Document:

EX-10.3

 

Exhibit 10.3

Execution
Version

EMPLOYMENT AGREEMENT

This Employment Agreement (this “Agreement”) is entered into as of the 25th day of May,
2005 (the “Effective Date”) by and between JOHN A. BLAIR, an individual residing in California
(“Executive”) and SANTA ACQUISITION CORPORATION (“Employer”) with principal offices
at 111 S. La Cumbre Lane, Santa Barbara, California 93105.

     Section 1. Term. Employer hereby employs Executive and Executive hereby accepts such
employment, upon the terms and conditions hereinafter set forth. The term of employment hereunder
shall continue for five (5) years from the Effective Date, subject to earlier termination in
accordance with Section 4 below (the “Term”, which Term shall include any renewal period
described below). This Agreement shall not renew except upon mutual agreement of the parties.

     Section 2. Executive’s Duties.

          (a) Executive shall be Chief Executive Officer of Employer (“CEO”) and shall report
directly to the Board of Directors of the Employer (the “Board”) and the Chief Executive
Officer and/or President or a designee of the Chief Executive Officer of DealerTrack Holdings, Inc.
(“Parent”). Executive shall faithfully and diligently perform his duties at the direction
of the Board, Parent’s Chief Executive Officer, President or the Chief Executive Officer’s
designee, to the best of Executive’s ability. Executive shall (i) devote his best efforts, skill,
and ability and full business time and attention to the performance of the services customarily
incident to such office, subject to vacations and sick leave as provided herein and in accordance
with Employer policy, (ii) carry out his duties in a competent and professional manner; and (iii)
generally promote the interests of Employer. It is acknowledged and agreed that Executive may
continue to be an officer and employee of Automotive Lease Guide (alg), LLC (“ALG”)
incidental to the winding up of ALG’s business and on the condition that Executive’s activities for
ALG do not interfere with the performance of his duties hereunder. Subject to applicable law,
Executive shall not knowingly participate in any activity that is detrimental to the interests of
the Employer or any of its affiliates, including, without limitation, any criticism or
disparagement of any type by Executive, through the media or otherwise, of Employer or any
affiliate of Employer, except in connection with the exercise of Executive’s rights against the
Employer or any affiliate of Employer.

          (b) Executive agrees to abide by all policies applicable to senior officers of Employer
promulgated from time to time by Parent or Employer which policies are enforced uniformly and
applicable to all similarly-situated executives of Parent or Employer, as applicable and, as
applied to Executive, are consistent with such policies as applied to similarly-situated executives
of other operating companies that are affiliates of Parent (“Operating Companies”).

          (c) Except for such business travel as may be incident to his duties hereunder, Executive
shall perform his duties at Employer’s offices at the address set forth in the preamble to this
Agreement or at such other location as may be approved by Employer.

 

 

     Section 3. Compensation for Executive’s Services. In consideration of the duties and
services to be performed by Executive pursuant to Sections 1 and 2 hereof, Executive shall receive:

          (a) Salary. Executive shall earn salary (the “Salary”) at the annual rate of
Two Hundred Fifty Thousand Dollars ($250,000), less all applicable federal, state, and local tax
withholdings. Such Salary shall be earned and shall be payable in periodic installments in
accordance with Employer’s payroll practices. During the term of Executive’s employment with
Employer, the Board of Directors of Parent (the “Parent Board”) or Compensation Committee
of the Parent Board (the “Compensation Committee”) will review the Salary annually and may
in its discretion increase the Salary, but may not reduce it during the Term unless Parent
institutes salary reductions across the board; provided that in any event, the Salary shall not be
reduced below Two Hundred Fifty Thousand Dollars ($250,000) per year without the Executive’s
written consent.

          (b) Annual Bonus. In addition to the Salary, Executive is eligible to receive a cash
performance bonus (“Bonus”), less all applicable federal, state, and local tax
withholdings, in each calendar year of the Term, including a Bonus pro rated for the portion of
calendar year 2005 during which Executive is employed under this Agreement. This bonus shall be
payable, if at all, on a schedule consistent with Employer’s bonus payments to its other
Executives. For each calendar year, Executive can earn a target Bonus equal to 50% of Salary based
on Employee’s attainment of budget goals and other criteria established by the Board in its sole
and absolute discretion. Executive may earn a Bonus of up to 100% of Salary based on exceeding
such budget goals and other criteria in increments established by the Board in its sole and
absolute discretion. Executive understands and agrees that the Bonus is established in part as an
inducement for Executive to remain employed by Employer and, therefore, that no Bonus will be
deemed earned for a given year unless Executive remains employed through December 31 of that year.
Except as provided in Section 5(c), in the event that Executive’s employment terminates prior to
December 31 of any year during the Term, then Executive shall not receive payment of any Bonus, for
that year.

          (c) Additional Compensation. Without limiting the amounts otherwise set forth in this
Agreement, Executive shall receive a payment each month (the “Additional Compensation”) in
arrears from the Effective Date of this Agreement until the Note described in Section 3(d) below is
issued, based on the following formula:

[ $1,200,000 (the “Face Amount”) ] x [the prime interest rate, as published
in the Wall Street Journal as of the Effective Date, plus 1%, up to an aggregate
maximum rate of 7% (the “Interest Rate”)] / 12.

          (d) Additional Bonus. As an additional inducement for Executive to remain employed by
Employer, Executive shall be eligible to receive an additional bonus (the “Additional
Bonus”), less all applicable federal, state and local tax withholdings, as follows:

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	 	(1)	 	If in any calendar year ending on or before
December 31, 2009 (y) the revenue from sales of ALG products and Chrome
Systems Corporation (“Chrome”) products (“ALG/Chrome Revenues”)
for such year equals or exceeds $50.0 million (the “ALG/Chrome
Revenue Milestone”) and (z) the EBITDA Ratio for the ALG/Chrome
business for such year equals or exceeds the EBITDA Ratio of the Parent
business as a whole (exclusive of the ALG/Chrome business), then Parent
shall promptly issue to Executive a note in the principal amount of
$1,200,000 on the terms described in (d)(3) below (the “Note”).
“EBITDA Ratio” shall mean the ratio of the earnings before
interest, taxes, depreciation, and amortization for the respective
business in question divided by the revenue from such business.
	 
