EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT dated February 15, 1996, between Auto Bond
Acceptance Co., a Texas corporation (the "Company"), and Charles A. Pond, an
individual (the "Employee");
W I T N E S S E T H:
WHEREAS, the Company desires to employ the Employee for the period of time
set forth herein; and
WHEREAS, the Employee is willing to undertake the duties hereinafter set
forth and to be subject to the restrictions hereinafter specified in exchange
for the substantial inducements and incentives herein set forth;
NOW, THEREFORE, the Company and the Employee agree as follows:
1. Term. The Company hereby retains the Employee as President of the
Company for a three-year term commencing on the date hereof and continuing until
the third anniversary of the date hereof (such period being hereinafter
sometimes called the "term of this Agreement"). The Employee accepts such
employment and agrees to perform the services specified herein, all upon the
terms and conditions hereinafter stated.
2. Duties as Employee. The Employee shall serve the Company in the
capacity of President and shall report to, and be subject to the general
direction and control of, the Board of Directors of the Company (the "Board")
and the Chief Executive Officer ("CEO") of the Company. The Employee shall
perform the executive, management and administrative duties of the President of
the Company and such other executive duties as are from time to time assigned to
him by the Board of Directors or the CEO and as are not inconsistent with the
provisions hereof.
3. Time and Availability. The Employee shall devote his full business time
and attention to the business of the Company, and, except as may be specifically
permitted by the Company, shall not be engaged in any other business activity
during the term of this Agreement. The foregoing shall not be construed as
preventing the Employee from making passive investments in other businesses or
enterprises, provided, however, that such investments do not require services on
the part of the Employee which would in any way impair the performance of his
duties under this Agreement.
4. Compensation. As compensation for the services the Employee will
provide to the Company hereunder and for the agreements of the Employee set
forth herein, the Company shall pay to the Employee a salary of $15,000 (the
"Salary") per full calendar
month of service completed. From time to time during the term of this Agreement,
the Employee's salary may be increased by, and at the sole discretion of, the
Board, in which case the amount of such increased salary shall thereafter be
deemed to be the amount of salary contracted for in this Agreement. In addition
to the Salary payable to the Employee hereunder, in the event the Company
successfully completes an initial public offering of its Common Stock prior to
February 28, 1997, the Company shall pay the Employee a bonus of $90,000. The
Employee shall also be entitled to receive a performance bonus calculated as
follows:
In the event the Company meets 90% of the sales target (the "Sales Target") and
90% of the income target (the "Income Target") set forth on Exhibit A hereto,
the Employee shall become eligible for a performance bonus. Providing the
eligibility requirements of the previous sentence are met, the Company shall pay
the Employee a performance bonus equal to (i) $4,500 for each 10% increase in
the Company's sales over the Sales Target (up to a maximum of $45,000) and (ii)
$4,500 for each 10% increase in the Company's income over the Income Target (up
to a maximum of $45,000).
In addition, the Board may grant the Employee additional compensation in the
form of bonuses or stock options or such other consideration as may be
determined from time to time in the sole discretion of the Board. Following the
Company's initial public offering, the Company intends to establish a stock
grant and/or stock option plan for the benefit of its senior management. The
Employee shall be entitled, as a senior officer of the Company, to participate
in any such program, with the level of his participation to be determined by the
Board. The Salary set forth herein shall be payable in monthly or semi-monthly
installments in accordance with the payroll policies of the Company in effect
from time to time during the term of this Agreement.
5. Benefits. During the term of this Agreement, the Employee shall be
entitled to participate in all employee benefit plans and arrangements in the
same manner as other executive officers of the Company.
6. Expenses. During the term of this Agreement, the Company shall pay or
reimburse the Employee, upon submission of an appropriate statement by him
documenting such expenses as required by the Internal Revenue Code, for all
out-of-pocket expenses for entertainment, travel, meals, hotel accommodations
and the like incurred by him in the interest of the business of the Company and
in accordance with such procedures established by the Board. In addition, the
Company shall pay (a) all pre-approved out-of-pocket
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expenses incurred for the packing and shipping of household goods and personal
belongings, including two automobiles, by the Employee and his family in
relocating to the Austin, Texas area and (b) one-half of the Employee's initial
fee at a country club of his choice in Austin, Texas.
7. Termination.
(a) Death. If the Employee should die during the term of this
Agreement, the Company shall have no further obligation hereunder to the
Employee, his spouse or his estate except to pay to the Employee's spouse
if she should survive him, or to the Employee's estate if his spouse shall
not survive him, the Salary accrued through the end of the month in which
the Employee's death occurred. All such payments to the Employee's spouse
or estate shall be made in the same manner and at the same times as the
Salary would have been paid to the Employee had he not died.
