Exhibit 10.1
SEPARATION AGREEMENT
AND
GENERAL RELEASE
TO: George M. Daly
     This Separation Agreement and General Release (the “Agreement”) is executed
on the dates given on the signature pages by and between Affirmative Services,
Inc. (the “Company”) and George M. Daly (“Executive,” “you” or “I”).
RECITALS
     WHEREAS, Executive is currently employed by the Company as its Senior Vice
President, Retail Companies. The following entities are affiliated with the
Company and are herein collectively defined as the “Affiliated Entities”:
Affirmative Insurance Holdings, Inc., Affirmative Retail, Inc., A-Affordable
Insurance Agency, Inc., Driver’s Choice Insurance Agencies, Inc., Driver’s
Choice Insurance Services, LLC, Fed USA Retail, Inc., Instant Auto Insurance
Agency of Arizona, Inc., Instant Auto Insurance Agency of Colorado, Inc.,
Instant Auto Insurance Agency of Indiana, Inc., Instant Auto Insurance Agency of
New Mexico, Inc., InsureOne Independent Insurance Agency, Inc., and Yellow Key
Insurance Agency, Inc.
     WHEREAS, the Company and Executive entered into a Change in Control
Agreement dated July 18, 2005 (“Change in Control Agreement”).
     WHEREAS, effective November 30, 2005, Executive shall resign from the
Company as its Senior Vice President, Retail Companies, unless his employment
from the Company is earlier terminated as provided herein.
     WHEREAS, the parties agree that Executive’s employment with the Company,
and the separation therefrom, are the result of a mutual agreement between
Executive and the Company.
     WHEREAS, Executive, on the one hand, and the Company, on the other hand,
have agreed to provide each other with a general release of claims as contained
herein and in the Supplemental General Release Agreement, attached hereto as
Exhibit “A” and incorporated herein by reference (the “Supplemental Release”).
     Now, therefore, Executive and the Company hereby agree to enter into this
Agreement setting forth their respective obligations related to Executive’s
separation as follows:
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I. Separation of Employment
     A. Executive shall resign as the Senior Vice President, Retail Companies of
the Company and the Affiliated Entities effective November 30, 2005.
     B. The time period between the Effective Date of this Agreement (as defined
in Section IV(K)) and November 30, 2005 shall be defined as the “Transition
Period.” During the Transition Period, Executive agrees to assist, at the
discretion and request of the Company, with the transition of his duties to his
successor and provide such other services as may be requested by the Company
from time to time. Executive agrees that, at any time prior to expiration of the
Transition Period, the Company shall be entitled to terminate Executive, to
assign Executive to work from home or to relieve Executive of his obligations
and duties as an employee of the Company and all Related Entities if it
determines, in its sole discretion, that Executive is not satisfactorily
performing his assigned duties.
     C. During the Transition Period, Executive shall have no authority to bind
the Company or any of the Affiliated Entities and shall take no action with
respect to third parties on behalf of the Company or any of the Affiliated
Entities unless he receives the prior express written permission of the Chief
Executive Officer of the Company, or his designees, including the President of
the Retail Division Companies.
     D. On the earlier of December 1, 2005 or the effective date of Executive’s
termination, Executive shall sign and deliver to the Company the Supplemental
Release. Should Executive fail to sign and deliver the Supplemental Release on
December 1, 2005, he shall be in material breach of this Agreement. In the event
of Executive’s breach of this Section, the Company shall be entitled to an order
of specific performance from a court of competent jurisdiction requiring
Executive to sign and deliver the Supplemental Release to the Company and
Executive hereby consents to the entry of such an order.
II. Special Compensation and Benefits
     A. The Company agrees to provide Executive with a general release of claims
as detailed in Section III(C).
     B. During the Transition Period, the Company will pay Executive his normal
salary, such payments being paid on the Company’s regular paydays in accordance
with the Company’s normal payroll practices (“Installment Transition Payments”)
and the first installment being paid on the first regular payday after the
Effective Date of this Agreement. The Installment Transition Payments are
subject to termination as provided in Sections I(B) and IV(C) of this Agreement.