	 	(2)	 	If ALG/Chrome Revenues for the year ending
December 31, 2009 equal 70% of the ALG/Chrome Revenue Milestone, and
(d)(1)(z) above occurs for that year, Parent shall issue to Executive a
Note in the principal amount of $600,000. If ALG/Chrome Revenues for
the year ending December 31, 2009 are greater than 70% of the
ALG/Chrome Revenue Milestone, but less than 100% of such milestone and
(d)(1)(z) above occurs, then Parent shall issue to Executive a Note in
the principal amount of (x) $600,000 plus (y) $20,000 for each
additional $500,000 of ALG/Chrome Revenues for the year ending December
31, 2009 in excess of 70% of the ALG/Chrome Revenue Milestone and less
than 100% of the ALG/Chrome Revenue Milestone. For the avoidance of
doubt, there will be no additional $20,000 (or portion thereof) added
to the principal of the Note for each incremental additional ALG/Chrome
Revenues for the year ending December 31, 2009 of less than $500,000.
For example, if ALG/Chrome Revenues for the year ending December 31,
2009 are $36,200,000, then an additional amount of $40,000 (i.e.,
$20,000 x2) shall be added to the principal amount of the Note for a
total principal amount of $640,000.
	 
	 	(3)	 	The Note will provide that (w) it shall bear
interest at the Interest Rate, (x) interest accrued on the Note will be
paid to the Executive monthly, (y) it will be payable in full on June
30, 2010, and (z) it may be prepaid without penalty at any time in
Parent’s sole discretion.

	 	(i)	 	Within 90 days following each of
the years ending December 31, 2005, 2006, 2007, 2008 and 2009,
Parent shall deliver to Executive Parent’s calculation, with
reasonable supporting detail (the “Parent’s
Calculation”) of ALG/Chrome Revenues or ALG Revenues, as the
case may

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	 	 	 	be, and the applicable EBITDA Ratios (collectively, the
“Financial Milestones”) for the preceding calendar
year.

	 	(ii)	 	If Executive disagrees with the
Parent’s Calculation, the Executive may, within 30 days after
delivery of the Parent’s Calculation, deliver a notice to Parent
disagreeing with any portion of the Parent’s Calculation for
such year (the “Objection Notice”). The Objection
Notice shall specify in reasonable detail those items or amounts
as to which Executive disagrees. If Executive does not deliver
an Objection Notice during such time period or Executive
indicates agreement with the Parent’s Calculation, then the
Parent’s Calculation shall be the agreed upon amounts for the
Financial Milestones for such applicable period.
	 
	 	(iii)	 	If Executive shall have
delivered the Objection Notice within the 30 day period referred
to in clause (ii) above, then Parent and Executive shall, during
the 30 days following such delivery, use their good faith
efforts to reach agreement on the disputed items or amounts in
order to determine the Financial Milestones. If Parent and
Executive are unable to reach agreement during such period, they
shall promptly thereafter cause a mutually acceptable
independent public accounting firm (the “Accounting
Referee”) to review the disputed items or amounts for the
purpose of calculating the Financial Milestone(s) in dispute.
The Accounting Referee may request additional supporting detail
from the Parent pertaining to the portion of the Parent’s
Calculation identified by Executive in the Objection Notice.
Within ten (10) days after delivery of such additional detail,
the Executive may supplement the Objection Notice to add any
disputes newly discovered by the Executive from the additional
detail, but only if such item in dispute could not reasonably
have been ascertained from the supporting detail provided by
Parent with the Parent Calculation. The Objection Notice may be
supplemented only once. In making such calculation, the
Accounting Referee shall consider only those items or amounts in
the Parent’s Calculation as to which the Executive has disagreed
and which are specifically identified in reasonable notice in
the Objection Notice, as supplemented, if applicable. The
Accounting Referee shall deliver to Parent and Executive, as
promptly as practicable, a written report setting forth its
calculation of the items or amounts in dispute. Such report
shall be final and binding upon Parent and Executive, absent
manifest error or willful misconduct. The cost of

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	 	 	 	such review and report shall be borne (x) by Executive, if
Parent’s calculation of the Financial Milestone(s) in dispute
is closer to the Accounting Referee’s determination than
Executive’s calculation thereof, (y) by Parent, if the
reverse is true and (z) except as provided in (x) or (y)
above, equally by Executive and Parent.

	 	(4)	 	If Parent sells or disposes of some or all of
the assets of Employer or Chrome or does not collect fair market value
for the products/services of the Company or Chrome because said
products/services are sold as part of a bundle of products/services,
the terms of this Section 3(d) will be adjusted equitably in the manner
described under similar circumstances in that certain Asset Purchase
Agreement, dated May 25, 2005, by and among Employer, ALG, Executive
and other parties (the “Purchase Agreement”).

