6 of the Employee Retirement Income
Security Act of 1974, as amended (“COBRA”).

 

 

     3.3. Company’s Obligations on Termination Due to a Change of Control.

     (a) Definitions.

	 	(i)	 	For purposes of this Agreement, a “Change of
Control” shall mean:

     (A) the acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the “Exchange Act”)) (for the purposes of this
Section 3.3, a “Person”) of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of 50% or more of
the voting power of the then outstanding voting securities of the Company
entitled to vote generally in the election of directors (the “Outstanding
Company Voting Securities”); provided, however, that for purposes of this
subsection (a), any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Company or any corporation controlled
by the Company shall not constitute a Change of Control; or

     (B) individuals who, as of the date hereof, constitute the Board (the
“Incumbent Board”) cease for any reason to constitute at least a majority
of the Board; provided, however, that any individual (other than an
individual whose initial assumption of office occurs as a result of an
actual or threatened solicitation of proxies or consents by or on behalf of
a Person other than the Board) who becomes a director subsequent to the
date hereof whose election or nomination for election was approved by a
vote of at least a majority of the directors then comprising the Incumbent
Board shall be considered as though such individual were a member of the
Incumbent Board; or

     (C) consummation of a reorganization, merger or consolidation or sale
or other disposition of all or substantially all of the assets of the
Company (a “Business Combination”) unless, following such Business
Combination, (i) all or substantially all of the individuals and entities
who were the beneficial owners of the Outstanding Company Voting Securities
immediately prior to such Business Combination beneficially own, directly
or indirectly, more than 50% of the voting power of the then outstanding
voting securities entitled to vote generally in the election of directors,
as the case may be, of the corporation resulting from such Business
Combination (including, without limitation, a corporation which as a result
of such transaction owns the Company or all or substantially

 

 

all of the Company’s assets either directly or through one or more
subsidiaries) in substantially the same proportions as their ownership,
immediately prior to such Business Combination of the Outstanding Company
Voting Securities and (ii) at least a majority of the members of the board
of directors of the corporation resulting from such Business Combination
were members of the Incumbent Board at the time of the execution of the
initial agreement, or of the action of the Board, providing for such
Business Combination; or

     (D) approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.

     (ii) For purposes of this Agreement, “affiliated companies” shall include any
company controlled by, controlling or under common control with the Company.

     (iii) For purposes of this Agreement, “Involuntary Termination” shall mean
Loughmiller’s voluntary termination following (A) a change in Loughmiller’s
position with the Company which materially reduces Loughmiller’s level of
responsibility, (B) a reduction in Loughmiller’s Base Salary, or (C) a change in
Loughmiller’s place of employment, which is more than seventy-five (75) miles from
Loughmiller’s place of employment prior to the change, provided and only if such
change or reduction is effected without Loughmiller’s written concurrence.

     (iv) For purposes of this Agreement, “Date of Termination” shall mean (A) if
Loughmiller’s employment is terminated by the Company for Cause, or by Loughmiller,
the date of receipt of the Notice of Termination or any later date specified
therein, as the case may be, (B) if Loughmiller’s employment is terminated by the
Company for other than for Cause or Disability, the date on which the Company
notifies Loughmiller of such termination and (C) if Loughmiller’s employment is
terminated by reason of death or Disability, the date of death of Loughmiller or
the Disability Effective Date, as the case may be.

     (v) For purposes of this Agreement, “Accrued Obligations” shall mean the sum
of (A) Loughmiller’s Base Salary through the Date of Termination to the extent not
theretofore paid, (B)the greater of (I) the product of (x) any Incentive
Compensation paid to or deferred by Loughmiller for the fiscal year preceding the
fiscal year in which Loughmiller’s Date of Termination occurs (annualized in the
event that Loughmiller was not employed by the Company for the whole of such fiscal
year) and (y) a fraction, the numerator of which is the number of days in the
current fiscal year through the Date of Termination, and the denominator of

 

 

which is 365 and (II) the average of the past three (3) years’ annual bonuses,
provided, however, that Loughmiller shall receive his target bonus if he is
terminated within his first eight (8) fiscal quarters with the Company (such
greater amount being the “Highest Annual Bonus”) and (C) any compensation
previously deferred by Loughmiller (together with any accrued interest or earnings
thereon) and any accrued vacation pay, in each case to the extent not theretofore
paid. Notwithstanding the foregoing, in no event will Loughmiller be entitled to a
duplication of any Incentive Compensation payments.

