Exhibit 10.6
EXECUTION COPY
SHAREHOLDER COVENANT AGREEMENT
THIS SHAREHOLDER COVENANT AGREEMENT is made and entered into effective as
of the January 26, 2005, by and between Xxxxxxx X. Xxxxx, Xxxxxxx X. Xxxxx,
Xxxxxxx X. Xxxxxx and Xxxx X. Xxxxxxxxx (collectively the "Shareholders" or
individually, "Shareholder"), FLF, Inc. d/b/a Diversified Risk Insurance Brokers
(the "Company") and Xxxxxx Holding Company, Inc. ("Xxxxxx"). Terms not otherwise
defined herein shall have the meaning given to such terms in the Acquisition (as
defined herein).
WHEREAS, pursuant to an Acquisition Agreement (hereinafter called the
"Acquisition Agreement") dated November 22, 2004 to be effective January 26,
2005 by and among the Company, the Shareholders, Xxxxxx and Xxxxxx Acquisition
Company, Inc. ("Xxxxxx Acquisition Company"), Xxxxxx Acquisition Company merged
with and into the Company, with the Company as the surviving corporation and on
such terms that the Shareholders exchanged their Company stock for Xxxxxx stock
pursuant to the terms and conditions set forth in the Acquisition Agreement;
WHEREAS, the Shareholders will derive substantial benefits from the
merger transaction set forth in the Acquisition Agreement; and
WHEREAS, it is a condition to Xxxxxx'x obligation to consummate the
merger transaction, as specified in Section 7.10 of the Acquisition Agreement,
that each Shareholder enter into this Agreement;
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and intending to be legally bound hereby, the parties agree as follows:
1. Shareholders' Covenants.
(a) Nonsolicitation of Clients. Each Shareholder agrees that he will not,
individually or jointly, directly or indirectly: (i) solicit or accept insurance
business or accounts from, make insurance sales to, or act as a broker for
insurance accounts or receive fees or commissions with respect to any of the
foregoing activities to or for any person or entity who is a client or customer
of the Company, at the time of the execution of this Agreement, or any client or
customer of the Company or any successor thereto at any time during the term of
this Agreement (other than in his capacity as an employee of the Company or any
successor to the Company) nor (ii) in any way interfere with the relationship
between any client or customer of the Company and the Company (including,
without limitation, making any negative statements or communications concerning
the Company). The obligations of each Shareholder under this Section l(a) shall
extend to the location or locations utilized by any person or entity who is or
becomes a client or customer of the Company or any successor thereto during the
term hereof.
(b) Nonsolicitation of Employees. Each Shareholder agrees that he will not,
directly or indirectly, employ, solicit for employment or advise or recommend to
any person not affiliated with the Company or its affiliates that they employ or
solicit for employment, any employee of the Company or its affiliates.
(c) Covenant Not to Compete. Each Shareholder acknowledges and agrees with
Xxxxxx that each Shareholder's services to the Company are unique in nature and
that the business conducted by the Company and its successors would be
irreparably damaged if any of the Shareholders were to provide similar services
to any person or entity competing with the Company or its successors or engaged
in a similar business. Each Shareholder agrees that he will not either for
himself or for any other individual, corporation, partnership, joint venture or
other entity, directly or indirectly (as a director, officer, proprietor,
employee, manager, consultant, independent contractor, advisor (or otherwise)),
engage in, own any interest in, perform any services for, participate in or be
connected with any business or organization that directly engages in insurance
agency or insurance brokerage services in the following counties in the state of
California: Alameda, Contra Costa, Marin, Napa, San Francisco, San Mateo, Santa
Xxxxx, Santa Cruz, Solano and Sonoma provided, however, that the provisions of
this subparagraph (c) shall not be deemed to prohibit a Shareholder's ownership
of not more than two percent (2%) of the total shares of all classes of stock
outstanding of any publicly held company.
2. Consideration. Each Shareholder acknowledges and agrees that (a) he has
and will derive substantial benefit in the form of the Merger Consideration and
(b) the execution and delivery of this Agreement is a condition precedent to the
consummation of the transactions set forth in the Acquisition Agreement. Each
Shareholder acknowledges and agrees that no separate or additional consideration
is required and that the Merger Consideration received by each Shareholder
pursuant to the Acquisition Agreement is adequate consideration to make this
Agreement valid, binding and enforceable in accordance with its terms.
3. Term. The term of this Agreement shall extend for the longer of (i) five
(5) years from the date hereof and (ii) eighteen months from the date on which
the Shareholder is no longer an employee of the Company or its successor (such
period the "Noncompete Period"); provided, that if the Company terminates the
employment of the Shareholder without Cause (as defined in that certain
Employment Agreement by and among Xxxxxx, the Company and such Shareholder,
dated as of the date hereof (the "Employment Agreement")), Section 1(c) shall
terminate upon the later of (x) the termination of the Company's obligation to
make post-termination payments pursuant to Section 10 of the Employment
Agreement or (y) the effectiveness of such termination. In the event of a breach
of this Agreement, the term shall be extended as to the breaching Shareholder
for a period equal to the duration of any period during which such Shareholder
is in breach of the Agreement.