          (e) Equity. In connection with Executive’s employment, within forty-five (45) days of
the Effective Date, Executive will be granted stock options (“Stock Options”) to purchase
40,000 shares of Parent common stock pursuant to the terms of either (i) the DealerTrack Holdings,
Inc. Stock Option Plan, dated as of February 1, 2001, as amended, or (ii) any new incentive stock
option plan adopted by Parent on or before the date of grant ( in either case, hereinafter,
“Stock Option Plan”) and the stock option agreement (the “Option Agreement”)
Executive will be required to enter into pursuant to the Stock Option Plan. Except as otherwise
provided herein, the terms of the Stock Options shall be governed by this Section 3(e) and, to the
extent not inconsistent herewith, the Stock Option Plan and the Option Agreement. The Stock
Options will vest so long as the Executive remains employed in accordance with the following
schedule: Stock Options to acquire twenty-five percent (25%) of said shares will vest on the
first anniversary of the Effective Date and the remaining Stock Options will vest ratably on a
monthly basis thereafter for the following thirty-six (36) months. Executive shall be credited
with twelve (12) months accelerated vesting of his Stock Options upon termination of Executive’s
employment by: (1) Employer without Cause (as defined below); or (2) Executive for Good Reason (as
defined below). Executive shall be credited with twenty four (24) months accelerated vesting of
his Stock Options upon a Change of Control (as defined in the Stock Option Plan). Executive shall
be credited with full acceleration and vesting of his Stock Options upon the earlier of: (1) the
termination of Executive’s employment without Cause within twelve (12) months after a Change of
Control; or (2) termination of the Executive’s employment for Good Reason within twelve (12) months
after a Change of Control. Anything in the Stock Option Plan to the contrary notwithstanding, if
Executive’s employment is terminated by Executive with Good Reason or by the Employer without
Cause, or under circumstances described above which would result in certain accelerated vesting of
any unvested Stock Options held by Executive, the unexercised portion of any Stock Options held by
Executive will not terminate until the twelve (12) month anniversary of the date of termination of
Executive’s employment. Any Stock Options that remain unvested in accordance with the terms of
this Agreement, the Stock Option Plan and Option Agreement upon termination of the Executive’s
employment shall expire. In the event Employer determines to provide equity in satisfaction of

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this provision, in whole or in part, by issuing restricted stock, the derestriction terms of
such grant shall be equivalent to the foregoing vesting terms.

          (f) Benefits. Employer shall provide Executive with the right to participate in and
receive benefits from all life, accident, disability, medical and pension or profit-sharing plans,
and all similar benefits as are from time to time in effect and that are generally comparable to
benefits made available to similarly-situated senior officers of the Operating Companies. The
amount and extent of benefits to which Executive is entitled shall be governed by the specific
benefit plan, as it may be amended from time to time.

          (g) Expenses. Employer shall promptly reimburse Executive for reasonable expenses for
cellular telephone usage, entertainment, travel, meals, lodging and similar items incurred in the
conduct of Employer’s business. Such expenses shall be reimbursed in accordance with Employer’s
expense reimbursement policies and guidelines.

          (h) Vacation; Sick Leave. During the Term, Executive shall be entitled to four weeks
(4) weeks vacation per year, paid holidays, sick leave, and similar benefits, to be earned and used
in accordance with Employer’s policy and procedure for other similarly situated senior executive
officers.

          (i) Modification. Employer reserves the right to modify, suspend or discontinue any
and all of the above plans, practices, policies and programs referenced in Sections 3(f) and (g) at
any time in its discretion without recourse by Executive so long as such action is taken generally
with respect to other similarly situated senior executive officers.

          (j) Guarantee of First Year Compensation. If Employer terminates Executive’s
employment without Cause or if Employee terminates his employment for Good Reason during the first
year of the Term, all remaining unpaid compensation for such first year shall, in the case of
payments pursuant to Sections 3(a) and 3(d) be paid on regular payment dates and, in the case of
Section 3(b) be paid when ascertainable, without reducing any severance obligations of Employer as
provided in Section 5. Executive’s rights and obligations will be subject to the terms and
conditions of applicable benefit plans.

     Section 4. Termination of Employment.

          (a) Resignation. Executive may voluntarily terminate his employment with Employer at
any time with or without Good Reason, upon written notice to Employer.

          (b) Termination. Employer may terminate Executive’s employment at any time, with or
without Cause, upon written notice to Executive.

          (c) Death or Disability. Executive’s employment shall terminate immediately upon
Executive’s death. In the event Employer, in good faith, determines that Executive is unable to
perform the functions of his position due to a Disability (as defined below), it may notify
Executive in writing of its intention to terminate Executive’s employment and Executive’s
employment with Employer shall terminate effective on the thirtieth (30th) day after receipt of
such notice by Executive. For the purposes of this Agreement, “Disability” shall mean a
physical or mental impairment that substantially limits a major life activity of Executive

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and renders Executive unable to perform the essential functions of his position even with
reasonable accommodation (that does not impose an undue hardship on Employer), and which has lasted
at least (i) sixty (60) consecutive days or (ii) the balance of Executive’s entitlement to leave,
if any, under the Family and Medical Leave Act or similar state law, or (iii) the balance of any
elimination period under the Employer’s long term disability insurance program (without regard to
whether Executive is awarded benefits under such program), whichever is longer.

          (d) Cause. Employer may immediately terminate Executive’s employment for “Cause” by
giving written notice to Executive. For purposes of this Agreement, “Cause” shall mean:

(1) Executive’s commission of an act of fraud or embezzlement upon Employer
or any of its affiliates; or

(2) Executive’s commission of any willful act intended to injure the
reputation, business, or any business relationship of Employer or any of its
affiliates; or

(3) Executive is found by a court of competent jurisdiction to have
committed a felony; or

(4) the refusal or failure of Executive to perform Executive’s duties with
Employer in a competent and professional manner that is not cured by
Executive within ten (10) business days after a written demand therefor is
delivered to Executive by the Board which specifically identifies the manner
in which the Board believes that Executive has not substantially performed
Executive’s duties; provided, further, however, that if the Board, in good
faith, determines that the refusal or failure by Executive is egregious in
nature or is not susceptible of cure, then no cure period shall be required
hereunder; or

(5) the refusal or failure of Executive to comply with any of his material
obligations under this Agreement (including any Exhibit hereto) that is not
cured by Executive within ten (10) business days after a written demand
therefore is delivered to Executive by the Board which specifically
identifies the manner in which the Board believes Executive has materially
breached this Agreement; provided, further, however, that if the Board, in
good faith, determines that the refusal or failure by Executive is egregious
in nature or is not susceptible of cure, then no cure period shall be
required hereunder.

