SPECIAL COMMITTEE INDEMNIFICATION AGREEMENT
SPECIAL
COMMITTEE INDEMNIFICATION AGREEMENT
SPECIAL
COMMITTEE INDEMNIFICATION AGREEMENT
(this
"Agreement")
dated
as of December 4, 2006, by and between Direct General Corporation (the
"Company"),
a
Tennessee corporation, and _______________________ ("Indemnitee"):
WHEREAS,
the
Indemnitee is provided indemnification pursuant to the Tennessee Business
Corporation Act and the Charter and Bylaws of the Company;
WHEREAS,
the
Board of Directors of the Company (the "Board")
on
June 5, 2006 authorized entering into an indemnification agreement with each
of
the members of the Special Committee first established by the Board on
May 19, 2006 (the "Special
Committee"),
and
Indemnitee has accepted appointment to the Special Committee in reliance upon
the authorization by the Board; and
WHEREAS,
it is
reasonable and prudent for the Company contractually to obligate itself to
indemnify each member of the Special Committee;
NOW,
THEREFORE,
in
consideration of the premises, the mutual agreements herein set forth below
and
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties agree as follows:
1. Services
by Indemnitee; Notice of Proceeding.
(a) Services.
Indemnitee may at any time and for any reason resign from the Board or the
Special Committee.
(b) Notice
of Proceeding.
Indemnitee shall promptly notify the Company in writing upon being served with
any summons, citation, subpoena, complaint, indictment, information or other
document relating to any Proceeding or matter that may be subject to
indemnification or advancement of Expenses (as defined below) covered by this
Agreement.
2. Indemnification.
(a) General.
The Company shall indemnify and advance Expenses to Indemnitee in connection
with any action, suit, arbitration, alternate dispute resolution mechanism,
investigation, administrative hearing or any other actual, threatened or
completed proceeding whether civil, criminal, administrative or investigative,
direct or derivative, other than one initiated directly by Indemnitee, and
which
arises out of or is related to service by Indemnitee as a member of the Special
Committee and to which Indemnitee is or is threatened to be made a party (a
"Proceeding").
"Expenses"
shall
mean all reasonable attorneys' fees, retainers, court costs, transcript costs,
fees of experts, witness fees, reasonable and necessary travel expenses,
duplicating costs, printing and binding costs, telephone charges, postage,
delivery service fees, and all other disbursements or expenses of the types
customarily incurred in connection with prosecuting, defending, preparing to
prosecute or defend, investigating, being or preparing to be a witness in a
Proceeding, for which reasonable and appropriate documentation is presented
to
the Company in accordance with the Company's standard policies and procedures
for submission and reimbursement of business expenses.
(b) Proceedings.
Subject to the terms and conditions of this Agreement, the Company shall
indemnify Indemnitee against Expenses, judgments, penalties, fines and amounts
paid in settlements actually and reasonably incurred by Indemnitee or on
Indemnitee's behalf in connection with such Proceeding or any claim, issue
or
matter therein. The Company may through counsel of its choosing participate
with
Indemnitee in the defense in a claim in any Proceeding. If the Company elects
to
participate with Indemnitee in the defense a claim, the Company shall be
responsible for the costs of its legal counsel. Indemnitee shall not agree
to or
enter into any settlement or consent decree with respect to any claim without
providing the Company with prior written notice.
(c) Indemnification
for Expenses As a Witness.
To the extent that Indemnitee is a witness in any Proceeding, Indemnitee shall
be indemnified against all Expenses actually and reasonably incurred by
Indemnitee or on Indemnitee's behalf in connection therewith.
3. Advancement
of Expenses.
The Company shall advance all reasonable Expenses which were incurred by or
on
behalf of Indemnitee in connection with any Proceeding within 30 days after
the
receipt by the Company of a statement from Indemnitee requesting such advance,
provided the statement is accompanied by appropriate documentation of such
Expenses in accordance with the Company's usual policies for reimbursement
of
business expenses. An advance may be requested at any time prior to, during
or
after final disposition of such Proceeding.
