INSURANCE AUTO AUCTIONS INC /CA
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
<DOCUMENT>
<TYPE>EX-10.1
<SEQUENCE>3
<FILENAME>c62638ex10-1.txt
<DESCRIPTION>AMENDED AND RESTATED EMPLOYMENT AGREEMENT
<TEXT>

<PAGE>   1
                                                                    Exhibit 10.1

                              AMENDED AND RESTATED
                              EMPLOYMENT AGREEMENT

     THIS EMPLOYMENT AGREEMENT (this "Agreement") was originally entered into as
of this 17th day of November, 2000 and was amended and restated on April 2, 2001
by and between THOMAS C. O'BRIEN ("O'Brien") and INSURANCE AUTO AUCTIONS, INC.,
an Illinois corporation ("Company").

                                    RECITALS

     WHEREAS, the Company desires to employ O'Brien and O'Brien desires to be
employed by 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 O'Brien, and O'Brien hereby
accepts employment with the Company, as President and Chief Executive Officer,
with authority over the day to day operations of the Company and its operating
subsidiaries. The Company agrees to take all action necessary to nominate and
elect O'Brien as a director of the Company as soon as possible following his
commencement of employment. O'Brien shall be the highest ranking executive of
the Company and shall be subject to the direction and control of the Board of
Directors of the Company (the "Board"). O'Brien shall devote all of his business
time and services to the business and affairs of the Company. O'Brien shall also
perform such other executive-level duties consistent with his position as
President and Chief Executive Officer as may be assigned to him from time to
time by the Board, including, without limitation, serving as a member of any
Board Committee if the Board shall elect O'Brien to such positions, and serving
as an officer and/or director of the Company's operating subsidiaries. The
duties and services to be performed by O'Brien 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
O'Brien's duties.

     2.   COMPENSATION. As compensation for O'Brien'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 O'Brien a base salary at the rate of $350,000 per annum commencing on the
date hereof ("Base Salary"). The Base Salary shall be subject to annual review
by the Board and may be increased by the Board in their sole and absolute
discretion but may not be decreased. Such salary shall be payable to O'Brien in
such equal periodic payments as the Company generally pays its employees, but in
no event less frequently than monthly.

     2.2. PERFORMANCE INCENTIVE. As additional compensation for performance of
the services rendered by O'Brien during the term of this Agreement, the Company
will pay to O'Brien, in cash, a performance incentive amount equal to at least
40% of O'Brien's annual salary based upon the achievement of objectively
quantifiable and measurable goals and

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objectives which shall be determined, in advance, by the Board with respect to
each fiscal year of the Company. O'Brien may receive in excess of 40% of his
annual salary as a performance incentive if his performance exceeds the goals
and objectives determined by the Board. Amounts paid to O'Brien pursuant to this
Section 2.2 are 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 O'Brien an option
to purchase 300,000 shares of the Company's common stock (the "Option"). The
Option shall be granted under the Company's 1991 Stock Option Plan, as amended
(the "Option 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 before the day that O'Brien becomes employed
by the Company subject to the vesting and termination provisions described
below. The Option shall become exercisable in four equal annual installments
beginning on the first anniversary of the grant date, and 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, O'Brien 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. O'Brien
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. The Company will pay for the non-equity portion of a membership in
and reimburse reasonable dues for a golf club membership in a golf club to be
mutually agreed upon by the Company and O'Brien. O'Brien 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 O'Brien 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 O'Brien 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 O'Brien 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 O'Brien are superseded by this Agreement. In
addition, this Agreement shall terminate by reason of O'Brien's death or the
substantial inability of O'Brien, 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").