          (e) Good Reason. Executive may terminate his employment for “Good Reason,” by
delivering written notice of such termination (“Employer Default Notice”) to the Chief
Executive Officer of Parent within sixty (60) days after the occurrence of any of the following
events, each of which shall constitute Good Reason: (i) Employer’s material breach of any provision
of this Agreement, the Stock Options or the Stock Option Plan which has not been cured within the
allotted time; (ii) a material reduction of Executive’s title, status, authority,

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responsibility or duties as CEO or the assignment to Executive of any duties materially
inconsistent with the position of CEO; (iii) any material reduction in Executive’s Salary or
benefits; (iv) the failure of any successor entity to assume the terms of this Agreement upon any
Change of Control; (v) moving Employer’s principal executive office more than 50 miles from
Employer’s address set forth in the preamble to this Agreement; or (vi) a determination, that is
final and unappealable (“Final Order”), that Employer has defaulted under Section 2.06 of
the Purchase Agreement but only if and when Employer fails to make the payment with respect to
which it is found to be in default within the later of (i) the time specified in the Final Order or
(ii) 30 days following the entry of the Final Order. The Employer Default Notice shall specify the
reason for Executive’s belief that an event constituting Good Reason has occurred. Notwithstanding
the foregoing, any material breach of this Agreement by Employer, or other event constituting Good
Reason, shall not constitute Good Reason if any such breach or other event is cured or corrected by
Employer within ten (10) business days following delivery to Employer of the Employer Default
Notice.

          (f) Continuing Obligations. Executive acknowledges and agrees that any termination
under this Section 4 is not intended, and shall not be deemed or construed, to affect in any way
any of Executive’s covenants and obligations contained in Sections 6 and 7 hereof, which shall
continue in full force and effect beyond such termination for any reason.

     Section 5. Termination Obligations.

          (a) Resignation. If Executive’s employment is terminated voluntarily by Executive
without Good Reason, Executive’s employment shall terminate without further obligations to
Executive other than for payment of the sum of any unpaid Salary determined by the Board and
reimbursable expenses and vacation accrued and owing to Executive prior to the termination. The
sum of such amounts shall hereinafter be referred to as the “Accrued Obligations,” which
shall be paid to Executive or Executive’s estate or beneficiary within thirty (30) days of the date
of termination. If Executive voluntarily terminates his employment without Good Reason and within
thirty (30) days of such termination, DealerTrack determines that it would have had Cause to
terminate Executive pursuant to Section 4(d), Executive shall be deemed to have been terminated for
Cause and the terms of Section 5(b) shall apply.

          (b) Cause. If Executive’s employment is terminated by Employer for Cause, the
Employer and Parent shall not have any further obligations to Executive other than for the timely
payment of Accrued Obligations. If it is subsequently determined by an arbitrator, pursuant to
Section 18 hereof, that Employer did not have Cause for termination, then Employer’s decision to
terminate shall be deemed to have been made without Cause and the terms of Section 5(c) shall
apply.

          (c) By Employer Other than for Cause or Death or Disability; By Executive for Good
Reason.

               (1) If (A) Employer terminates Executive’s employment for a reason other than Cause, or due to
Executive’s death or Disability, or (B) Executive terminates his employment for Good Reason,
Employer shall have no further obligations to Executive other than for (i) the payment of Accrued
Obligations; (ii) severance pay in an amount equal to twenty-

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four (24) months of Salary to be paid in equal monthly installments; (iii) a pro
rata Bonus calculated based on multiplying the percentage of the year Executive worked for
Employer during the year of his termination by the Bonus received by Executive during the preceding
year or which would have been received for the current year, whichever is greater; (iv) the
Additional Bonus, payable as set forth in Section 3(d) above; (v) the Additional Compensation,
payable as set forth in Section 3( c) above; and (vi) if Executive elects continuation of his
medical and/or dental insurance coverage in accordance with the law known as “COBRA,” payment of
the Employer’s share of premiums for such coverage(s) for up to twelve (12) months or until the
executive no longer is eligible for COBRA continuation coverage, whichever is earlier.

               (2) If Executive terminates his employment for Good Reason and it is subsequently determined
by an arbitrator, pursuant to Section 18 hereof, that Executive did not have Good Reason for
termination, then Executive’s decision to terminate for Good Reason shall be deemed to have been a
voluntary resignation, the terms of Section 5(a) shall apply, and all monies paid to Executive
pursuant to this Section 5(c)(1), except for those monies paid pursuant to Section 5(c)(1)(i),
shall be immediately returned to Employer.

               (3) The amounts payable pursuant to Section 5(c)(1) shall be the only amounts Executive shall
receive for termination in accordance with this Section 5(c).

          (d) Mitigation. In the event Executive’s employment with Employer is terminated
during the Term pursuant to this Section 5 on or after the first anniversary of the effective Date,
Executive shall be required to notify Employer, in writing, within seven (7) days of obtaining
subsequent employment, which shall include, without limitation, self-employment, consulting or
other arrangement but shall not include managing Eexecutive’s or his extended family’s passive
investments. In the event Executive obtains other employment during any severance payout period
described in Section 5(c)(1)(B)(ii), the severance payments due to Executive thereunder shall be
reduced by fifty (50%) percent of the amount paid to Executive in his new capacity (including the
amount of any up-front or deferred payments), commencing on the date Executive commences providing
services in his new capacity; provided, however, that such reduction will not be more than fifty
(50%) percent of the remaining severance payments due to Executive. Nothing herein shall be
construed to require Executive to seek employment. In the event that Executive inadvertently fails
to notify Employer of any subsequent employment within seven (7) days as described above and such
noncompliance is not intentional, then Employer’s sole remedy with respect to recovering damages
for such failure shall be to recoup the amounts so owed Employer under this Section 5(d) with
interest thereon at the US prime rate plus 2% and any reasonable fees and expense, including
reasonable attorney fees, that Employer may incur in collecting such amounts.