     C. During the Transition Period, Executive’s health and welfare benefits
will continue for him and his family at the current level of premium
contribution between the
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Company and Executive. After the expiration of the Transition Period, Executive
will be entitled to elect COBRA continuation of his insurance benefits, at his
own expense.
III. Mutual Release
     In return for the special compensation and benefits referenced in this
Agreement, I, George M. Daly, agree to the following:
     A. I agree, on behalf of myself and all of my heirs or personal
representatives, to release the Company, its parent companies, including without
limitation, Affirmative Insurance Holdings, Inc., subsidiaries, all affiliates
of each, including without limitation, the Affiliated Entities, predecessors and
successors, and all of its present or former officers, partners, directors,
members, managers, representatives, employees, agents, attorneys, employee
benefit programs, and the trustees, administrators, fiduciaries and insurers of
such programs (collectively the “Company Released Parties”), from any and all
claims for relief of any kind, whether known to me or unknown, which in any way
arise out of or relate to my employment at the Company or any of the Company
Released Parties, the separation of my employment at the Company or any of the
Company Released Parties, any agreements between the Company or any of the
Company Released Parties and me, including but not limited to the Change in
Control Agreement, and concerning any set of facts or events occurring at any
time up to the Effective Date of this Agreement, including, but not limited to,
any and all claims of discrimination of any kind, and any contractual, tort or
other common law claims. This settlement and waiver includes all such claims,
whether for breach of contract, quasi-contract, implied contract, quantum
meruit, unjust enrichment, compensation, deferred compensation, equity interest,
any tort claims, any and all claims under any applicable federal laws,
including, but not limited to, the Age Discrimination in Employment Act, as
amended, Title VII of the Civil Rights Act of 1964, as amended, the Civil Rights
Act of 1991, 42 U.S.C. § 1981, the Americans with Disabilities Act, as amended,
the Equal Pay Act, as amended, the Worker Adjustment and Retraining Notification
Act, the Employee Retirement Income Security Act of 1974, as amended, the Family
and Medical Leave Act, as amended, the Fair Labor Standards Act, as amended, the
Sarbanes-Oxley Act, or under any applicable state or local laws or ordinances or
any other legal restrictions on the Company’s rights, including the Texas
Commission on Human Rights Act.
     B. I further agree not to file a suit of any kind against the Company or
any of the Company Released Parties relating to my employment at the Company or
any of the Company Released Parties, the separation thereof, any agreements
between the Company or any of the Company Released Parties and me, including but
not limited to the Change in Control Agreement, any set of facts or events
occurring up to the Effective Date of this Agreement, or to participate
voluntarily in any employment-related claim brought by any other party against
the Company or any of the Company Released Parties. Even if a court rules that I
may file a lawsuit against the Company or any of the Company Released Parties
arising from my employment at the Company or any of the Company Released
Parties, or the separation thereof, or based on any other set of facts or events
occurring prior to the Effective Date of this Agreement, I agree not to
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accept any money damages or any other relief in connection with any such
lawsuit. I understand that this Agreement and General Release effectively waives
any right I might have to sue the Company or any of the Company Released Parties
for any claim arising out of my employment at the Company or any of the Company
Released Parties, the separation of my employment, any agreements between the
Company or the Company Released Parties and me, including but not limited to the
Change in Control Agreement, or based on any other set of facts or events
occurring prior to the Effective Date of this Agreement.
     However, this release does not waive my rights to enforce this Agreement.
In addition, this release does not give up my rights, if any, to COBRA benefits
under the Company’s standard benefit programs applicable to me. Further, this
release does not waive my rights to vested 401(k) or pension monies, my final
paycheck, reimbursement of any outstanding business expense amounts (in
accordance with the Company’s existing reimbursement policies) or my rights to
indemnification, if any, under the Company’s declaration of trust or bylaws.