4. Entitlement
to Indemnification.
(a) Request.
To obtain indemnification under this Agreement, Indemnitee shall submit to
the
Company a written request for indemnification, including such information as
is
reasonably available to Indemnitee to demonstrate that Indemnitee is entitled
to
indemnification, and including invoices or other appropriate support for the
amount claimed in accordance with the Company's standard policies for of
reimbursement of business expenses.
(b) Payment.
Unless the procedures set forth in Section 6
of this
Agreement are invoked by the Company or unless Indemnitee shall permit the
Company to defer payment, payment to Indemnitee shall be made within 30 days
after receipt of such written request and invoices or other support as provided
in Section 4(a), above.
5. Presumptions
and Effect of Certain Proceedings.
(a) Burden
of Proof.
In making a determination with respect to entitlement to Indemnification
hereunder, the person or persons or entity making such determination shall
presume that Indemnitee is entitled to indemnification under this Agreement
if
Indemnitee has submitted a request for indemnification in accordance with
Section 4(a)
of this
Agreement, and the Company shall have the burden of proof to overcome that
presumption in connection with the making by any person, persons or entity
of
any determination contrary to that presumption.
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(b) Effect
of Other Proceedings.
The termination of any Proceeding or of any claim, issue or matter therein,
by
judgment, order, settlement or conviction, or upon a plea of nolo
contendere
or its
equivalent, shall not (except as otherwise expressly provided in this Agreement,
the Tennessee Business Corporation Act, as such may be amended from time to
time, or by the Charter or Bylaws of the Company in effect on the date of this
Agreement) of itself adversely affect the right of Indemnitee to indemnification
or create a presumption that Indemnitee did not act in good faith or violated
the duty of loyalty.
(c) Reliance
as Safe Harbor. For
purposes of any determination of good faith by the Company under the Tennessee
Business Corporation Act, Indemnitee shall be deemed to have acted in good
faith
if Indemnitee's action is based on the records or books of account of the
Company, including financial statements, or on information supplied to
Indemnitee by the officers of the Company in the course of their duties, or
on
the advice of legal counsel for the Company, the Board or any permanent or
temporary committee thereof (including, without limitation, the Special
Committee) or on information or records given or reports made to the Company,
the Board or any permanent or temporary committee thereof (including, without
limitation, the Special Committee) by an independent certified public
accountant, investment banker or other expert selected with reasonable care
by
the Company, the Board or any permanent or temporary committee thereof
(including, without limitation, the Special Committee). The provisions of this
Section 5(c)
shall
not be deemed to be exclusive or to limit in any way the other circumstances
in
which the Indemnitee may be deemed to have met the applicable standard of
conduct set forth under applicable law.
(d)
Actions
of Others.
The
knowledge and/or actions, or failure to act, of any director, officer, agent
or
employee of the Company shall not be imputed to Indemnitee for purposes of
determining the right to indemnification under this Agreement.
6. Remedies
of Indemnitee.
(a) Method
of
Determination. If the Company determines not to honor a written request for
indemnification, it shall notify Indemnitee within 30 days of receipt of such
request (a "Denial Notice"). Within 30 days of delivery of a Denial Notice
to
Indemnitee, Indemnitee may appeal the denial of indemnity by delivery of written
notice (a "Denial Appeal") to the Company invoking its right to have an
Independent Counsel consider its right to the indemnification
requested.
"Independent Counsel" shall
mean a
law firm, or a member of a law firm, that is experienced in matters of Tennessee
corporation law and neither presently is, nor in the past five years has been,
retained to represent: (i) the Company or Indemnitee in any matter material
to
either such party or (ii) any other party to the Proceeding giving rise to
a
claim for indemnification hereunder. Notwithstanding the foregoing, the term
"Independent Counsel" shall not include any person who, under the applicable
standards of professional conduct then prevailing, would have a conflict of
interest in representing either the Company or Indemnitee in an action to
determine Indemnitee's rights under this Agreement. The Independent Counsel
shall represent the Board of Directors of the Company and shall be engaged
to
make a fair, disinterested evaluation of the Indemnitee's right, or lack
thereof, to indemnification under the facts being considered by the Board,
and
shall not be bound by any duty to advocate the position of the Company
(notwithstanding that the Company is paying the fees of the Independent Counsel,
as provided below). The Independent Counsel shall consider the merits of
Indemnitee's written request for indemnification and shall deliver a written
opinion to the Board on the matter (with a copy to Indemnitee).