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     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 O'Brien any
severance payments or continue to cover O'Brien 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. O'Brien voluntarily terminates this
          Agreement for any reason; or

               (ii) CAUSE. The Company terminates O'Brien'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 O'Brien 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
               O'Brien by the Board which specifically identifies the manner in
               which the Board believes that O'Brien has not substantially
               performed his duties; or

                    (B) the engaging by O'Brien in illegal conduct or gross
               misconduct which is demonstrably 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 O'Brien (or his legal
representatives as the case may be) the specific obligations as set forth below:

               (i)  DEATH. O'Brien's employment shall terminate automatically
          upon O'Brien's death. If O'Brien's employment under this Agreement is
          terminated by reason of his death, the Company's sole obligation to
          O'Brien'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 O'Brien 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
          O'Brien'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 O'Brien'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 O'Brien occurs, the Company
          may give to O'Brien written notice in accordance with Section 6.1 of
          this Agreement of its intention to terminate O'Brien's employment. In
          such event, O'Brien's employment with the Company shall terminate
          effective on the 30th day after receipt of such notice by O'Brien (the
          "Disability Effective Date"), unless within

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          the 30-day period after such receipt, O'Brien returns to full-time
          performance of his duties. The Company's sole obligation to O'Brien
          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 O'Brien's employment
hereunder apart from a Change of Control, the Company shall pay to O'Brien an
amount equal to the sum of (i) O'Brien's annual base salary at the time
O'Brien's employment is terminated; plus (ii) O'Brien's average annual bonus
received over the eight (8) fiscal quarters of the Company immediately preceding
Company's fiscal quarter during which O'Brien's employment is terminated,
without exceeding O'Brien's target bonus for Company's fiscal year during which
O'Brien's employment is terminated, provided, however, that O'Brien shall
receive his target bonus if he is terminated within his first eight (8) fiscal
quarters with the Company; plus (iii) O'Brien's auto allowance for the Company's
fiscal year during which O'Brien's employment is terminated. In addition, the
Company shall provide, at Company's expense, continued coverage for O'Brien and
his beneficiaries for a period extending through the earlier of the date O'Brien
begins any subsequent full-time employment for pay and the date that is one (1)
year after O'Brien's termination of employment, under the Company's health plan
covering O'Brien and O'Brien's beneficiaries, provided that O'Brien 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


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               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 by the Company's shareholders 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 O'Brien's voluntary termination following (A) a change in
          O'Brien's position with the Company which materially reduces O'Brien's
          level of responsibility, (B) a reduction in O'Brien's level of
          compensation (including Base Salary and targeted Incentive
          Compensation), (C) a change in O'Brien's place of employment, which is
          more than seventy-five (75) miles from O'Brien's place of employment
          prior to the change, provided and only if such change or reduction is
          effected without O'Brien's written concurrence or (D) following a
          Change of Control (or following the last of a series of related
          Changes of Control including, but not limited to, an acquisition
          described in Section 3.3(i)(a)(A) followed by a Business Combination)
          or following a Corporate Transaction (as defined in the Option Plan),
          O'Brien's failure to receive within 60 days of such date a stock
          option grant or similar incentives (the "New Option") which provides
          him with at


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          least an aggregate of 2.5% (at the time of such grant) of the common
          stock of the successor to the Company (after giving effect to all
          management options and similar incentives granted in conjunction with
          the New Option). This 2.5% aggregate amount shall be determined after
          adding back in any other outstanding options or similar incentives of
          the Company or the successor to the Company granted to O'Brien. The
          New Option shall have a per share exercise price equal to the per
          share price paid by the acquirer in such Change of Control (or series
          of related Changes of Control), or Corporate Transaction.

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

               (v)  For proposes of this Agreement, "Accrued Obligations" shall
          mean the sum of (A) O'Brien'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
          O'Brien for the fiscal year preceding the fiscal year in which
          O'Brien's Date of Termination occurs (annualized in the event that
          O'Brien 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) average of the past three (3)
          years' annual bonuses, provided, however, that O'Brien 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 O'Brien
          (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 O'Brien 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 O'Brien's employment with the Company terminates by reason
of O'Brien'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)(iii)
above) within two (2) years of the effective date of the Change of Control,
O'Brien shall be entitled to receive the following:

               (i)  Company must pay O'Brien an amount equal to 150% of the sum
          of (A) O'Brien's Base Salary and (B) his Highest Annual Bonus;

               (ii) Company shall also pay O'Brien any Accrued Obligations; and


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

          (c)  SEVERANCE BENEFITS FOR TERMINATION AFTER THE SECOND YEAR
FOLLOWING A CHANGE OF CONTROL. If O'Brien is terminated after the second year
following a Change of Control, the Company's obligations shall be as set forth
in Section 3.2 of this Agreement.