          (b) Severance Benefits for Termination Within Two (2) Years of a Change of Control. If
Loughmiller’s employment with the Company terminates by reason of Loughmiller’s Involuntary
Termination (as defined in Section 3.3(a)(iii) above) or termination by the Company without
Cause (as defined in Section 3.2(a)(ii)) above) within two (2) years of the effective date
of the Change of Control, Loughmiller shall be entitled to receive the following:

     (i) Company shall continue to pay Loughmiller an amount equal to 150% of the
sum of (A) Loughmiller’s Base Salary and (B) his Highest Annual Bonus;

     (ii) Company shall pay Loughmiller any Accrued Obligations; and

     (iii) Company shall also provide, at its expense, continued coverage of
Loughmiller and Loughmiller’s beneficiaries for eighteen (18) months after the Date
of Termination or until Loughmiller commences any full-time employment, whichever
comes first, under the Company’s health plan covering Loughmiller and Loughmiller’s
beneficiaries, provided, however, that Loughmiller properly elects coverage
pursuant to COBRA.

          (c) Severance Benefits for Termination After the Second Year Following a Change of Control.
If Loughmiller is terminated after the second year following a Change of Control, the Company’s
obligations are as set forth in Section 3.2 of this Agreement.

          (d) Stock Options After a Change of Control. Subject to Section 2.3 of this
Agreement, all Loughmiller’s outstanding stock options to purchase Company common stock shall
accelerate and become fully exercisable.

     3.4. Certain Additional Payments by the Company; Excise Tax Gross-up. A “Gross-Up Payment”
(as defined below) shall be made to Loughmiller when payments of compensation payable to
Loughmiller on termination of employment in connection with a Change of Control, including, without
limitation, the vesting of an option or other non-cash benefit or property, whether pursuant to the
terms of any applicable plan, arrangement or agreement with the Company or any of its affiliated
companies (the “Total Payments”)

 

 

would trigger a tax imposed on Loughmiller under Section 4999 of the Internal Revenue Code of
1986, as amended (the “Excise Tax”).

     For purposes hereof, the Gross-Up Payment shall mean a payment to Loughmiller in such amount
as is necessary to ensure that the net amount retained by Loughmiller, after reduction for any
Excise Tax (including any penalties or interest thereon) on the Total Payments and any federal,
state and local income or employment tax and Excise Tax on the Gross-Up Payment provided for by
this Section 3.4, but before reduction for any federal, state or local income or employment
tax on the Total Payments, shall be equal to the Total Payments.

     3.5. Exclusive Benefits. If more than one benefit due to termination becomes payable under
Sections 3.2 or 3.3, the greatest of such benefits shall become payable to the
exclusion of all other such benefits and shall be in lieu of any other severance or similar
benefits that would otherwise be payable under any other agreement, plan, program or policy of the
Company. Notwithstanding anything in the prior sentence to the contrary, Loughmiller shall be
entitled to benefits and incentives under all benefit plans and equity incentive plans, policies
and programs (except as expressly excluded herein, including, without limitation, Section
2.3 of this Agreement) according to the terms of such benefit plans and equity incentive plans,
policies and programs as in effect from time to time, including any acceleration of vesting
provisions in the Company’s option plans, including any benefits under the Executive Severance Plan
for Officers.