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(b) Selection,
Payment, Discharge, of Independent Counsel.
The Independent Counsel shall be selected, paid and discharged in the following
manner:
(1) The
Independent Counsel shall be selected by Indemnitee (unless Indemnitee shall
request that such selection be made by the Board, in which event
clause (2)
of this
Section 6(b)
shall
apply), and Indemnitee shall give written notice to the Company advising it
of
the identity of the Independent Counsel so selected.
(2) If
Indemnitee requests that such selection be made by the Board, the Independent
Counsel shall be selected by the Board, and the Company shall give written
notice to Indemnitee advising Indemnitee of the identity of the Independent
Counsel so selected.
(3) Following
the initial selection described in clauses (1)
and
(2)
of this
Section 6(b),
Indemnitee or the Company, as the case may be, may, within 15 days after such
written notice of selection has been given, deliver to the other party a written
objection to such selection. Such objection may be asserted only on the ground
that the Independent Counsel so selected does not meet the requirements of
an
"Independent Counsel" as defined in this Agreement, and the objection shall
set
forth with particularity the factual basis of such assertion. Absent a proper
and timely objection, the person so selected shall act as Independent Counsel.
If such written objection is made, the Independent Counsel so selected may
not
serve as Independent Counsel unless and until (1) a court has determined that
such objection is without merit or (2) Indemnitee and the Company later agree
in
writing that such person may serve as Independent Counsel.
(4) Either
the Company or Indemnitee may petition any court of competent jurisdiction
if
the parties have been unable to agree on the selection of Independent Counsel
within 20 days after submission by Indemnitee of a written request for
appointment of an Independent Counsel, pursuant to Section 6 (a) of this
Agreement. Such petition may request a determination whether an objection to
the
party's selection is without merit and/or seek the appointment as Independent
Counsel of a person selected by the Court or by such other person as the Court
shall designate. A person so appointed shall act as Independent Counsel under
Section 6(a)
of this
Agreement.
(5) The
Company shall pay any and all reasonable fees and expenses of Independent
Counsel incurred by such Independent Counsel in connection with acting pursuant
to this Agreement, and the Company shall pay all reasonable fees and expenses
incident to the procedures of this Section 6(b),
regardless of the manner in which such Independent Counsel was selected or
appointed.
(c) Cooperation.
Indemnitee shall cooperate with the person, persons or entity making the
determination with respect to Indemnitee's entitlement to indemnification under
this Agreement, including providing to such person, persons or entity upon
reasonable advance request any documentation or information which is not
privileged or otherwise protected from disclosure and which is reasonably
available to Indemnitee and reasonably necessary to such determination. Any
costs or expenses (including attorneys' fees and disbursements) incurred by
Indemnitee in so cooperating with the person, persons or entity making such
determination shall be borne by the Company (irrespective of the determination
as to Indemnitee's entitlement to indemnification) and the Company hereby
indemnifies and agrees to hold Indemnitee harmless therefrom.
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(d) Adjudication.
In the event of a Dispute, Indemnitee shall be entitled to an adjudication
in a
court of competent jurisdiction of Indemnitee's entitlement to such
indemnification or advancement of Expenses. "Dispute"
shall
mean that any of the following have occurred, and Indemnitee has not agreed
in
writing to permit the Company to do the following:
(1) payment
of indemnification is not made pursuant to Section 4(a)
of this
Agreement within 30 days after receipt by the Company of a written request
therefor;
(2) advancement
of Expenses is not timely made pursuant to Section 2(b)
of this
Agreement;
(3) payment
of indemnification is not made within 30 days after a determination has been
made that Indemnitee is entitled to indemnification pursuant to
Section 6(a)
of this
Agreement; or
(4) if
the
determination of entitlement to be made pursuant to Section 6(a)
of this
Agreement has not been made within 60 days after receipt by the Company of
a
Denial Appeal.
