Chief Operating Officer Employment Agreement

EMPLOYMENT AGREEMENT


THIS EMPLOYMENT AGREEMENT dated November 15, 1995, between Auto Bond Acceptance Co., a Texas corporation (the "Company"), and Adrian Katz, 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 Vice Chairman and Chief Operating Officer of the Company for a three-year term commencing on the date hereof and continuing until the three-year anniversary of the date hereof (such period being hereinafter sometimes called the "term of this Agreement"); provided, however, that the Company shall give the Employee at least six months notice of its intention not to extend the term of this Agreement and the term of this Agreement shall be automatically extended until six months shall have elapsed following delivery of such notice. 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 Vice Chairman and Chief Operating Officer 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 Vice Chairman and Chief Operating Officer 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 (i) grant Employee the Bonus Shares in accordance with the provisions of Section 10 hereof and (ii) pay to the Employee a salary of $12,500 (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, 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. 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 all pre-approved out-of-pocket expenses incurred by the Employee in relocating to the Austin, Texas area.


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


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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 Company terminated this Agreement. 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 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,
10 and 12 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


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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, (v) has breached any material term
or provision of this Agreement or (iv) has failed to relocate his
residence to the Austin, Texas area on or prior to June 30, 1996. 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.


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 ...