     C. In return for the consideration referenced in this Agreement, the
Company agrees to the following:
     Except as set forth in the last paragraph of this Section, the Company
agrees, on behalf of itself and all of its parent companies, subsidiaries,
affiliates, predecessors and successors, to release Executive and his heirs
(collectively the “Executive Released Parties”), from any and all claims for
relief of any kind, whether known to it or unknown, which in any way arise out
of or relate to Executive’s employment at the Company or any of the Company
Released Parties, the separation of Executive’ s employment at the Company or
any of the Company Released Parties, or any agreements between the Company or
any of the Company Released Parties and Executive, including but not limited to
the Change in Control Agreement, and concerning any set of facts or events
occurring at any time up to the Effective Date of this Agreement.
     Except as set forth in the last paragraph of this Section, the Company
further agrees not to file a suit of any kind against Executive or any of the
Executive Released Parties relating to Executive’s employment at the Company,
the separation thereof, any agreements between the Company or any of the Company
Released Parties and Executive, including but not limited to the Change in
Control Agreement, or to participate voluntarily in any employment-related claim
brought by any other party against Executive or any of the Executive Released
Parties. Except as set forth in the last paragraph, even if a court rules that
the Company may file a lawsuit against Executive or any of the Executive
Released Parties arising from Executive’s employment at the Company or any of
the Company Released Parties, or the separation thereof, or based on any other
set of facts or events occurring prior to the Effective Date of this Agreement,
the Company agrees not to accept any money damages or any other relief in
connection with any such lawsuit. The Company understands that this Agreement
and General Release effectively waives any right it might have to sue Executive
or any of the Executive Released Parties for any claim arising out of
Executive’s employment at the Company or any of the Company Released Parties,
any agreements between the Company or the Company Released Parties and
Executive,
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including but not limited to the Change in Control Agreement, or the separation
of Executive’s employment, or based on any other set of facts or events
occurring prior to the Effective Date of this Agreement, except as set forth in
the last paragraph of this Section.
     Notwithstanding the generality of the foregoing, nothing contained herein
shall release the Executive Released Parties from any claim relating to (i) a
breach by Executive of any provision of any agreement that pursuant to the
Separation Agreement survives the execution thereof, including but not limited
to non-disclosure, non-competition and non-solicitation agreements with the
Company or any of the Company Release Parties, (ii) Executive’s obligations set
forth herein, or (iii) Executive’s fraud, willful misconduct or gross
negligence.
     D. I agree to execute the Supplemental Release attached hereto as Exhibit A
on the earlier of December 1, 2005 or the effective date of my termination and
immediately deliver it to the Company.
IV. Restrictive Covenants and Miscellaneous Provisions
     A. While I understand that I have had such an obligation since I began my
employment with the Company or any of the Company Released Parties, I confirm
that I shall not disclose any of the trade secrets or other confidential or
restricted information of the Company or any of the Company Released Parties and
shall not make use of such trade secrets or confidential or restricted
information in any fashion at any time, including in any future employment.
     B. I agree to comply at all times after the Effective Date of this
Agreement with all provisions of Sections 6(a), (b) and (c) of the Change in
Control Agreement, which provisions are substantively set forth in subsections
(1) through (5) below and which include covenants concerning the non-disclosure
of confidential information, a non-competition covenant and a non-solicitation
covenant. I acknowledge and agree that these provisions shall survive the
separation of my employment and the execution of this Agreement, and shall apply
at all times after the Effective Date of this Agreement, regardless of the
nature of or reason for my separation and the payments made with regard thereto.
     (1) Confidential Information. I acknowledge and agree that the Company and
Affiliated Entities have, since the inception of my employment and throughout
the entire period thereof, provided me with Confidential Information (as defined
below). I agree that I will not divulge or disclose to anyone (other than the
Company, Affiliated Entities or any persons employed or designated by the
Company) any Confidential Information. Confidential Information shall include
all information of a confidential nature relating to the business of the Company
or any of its subsidiaries or affiliates (including the Affiliated Entities),
including, without limitation, customer lists, contract terms, marketing plans,
business plans, financial data, cost information, sales data, or business
opportunities whether for existing, new or developing businesses, and I further
agree not to disclose, publish or make use of any such knowledge or
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Confidential Information at any time, including in any future employment,
without the consent of the Company.