     4. Inventions and Creations. Loughmiller agrees that all inventions, discoveries,
improvements, ideas and other contributions (collectively “Inventions”) whether or not copyrighted
or copyrightable, patented or patentable, or otherwise protectable in law, which are conceived,
made, developed or acquired by Loughmiller, either individually or jointly, during his employment
with the Company or any of its subsidiaries, and which relate in any manner to the business of the
Company or any of its subsidiaries, shall belong to the Company and Loughmiller does hereby assign
and transfer to the Company his entire right, title and interest in the Inventions. Loughmiller
agrees to promptly and fully disclose the Inventions to the Company, in writing if requested by the
Company, and to execute and deliver any and all lawful application, assignment and other documents
which the Company requests for protecting the Inventions in the United States or any other country.
The Company shall have the full and sole power to prosecute such applications and to take all other
action concerning the Inventions, and Loughmiller will cooperate fully within a lawful manner, at
the expense of the Company, in the preparation and prosecution of all such applications and in any
legal actions and proceedings concerning the Inventions. The provisions of this Section 4
shall survive the termination of this Agreement.

 

 

     5. Non-Competition; Non-Solicitation; Confidential Information.

     5.1. Non-Competition Agreement. Loughmiller hereby acknowledges and agrees that the Company
actively engages in its business throughout all of North America. Accordingly, Loughmiller agrees
that during the Non-Competition Period (as defined below), Loughmiller will not, directly or
indirectly, whether as a partner, officer, shareholder, advisor, employee or otherwise, promote,
participate, become employed by, or engage in any activity or other business similar to the
Company’s business or any entity engaged in a business competitive with the Company’s business in
any state within the United States as well as in Canada or Mexico. If Loughmiller fails to comply
with the provisions of this Section 5.1, the Company may, in addition to pursuing all other
remedies available to the Company under law or in equity as a result of such breach, cease payment
of all severance benefits under Section 3. For purposes hereof, “Non-Competition Period”
shall mean the period commencing on the date hereof and ending eighteen (18) months after the later
of the termination of Loughmiller’s employment hereunder or Loughmiller’s submission of his
resignation, or removal of Loughmiller as Vice President, Corporate Counsel and Assistant Secretary
of the Company and the Company’s payment and provision of Change of Control severance benefits
pursuant to Section 3.3.

     5.2. Non-Solicitation Agreement. During the term of this Agreement and for a period of
eighteen (18) months thereafter, Loughmiller shall not, directly or indirectly, individually or on
behalf of any Person (as defined below) solicit, aid or induce (a) any then current employee of the
Company to leave the Company in order to accept employment with or render services for Loughmiller
or such Person or (b) any customer, client, vendor, lender, supplier or sales representative of the
Company or similar persons engaged in business with the Company to discontinue the relationship or
reduce the amount of business done with the Company. “Person” means any individual, a partnership,
a corporation, an association, a limited liability company, a joint stock company, a trust, a joint
venture, an unincorporated organization, a governmental entity, or any department, agency or
political subdivision thereof, or an accrediting body.

     5.3. Confidential Information. Loughmiller acknowledges and agrees that he is in possession of
and will be exposed to during the course of, and incident to, his employment by and affiliations
with the Company, Confidential Information (as defined herein) relating to the Company and its
affiliated companies. For purposes hereof, “Confidential Information” shall mean all proprietary or
confidential information concerning the business, finances, financial statements, properties and
operations of the Company and its affiliated companies, including, without limitation, all customer
and prospective customer and supplier lists, know-how, trade secrets, business and marketing plans,
techniques, forecasts, projections, budgets, unpublished financial statements, price lists, costs,
computer programs, source and object codes, algorithms, data, and other original works of
authorship, along with all information received from third parties and held in confidence by the
Company and its affiliated companies (including, without

 

 

limitation, personnel files and employee records). During the Non-Competition Period and at
all times thereafter, Loughmiller will hold the Confidential Information in the strictest
confidence and will not disclose or make use of (directly or indirectly) the Confidential
Information or any portion thereof to or on behalf of himself or any third party except (a) as
required in the performance of his duties as an employee, director or shareholder of the Company,
(b) as required by the order of any court or similar tribunal or any other governmental body or
agency of appropriate jurisdiction; provided, that Loughmiller shall, to the extent practicable,
give the Company prior written notice of any such disclosure and shall cooperate with the Company
in obtaining a protective order or such similar protection as the Company may deem appropriate to
preserve the confidential nature of such information. The foregoing obligations to maintain the
Confidential Information shall not apply to any Confidential Information which is or, without any
action by Loughmiller, becomes generally available to the public. Upon termination of any
employment or consulting relationship between the Company and Loughmiller, Loughmiller shall
promptly return to the Company all physical embodiments of the Confidential Information (regardless
of form or medium) in the possession of or under the control of Loughmiller.

