RESIGNATION AND RESTRICTIVE COVENANTS AGREEMENT
RESIGNATION
AND RESTRICTIVE COVENANTS AGREEMENT
THIS
RESIGNATION AND RESTRICTIVE COVENANTS AGREEMENT (this “Agreement”) is dated as
of December 4, 2006, and is entered into by and between Xxxxxxx X. Xxxxx
(“Executive”), Direct General Corporation, a Tennessee corporation (the
“Company”), and Elara Holdings, Inc., a Delaware corporation (“Holdco” or
"Parent").
RECITALS
WHEREAS,
pursuant to that certain Agreement and Plan of Merger (the “Merger Agreement”)
by and among the Company, Holdco, and Elara
Merger Corporation, a Tennessee corporation, and a wholly-owned subsidiary
of
Holdco ("Merger
Sub"),
Merger
Sub will be merged with and into the Company, with the Company surviving as
a
wholly-owned
subsidiary of Holdco
(the
"Merger");
WHEREAS,
as of
the date hereof, Executive is employed as the Chief Executive Officer ("CEO")
of
the Company and is subject to an Executive Employment Agreement with the
Company, dated July 21, 2003 (the "Employment Agreement"), which provides for
that certain severance payment as described therein and subject to the terms
and
conditions set forth therein;
WHEREAS,
in
connection with, and upon the consummation of, the Merger, Executive will
receive substantial consideration in exchange for the sale of his interest
in
the Company;
WHEREAS,
the
parties hereto desire that effective as of and contingent upon the consummation
of the Merger, Executive shall cease being an employee and officer of the
Company in all respects, including as Chief Executive Officer; and
WHEREAS,
the
parties hereto desire Executive to continue to serve as a member of the Board
of
Directors of the Company from and following the consummation of the Merger.
AGREEMENT
NOW,
THEREFORE,
in
consideration of the mutual covenants and promises contained herein and for
other good and valuable consideration, the receipt and sufficiency of which
are
hereby acknowledged, the parties hereto, each intending to be legally bound
hereby, agree as follows:
1. Resignation;
Continued Service on Board of Directors.
Executive
hereby resigns as CEO and Chairman of the Board of Directors of the Company
(the
"Board") effective as of, and contingent upon, the consummation of the Merger
and agrees that at such time he shall no longer be an employee or officer of
the
Company in any capacity. Executive hereby further agrees to continue to serve
as
a director on the Board and shall remain a director of the Company from and
following the consummation of the Merger subject to removal or renomination
and
reelection in accordance with the Company's charter and bylaws.
2. Waiver
of Change of Control Severance.
Executive
hereby knowingly and voluntarily agrees to waive any and all rights that he
may
have to any and all amounts provided under Section 3.3(i) of the Employment
Agreement as a result of or in connection with the Merger and to release the
Company, Parent, Holdco and/or any of their respective affiliates from any
and
all claims he may have thereto; provided, however, that such waiver and release
shall be contingent upon the consummation of the Merger, and shall have no
effect unless and until such consummation occurs. For the avoidance of all
doubt, the specific provision of the Employment Agreement being waived pursuant
to this Section 2 of this Agreement is as follows:
(i)
in the event Executive's employment is terminated in connection with a Change
of
Control, the Company shall make an additional payment of a lump sum amount
equal
to (a) three times his annual salary as in effect at the time plus (b) three
times the highest amount of his bonus paid to Executive within the three years
preceding such termination.
For
the
purposes of this Agreement, the parties acknowledge and agree that absent the
waiver contemplated by this Section 2, the severance amounts contemplated under
Section 3.3(i) of the Employment Agreement would become due and payable as
a
result of the Merger. The parties intend and hereby agree that this Section
2
shall amend the Employment Agreement to delete Section 3.3(i) set forth above
and to remove any and all amounts payable thereunder from the calculation under
Section 3.3 of the Employment Agreement of the "Aggregate Payment" and the
"Excise Tax," as each is defined in Section 3.3 of the Employment Agreement.