     (2) Non-Compete. In consideration of the parties’ various mutual promises
contained herein, including without limitation those involving Confidential
Information, I agree that upon the separation of my employment from the Company
(for whatever reason), I shall not enter into or engage in any phase of the
business conducted by the Company in any state in which the Company is
conducting business on the date of termination of my employment with the
Company, either as an individual for my own account, as a partner or joint
venturer, or as an employee, agent, officer, director, or substantial
shareholder of a corporation or otherwise for a period of one (1) year following
the date of my separation from the Company. As of the Effective Date of this
Agreement, the business conducted by the Company is defined as owning and
operating (i) insurance companies providing automobile insurance coverage of any
type or class, (ii) underwriting agencies (or managing general agencies) that
produce and administer automobile insurance, and (iii) retail agencies that sell
automobile insurance policies. My obligations set forth in this paragraph may be
excused only upon written consent of the President of the Company.
     (3) Non-Solicitation. In consideration of the parties’ various mutual
promises contained herein, including without limitation those involving
Confidential Information, I agree that upon the separation of my employment from
the Company (for whatever reason), I shall not directly or indirectly solicit
either (i) any employees of the Company to leave their employment with the
Company for employment with any other entity, or (ii) business in the area of
automobile insurance from any entity, organization or person which has
contracted with the Company, which has been doing business with the Company,
from which the Company was soliciting business at the time of my separation of
employment, or from which I knew or had reason to know that the Company was
going to solicit business at the time of my separation of employment, in each
case for a period of one (1) year from the date of my separation from the
Company.
     (4) Enforcement. I acknowledge and agree that any of the covenants
contained in this Section may be specifically enforced through injunctive
relief, but such right to injunctive relief shall not preclude Company from
other remedies which may be available to it.
     (5) Reformation. I agree and stipulate that the agreements and covenants
not to compete and not to solicit contained in this Section are fair and
reasonable in light of all of the facts and circumstances of the relationship
between me and the Company; however, I am aware that in certain circumstances
courts have refused to enforce certain terms of agreements not to compete and
agreements not to solicit. Therefore, in furtherance of, and not in derogation
of the provisions of this Section, I agree that in the event a court should
decline to enforce any provision of this Section, that this Section shall be
deemed to be modified or reformed to restrict my competition with the Company or
the Affiliated Entities to the maximum extent, as to time, geography and
business scope, that the court shall find enforceable; provided, however, in no
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event shall the provisions of this Section be deemed to be more restrictive to
me than those contained herein.
     C. I understand and agree that the Company shall have the right to and will
terminate the Installment Transition Payments and/or sue me for breach of this
Agreement if I violate the provisions of Section IV(B), or otherwise fail to
comply with this Agreement. I further acknowledge that but for my agreements to
comply with my obligations described in this Section and this Agreement, the
Company would not provide me with the compensation, benefits and consideration
set forth in Section II.
     D. I warrant that upon the separation of my employment, I will return to
the Company all company property in my possession, including, but not limited
to, company files, work product, computer equipment, computer software, cell
phones, pagers, corporate credit cards, identification cards, manuals, company
documents and company keys. I further agree to cooperate and work with Company’s
General Counsel to ensure my compliance with this Section IV(D).
     E. I understand that the short-term disability, long-term disability and
life insurance coverage provided by the Company, if any, will end on
November 30, 2005. I also understand that the Company will not pay for any
business-related or other charges incurred by me after November 30, 2005, unless
such expenses are expressly approved in advance by the Chief Executive Officer
of the Company. I further understand that I will cease to accrue vacation and/or
Paid Time Off (“PTO”) as of November 30, 2005. Executive shall be paid for any
accrued, unused vacation and/or PTO within fourteen (14) days after the
Effective Date of the Supplemental Release (as defined therein).
     F. This Agreement does not constitute an admission of any kind by the
Company, but is simply an accommodation that offers certain extra benefits to
which I would not otherwise be entitled in return for my agreeing to and signing
this document.
     G. I agree not to voluntarily make the terms and conditions or the
circumstances surrounding this Agreement known to anyone other than an attorney
and/or tax consultant from whom I receive counseling, or, if I am married, to my
spouse, or except as otherwise required by law. I acknowledge that any such
person must agree not to further disclose the terms of this Agreement.