     5.4. Scope of Restriction. The parties have attempted to limit the scope of the covenants set
forth in Section 5 to the extent necessary. The parties recognize, however, that reasonable
people may differ in making such determination. Consequently, the parties hereby agree that if the
scope and duration of such covenants would, but for this provision, be deemed by a court of
competent authority to be unreasonable or otherwise unenforceable, such court may modify such
covenants to the extent that such court determines to be necessary in order to grant enforcement
thereof as so modified.

     5.5. Remedies. The parties hereto recognize that the Company will suffer irreparable injury in
the event of a breach of the terms of Section 5 by Loughmiller. In the event of a breach of
the terms of Section 5, the Company shall be entitled, in addition to any other remedies
and damages available and without proof of monetary or immediate damage, to a temporary and/or
permanent injunction, without the necessity of posting a bond, to restrain the violation of
Section 5 by Loughmiller or any Persons acting for or in concert with him. Such remedy,
however, shall be cumulative and nonexclusive and shall be in addition to any other remedy which
the parties may have.

     5.6. Common Law of Torts or Trade Secrets. The parties agree that nothing in this Agreement
shall be construed to limit or negate the common law of torts or trade secrets where it provides
the Company with broader protection than that provided herein.

     5.7. Survival of Section 5. The provisions of Section 5 shall survive the
termination of Loughmiller’s employment and the termination of this Agreement.

 

 

     6. General Provisions.

     6.1. Notices. All notices, demands or other communications to be given or delivered under or
by reason of the provisions of this Agreement shall be in writing and shall be deemed to have been
given when delivered personally to the recipient, sent to the recipient by reputable express
courier service (charges prepaid), sent by facsimile (with copy sent via another method approved
herein), or mailed to the recipient by certified or registered mail, return receipt requested and
postage prepaid. Such notices, demands and other communications shall be sent to the Company and to
Loughmiller at the addresses indicated below:

	 	 	 	 	 	 	 
	 

	 	If to the Company:
	 	Insurance Auto Auctions, Inc.	 	 
	 

	 	 	 	Two Westbrook Corporate Center	 	 
	 

	 	 	 	Suite 500	 	 
	 

	 	 	 	Westchester, Illinois 60154	 	 
	 

	 	 	 	Phone:708-492-7000	 	 
	 

	 	 	 	Fax:708-492-7078	 	 
	 

	 	 	 	Attention:President & CEO	 	 
	 
	 	 	 	 	 	 
	 

	 	With copies to:
	 	Katten Muchin Zavis	 	 
	 

	 	 	 	525 West Monroe Street, Suite 1900	 	 
	 

	 	 	 	Chicago, Illinois 60661	 	 
	 

	 	 	 	Phone:312-902-5267	 	 
	 

	 	 	 	Fax:312-577-8885	 	 
	 

	 	 	 	Attention:Herbert Wander, Esq.	 	 
	 
	 	 	 	 	 	 
	 

	 	If to Loughmiller:
	 	Eric Loughmiller	 	 
	 

	 	 	 	Insurance Auto Auctions, Inc.	 	 
	 

	 	 	 	Two Westbrook Corporate Center	 	 
	 

	 	 	 	Suite 500	 	 
	 

	 	 	 	Westchester, IL 60154	 	 
	 

	 	 	 	Phone:708-492-7219	 	 
	 

	 	 	 	Fax:708-492-7575	 	 
	 
	 	 	 	 	 	 
	 

	 	With copies to:	 	 	 	 
	 

	 	 	 	 

	 	 
	 

	 	 	 	 

	 	 
	 

	 	 	 	 

	 	 
	 

	 	 	 	 

	 	 

or to such other address or to the attention of such other person as the recipient party has
specified by prior written notice to the sending party.