Except as described herein, this amendment is not intended to have, and shall
not be deemed to have, any effect on any of the remaining sections of the
Employment Agreement.
3. Severance
Benefit
The
parties expressly acknowledge and agree that effective as of, and contingent
upon, the consummation of the Merger, Executive's resignation pursuant to the
terms and conditions set forth in this Agreement, including Executive's
agreement to waive any entitlement to Section 3.3(i) of the Employment
Agreement, and Executive's execution and non-revocation of a binding general
waiver and release of claims, as required by the Employment Agreement, Executive
shall be entitled to receive the payments and benefits set forth in Section
3.3
of the Employment Agreement, provided, however, that the Company and Executive
expressly acknowledge and agree that, notwithstanding anything to the contrary
in the Employment Agreement, Executive's coverage under the Consolidated Omnibus
Budget Reconciliation Act of 1986 ("COBRA") shall be limited to the extent
such
coverage is required under and shall be governed solely by that statute.
In
addition to the severance benefits set forth in Section 3.3 of the Employment
Agreement, as amended herein, Executive also may be entitled to certain
additional benefits. Specifically, effective as of, and contingent upon, the
consummation of the Merger, Executive's resignation pursuant to the terms and
conditions set forth in this Agreement, and Executive's execution and
non-revocation of a binding general waiver and release of claims, Executive
shall be entitled to retain as his own property at no cost to him the following
items of property currently being provided by the Company for use by Executive,
provided that Executive shall be responsible for any and all taxes associated
with his retention of such property:
| (a) |
any
and all cellular telephones and corresponding cellular telephone
numbers;
|
| (b) |
the
2004 Cadillac Deville DTS having the vehicle identification number
of
0X0XX00000X000000; and
|
| (c) |
the
2006 Ford F150 truck having the vehicle identification number of
0XXXX00X00XX00000.
|
4. Exclusive
Services, Non-Solicitation and Non-Disclosure of Confidential
Information
(a) Executive
agrees that from the date his employment terminates and continuing for a period
of five (5) consecutive years, Executive shall not, either directly or
indirectly, make known to any person, firm, corporation or other legal entity
the names or addresses of any of the prospective (to Executive’s knowledge) or
current customers, clients, insureds, insurers, reinsurers, brokers, lenders,
suppliers, service providers, employees, agents, representatives, and/or
shareholders of the Company or any of its affiliates (hereinafter collectively
referred to as “Business Contacts”) or any other information pertaining to them.
Executive further agrees that, for a period of five (5) years immediately
following the date Executive’s employment with the Company terminates, Executive
shall not, either directly or indirectly, solicit (to the extent that such
solicitation in any way relates to or arises out of the provision — whether
proposed or actual or otherwise — of products and/or services similar in kind or
purpose to those provided or expected to be provided by the Company and/or
any
of its affiliates), divert, take away, or attempt to solicit, divert, or take
away any prospective (to Executive’s knowledge) or current Business Contacts or
any persons or legal entities that were prospective (to Executive’s knowledge)
or current Business Contacts at any point during Executive’s term of employment
with the Company, either for Executive or for any other person, firm,
corporation, or other legal entity. Nor shall Executive during the same period
contact or attempt to contact any prospective (to Executive’s knowledge) or
current Business Contacts for any reason in any way relating to or arising
out
of the provision (whether proposed or actual or otherwise) of products and/or
services similar in kind or purpose to those provided or expected to be provided
by the Company and/or any of its affiliates, other than ordinary course contact
by Executive as a consumer.
(b) Executive
agrees that for a period of five (5) consecutive years from the date Executive's
employment with the Company terminates, Executive shall not disrupt, damage,
impair or interfere with the business of the Company and/or any of its
affiliates, whether by way of interfering with or raiding their employees,
disrupting their relationships with any prospective (to Executive’s knowledge)
or current Business Contacts, or otherwise. Nor shall Executive during the
same
period either
directly or indirectly solicit, induce, recruit, or encourage to leave the
employment of the Company and/or any of its affiliates for any reason and/or
to
perform work for a competitor of the Company and/or any of its affiliates (as
an
employee, independent contractor, or otherwise) (such conduct is collectively
referred to as “solicitation”) any person who is then employed by the Company
and/or any of its affiliates or who left the employ of the Company and/or any
of
its affiliates less than one (1) year prior to the solicitation.
