NON-COMPETITION AND CONFIDENTIALITY AGREEMENT
Exhibit 10.5
Execution Copy
Execution Copy
This
Non-Competition and Confidentiality Agreement the
(“Agreement”) is dated June 14,
2004, and is effective as of June 14, 2004 (the “Effective Date”), by and between American
Risk Pooling Consultants, Inc., a Michigan corporation (the “Company”), and Xxxxxx X. Xxxx
(“Stockholder”).
WHEREAS, the Company, Public Entity Risk Services of Ohio, Inc., an Ohio corporation (together
with the Company, the “Companies”), ARPCO Holdings, Inc., a Delaware corporation (the
“Purchaser”), Stockholder, Xxxxx X. Xxxxxxx and Xxxxxxx X. Xxxxxx (Stockholder, Spilkin and
Xxxxxx being collectively referred to herein as the “Sellers”) have entered into that
certain Stock Purchase Agreement dated as of March 1, 2004 (the “Purchase Agreement”),
pursuant to which the Purchaser has agreed to purchase from the Sellers all of the outstanding
shares of capital stock of the Companies;
WHEREAS, Stockholder will benefit from the consummation of the transactions contemplated by
the Purchase Agreement; and
WHEREAS, as a condition to the consummation of the transactions contemplated by the Purchase
Agreement, the Purchaser has required that Stockholder execute and deliver this Agreement and
Stockholder desires to do so.
NOW, THEREFORE, for and in consideration of the foregoing and the mutual covenants and
promises contained herein, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto, intending to be legally bound hereby, agree as follows:
1. Definitions. Capitalized terms used but not defined herein shall have the
meanings ascribed to them in the Purchase Agreement.
2. Consideration. In consideration of the covenants made by Stockholder herein, the
Company shall pay Stockholder $250,000 per year for each year of the Non-Competition Period (as
defined below), which amount shall be payable quarterly in advance; provided,
however, that in the event Stockholder breaches in any material respect any of the
covenants set forth herein and such breach is not cured to the reasonable satisfaction of the
Company within ten (10) days after written notice thereof is delivered to Stockholder, Stockholder
shall return all amounts paid to him by the Company and the Company shall have no further
obligation to make any payments hereunder.
3. Non-Competition. Stockholder covenants and agrees that during the Non-Competition
Period (as defined below) Stockholder will not:
(a) engage, directly or indirectly, in any manner (whether as an owner, officer,
director, partner, manager, employee, independent contractor, consultant or otherwise) in
the Business (as defined below) anywhere in the Territory; provided,
however, that the passive ownership by Stockholder of no more than
one percent
(1%) of the total equity securities of a publicly-traded entity shall not violate the
provisions of this Section 3;
(b) engage, directly or indirectly, in any activity that competes with the Business
anywhere in the Territory;
(c) accept employment with or provide any services to, directly or indirectly, in any
manner (whether as an owner, officer, director, partner, manager, employee, independent
contractor, consultant or otherwise) any competitor of the Business; or
(d) attempt in any way, directly or indirectly, to obtain for himself, or others, or
to divert from the Company or its Subsidiary and Affiliates any rights, benefits, sales or
profits arising out of or in connection with the Business.
For purposes hereof, “Territory” shall mean the United States.
For purposes hereof, the “Non-Competition Period” shall mean the period beginning on the
Effective Date and ending upon a Change of Control. For purposes hereof, “Change of
Control” shall mean (i) a merger or consolidation of the Company or the Purchaser with or into
another corporation or other entity pursuant to which the equity holders of the surviving
corporation or entity that did not beneficially own a majority of the voting power of the
outstanding shares of capital stock of the Company immediately prior to such merger or
consolidation, the effect of which is that such party or group beneficially owns at least a
majority of such voting power immediately after such merger or consolidation; (ii) the sale, lease,
license, conveyance or transfer of all or substantially all of the assets of the Company or the
Purchaser; (iii) except for the transactions contemplated by the Purchase Agreement, any purchase
of shares of capital stock of the Company or the Purchaser (either through a negotiated stock
purchase or a tender for such shares) by any party or group, through one, or a series of related
transactions, that did not beneficially own a majority of the voting power of the outstanding
shares of capital stock of the Company or the Purchaser immediately prior to such purchase, the
effect of which is that such party or group beneficially owns at least a majority of such voting
power immediately after such purchase; or (iv) any liquidation, dissolution or winding up of the
Company or the Purchaser, whether voluntary or involuntary.
