INSURANCE AUTO AUCTIONS INC /CA
EMPLOYMENT AGREEMENT FOR THOMAS C. O'BRIEN
<DOCUMENT>
<TYPE>EX-10.163
<SEQUENCE>3
<FILENAME>c61315ex10-163.txt
<DESCRIPTION>EMPLOYMENT AGREEMENT FOR THOMAS C. O'BRIEN
<TEXT>

<PAGE>   1
                                                                  EXHIBIT 10.163


                              EMPLOYMENT AGREEMENT

     THIS EMPLOYMENT AGREEMENT (this "Agreement") is entered into as of this
17th day of November, 2000 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.



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     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 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, except as provided
below, shall be subject to the usual terms and conditions of options issued
pursuant to and in accordance with the Option Plan. Notwithstanding the above,
in the event of either a Change of Control (hereinafter defined) or a Corporate
Transaction (as defined in the Option Plan), in each case, within six (6) months
following the date of this Agreement, the Option shall immediately terminate
prior to such occurrence and shall neither accelerate pursuant to Section X of
the Option Plan nor be exercisable from and after such time.

     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.




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     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").

     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.




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                    (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 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 (i)
an amount equal to his monthly salary at the rate in effect at the time of such
termination for a period of twelve (12) months thereafter; and (ii) 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").


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3.3. COMPANY'S OBLIGATIONS ON TERMINATION DUE TO A CHANGE OF CONTROL.

     (a)  DEFINITIONS.

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

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

               (B) individuals who, as of the date hereof, constitute the Board
          (the "Incumbent Board") cease for any reason to constitute at least a
          majority of the Board; provided, however, that any individual (other
          than an individual whose initial assumption of office occurs as a
          result of an actual or threatened solicitation of proxies or consents
          by or on behalf of a Person other than the Board) who becomes a
          director subsequent to the date hereof whose election or nomination
          for election 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





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          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 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



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     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 purposes 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 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 (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 shall continue to pay O'Brien an amount equal to his Base
     Salary for a period of eighteen (18) months thereafter and payment of any
     Accrued Obligations; and

          (ii) 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. Subject to Section 2.3 of this
Agreement, all of O'Brien's outstanding stock options to purchase Company common
stock shall accelerate and become fully exercisable, unless a Change of Control
or Corporate Transaction




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(as defined in the Option Plan) occurs within six (6) months following the date
of this Agreement.

     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 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,



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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 mean all proprietary or
confidential information concerning the business, finances, financial
statements, curricula, properties and operations of the Company and its
affiliated companies,



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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 NonCompetition 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.




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     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.

     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: 3 12-577-8648
                             Attention: David J. Kaufman, Esq

If to O'Brien                Thomas C. O'Brien
                             526 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



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and preempt any prior understandings, agreements or representations by or among
the parties, written or oral, which may have related to the subject matter
hereof in any way.

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

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

     6.5. RESOLUTION OF DISPUTES; ARBITRATION. Should a dispute arise concerning
this Agreement, its interpretation or termination, or 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 ether 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.



                                       12
<PAGE>   13


     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.







                             SIGNATURE PAGE FOLLOWS.









                                       13
<PAGE>   14


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



                                          INSURANCE AUTO AUCTIONS, INC.

 By:  /s/  T. J. O'Malia                  BY:  /s/  C. G. Knowles
      ---------------------------              -----------------------------
 Name: Thomas J. O'Malia                  Name:  Christopher G. Knowles
       --------------------------                ---------------------------
 Title:  Chairman                         Title:  Chief Executive Officer
         ------------------------                 --------------------------




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




















                                       14

</TEXT>
</DOCUMENT>