          (e) Release. Notwithstanding anything to the contrary contained herein, no severance
payments required hereunder shall be made by Employer until such time as Executive shall execute a
general release for the benefit of Employer in a form satisfactory to Employer. Such general
release shall not apply to (i) Executive’s rights under the Purchase Agreement, (ii) Executive’s
rights under his Stock Option Agreement, (iii) Executive’s rights, as applicable, to
indemnification under Employer’s or Parent’s charter documents, any indemnification agreement or
applicable law, (iv) Executive’s rights under laws governing worker’s compensation, or (v)
Executive’s post-termination rights under this Agreement.

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          (f) Stock Options. Except as expressly provided herein, the terms of the Stock Option
Plan and any related Stock Option Agreement and/or Notice of Grant shall govern the termination,
vesting, and/or exercise of Executive’s Stock Options upon the termination of Executive’s
employment for any reason.

          (g) Exclusive Remedy. Executive agrees that the payments set forth in this Agreement
shall constitute the exclusive and sole remedy for any termination of Executive’s employment and
Executive covenants not to assert or pursue any other remedies, at law or in equity, with respect
to this Agreement.

          (h) Termination of Executive’s Office. Following the termination of Executive’s
employment for any reason, Executive shall hold no further office or position with Employer.

     Section 6. Restrictions Respecting Confidential Information. Executive hereby
covenants and agrees that, during his employment and thereafter, Executive will not, under any
circumstance, disclose in any way any Confidential Information (as defined below) to any other
person other than (i) at the direction of and for the benefit of Employer or (ii) to his attorneys
or other advisors in connection with the enforcement of Executive’s or ALG’s rights under the
Purchase Agreement or any Ancillary Agreement (as defined in the Purchase Agreement), provided such
individuals agree to be bound by the confidentiality obligations herein and, if such Confidential
Information is relevant to such enforcement action, to the court or arbitrator, as applicable,
subject to a protective order. For the purposes of the foregoing, “Confidential
Information” means any information pertaining to the assets, business, creditors, vendors,
manufacturers, customers, data, employees, financial condition or affairs, formulae, licenses,
methods, operations, procedures, reports, suppliers, systems and technologies of Employer and its
affiliates, including (without limitation) the contracts, patents, trade secrets and customer lists
developed or otherwise acquired by Employer and its affiliates; provided, however,
that Confidential Information shall exclude any information that was, is, or becomes publicly
available other than through disclosure by Executive or any other person known to Executive to be
subject to confidentiality obligations to Employer. All Confidential Information is and will
remain the sole and exclusive property of Employer and its affiliates. Following the termination
of his employment, Executive shall return all documents and other tangible items containing
Confidential Information to Employer, without retaining any copies, notes or excerpts thereof.

     Section 7. Proprietary Matters. Executive expressly understands and agrees that any
and all improvements, inventions, discoveries, processes, or know-how that are generated or
conceived by Executive, whether alone or with others, during the Term (collectively, the
“Inventions”) will be the sole and exclusive property of Employer, and Executive will,
whenever requested to do so by Employer (either during the Term or thereafter), execute and assign
any and all applications, assignments and/or other instruments and do all things which Employer may
deem necessary or appropriate in order to apply for, obtain, maintain, enforce and defend patents,
copyrights, trade names or trademarks of the United States or of foreign countries for said
Inventions, or in order to assign and convey or otherwise make available to Employer the sole and
exclusive right, title, and interest in and to said Inventions, applications, patents, copyrights,
trade names or trademarks; provided, however, that pursuant to California Labor
Code Section 2872 and any successor thereto, the provisions of this Section 7 shall not apply to an

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invention that qualifies fully under the provisions of California Labor Code Section 2870 (and
any successor thereto) which provides:

“Any provision in an employment agreement which provides that an employee shall
assign, or offer to assign, any of his or her rights in an invention to his or her
employer shall not apply to an invention that the employee developed entirely on his
or her own time without using the employer’s equipment, supplies, facilities, or
trade secret information except for those inventions that either: (1) Relate at the
time of conception or reduction to practice of the invention to the employer’s
business, or actual or demonstrably anticipated research or development of the
employer; or (2) Result from any work performed by the employee for the employer.”

Executive shall promptly communicate and disclose to Employer all Inventions conceived, developed
or made by him during his employment by Employer, whether solely or jointly with others, and
whether or not patentable or copyrightable, (a) which relate to any matters or business of the type
carried on or being developed by Employer, or (b) which result from or are suggested by any work
done by him in the course of his employment by Employer. Executive shall also promptly communicate
and disclose to Employer all material other data obtained by him concerning the business or affairs
of Employer in the course of his employment by Employer.

          Section 8. Equitable Relief. Executive acknowledges and agrees that Employer will
suffer irreparable damage which cannot be adequately compensated by money damages in the event of a
breach, or threatened breach, of any of the terms and provisions of Section 6 or 7 of this
Agreement, and that, in the event of any such breach, or threatened breach, Employer will not have
an adequate remedy at law. It is therefore agreed that Employer, in addition to all other such
rights, powers, privileges and remedies that it may have, shall be entitled to injunctive relief,
specific performance or such other equitable relief as Employer may request to enforce any of those
terms and provisions and to enjoin or otherwise restrain any act prohibited thereby, and Executive
will not raise and hereby waives any objection or defense that there is an adequate remedy
available at law. Notwithstanding the provisions of Section 18 of this Agreement, Executive agrees
that Employer shall be entitled to seek such injunctive relief, without bond, in a court of
competent jurisdiction. The Executive agrees that any claim he may have against the Employer or
Parent shall not constitute a defense against the issuance of such equitable relief. The foregoing
shall not constitute a waiver of any of Employer’s rights, powers, privileges and remedies against
or in respect of a breaching party or any other person or thing under this Agreement, or applicable
law.