For purposes hereof, “Business” shall mean, collectively, (i) the provision or coordination
of accounting, finance, claims handling, underwriting, investment and general welfare services as a
third party administrator for public entity risk pools or excess reinsurance pools and their
members; (ii) any brokerage, agency, managing general agency, administrator, third-party
administrator, insurance or other similar activities relating to the property and casualty or
excess and surplus segments of the insurance industry; and (iii) any other business in which the
Company or any direct or indirect parent company or Subsidiary of the Company is engaged during the
term hereof.
4. Non-Solicitation. Stockholder covenants and agrees that during the
Non-Competition Period, Stockholder will not, directly or indirectly, in any manner (whether
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as an
owner, officer, director, partner, manager, employee, independent contractor, consultant or
otherwise):
(a) solicit any customer of the Company or its Subsidiary for products or services
competitive with the Company or its Subsidiary; or
(b) solicit for employment or other services or employ or engage as a consultant or
otherwise any person who is or was an employee of the Company or its Subsidiary and
Affiliates.
The covenant in subparagraph (a) above applies to those customers and the related entities of the
customers to which the Company or its Subsidiary sold any of its products or services during the
twelve (12) month period prior to the termination of Stockholder’s relationship with the Company as
an owner, officer, director, employee, consultant or otherwise, and those prospective customers
with which the Company or its Affiliates pursued sales during such period. The covenant in
paragraph (b) above will not prohibit any general solicitation for employment by Stockholder or any
of his Affiliates not specifically directed at employees of the Company or its Subsidiary and
Affiliates.
5. Non-Disparagement. Stockholder covenants and agrees that from the Effective Date
and thereafter, (i) Stockholder shall not induce or incite claims of discrimination, wrongful
discharge, or any other claims against the Company, or any of its Affiliates (including their
directors, officers, employees or equity holders), by any other persons, employees or entities,
(ii) Stockholder shall not undertake any harassing or disparaging conduct directed at the Company,
or any of its Affiliates (including any of their directors, officers, employees or equity holders),
and (iii) Stockholder shall not make any negative or derogatory statements concerning the Company,
or the any of its Affiliates (including their officers, directors, employees, equity holders and
agents) or the Company’s products or services.
6. Assignment. The Company shall have the right to assign, in whole or in part and
from time to time, to any purchaser of any segment of the Business, the rights of the Company set
forth in Sections 3, 4 and 5 of this Agreement to the extent that they relate to the segment of the
Business that is transferred to such purchaser and, upon such assignment, the provisions of
Sections 3, 4 and 5 shall continue to bind Stockholder in the same manner as prior to such
assignment.
7. Confidential Information.
(a) Non-Disclosure. Stockholder in the past has learned and had access to and
may, from time to time, learn or have additional access to information and/or materials,
constituting trade secrets and other confidential and proprietary information of the
Company or its Subsidiary or predecessors, or of third parties to whom the Company or its
Subsidiary or predecessors is obligated to maintain the
confidentiality of, including, but not by way of limitation, financial data, pricing
information, technical data, future plans, customer and prospective customer requirements
and marketing techniques and procedures (the
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“Confidential Information”).
Notwithstanding the foregoing, information which is or becomes generally available to the
public other than as a result of a disclosure by the Stockholder in violation of this
Agreement or other obligation of confidentiality shall not be deemed Confidential
Information for purposes hereof. Neither the Company nor its Subsidiary shall be required
to advise Stockholder specifically of the confidential nature of any such Confidential
Information, nor shall the Company or its Subsidiary be required to affix a designation of
confidentiality to any tangible item delivered or made available to Stockholder, in order
to establish and maintain the confidential nature of the same. Confidential Information
shall include any work product of Stockholder developed or to be developed as a part or in
furtherance of, or during the working hours of, Stockholder’s relationship with the Company
as an owner, officer, director, employee, consultant or otherwise, including all financial
data, customers and prospective customers developed or to be developed or identified or to
be identified by Stockholder. All Confidential Information provided to Stockholder by the
Company or its Subsidiary or predecessors or to which Stockholder, intentionally or
inadvertently, otherwise becomes aware, knowledgeable, or in possession of as a direct or
indirect result of Stockholder’s relationship with the Company as an owner, officer,
director, employee, consultant or otherwise shall be held and protected by Stockholder with
the strictest confidentiality, and Stockholder shall not, whether during or after the
termination of such relationship, cause or allow any of the Confidential Information to be
disclosed, delivered, transferred, or otherwise made known to any person or entity not
expressly authorized by the Company to receive or be made aware of the same. Disclosure of
Confidential Information by Stockholder, except as specifically required in the performance
of his duties to the Company, to any person or entity not then an employee of the Company
who is not subject to a confidentiality agreement similar to this Section 7 and with a need
to know such Confidential Information shall require prior written authorization by the
Board of Directors of the Company.