(b) Disability. If during the term of this Agreement, the Employee
shall be prevented from performing his duties hereunder by reason of
disability, and such disability shall continue for a period of six months,
then the Company, upon 30 days' prior written notice to the Employee, may
terminate this Agreement at any time after the expiration of such
six-month period. For purposes of this Agreement, the Employee shall be
deemed to have become disabled when the Board, upon the advice of a
licensed physician (mutually approved by the Company and the Employee or
the representative of the Employee in the event of his inability to
approve), shall have determined that the Employee has become physically or
mentally incapable (excluding infrequent and temporary absences due to
ordinary illness) of performing his duties under this Agreement. If the
Company terminates this Agreement, then the Company shall have no further
obligation to the Employee except to pay to the Employee, or in the event
of his subsequent death, to his spouse if she should survive him or to his
estate if his spouse shall not survive him, the Salary accrued through the
end of the month in which the Employee's death occurred. All such payments
to the Employee or his spouse or estate shall be made in the same manner
and at the same times as the Salary would have been paid to the Employee
had he not become disabled.
(c) Termination by Employee. If the Employee voluntarily
terminates this Agreement, then the Company shall have no further
obligation to the Employee except to pay to the
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Employee the Salary accrued through the date on which the Employee
terminated this Agreement. Such payment to the Employee shall be made in
the same manner and at the same times as the Salary would have been paid
to the Employee had he not terminated this Agreement.
(d) Discharge for Cause. Notwithstanding any other provision of this
Agreement, if prior to the expiration of the term of this Agreement the
Employee shall be discharged by the Company for cause, then this Agreement
shall automatically terminate (except for the provisions of Sections 8, 9
and 11 which shall continue in effect), and upon such termination, the
Company shall have no further obligation to the Employee except that the
Company shall pay to the Employee an amount equal to the Employee's base
salary accrued to the date of such termination. For purposes of this
Agreement, a discharge for cause shall mean a discharge resulting from a
good faith determination by the Company (after the Employee has been given
notice of such intended termination and, if the reasons for such
termination can be cured, a period of 10 days to cure such reasons) that
the Employee (i) has been convicted of a crime involving fraud, theft or
embezzlement or of any other crime involving moral turpitude, (ii) has
failed or refused to follow reasonable policies or directives established
by the Company, (iii) has persistently failed to attend to his duties
hereunder, (iv) has committed acts amounting to gross negligence or
willful misconduct to the substantial detriment of the Company, or (v) has
breached any material term or provision of this Agreement. Such payment to
the Employee shall be made in the same manner and at the same times as the
Salary would have been paid to the Employee had this Agreement not been
terminated.
(e) Termination. If the Employee's employment with the Company shall
terminate prior to the first anniversary of the date of this Agreement for
any reason other than termination by the Employee pursuant to Section 7(c)
or termination by the Company for cause pursuant to Section 7(d), the
Company shall have no further obligation hereunder to the Employee, his
spouse or his estate except to pay to the Employee, his spouse if she
should survive him, or to his estate if his spouse shall not survive him,
his Salary for the remainder of the first year of this Agreement. All such
payments to the Employee, his spouse or estate shall be made in the same
manner and at the same times as the Salary would have been paid to the
Employee had his employment not been terminated.
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8. Confidentiality.
(a) Acknowledgment. The Employee agrees and acknowledges that in the
course of rendering services to the Company and its Clients (as defined below)
he will have access to and will become acquainted with confidential information
about the professional, business and financial affairs of the Company, the
Company's direct or indirect subsidiaries (for purpose of Sections 8 and 9
herein, the term Company shall include any of the Company's direct or indirect
subsidiaries), the Company's strategy and procedures and the Company's Clients,
and may in the future contribute to such information. As used in this Agreement,
the term "Clients" refers to any entity in the sub-prime automobile financing or
refinancing business with which the Company conducts business. The Employee
further recognizes that he is employed as a key employee, that the Company is
engaged in a highly competitive business, and that the success of the Company in
the marketplace depends upon its good will and reputation for providing
exemplary services to its Clients by developing, innovative, aggressive,
cutting-edge and/or novel methods of financing or refinancing the purchase of
automobiles in the sub-prime market, and arranging financing for companies that
are in the business of financing the purchase of automobiles in the sub-prime
market. The Employee recognizes that in order to guard the legitimate interests
of the Company it is necessary for the Company to protect all such confidential
information, good will and reputation.