(e) De
Novo Review.
In the event that there is a Dispute involving disagreement between
Indemnitee and the Company with a determination made by an Independent Counsel
pursuant to Section 6(a)
of this
Agreement concerning Indemnitee's entitlement, or lack thereof, to
indemnification, any judicial proceeding commenced pursuant to this
Section 6
shall be
conducted in all respects as a
de
novo
trial on
the merits, and neither party shall be prejudiced by reason of the Independent
Counsel's determination. In any such proceeding, the Company shall have the
burden of proving that Indemnitee is not entitled to indemnification or
advancement of Expenses, as the case may be.
(f) Procedures
Valid.
The Company and Indemnitee shall be precluded from asserting in any judicial
proceeding or arbitration commenced pursuant to this Section 6
that the
procedures and presumptions of this Agreement are not valid, binding and
enforceable and shall stipulate in any such court that they are bound by all
of
the provisions of this Agreement.
(g) Expenses
of Adjudication.
In the event that it is Indemnitee who, pursuant to this
Section 6,
seeks a
judicial adjudication of Indemnitee's rights under, or to recover damages for
breach of, this Agreement, and the final ruling in such adjudication is in
favor
of Indemnitee's claims, then Indemnitee shall be entitled to recover from the
Company, and shall be indemnified by the Company against, any and all expenses
(of the types described in the definition of Expenses in this Agreement)
actually and reasonably incurred by Indemnitee in such adjudication.
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7. Non-exclusivity,
Insurance, Subrogation.
(a) Non-Exclusivity.
The rights of indemnification and to receive advancement of Expenses as provided
by this Agreement shall not be deemed exclusive of any other rights to which
Indemnitee may at any time be entitled under applicable law, the Charter, the
Bylaws, any agreement, a vote of stockholders or a resolution of directors,
or
otherwise. No amendment, alteration, rescission or replacement of this Agreement
or any provision hereof shall be effective as to Indemnitee with respect to
any
action taken or omitted by such Indemnitee prior to such amendment, alteration,
rescission or replacement.
(b) Insurance.
The Company may maintain an insurance policy or policies against liability
arising out of this Agreement or otherwise.
(c) No
Duplicative Payment.
The Company shall not be liable under this Agreement to make any payment of
amounts otherwise indemnifiable hereunder if and to the extent that Indemnitee
has otherwise actually received such payment under any insurance policy,
contract, agreement or otherwise.
8. Miscellaneous
Provisions.
(a) Term
of Agreement.
This Agreement shall continue until and terminate upon the later of: (a) 10
years after the date that Indemnitee has ceased to serve as a director, officer,
employee, agent or fiduciary of the Company or (b) the final termination of
all
pending Proceedings in respect of which Indemnitee is granted rights of
indemnification or advancement of expenses hereunder and of any proceeding
commenced by Indemnitee pursuant to Section 6
of this
Agreement relating thereto.
(b) Counterparts.
This
Agreement may be executed in separate counterparts, each of which will be an
original and all of which taken together shall constitute one and the same
agreement, and any party hereto may execute this Agreement by signing any such
counterpart.
(c) Severability.
Whenever possible, each provision of this Agreement shall be interpreted in
such
a manner as to be effective and valid under applicable law but if any provision
of this Agreement is held to be invalid, illegal or unenforceable under any
applicable law or rule, then such provision shall be deemed modified to the
extent required to carry out the intent of this Agreement, and the validity,
legality and enforceability of the other provisions of this Agreement will
not
be affected or impaired thereby.
(d) Successors
and Assigns.
This Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective heirs, personal representatives and successors
and
assigns.
(e) Modification,
Amendment, Waiver or Termination.
No provision of this Agreement may be modified, amended, waived or terminated
except by an instrument in writing signed by the parties to this Agreement.
No
course of dealing between the parties will modify, amend, waive or terminate
any
provision of this Agreement or any rights or obligations of any party under
or
by reason of this Agreement.