4. Injunctive Relief for Breach. 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 is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision or any other jurisdiction, and this Agreement shall be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein. The parties
hereto agree and acknowledge that each Shareholder's breach of the terms and
provisions contained in Section 1 of this Agreement shall materially and
irreparably harm the Company, that money damages shall accordingly not be an
adequate remedy for any breach of the provisions of this Agreement by any
Shareholder. Therefore, in addition to all other rights and remedies which the
Company may have at law and in order to enforce or prevent any violations of the
provisions of Section 1 of this Agreement, as an additional and cumulative
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remedy, the covenants contained in Section 1 shall be enforceable by the Company
may, in its sole discretion, seek specific performance and/or other injunctive
relief (without posting any bond or deposit) from any court of law or equity of
competent jurisdiction. Each of the Shareholders, Xxxxxx and the Company intend
that the covenants of Section 1 shall be deemed to be a series of separate
covenants for each county set forth in Section 1(c) and one for each month of
the Noncompete Period. If any court of competent jurisdiction shall finally
determine that the restraints provided for in Section 1 are invalid or
unenforceable, as to the area, activity or time covered, such court shall have
the power to reduce or restrict said area, activity or time covered, to delete
specific words or phrases or to replace any invalid or unenforceable term or
provision in Section 1 with a term or provision that is valid and enforceable
and that comes closest to expressing the intention of the invalid or
unenforceable term or provision, and this Agreement shall be enforceable as so
modified.
5. Xxxxxx or Company Bankruptcy. Notwithstanding anything herein to the
contrary, in the event that a petition for adjudication of either Xxxxxx or the
Company (or any successor or assignee of either entity), as a voluntary or
involuntary debtor shall be filed under the laws relating to bankruptcy and said
petition is not dismissed within thirty (30) days of filing, then all of the
restrictions and covenants in this Agreement, and specifically the covenants in
Section 1(a, b and c), shall immediately be null and void.
6. Miscellaneous.
(a) 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 or when sent by facsimile followed by delivery by reputable overnight
courier service, or one day after being sent to the recipient by reputable
overnight courier service (charges prepaid). Such notices, demands and other
communications shall be sent to Buyer, Seller and the Company at the addresses
indicated below. All notices, demands and other communications hereunder may be
given by any other means (including telecopy or electronic mail), but shall not
be deemed to have been duly given unless and until it is actually received by
the intended recipient:
If to Xxxxxx: Xxxxxxx Xxxxx, III, Co-Chairman, Co-CEO and
CFO and
R. Xxxxxxx Xxxxxxx, President
Xxxxxx Holding Company, Inc.
000 Xxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
Facsimile: (000) 000-0000
With a copy to: Xxxx Xxxx, Esq.
Xxxxxxxx & Xxxxx, LLP
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000-0000
Facsimile: (000) 000-0000
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If to
Shareholders: Xxxxxxx X. Xxxxx
Diversified Risk Insurance Brokers
0000 Xxxxxxxx Xxx.
Xxxxxxxxxx, XX 00000
Facsimile: (000) 000-0000
With a copy to: Xxxxx X. Xxxxxx, Esquire
Xxxx XxXxxxxxxx Xxxxxxx & Xxxxxxx, P.C.
000 Xxxx 00xx Xxxxxx
Xxxx, XX 00000-0000
Facsimile: (000) 000-0000
Any party may change the address to which notices are to be sent to it by
giving ten (10) days' written notice of such change of address to the other
party in the manner hereinafter provided for giving notice. Notices will be
considered delivered on the date of personal delivery or on the date of deposit
in the United States mail in the manner above provided for giving notice by
mail.
(b) Survival. This Agreement shall extend to and be binding upon each
Shareholder, his legal representatives and heirs.
(c) Waiver of Breach. The waiver of a breach of any provision of this
Agreement shall not operate or be construed as a waiver of any subsequent
breach.
(d) Entire Agreement. Except for the other agreements and documents
specifically referred to herein, this instrument contains the entire agreement
of the parties with respect to the subject matter hereof. It may not be changed
orally but only by an amendment in writing signed by the party against whom
enforcement is sought.
(e) Governing Law. This Agreement shall be governed by, construed and
enforced in accordance with the laws of the State of California without giving
effect to any choice of law or conflict of law provision or rule (whether of the
State of California or any other jurisdiction).
(f) Headings. Headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
(g) Successors and Assigns. All of the terms and provisions of this
Agreement shall be binding on and inure to the benefit of and be enforceable by
Xxxxxx, Xxxxxx Acquisition Company and Diversified Risk, their successors and
assigns.
(h) Further Assurances. Each of the parties hereto shall use such party's
reasonable efforts to take such actions as may be necessary or reasonably
requested by the other parties hereto to carry out and consummate the
transactions contemplated by this Agreement.
(i) Counterparts. This Agreement may be signed in any number of
counterparts, all of which, taken together, shall constitute a single agreement.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first hereinabove written.
COMPANY:
FLF, INC. d/b/a DIVERSIFIED RISK
INSURANCE BROKERS
By:
-----------------------------
Title:
--------------------------
THE SHAREHOLDERS:
/s/ XXXXXXX X. XXXXX
---------------------------------
Xxxxxxx X. Xxxxx
/s/ XXXXXXX X. XXXXX
---------------------------------
Xxxxxxx X. Xxxxx
/s/ XXXXXXX X. XXXXXX
---------------------------------
Xxxxxxx X. Xxxxxx
/s/ XXXX X. XXXXXXXXX
---------------------------------
Xxxx X. Xxxxxxxxx