(b) Proprietary Information. In the course of his service to the
Company, the Employee may have access to and may help create confidential
information, including, but not limited to: the identity of proposed
transactions or the parties thereto, the status of negotiations concerning
proposed transactions, forecasts, budgets, pricing information, Company
developed methods of operation, risk management strategies and procedures,
Client lists, lists of contact persons at Clients, specialized know-how
developed by the Company, business documents or information, marketing data,
trade secrets, personnel roster, including the identity, qualifications and/or
salary scale of any consultant or other Company employee, and other information
generated by the Company or arising in connection with the Company's business
the disclosure of which would give an advantage to the Company's competitors or
Clients. Such information shall hereinafter be called "Proprietary Information"
and shall include any and all items enumerated in the preceding sentence which
come within the scope of the business activities of the Company as to which the
Employee has had or may have access, whether previously existing, now existing
or arising hereafter, whether or not conceived or developed by others or by
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the Employee alone or with others during the period of his service to the
Company, and whether or not conceived or developed during regular working hours.
"Proprietary Information" shall not include (a) any information which is in the
public domain during the period of service by the Employee, provided such
information is not in the public domain as a consequence of disclosure by the
Employee in violation of this Agreement or by any other person who was
contractually obligated not to disclose such information and (b) any information
not considered confidential information by similar enterprises operating in the
sub-prime automobile finance industry.
(c) Fiduciary Obligations. The Employee agrees and acknowledges that
Proprietary Information belongs solely to the Company and is of critical
importance to the Company and that a use or disclosure of the Proprietary
Information in violation of this Section 8 may seriously and irreparably impair
and damage the Company's businesses. The Employee therefore agrees, while he is
an employee of the Company and at all times thereafter, (a) to keep all
Proprietary Information in a fiduciary capacity for the sole benefit of the
Company and (b) not to use the Proprietary Information for the benefit of the
Employee or any other person or entity.
(d) Non-Disclosure. The Employee shall not disclose, directly or
indirectly (except as required by law), any Proprietary Information to any
person other than (a) the Company, (b) employees of the Company that the
Employee reasonably believes have been authorized to receive such information,
(c) such other persons to whom the Employee has been instructed to make
disclosure by the Board, or (d) the Employee's counsel so long as such counsel
agrees to keep all Proprietary Information confidential (in the case of clause
(b) only to the extent required in the course of the Employee's service to the
Company). At the termination of employment hereunder, the Employee shall deliver
to the Company all notes, letters, documents and records which may contain
Proprietary Information which are then in his possession or control and shall
not retain or use any copies or summaries thereof.
9. Non-Competition and Non-Solicitation.
(a) Non-Competition Covenant.
The Employee acknowledges and agrees that (a) in order for the
Company to further ensure that the Proprietary Information will be used solely
for the benefit of the Company and not for the benefit of the Employee or any
other person or entity and (b) in consideration of the Company entering into
this Agreement, the
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Employee has agreed not to compete with the Company to the extent provided in
this Section. The Employee covenants and agrees that during the Restricted
Covenant Period (as that term is defined below), the Employee shall not, whether
for his own account or for any other person or organization other than the
Company, (a) manage, operate, control, assist (directly or indirectly), or
participate in the management, operation or control of, (b) serve as a director,
officer, partner, manager, employee or consultant of, or own more than five
percent of the outstanding voting securities of, or (c) lease property to any
enterprise which, within the Restricted Area (as that term is defined below),
carries on the businesses of financing or refinancing the purchase of
automobiles in the sub-prime market or arranging financing for companies that
are in the business of financing the purchase of automobiles in the sub-prime
market. The Employee further agrees that, during the Restrictive Covenant Period
and within the Restricted Area, he shall not knowingly call upon, solicit,
divert, attempt to solicit or divert, or conduct or carry on any business with
any of the former Clients, current Clients or potential Clients of the Company
known to the Employee (including for this purpose only those former Clients who
were Clients during the last twelve (12) months of his employment with the
Company), without in each case obtaining the prior written consent of the
Company.
(b) Non-Solicitation of Employees. The Employee further agrees that
during the period commencing on the date hereof and continuing until the second
anniversary of the termination of the Employee's employment by the Company, he
will not directly or indirectly, solicit the employment or engagement as a
consultant of any person who was an employee of or a consultant to the Company
at any time during the last twelve months of the Employee's employment with the
Company, or hire such employee or engage as a consultant any such person, unless
in each case the Employee obtains the prior written consent of the Company.