(c) Executive
agrees that for a period of five (5) consecutive years from the date his
employment with the Company terminates, he will not in any city, town, county,
parish or other municipality in any state of the United States or any other
place in the world that is indirectly or directly affected or reached by the
activities or services rendered by Executive on behalf of the Company at any
time during Executive's employment with the Company: (i) engage in a directly
or
indirectly competing business for Executive’s own account; (ii) enter the employ
of, or render any consulting or any other services to, any entity that competes
directly or indirectly with the Company and/or any of its affiliates; or (iii)
become interested in any such entity in any capacity, including, without
limitation, as an individual, partner, shareholder, officer, director,
principal, agent, trustee or consultant; provided, however, that Executive
may
own, directly or indirectly, solely as a passive investment, securities of
any
entity traded on any national securities exchange if Executive is not a
controlling person of, or a member of a group which controls, such entity and
does not, directly or indirectly, own 5% or more of any class of securities
of
such entity.
(d) Executive
acknowledges that, in his employment with the Company, he has occupied a
position of trust and confidence with the Company and/or its affiliates and
has
received training that has enhanced his skill and experience. Executive agrees
that he shall not without limitation in time or until such information shall
have become public other than by Executive’s unauthorized disclosure, use,
disclose or disseminate any trade secrets, confidential information or any
other
information of a secret, proprietary, confidential or generally undisclosed
nature (hereinafter collectively referred to as “Confidential Information”)
relating to the Company and/or any of its affiliates, or their respective
businesses, contracts, projects, proposed projects, revenues, costs, operations,
methods or procedures. Executive acknowledges that said information is
specialized, unique in nature and of great value to the Company and/or its
affiliates, and that such information gives the Company and/or its affiliates
a
competitive advantage in their businesses.
(e) Executive
agrees that following the termination of his employment with the Company, he
will not at any time, without the prior written consent of the Company,
communicate to any person, any trade secrets, confidential information or any
other information of a secret, proprietary, confidential or generally
undisclosed nature relating to the Company and/or its affiliates and/or their
businesses, or any other information referred to in subsection (d) of this
Section, obtained by Executive during Executive’s employment by the Company that
is not generally available public knowledge (other than by acts or omissions
by
Executive).
(f) Executive
acknowledges and agrees that (i) the trade secrets and confidential and related
information referred to in this Agreement and (ii) the relationships with the
Business Contacts referenced in this Agreement each are of substantial value
to
the Company and/or its affiliates and that a breach of any of the terms and
conditions of this Agreement relating to those subjects would cause irreparable
harm to the Company and/or its affiliates, for which the Company and/or its
affiliates would have no adequate remedy at law. Therefore, in addition to
any
other remedies that may be available to the Company and/or any of its affiliates
under this Agreement or otherwise, the Company and/or its affiliates shall
be
entitled to obtain temporary restraining orders, preliminary and permanent
injunctions and/or other equitable relief to specifically enforce Executive’s
duties and obligations under this Agreement, or to enjoin any breach of this
Agreement, without the need to post a bond or other security and without the
need to demonstrate special damages. Furthermore, Executive agrees that any
damages suffered by the Company and/or its affiliates as a result of Executive’s
breach of Executive’s duties and obligations under this Agreement shall entitle
the Company and/or its affiliates to offset such damages against any payments
to
be made pursuant to this Agreement or his Employment Agreement, to the extent
permitted by applicable law.
(g) Executive
and the Company intend that if any portion of the restrictions set forth in
this
Section 4 should, for any reason whatsoever, be declared invalid by an
arbitrator or a court of competent jurisdiction, the validity or enforceability
of the remainder of such restrictions shall not thereby be adversely affected,
and Executive declares that in light of his knowledge of the Company and his
position of trust and confidence as a founder and principal stockholder of
the
Company who, pursuant to the Merger will receive substantial consideration
in
exchange for the sale of his interest in the Company, the territorial and time
limitations set forth in this Section 4 are reasonable and properly required
for
the adequate protection of the business of the Company and/or its affiliates.