     H. I agree not to make any statements that disparage the reputation of the
Company or any of the Company Released Parties, or their businesses or services.
I agree that any breach or violation of this non-disparagement provision shall
entitle the Company to sue me on this Agreement for the immediate recovery of
any damages caused by such breach.
     I. All payments and benefits under this Agreement are gross amounts and
will be subject to taxes and lawful deductions, if any.
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     J. The venue for the litigation of any dispute arising out of this
Agreement shall be a court of competent jurisdiction in Dallas County, Texas. If
either party files a lawsuit in state court arising out of this Agreement, the
other party may remove the lawsuit to federal court to the extent jurisdiction
exists. Texas law shall govern the interpretation and enforcement of this
Agreement.
     K. I am entering into this Agreement freely and voluntarily. I have
carefully read and understand all of the provisions of this Agreement. I
understand that it sets forth the entire agreement between me and the Company
and I represent that no other statements, promises, or commitments of any kind,
written or oral, have been made to me by the Company, or any of its agents, to
cause me to accept it. I acknowledge that I have been advised to consult legal
counsel concerning this Agreement prior to signing the Agreement, and that I
have had sufficient opportunity to do so. I understand that I may have up to
twenty-one (21) days from the date of this letter to consider this Agreement. I
understand that if I sign this Agreement, I will then have seven (7) days to
cancel it if I so choose. I may cancel this Agreement by delivering a written
notice of cancellation to the General Counsel of Company. However, if I elect to
cancel this Agreement, I understand I will not be entitled to any of the
benefits, compensation, or other consideration referenced in this Agreement. I
realize this Agreement is not effective or enforceable until the seven-day
period expires without revocation. I understand that this Agreement will not
become effective until the eighth day after I sign the Agreement without
revocation (the “Effective Date”). I understand that the Company will have no
duty to pay me or provide me with the compensation and benefits listed in
Section II until the Effective Date of this Agreement.
<remainder of page intentionally left blank>
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I acknowledge acceptance of this Agreement by my signature below:

/s/ GEORGE M. DALY   October 13, 2005 George M. Daly  
Date

Agreed to and accepted on behalf of Affirmative Services, Inc.:

         
By:
  /s/ DAVID B. SNYDER    

       
 
       
Name:
  David B. Snyder    

       
Title:
  Senior Vice President    

       
Date:
  October 13, 2005    

       

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Exhibit A
SUPPLEMENTAL GENERAL RELEASE AGREEMENT
     This Supplemental General Release Agreement is entered into on this 30th
day of November, 2005 by and between Affirmative Services, Inc. (the “Company”)
and George M. Daly (“Executive,” “you” or “I”).
RECITALS
     WHEREAS, Executive is currently employed by the Company as its Senior Vice
President, Retail Companies. The following entities are affiliated with the
Company and are herein collectively defined as the “Affiliated Entities”:
Affirmative Insurance Holdings, Inc., Affirmative Retail, Inc., A-Affordable
Insurance Agency, Inc., Driver’s Choice Insurance Agencies, Inc., Driver’s
Choice Insurance Services, LLC, Fed USA Retail, Inc., Instant Auto Insurance
Agency of Arizona, Inc., Instant Auto Insurance Agency of Colorado, Inc.,
Instant Auto Insurance Agency of Indiana, Inc., Instant Auto Insurance Agency of
New Mexico, Inc., InsureOne Independent Insurance Agency, Inc., and Yellow Key
Insurance Agency, Inc.
     WHEREAS, the Company and Executive entered into a Separation Agreement and
General Release dated October 12, 2005 (“Separation Agreement”).
     WHEREAS, Executive agreed to sign and deliver this Supplemental General
Release Agreement as a material inducement to have the Company enter into the
Separation Agreement.