(b) Limitation on Use. All Confidential Information of the Company or its
Subsidiary or predecessors, or of any third party to whom the Company or its Subsidiary or
predecessors owes a duty of non-disclosure, which Stockholder has received, receives or
becomes knowledgeable of shall be utilized by Stockholder for the singular purpose of
carrying out Stockholder’s duties and undertakings on behalf of the Company. Stockholder
shall diligently protect and maintain the confidentiality of the Confidential Information.
In no event shall Stockholder, whether during or after termination of his relationship with
the Company, copy any Confidential Information, except as needed, nor utilize any
Confidential Information in a manner so as to compete with the Company or its Subsidiary,
or to aid or further the competition of any other person or entity with the Company or its
Subsidiary, or to otherwise disclose or dispose thereof for personal gain or for any
reason injurious to the interests of the Company or its Subsidiary. Upon termination
of Stockholder’s relationship with the Company, Stockholder shall immediately turn over to
the Company all books, records,
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financial data, price lists, customer lists and other
material relating to the business of the Company or its Subsidiary.
8. Release. In the event the Company fails to make payments required hereunder
(other than in connection with a good faith dispute with Stockholder) and such failure continues
for a period of twenty (20) days after written notice thereof is delivered to the Company,
Stockholder shall have no further obligations under Section 3 above.
9. Construction. Whenever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law, but if any provision
of this Agreement or the application thereof to any party or circumstance shall be prohibited by or
invalid under applicable law, including, without limitation, by reason of its being extended over
too great a period of time or too large a geographic area or over too great a range of activities
or otherwise, such provision shall be ineffective to the minimal extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the remaining provisions of
this Agreement or the application of such provision and, if applicable, such provision shall be
interpreted to extend only over the maximum period of time, geographic area or range of activities
as to which it may be enforceable.
10. Injunctive Relief and Other Remedies. Stockholder agrees that any breach of the
provisions hereof will result in irreparable damage to the Company for which the Company will have
no adequate remedy at law, and, therefore if such a breach should occur, Stockholder consents to
any temporary or permanent injunction or decree of specific performance by any court of competent
jurisdiction in favor of the Company enjoining any such breach, without prejudice to any other
right or remedy to which the Company shall be entitled and without requirement of a bond or other
security.
11. Costs of Enforcement. In the event either party brings an action or proceeding to
enforce any provision or provisions of this Agreement or to obtain damages as a result of a breach
of this Agreement or to enjoin any breach of this Agreement, the prevailing party in such action or
proceeding shall be entitled to recover from the non-prevailing party any and all reasonable costs
and expenses (including, without limitation, attorneys’ fees) incurred by such prevailing party in
connection with such action or proceeding.
12. Extension of Time Period. The time periods for the restrictions set forth in this
Agreement shall be extended by the number of days in which Stockholder is in breach of such
restrictions.