 

 

     6.2. Entire Agreement. Except as otherwise expressly set forth herein, this Agreement
embodies the complete agreement and understanding among the parties and supersede and preempt any
prior understandings, agreements or representations by or among the parties, written or oral, which
may have related to the subject matter hereof in any way.

     6.3. Successors and Assigns. All covenants and agreements contained in this Agreement by or
on behalf of either party hereto shall bind such party and its heirs, legal representatives,
successors and assigns and inure to the benefit of the other party hereto and their heirs, legal
representatives, successors and assigns.

     6.4. Governing Law. This Agreement shall be construed and enforced in accordance with, and
all questions concerning the construction, validity, interpretation and performance of this
Agreement shall be governed by the laws of the State of Illinois without giving effect to the
provisions thereof regarding conflict of laws.

     6.5. Resolution of Disputes; Arbitration. Should a dispute arise concerning this Agreement,
its interpretation or termination, or Loughmiller’s employment with the Company, either party may
request a conference with the other party to this Agreement and the parties shall meet to attempt
to resolve the dispute. Failing such resolution within thirty (30) days of ether party’s request
for a conference, the Company and Loughmiller shall endeavor to select an arbitrator who shall hear
the dispute. In the event the parties are unable to agree on an arbitrator, Loughmiller and
Company shall request the American Arbitration Association (“AAA”) to submit a list of nine (9)
names of persons who could serve as an arbitrator. The Company and Loughmiller shall alternately
remove names from this list (beginning with the party which wins a flip of a coin) until one person
remains and this person shall serve as the impartial arbitrator. The arbitration shall be
conducted in accordance with the National Rules for the Resolution of Employment Disputes as
promulgated by the AAA. The decision of the arbitrator shall be final and binding on both parties.
Each party shall bear equally all costs of the arbitrator.

     The arbitrator shall only have authority to interpret, apply or determine compliance with the
provisions set forth in this Agreement, but shall not have the authority to add to, detract from or
otherwise alter the language of this Agreement.

     6.6. Representations of Loughmiller. Loughmiller hereby represents and warrants to the
Company that his execution, delivery and performance of this agreement will not violate or result
in any breach of any agreement, contract, understanding or written policy to which Loughmiller is
subject as a result of any prior employment, any investment or otherwise. Loughmiller is not
subject to any agreement, contract or understanding which in any way restricts or limits his
ability to accept employment with the Company or perform the services contemplated herein.

 

 

     6.7. Descriptive Headings; Interpretation. The descriptive headings of this Agreement are
inserted for convenience only and do not constitute a part of this Agreement.

     6.8. Counterparts. This Agreement may be executed simultaneously in two or more counterparts,
any one of which need not contain the signatures of more than one party, but all such counterparts
taken together shall constitute one and the same Agreement.

     6.9. Amendments and Waivers. No modification, amendment or waiver of any provisions of this
Agreement shall be effective unless approved in writing by each of the parties hereto. The
Company’s failure at any time to enforce any of the provisions of this Agreement shall in no way be
construed as a waiver of such provisions and will not affect the right of the Company to enforce
each and every provision hereof in accordance with its terms.

     6.10. Non-Assignment. This Agreement shall not be assigned by Loughmiller.

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first
written above.

	 	 	 	 	 
	 	 	INSURANCE AUTO AUCTIONS, INC.
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Thomas C. O’Brien
	 

	 	 	 	 
	 

	 	Name:
	 	Thomas C. O’Brien
	 

	 	Title:
	 	President and Chief Executive Officer
	 
	 	 	 	 
	 

	 	 	 	/s/ Eric Loughmiller
	 

	 	 	 	 
	 

	 	 	 	ERIC LOUGHMILLER

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