     Now, therefore, Executive and the Company hereby agree to enter into this
Supplemental General Release Agreement setting forth their respective
supplemental obligations related to Executive’s separation as follows:
I. Special Compensation and Benefits
     In consideration for his release of claims, as well as his other promises
contained herein, the Company agrees to provide Executive with the following
special consideration:
     A. Provided Executive has satisfactorily performed his duties and
responsibilities during the Transition Period (as defined in the Separation
Agreement), which duties were set forth in the Separation Agreement, the Company
agrees to pay to Executive severance pay in the gross amount of $125,000.00,
payable as follows: (i) one lump sum payment in the amount of $25,000.00 payable
to Executive on December 1, 2005; (ii) subsequent periodic payments in the
amount of $20,000.00 per month payable on the first day of each of January,
February, March and April 2006; and (iii) $20,000.00 payable on November 1,
2006. All payments made pursuant to this Paragraph shall be subject to taxes and
lawful deductions.
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     B. The Company agrees to provide Executive with a general release of claims
as detailed in Section II(C).
II. Mutual Release
     In return for the special compensation and benefits referenced in this
Agreement, I, George M. Daly, agree to the following:
     A. I agree, on behalf of myself and all of my heirs or personal
representatives, to release the Company, its parent companies, including without
limitation, Affirmative Insurance Holdings, Inc., subsidiaries, all affiliates
of each, including without limitation, the Affiliated Entities, predecessors and
successors, and all of its present or former officers, partners, directors,
members, managers, representatives, employees, agents, attorneys, employee
benefit programs, and the trustees, administrators, fiduciaries and insurers of
such programs (collectively the “Company Released Parties”), from any and all
claims for relief of any kind, whether known to me or unknown, which in any way
arise out of or relate to my employment at the Company or any of the Company
Released Parties, the separation of my employment at the Company or any of the
Company Released Parties, any agreements between the Company or any of the
Company Released Parties and me, including but not limited to the Change in
Control Agreement, and concerning any set of facts or events occurring at any
time up to the Effective Date of this Agreement (as defined herein), including,
but not limited to, any and all claims of discrimination of any kind, and any
contractual, tort or other common law claims. This settlement and waiver
includes all such claims, whether for breach of contract, quasi-contract,
implied contract, quantum meruit, unjust enrichment, compensation, deferred
compensation, equity interest, any tort claims, any and all claims under any
applicable federal laws, including, but not limited to, the Age Discrimination
in Employment Act, as amended, Title VII of the Civil Rights Act of 1964, as
amended, the Civil Rights Act of 1991, 42 U.S.C. § 1981, the Americans with
Disabilities Act, as amended, the Equal Pay Act, as amended, the Worker
Adjustment and Retraining Notification Act, the Employee Retirement Income
Security Act of 1974, as amended, the Family and Medical Leave Act, as amended,
the Fair Labor Standards Act, as amended, the Sarbanes-Oxley Act, or under any
applicable state or local laws or ordinances or any other legal restrictions on
the Company’s rights, including the Texas Commission on Human Rights Act.
     B. I further agree not to file a suit of any kind against the Company or
any of the Company Released Parties relating to my employment at the Company or
any of the Company Released Parties, the separation thereof, any agreements
between the Company or any of the Company Released Parties and me, including but
not limited to the Change in Control Agreement, any set of facts or events
occurring up to the Effective Date of this Agreement, or to participate
voluntarily in any employment-related claim brought by any other party against
the Company or any of the Company Released Parties. Even if a court rules that I
may file a lawsuit against the Company or any of the Company Released Parties
arising from my employment at the Company or any of the Company Released
Parties, or the separation thereof, or based on any
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other set of facts or events occurring prior to the Effective Date of this
Agreement, I agree not to accept any money damages or any other relief in
connection with any such lawsuit. I understand that this Agreement and General
Release effectively waives any right I might have to sue the Company or any of
the Company Released Parties for any claim arising out of my employment at the
Company or any of the Company Released Parties, the separation of my employment,
any agreements between the Company or the Company Released Parties and me,
including but not limited to the Change in Control Agreement, or based on any
other set of facts or events occurring prior to the Effective Date of this
Agreement.
     However, this release does not waive my rights to enforce this Agreement.
In addition, this release does not give up my rights, if any, to COBRA benefits
under the Company’s standard benefit programs applicable to me. Further, this
release does not waive my rights to vested 401(k) or pension monies, my final
paycheck, reimbursement of any outstanding business expense amounts (in
accordance with the Company’s existing reimbursement policies) or my rights to
indemnification, if any, under the Company’s declaration of trust or bylaws.