          Section 9. Notice. Any notice, request, demand or other communication hereunder shall
be in writing, shall be delivered by hand or sent by registered or certified mail or by reputable
overnight delivery service, postage prepaid, to the addressee at the address set forth below (or at
such other address as shall be designated hereunder by written notice to the other party hereto)
and shall be deemed conclusively to have been given when actually received by the addressee.

11

 

All notices and other communications hereunder shall be addressed as follows:

	 	 	 
	 

	 	If to Executive:
	 
	 	 
	 

	 	John A. Blair

701 Via Hierba

Santa Barbara, California 93110
	 
	 	 
	 

	 	With a copy to:
	 
	 	 
	 

	 	Joseph D. Abkin, Esq.

Fell, Marking, Abkin, Montgomery,
  Granet
& Raney, LLP

222 E. Carrillo St., Suite 400

Santa Barbara, CA 93101
	 
	 	 
	 

	 	If to the Employer:
	 
	 	 
	 

	 	Mark F. O’Neil

[DealerTrack Sub]

1111 Marcus Avenue

Lake Success, NY 11042
	 
	 	 
	 

	 	With copies to:
	 
	 	 
	 

	 	General Counsel

DealerTrack Holdings, Inc.

1111 Marcus Avenue

Lake Success, NY 11042
	 
	 	 
	 

	 	and to:
	 
	 	 
	 

	 	Ruskin Moscou Faltischek, P.C.

East Tower, 15th Floor

190 EAB Plaza

Uniondale, NY 11556

Attention: Irvin Brum, Esq.

or to such other address as either party shall have furnished to the other in writing in accordance
herewith.

     Section 10. Legal Counsel. In entering into this Agreement, the parties represent
that they have relied upon the advice of their attorneys, who are attorneys of their own choice,
and that the terms of this Agreement have been completely read and explained to them by their
attorneys, and that those terms are fully understood and voluntarily accepted by them.

12

 

     Section 11. Section and Other Headings. The section and other headings contained in
this Agreement are for reference purposes only and shall not affect the meaning or interpretation
of this Agreement.

     Section 12. Governing Law. This Agreement has been executed and delivered, and shall
be governed by and construed in accordance with the applicable laws pertaining, in the State of
California, without regard to conflicts of laws principles. Without prejudice to the obligations
of either party under Section 18, each party irrevocably and unconditionally submits to the
jurisdiction of the California state court in Los Angeles County or any federal court of the United
States sitting in Los Angeles, California and any appellate court presiding thereover.

     Section 13. Severability. In the event that any term or provision of this Agreement
shall be finally determined to be superseded, invalid, illegal or otherwise unenforceable pursuant
to applicable law by a governmental authority having jurisdiction and venue, that determination
shall not impair or otherwise affect the validity, legality or enforceability, to the maximum
extent permissible by law, (a) by or before that authority of the remaining terms and provisions of
this Agreement, which shall be enforced as if the unenforceable term or provision were deleted, or
(b) by or before any other authority of any of the terms and provisions of this Agreement.

     Section 14. Counterparts. This Agreement may be executed in two counterpart copies of
the entire document or of signature pages to the document, each of which may be executed by one of
the parties hereto, but all of which, when taken together, shall constitute a single agreement
binding upon both of the parties hereto.

     Section 15. Benefit. This Agreement shall be binding upon and inure to the benefit of
the respective parties hereto and their legal representatives, successors and assigns. Insofar as
Executive is concerned, this Agreement, being personal, cannot be assigned; provided, however, that
should Executive become entitled to payment pursuant to Section 5 hereof, he may assign his rights
to such payment to his legal representatives, successors, and assigns. Without limiting the
generality of the foregoing, all representations, warranties, covenants and other agreements made
by or on behalf of Executive in this Agreement shall inure to the benefit of the successors and
assigns of Employer.

     Section 16. Modification. This Agreement may not be amended or modified other than by
a written agreement executed by all parties hereto.

     Section 17. Entire Agreement. Except as provided in Section 5(e) hereof, this
Agreement contains the entire agreement of the parties and supersedes all other representations,
warranties, agreements and understandings, oral or otherwise, among the parties with respect to the
matters contained herein.

     Section 18. Arbitration.

          (a) Executive agrees that any dispute or controversy arising out of, relating to, or in
connection with this Agreement or the termination thereof, or the interpretation, validity,
construction, performance, breach, or termination thereof, shall be settled by expedited, binding
arbitration to be held in Los Angeles, California, in accordance with the National Rules for the
Resolution of Employment Disputes then in effect of the American Arbitration

13

 

Association (the “Rules”). The arbitrator may grant injunctions or other relief in
such dispute or controversy. The decision of the arbitrator shall be final, conclusive and binding
on the parties to the arbitration. Judgment may be entered on the arbitrator’s decision in any
court having jurisdiction. The arbitrator may award the prevailing party its reasonable attorneys’
fees and costs.

          (b) EXECUTIVE HAS READ AND UNDERSTANDS THIS SECTION, WHICH DISCUSSES ARBITRATION. EXECUTIVE
UNDERSTANDS THAT BY SIGNING THIS AGREEMENT, EXECUTIVE IS AGREEING TO SUBMIT ANY CLAIMS ARISING OUT
OF, RELATING TO, OR IN CONNECTION WITH THIS AGREEMENT, OR THE INTERPRETATION, VALIDITY,
CONSTRUCTION, PERFORMANCE, BREACH OF TERMINATION THEREOF, TO BINDING ARBITRATION, AND THAT THIS
ARBITRATION CLAUSE CONSTITUTES A WAIVER OF EXECUTIVE’S RIGHT TO A JURY TRIAL AND RELATES TO THE
RESOLUTION OF ALL DISPUTES RELATING TO ALL ASPECTS OF THE EMPLOYER/EMPLOYEE RELATIONSHIP INCLUDING,
BUT NOT LIMITED TO, STATUTORY DISCRIMINATION CLAIMS.