13. Notices. Any notice required to be given with respect to this Agreement shall be
in writing, and shall be deemed to have been duly given: (a) when delivered personally; (b) two (2)
business days after being deposited with a nationally recognized
overnight courier with instructions for next day delivery; (c) one (1) day after receipt of
electronic confirmation if sent by facsimile or electronic mail; and (d) five (5) business days
after being deposited in the mails, certified or registered, return receipt requested, and with the
proper postage prepaid, addressed as follows:
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| If to the Company: | American Risk Pooling Consultants, Inc. | |||
| c/o Glencoe Capital, LLC | ||||
| 000 Xxxx Xxxxx Xxxxxx, Xxxxx 0000 | ||||
| Xxxxxxx, Xxxxxxxx 00000 | ||||
| Attention: Xxxxxxx Xxxxxxxxx | ||||
| Facsimile: (000) 000-0000 | ||||
| with a copy to: | ||||
| XxXxxxxxx, Will & Xxxxx | ||||
| 000 Xxxx Xxxxxx Xxxxxx | ||||
| Xxxxxxx, Xxxxxxxx 00000 | ||||
| Attention: Xxxxx X. Xxxxxxxx, Esq. | ||||
| Facsimile: (000) 000-0000 | ||||
| If to Stockholder: | Xxxxxx X. Xxxx | |||
| 0000 Xxxx Xxxx | ||||
| Xxxxxxx Xxxx, Xxxxxxxx 00000 | ||||
| and | ||||
| Xxxxxx X. Xxxx | ||||
| 3 Grove Isle | ||||
| Penthouse 1 | ||||
| Xxxxxxx Xxxxx, Xxxxxxx 00000 | ||||
| with a copy to: | ||||
| Spilkin, Xxxxxxx & Xxxxxx, P.C. | ||||
| 00000 Xxxxxxxxxxxx Xxx. | ||||
| Xxxxxxxxxx, Xxxxxxxx 00000 | ||||
| Attention: Xxxxx X. Xxxxxxx, Esq. |
The address of any party hereto may be changed by a notice in writing given in accordance with the
provisions hereof.
14. Amendments and Waiver. No amendment, waiver or consent with respect to any
provision of this Agreement shall in any event be effective, unless the same shall be in writing
and signed by each of the parties hereto, and then such amendment, waiver or consent shall be
effective only in the specific instance and for the specific purpose for which given.
15. Entire Agreement. This Agreement contains the entire understanding of the parties
hereto respecting the subject matter hereof and supersedes all prior agreements, discussions and
understandings.
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16. Assignment; Successors. Stockholder may not assign any of his obligations
hereunder. Any assignment in violation of the foregoing shall be null and void. Subject to the
foregoing, this Agreement shall be binding upon the parties hereto and shall inure to the benefit
of the parties hereto and their respective heirs, executors, administrators, legal representatives,
successors and permitted assigns.
17. Counterparts. This Agreement may be executed in one or more counterparts, each of
which shall constitute but one and the same instrument. One or more counterparts of this Agreement
may be delivered via facsimile, with the intention that they shall have the same effect as an
original counterpart hereof.
18. Non-Waiver of Breach. A waiver by any party hereto of a particular breach or
default by another party in connection with any provision of this Agreement must be in writing and
shall not be deemed a waiver of a default by a third party or any subsequent default or breach of
the same or any other provision of this Agreement.
19. GOVERNING LAW. THE VALIDITY AND EFFECT OF THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE INTERNAL SUBSTANTIVE LAWS OF THE STATE OF DELAWARE.
EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION
WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR PROCEEDING ARISING
OUT OF OR RELATING TO THIS AGREEMENT OR ANY JUDGMENT ENTERED BY ANY COURT IN RESPECT THEREOF
BROUGHT IN ILLINOIS OR THE U.S. DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS, AND HEREBY
FURTHER IRREVOCABLY WAIVES ANY CLAIM THAT ANY SUIT, ACTION OR PROCEEDINGS BROUGHT IN ILLINOIS OR IN
SUCH DISTRICT COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. THE PARTIES HERETO HEREBY WAIVE ANY
RIGHT TO A TRIAL BY JURY IN ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF, OR WITH RESPECT TO, THIS
AGREEMENT AND AGREE THAT ANY SUCH SUIT, ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT
BEFORE A JURY.
* * *
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year
first above written.
| COMPANY: | ||||||
| American Risk Pooling Consultants, Inc. | ||||||
| By: | /s/ Xxxxxxx X. Xxxxx | |||||
| Name: | Xxxxxxx X. Xxxxx | |||||
| Title: | Vice President | |||||
| STOCKHOLDER: | ||||||
| /s/ Xxxxxx X. Xxxx | ||||||
| Xxxxxx X. Xxxx | ||||||
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