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(f) Notices.
All notices, consents, requests, instructions, approvals or other communications
provided for herein shall be in writing and delivered by personal delivery,
overnight courier, mail or electronic facsimile addressed to the receiving
party
at the address set forth herein. All such communications shall be effective
when
received at the address or facsimile number for notice, except for notices
sent
by U.S. mail, which shall be effective on the third day after deposit in the
mail, properly addressed and postage prepaid.
|
If
to the Company:
0000
Xxxxxxxxxxxx Xxxx
Xxxxxxxxx,
Xxxxxxxxx 00000
Attention:
Xxxxxx X. Xxxxxx
|
If
to the Indemnitee:
_____________________
_____________________
|
Any
party
may change the address set forth above by notice to each other party given
as
provided herein.
(g) Headings.
The headings and any table of contents contained in this Agreement are for
reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
(h) Governing
Law.
ALL MATTERS RELATING TO THE INTERPRETATION, CONSTRUCTION, VALIDITY AND
ENFORCEMENT OF THIS AGREEMENT SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE
STATE OF TENNESSEE, WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW PROVISIONS
THEREOF.
(i) Third-Party
Benefit.
Nothing in this Agreement, express or implied, is intended to confer upon
any other person any rights, remedies, obligations or liabilities of any nature
whatsoever.
(j) Jurisdiction
and Venue.
THIS
AGREEMENT MAY BE ENFORCED IN ANY FEDERAL COURT OR STATE COURT SITTING IN
TENNESSEE, AND EACH PARTY CONSENTS TO THE JURISDICTION AND VENUE OF ANY SUCH
COURT AND WAIVES ANY ARGUMENT THAT VENUE IN SUCH FORUM IS NOT CONVENIENT. IF
ANY
PARTY COMMENCES ANY ACTION UNDER ANY TORT OR CONTRACT THEORY ARISING DIRECTLY
OR
INDIRECTLY FROM THE RELATIONSHIP CREATED BY THIS AGREEMENT IN ANOTHER
JURISDICTION OR VENUE, ANY OTHER PARTY TO THIS AGREEMENT SHALL HAVE THE OPTION
OF TRANSFERRING THE CASE TO THE ABOVE-DESCRIBED VENUE OR JURISDICTION OR, IF
SUCH TRANSFER CANNOT BE ACCOMPLISHED, TO HAVE SUCH CASE DISMISSED WITHOUT
PREJUDICE.
(k) Tennessee
Code.
The parties agree that notwithstanding any provision of this Agreement, no
indemnification authorized by this Agreement shall be made if the Company proves
that such payment is expressly prohibited by the provisions of the Tennessee
Business Corporation Act, as such may be amended from time to time, or by the
Charter or Bylaws of the Company in effect on the date of this Agreement. This
Agreement shall not be deemed to deny Indemnitee the benefit of any future
amendment to the Charter or Bylaws of the Company that expands the scope of
Indemnitee's rights to indemnification or advancement of Expenses. Any amendment
to the Charter or Bylaws of the Company that diminishes the scope of
Indemnitee's rights to indemnification or advancement of Expenses shall not
diminish Indemnitee's rights under this Agreement.
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(l) Remedies.
The parties agree that money damages may not be an adequate remedy for any
breach of the provisions of this Agreement and that any party may, in its
discretion, apply to any court of law or equity of competent jurisdiction for
specific performance and injunctive relief in order to enforce or prevent any
violations this Agreement, and any party against whom such proceeding is brought
hereby waives the claim or defense that such party has an adequate remedy at
law
and agrees not to raise the defense that the other party has an adequate remedy
at law.
[signature
page follows]
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IN
WITNESS WHEREOF,
the
parties hereto have executed this Special Committee Indemnification Agreement
as
of the date set forth in the first paragraph.
DIRECT
GENERAL CORPORATION
______________________________________________
Xxxxxxx
X. Xxxxx, Xx.
Chairman
and Chief Executive Officer
INDEMNITEE
______________________________________________
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