     Section 19. Representations and Warranties of Executive. In order to induce Employer
to enter into this Agreement, Executive represents and warrants to Employer, to the best of his
knowledge after the review of his personnel files, that: (a) the execution and delivery of this
Agreement by Executive and the performance of his obligations hereunder will not violate or be in
conflict with any fiduciary or other duty, instrument, agreement, document, arrangement or other
understanding to which Executive is a party or by which he is or may be bound or subject; and (b)
Executive is not a party to any instrument, agreement, document, arrangement or other understanding
with any person (other than Employer) requiring or restricting the use or disclosure of any
confidential information or the provision of any employment, consulting or other services.

     Section 20. Waiver of Breach. Except as may specifically provided herein, the failure
of a party to insist on strict adherence to any term of this Agreement on any occasion shall not be
considered a waiver or deprive that party of the right thereafter to insist upon strict adherence
to that term or any term of this Agreement. Any waiver hereto must be in writing.

[Remainder of Page Intentionally Left Blank]

14

 

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

	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	 	 	EXECUTIVE:	 	 
	 
	 	 	 	 	 	 
	 	 	/s/ John A. Blair	 	 
	 	 	 	 	 
	 	 	John A. Blair	 	 
	 
	 	 	 	 	 	 
	 

	 	Date:	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	SANTA ACQUISITION CORPORATION:	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Mark O’Neil	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	Date:	 	 	 	 
	 

	 	 	 	 	 	 

15EX-10.4

 

Exhibit 10.4

Execution Version

UNFAIR COMPETITION AND NONSOLICITATION AGREEMENT

     UNFAIR COMPETITION AND NONSOLICITATION AGREEMENT (hereafter, the “Agreement”) entered into as
of this 25th day of May, 2005 (the “Effective Date”), by and between Santa Acquisition
Corporation, Inc. (the “Company”) and John Blair, a resident of California.

W I T N E S S E T H

     WHEREAS, Mr. Blair owns a membership interest in Automotive Lease Guide (alg), LLC, a
California limited liability corporation with its principle place of business in Santa Barbara,
California (“ALG, LLC”), and is a shareholder in Automotive Lease Guide (alg) Canada, Inc. (“ALG,
Inc.”) (ALG, LLC and ALG, Inc. hereinafter collectively referred to as “ALG”). ALG is the leading
provider of residual values, analytical data products and consultation with respect to residual
values to the automotive industry throughout the United States (including each county in the State
of California) and Canada (the “Territory’) through, inter alia, the provision of residual guides,
portfolio risk analysis, portfolio securitization valuations, consulting and special studies
regarding residual values, development and provision of automotive data analysis and reporting
products, and providing data analysis for residual value insurance (the “Business”);

     WHEREAS, on even date herewith, the Company and ALG executed an Asset Purchase Agreement
(“Purchase Agreement”) pursuant to which the Company will purchase substantially all of the assets
of ALG;

     WHEREAS, the Company intends to carry on the Business of ALG and to employ Mr. Blair as its
Chief Executive Officer after consummation of the transactions contemplated by the Purchase
Agreement;

     WHEREAS, it is a condition precedent to the obligation of the Company to consummate the
transactions contemplated by the Purchase Agreement that Mr. Blair enter into and on the Effective
Date be bound by this Agreement;

     WHEREAS, the Company recognizes the importance of Mr. Blair to the Business and to the ability
of the Company to retain its client, employee and vendor relationships in respect of the Business;

     WHEREAS, the parties agree that Mr. Blair will be subject to certain restrictive covenants
necessary to protect the value of the assets and good will of ALG purchased by the Company,
including, without limitation, confidential, proprietary and trade secret information, and goodwill
among customers, employees and vendors;

     NOW THEREFORE, in consideration of good valuable consideration, including, without limitation,
the Company’s agreement to consummate the transactions contemplated by the

 

 

Execution Version

Purchase Agreement and the consideration provided by the Company therewith, the receipt and
adequacy whereof are hereby acknowledged, Mr. Blair covenants and agrees as follows:

     Section 1. Nonsolicitation/Non-Compete.

          (a) In view of the fact that any activity of Mr. Blair in violation of the terms hereof would
deprive the Company of the benefits of their bargain under the Purchase Agreement and under the
other agreements relating to that transaction, and to preserve the goodwill associated with the
Business, Mr. Blair hereby agrees during the Restricted Period he will not, without the express
written consent of DealerTrack Holdings, Inc. (the “Parent”), directly or indirectly, anywhere in
the Territory, (i) engage in any activity which is competitive with any portion of the Business or
is like or similar to the Business, (ii) participate or invest in, or provide or facilitate the
provision of financing to, or assist (whether as owner, part-owner, shareholder, partner, director,
officer, trustee, employee, agent or consultant, or in any other capacity), any business,
organization or person other than the Company (or any affiliate of or Successor to the Company)
whose business, activities, products or services are competitive with any portion of the Business
or are like or similar to the Business (a “Competitor”), (iii) solicit for or on behalf of himself
or any Competitor any client of the Business or any of its direct or indirect subsidiaries or
affiliates or divert to any person any client or business opportunity of the Company or any of its
direct or indirect subsidiaries or affiliates in respect of the Business, (iv) solicit or attempt
to hire or engage for or on behalf of himself or any Competitor any officer or employee of the
Company or any of its direct and/or indirect subsidiaries or affiliates, or (v) encourage for or on
behalf of himself or any Competitor, any such officer or employee to terminate his or her
relationship or employment with the Company or any of its direct or indirect subsidiaries or
affiliates.

Ownership, for personal investment purposes only, of not to exceed (i) individually, two (2%)
percent of the outstanding capital stock of any privately held entity, or (ii) two (2%) percent of
the outstanding voting stock of any publicly held corporation shall not constitute a violation
hereof.