In
the event that any such territorial or time limitation is deemed to be
unreasonable by an arbitrator or a court of competent jurisdiction, Executive
agrees to the reduction of the subject territorial or time limitation to the
area or period which such arbitrator or court shall have deemed
reasonable.
(h) All
of
the provisions of this Section 4 are in addition to any other written agreements
on the subjects covered herein that Executive may have with the Company and/or
any of its affiliates, and are not meant to and do not excuse any additional
obligations that Executive may have under such agreements.
5. Return
of Company Property
Executive
agrees, upon the termination of his employment with the Company, to return
all
physical, computerized, electronic or other types of records, documents,
proposals, notes, lists, files and any and all other materials including,
without limitation, computerized and/or electronic information that refers,
relates or otherwise pertains to the Company and/or its affiliates, and any
and
all business dealings of said persons and entities. In addition, Executive
shall
return to the Company all property or equipment that Executive has been issued
during the course of Executive’s employment or which Executive otherwise
currently possesses, including, but not limited to, any computers, cellular
phones, BlackBerries, PDAs, and/or pagers. Executive shall immediately deliver
to the Company any such physical, computerized, electronic or other types of
records, documents, proposals, notes, lists, files, materials, property and
equipment that are in Executive’s possession. Executive acknowledges that
Executive is not authorized to retain any physical, computerized, electronic
or
other types of copies of any such physical, computerized, electronic or other
types of records, documents, proposals, notes, lists, files or materials, and
is
not authorized to retain any other property or equipment of the Company and/or
its affiliates. Executive further agrees that Executive will immediately forward
to the Company any business information regarding the Company and/or any of
its
affiliates that has been or is inadvertently directed to Executive following
Executive’s last day of employment with the Company. The provisions of this
Section are in addition to any other written agreements on this subject that
Executive may have with the Company and/or any of its affiliates, and are not
meant to and do not excuse any additional obligations that Executive may have
under such agreements.
6. Cooperation
in Third-Party Disputes
At
all
times after Executive's employment with the Company has terminated, Executive
shall cooperate with the Company and/or its affiliates and each of their
respective attorneys or other legal representatives (collectively referred
to as
“Attorneys”) in connection with any claim, litigation, or judicial or arbitral
proceeding which is now pending or may hereinafter be brought or threatened
against the Company and/or any of its affiliates by any third party. Executive’s
duty of cooperation shall include, but shall not be limited to, (a) meeting
with
the Company’s and/or its affiliates’ Attorneys by telephone or in person at
mutually convenient times and places in order to state truthfully Executive’s
knowledge of the matters at issue and recollection of events; (b) appearing
at
the Company’s and/or its affiliates’ and/or their Attorneys’ request (and, to
the extent possible, at a time convenient to Executive that does not conflict
with the needs or requirements of Executive’s then-current employer) as a
witness at depositions, trials or other proceedings, without the necessity
of a
subpoena, in order to state truthfully Executive’s knowledge of the matters at
issue; and (c) signing at the Company’s and/or its affiliates’ and/or their
Attorneys’ request declarations or affidavits that truthfully state the matters
of which Executive has knowledge. The Company shall promptly reimburse Executive
for Executive’s actual and reasonable travel or other out-of-pocket expenses
that Executive may incur in cooperating with the Company and/or its affiliates
and/or their Attorneys pursuant to this Section. The provisions of this Section
are in addition to any other written agreements on this subject that Executive
may have with the Company and/or its affiliates, and are not meant to and do
not
excuse any additional obligations that Executive may have under such
agreements.