          (d)  STOCK OPTIONS AFTER A CHANGE OF CONTROL. All of O'Brien's
outstanding stock options to purchase Company common stock shall accelerate and
become fully exercisable upon a Change of Control or Corporate Transaction (as
defined in the Option Plan).

     3.4. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY; EXCISE TAX GROSS-UP. A
"Gross-Up Payment" (as defined below) shall be made to O'Brien when payments of
compensation payable to O'Brien 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
O'Brien 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 O'Brien
in such amount as is necessary to ensure that the net amount retained by
O'Brien, 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, O'Brien 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, provided, however, that O'Brien is not and shall not
become a "Participant" as that term is defined in the Company's Executive
Severance Plan for Officers, effective as of August 9, 2000 and therefore shall
not be eligible for any benefits under the Executive Severance Plan for
Officers.

     4.   INVENTIONS AND CREATIONS. O'Brien agrees that all inventions,
discoveries, improvements, ideas and other contributions (herein called
collectively "Inventions") whether or


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not copyrighted or copyrightable, patented or patentable, or otherwise
protectable in law, which are conceived, made, developed or acquired by O'Brien,
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 O'Brien does hereby
assign and transfer to the Company his entire right, title and interest in the
Inventions. O'Brien 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 O'Brien
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. O'Brien hereby acknowledges and agrees that
the Company actively engages in its business throughout all of North America.
Accordingly, O'Brien agrees that during the Non-Competition Period (as defined
below), O'Brien will not, directly or indirectly, whether as a partner, officer,
stockholder, 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 O'Brien 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 O'Brien's employment hereunder
(including the expiration of this Agreement) or O'Brien's submission of his
resignation, or removal of O'Brien as Chief Executive Officer 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, O'Brien 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 O'Brien 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. O'Brien 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


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mean all proprietary or confidential information concerning the business,
finances, financial statements, curricula, properties and operations of the
Company and its affiliated companies, including, without limitation, all
customer and prospective customer and supplier lists, knowhow, 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, O'Brien 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 stockholder 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 O'Brien 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 O'Brien, becomes generally available to the public.
Upon termination of any employment or consulting relationship between the
Company and O'Brien, O'Brien 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 O'Brien.

     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
O'Brien. 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 bond, to restrain the violation of Section 5 by O'Brien 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 O'Brien's employment and the termination of this Agreement.


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     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 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 O'Brien at
the addresses indicated below:

          If to the Company:       Insurance Auto Auctions, Inc.
                                   850 East Algonquin Road, Suite 100
                                   Schaumburg, Illinois  60173
                                   Phone: 847-839-3939
                                   Fax: 847-839-3999
                                   Attention: Gaspare G. Ruggirello, Esq.

          With copies to:          Katten Muchin Zavis
                                   525 West Monroe Street, Suite 1600
                                   Chicago, Illinois  60661
                                   Phone: 312-902-5564
                                   Fax: 312-577-8648
                                   Attention: David J. Kaufman, Esq.

          If to O'Brien:           Thomas C. O'Brien
                                   536 S. Blackstone Ave.
                                   Lagrange, IL  60525
                                   Phone: 708-579-1237
                                   Fax: 708-579-9437

          With copies to:          Paul Julian Esq.
                                   1038 N. LaSalle
                                   Chicago, IL  60601
                                   Phone: 312-266-1500
                                   Fax: 312-337-1972

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


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<PAGE>   11

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 O'Brien'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 either party's
request for a conference, the Company and O'Brien shall endeavor to select an
arbitrator who shall hear the dispute. In the event the parties are unable to
agree on an arbitrator, O'Brien 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 O'Brien 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 O'BRIEN. O'Brien 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 O'Brien is subject as a result of any prior employment,
any investment or otherwise. O'Brien 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 O'Brien.


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

                                    INSURANCE AUTO AUCTIONS, INC.


                                    By:     /s/ Joseph F. Mazzella
                                       -----------------------------------------
                                    Name:   Joseph F. Mazzella
                                    Title:  Chairman of the Board


                                            /s/ Thomas C. O'Brien
                                            ------------------------------------
                                            THOMAS C. O'BRIEN




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</TEXT>
</DOCUMENT>