          (b) “Restricted Period” means ten (10) years from the Effective Date, provided that
the Restricted Period will terminate earlier (i) with respect to all or a portion of the Territory,
on the date when the Company or any person deriving any right, title or interest from the Company
to the Business acquired from ALG (any such person, a “Successor”) ceases to carry on a business
like or similar to that of the Business therein, or (ii) with respect to Subsections 1(a)(i)-(iii)
only, following a determination by a court or arbitrator, that is final and unappealable (“Final
Order”), that the Company has defaulted under Section 2.06 of the Purchase Agreement, but only if
and when the Company or Parent fails to make the payment with respect to which it is found to be in
default within the later of (A) the time specified in the Final Order or, (B) 30 days following the
entry of a Final Order. By way of further clarification, Mr. Blair hereby acknowledges and agrees
that in the event Company, or any of its affiliates or any Successor ceases to carry on the
Business or a like or similar business in a portion of the Territory, Section 1(a) shall be deemed
to expire only with respect to that portion of the Territory and shall continue in full force and
effect with respect to the remainder of the Territory.

          (c) Mr. Blair acknowledges that the time, scope, geographic area and other provisions of this
Section 1 have been specifically negotiated by sophisticated commercial

 

 

Execution Version

parties and agrees that (i) all such provisions are reasonable under the circumstances of the
transactions contemplated hereby, (ii) are given as an integral and essential part of the
transactions contemplated in the Purchase Agreement and (iii) but for Mr. Blair’s agreement to
Section 1 contained herein, Parent and the Company would not have entered into or consummated the
transactions contemplated hereby. Mr. Blair has independently consulted with his counsel and has
been advised in all respects concerning the reasonableness and propriety of the covenants contained
herein, with specific regard to the Business to be conducted by Company and its subsidiaries and
affiliates, and represents that this Section 1 is intended to be and shall be fully enforceable and
effective in accordance with its terms.

     Section 2. Equitable Relief. Mr. Blair acknowledges and agrees that the Company will
suffer irreparable damage which cannot be adequately compensated by money damages in the event of a
breach, or threatened breach, of any of the terms and provisions of Section 1 of this Agreement,
and that, in the event of any such breach, or threatened breach, the Company will not have an
adequate remedy at law. It is therefore agreed that the Company, in addition to all other such
rights, powers, privileges and remedies that it may have, shall be entitled to injunctive relief,
specific performance or such other equitable relief as the Company may request to enforce any of
those terms and provisions and to enjoin or otherwise restrain any act prohibited thereby, and Mr.
Blair will not raise and hereby waives any objection or defense that there is an adequate remedy
available at law. Mr. Blair agrees that the Company shall be entitled to seek such injunctive
relief, without bond, in a court of competent jurisdiction and Mr. Blair hereby consents to the
jurisdiction of the state and federal courts of California for purposes of such an action. The
foregoing shall not constitute a waiver of any of the Company’s rights, powers, privileges and
remedies against or in respect of a breaching party or any other person or thing under this
Agreement, or applicable law. The Company shall have the right to enforce this Agreement in a
court of competent jurisdiction and shall not be required to arbitrate any claims hereunder
pursuant to Section 18 of the Employment Agreement of even date herewith by and between the Company
and Mr. Blair.

     Section 3. Disclosure of Agreement. Mr. Blair will disclose the existence and terms
of this Agreement to any prospective employer, partner, co-venturer, investor or lender prior to
entering into an employment, partnership or other business relationship with such person or entity.

     Section 4. Miscellaneous.

          (a) The parties agree that if any portion or provision of this Agreement is to any extent be
declared illegal or unenforceable by a court of competent jurisdiction, then the court may amend
such portion or provision so as to comply with the law in a manner consistent with the intention of
this Agreement, the remainder of this Agreement, or the application of such illegal or
unenforceable portion or provision in circumstances other than those as to which it is so declared
illegal or unenforceable, will not be affected thereby, and each portion and provision of the
Agreement will be valid and enforceable to the fullest extent permitted by law. In the event that
any provision of this Agreement is determined by any court of competent jurisdiction to be
unenforceable by reason of excessive scope as to geographic, temporal or functional coverage, such
provision will be deemed to extend only over the maximum geographic, temporal and functional scope
as to which it may be enforceable.

 

 

Execution Version

          (b) Mr. Blair agrees that no claim that he may have against the Parent or Company shall serve
as a defense to enforcement of his obligations hereunder.

          (c) This Agreement constitutes the entire agreement between the Parent, the Company and Mr.
Blair with respect to the subject matter hereof, and supersedes all prior representations and
agreements with respect to such subject matter. This Agreement may not be amended, modified or
waived except by a written instrument duly executed by the person against whom enforcement of such
amendment, modification or waiver is sought. The failure of any party to require the performance
of any portion or provision of this Agreement, or the waiver by any party of any breach of this
Agreement, in any particular case will not prevent any subsequent enforcement of such portion or
provision or to be deemed a waiver of any separate or subsequent breach.

          (d) This Agreement shall be governed by California law. The parties consent to exclusive
personal jurisdiction of the state and federal courts situated in Los Angeles, California in
respect to enforcement of this Agreement and waive any defenses based on personal jurisdiction or
venue in such courts. Should any action or proceeding be brought to construe or enforce the terms
and conditions of this Agreement or the rights of the parties hereunder, the losing party shall pay
to the prevailing party all court costs and reasonable attorneys’ fees and costs (at the prevailing
party’s attorney’s then-current rates) incurred in such action or proceeding.

     I UNDERSTAND THAT THIS AGREEMENT AFFECTS IMPORTANT RIGHTS THAT I HAVE. I HAVE READ IT
CAREFULLY AND AM SATISFIED THAT I UNDERSTAND IT COMPLETELY AND AGREE TO IT.

	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	Date:

	 	 	 	 	 	          /s/ John Blair	 	 
	 

	 	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	John Blair	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Address	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	SANTA ACQUISITION CORPORATION	 	 
	 
	 	 	 	 	 	 	 	 
	Date:

	 	 	 	 	 	          /s/ Mark O’Neil	 	 
	 

	 	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	By:	 	 
	 

	 	 	 	 	 	Its:

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