7. Non-Disparagement
of the Company
Executive
agrees that at all times following the termination of his employment, he will
not make, directly or indirectly, any public or private statements, gestures,
signs, signals or other verbal or nonverbal, direct or indirect communications
that are or could be harmful to or reflect negatively on the Company and/or
any
of its affiliates and/or their businesses, or that are otherwise disparaging
of
the Company and/or any of its affiliates and/or their businesses, or any of
their past, present or future officers, directors, employees, advisors, agents,
policies, procedures, practices, decision-making, conduct, professionalism
or
compliance with standards. The provisions of this Section are in addition to
any
other written agreements on this subject that Executive may have with the
Company and/or any of its affiliates, and are not meant to and do not excuse
any
additional obligations that Executive may have under such
agreements.
8. Invalid
Provision
The
parties understand and agree that if any provision of this Agreement shall,
for
any reason, be adjudged by any court or arbitrator of competent jurisdiction
to
be invalid or unenforceable, such judgment shall not affect, impair, or
invalidate the remainder of this Agreement, but shall be confined in its
operation to the provision of this Agreement directly involved in the
controversy in which such judgment shall have been rendered.
9. Governing
Law
This
Agreement shall be governed by and construed and enforced in accordance with
the
laws of the State of Tennessee, without regard to its conflict of laws
rules.
10. Headings
Titles
or
captions of Sections contained in this Agreement are inserted only as a matter
of convenience and for reference, and in no way define, limit, extend or
describe the scope of this Agreement or the intent of any provisions
hereof.
11. Interpretation
Executive
understands that this Agreement is deemed to have been drafted jointly by the
parties. Any uncertainty or ambiguity shall not be construed for or against
any
party based on attribution of drafting to any party.
12. Notice
Any
and
all notice given hereunder shall be in writing and shall be deemed to have
been
duly given when received, if personally delivered; when transmitted, if
transmitted by telecopy, or electronic or digital transmission method, upon
receipt of telephonic or electronic confirmation; the day after the notice
is
sent, if sent for next day delivery to a domestic address using a generally
recognized overnight delivery service (e.g.,
FedEx);
and upon receipt, if sent by certified or registered mail, return receipt
requested. In each case notice will be sent as follows:
If
to the
Company: Direct
General Corporation
0000
Xxxxxxxxxxxx Xxxx
Xxxxxxxxx,
Xxxxxxxxx 00000
Attention:
[•]
Fax
Number: [•]
with
a
copy to: Elara
Holdings, Inc.
c/o
Fremont Partners III, L.P.
000
Xxxxxxx Xxxxxx
Xxx
Xxxxxxxxx, XX 00000
Attention:
Xxxxx Xxxxx, Esq.
Fax
Number: (000) 000-0000
If
to
Executive: Xxxxxxx
X. Xxxxx
[Address]
[City/State/Zip
code]
Telephone:
[•]
Facsimile:
[•]
Any
party
may change its address and/or facsimile number for notice purposes by duly
giving notice to the other party pursuant to this Section.
13. Waiver
Failure
to insist upon strict compliance with any of the terms, covenants, or conditions
hereof shall not be deemed a waiver of such term, covenant, or condition, nor
shall any waiver or relinquishment of, or failure to insist upon strict
compliance with, any right or power hereunder at any one or more times be deemed
a waiver or relinquishment of such right or power at any other time or times.
No
waiver of any breach of any term or provision of this Agreement shall be
construed to be, nor shall be, a waiver of any other breach of this Agreement.
No waiver shall be binding unless in writing and signed by the party waiving
the
breach.
14. Counterparts
This
Agreement may be executed in counterparts, which together shall constitute
one
and the same Agreement. The parties may execute more than one copy of this
Agreement, each of which copies shall constitute an original. A facsimile
signature shall be deemed to be the same as an original signature.
IN
WITNESS WHEREOF,
the
parties hereto, intending to be legally bound, have hereunto executed this
Agreement on the day and year first written above.
XXXXXXX
X. XXXXX
/s/
Xxxxxxx X. Xxxxx
Xxxxxxx X. Xxxxx
DIRECT
GENERAL CORPORATION
By:
/s/ Xxxxx X. Xxxxx
Its:
President
ELARA
HOLDINGS, INC.
By:
/s/ Xxxxx Xxxxxx
Its:
Vice
President, Secretary and Treasurer