(c) Definitions. For the purposes of Section 9.1, the term
"Restricted Covenant Period" shall mean the period commencing on the date hereof
and terminating on the date 24 months after the Employee's employment with the
Company ends. For the purposes of this Section 9, the term "Restricted Area"
shall mean the territory within a 40-mile radius of any automobile dealership
with which the Company has done business during the term of this Agreement.
(d) No Conflicting Agreement. The Employee represents and warrants
to the Company that he is not bound by the provisions of any agreement with a
current or former employer which would prohibit or limit the Employee's
ability to render services to the
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Company as herein provided. The Employee further represents to the Company that
in the course of rendering services hereunder he will not divulge to the Company
any proprietary information of any other party to whom the Employee owes an
obligation of non-disclosure.
10. Vacations. The Employee shall be entitled each year to a vacation of
four weeks, during which time his compensation shall be paid in full. Each
vacation shall be taken during a period of time to be mutually agreed upon by
the parties.
11. Intellectual Property. The Employee hereby agrees that any and all
copyrights, patents, trademarks, patent or trademark applications, copyrights,
franchises, licenses, permits, rights (including, without limitation, rights to
software and rights to trade secrets and proprietary information, processes and
know-how) and other authorizations (collectively, the "Rights") which he
develops either alone or in collaboration with employees of the Company during
the term of this Agreement shall belong exclusively to the Company and, if
requested, he will execute any deeds, bills of sale, assignments, assurances, or
any other actions or things necessary or desirable to vest, perfect, or confirm
of record or otherwise in the Company its right, title, or interest in, to, or
under any of the Rights.
12. Notices. All notices, requests, consents and other communications
under this Agreement shall be in writing and shall be deemed to have been
delivered on the date personally delivered or on the date mailed, postage
prepaid, by certified mail, return receipt requested, if addressed to the
respective parties as follows:
If to Employee: 2600 Lake Austin Blvd. #5105
Austin, Texas 78703
If to the Company: Auto Bond Acceptance Co.
301 Congress Avenue, 9th Floor
Austin, Texas 78701
Either party hereto may designate a different address by providing written
notice of such new address to the other party hereto.
13. Specific Performance. The Employee acknowledges that a remedy at law
for any breach or attempted breach of Section 8, 9 or 11 of this Agreement will
be inadequate, agrees that the Company shall be entitled to specific performance
and injunctive and other equitable relief in case of any such breach or
attempted breach, and further agrees to waive any requirement for the securing
or
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posting of any bond in connection with the obtaining of any such injunctive or
any other equitable relief.
14. Severability. In case any term, phrase, clause, paragraph, section,
restriction, covenant or agreement contained in this Agreement shall be held to
be invalid or unenforceable, the same shall be deemed, and it is hereby agreed
that the same are meant to be several, and shall not defeat or impair the
remaining provisions hereof.
15. Waiver. The waiver by the Company of a breach of any provision of this
Agreement by the Employee shall not operate or be construed as a waiver of any
subsequent or continuing breach of this Agreement by the Employee.
16. Assignment. This Agreement may not be assigned by the Employee.
Neither the Employee nor his spouse or estate shall have any right to commute,
encumber or dispose of any right to receive payments hereunder, it being agreed
that such payments and the right thereto are nonassignable and nontransferable.
17. Binding Effect. Subject to the provisions of Section 16, this
Agreement shall be binding upon and inure to the benefit of the parties hereto,
the Employee's heirs and personal representatives, and the successors and
assigns of the Company.
18. Entire Agreement. This Agreement embodies the entire agreement and
understanding between the parties hereto with respect to the matters covered
hereby.
19. Amendment. This Agreement may be amended only by an instrument in
writing executed by the parties hereto.
20. Governing Law. This Agreement shall be construed and enforced in
accordance with and governed by the law of the State of Texas.
21. Survival. The provisions of this Sections 8, 9 and 11 shall survive
until the termination of this Agreement, regardless of the fact that the Company
will no longer be obligated to continue to make payments to the Employee
hereunder.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date and year first above written.
THE COMPANY:
AUTO BOND ACCEPTANCE CO.
By /s/ WILLIAM O. WINSAUER
-------------------------------
WILLIAM O. WINSAUER, Chief
Executive Officer
THE EMPLOYEE:
/s/ CHARLES A. POND
__________________________________
CHARLES A. POND
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