     C. In return for the consideration referenced in this Agreement, the
Company agrees to the following:
     Except as set forth in the last paragraph of this Section, the Company
agrees, on behalf of itself and all of its parent companies, subsidiaries,
affiliates, predecessors and successors, to release Executive and his heirs
(collectively the “Executive Released Parties”), from any and all claims for
relief of any kind, whether known to it or unknown, which in any way arise out
of or relate to Executive’s employment at the Company or any of the Company
Released Parties, the separation of Executive’ s employment at the Company or
any of the Company Released Parties, or any agreements between the Company or
any of the Company Released Parties and Executive, including but not limited to
the Change in Control Agreement, and concerning any set of facts or events
occurring at any time up to the Effective Date of this Agreement.
     Except as set forth in the last paragraph of this Section, the Company
further agrees not to file a suit of any kind against Executive or any of the
Executive Released Parties relating to Executive’s employment at the Company,
the separation thereof, any agreements between the Company or any of the Company
Released Parties and Executive, including but not limited to the Change in
Control Agreement, or to participate voluntarily in any employment-related claim
brought by any other party against Executive or any of the Executive Released
Parties. Except as set forth in the last paragraph, even if a court rules that
the Company may file a lawsuit against Executive or any of the Executive
Released Parties arising from Executive’s employment at the Company or any of
the Company Released Parties, or the separation thereof, or based on any other
set of facts or events occurring prior to the Effective Date of this Agreement,
the Company agrees not to accept any money damages or any other relief in
connection with any such lawsuit. The Company understands that this Agreement
and General Release effectively waives any right it might have to sue Executive
or any of the Executive Released Parties for any claim arising out of
Executive’s employment at the Company or any of the Company Released
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Parties, any agreements between the Company or the Company Released Parties and
Executive, including but not limited to the Change in Control Agreement, or the
separation of Executive’s employment, or based on any other set of facts or
events occurring prior to the Effective Date of this Agreement, except as set
forth in the last paragraph of this Section.
     Notwithstanding the generality of the foregoing, nothing contained herein
shall release the Executive Released Parties from any claim relating to (i) a
breach by Executive of any provision of any agreement that pursuant to the
Separation Agreement survives the execution thereof, including but not limited
to non-disclosure, non-competition and non-solicitation agreements with the
Company or any of the Company Released Parties, (ii) Executive’s obligations set
forth herein, or (iii) Executive’s fraud, willful misconduct or gross
negligence.
III. Restrictive Covenants and Miscellaneous Provisions
     A. While I understand that I have had such an obligation since I began my
employment with the Company or any of the Company Released Parties, I confirm
that I shall not disclose any of the trade secrets or other confidential or
restricted information of the Company or any of the Company Released Parties and
shall not make use of such trade secrets or confidential or restricted
information in any fashion at any time, including in any future employment.
     B. I agree to comply at all times after the Effective Date of this
Agreement with all provisions of Sections 6(a), (b) and (c) of the Change in
Control Agreement, which provisions are substantively set forth in subsections
(1) through (5) below and which include covenants concerning the non-disclosure
of confidential information, a non-competition covenant and a non-solicitation
covenant. I acknowledge and agree that these provisions shall survive the
separation of my employment and the execution of this Agreement, and shall apply
at all times after the Effective Date of this Agreement, regardless of the
nature of or reason for my separation and the payments made with regard thereto.
     (1) Confidential Information. I acknowledge and agree that the Company and
Affiliated Entities have, since the inception of my employment and throughout
the entire period thereof, provided me with Confidential Information (as defined
below). I agree that I will not divulge or disclose to anyone (other than the
Company, Affiliated Entities or any persons employed or designated by the
Company) any Confidential Information. Confidential Information shall include
all information of a confidential nature relating to the business of the Company
or any of its subsidiaries or affiliates (including the Affiliated Entities),
including, without limitation, customer lists, contract terms, marketing plans,
business plans, financial data, cost information, sales data, or business
opportunities whether for existing, new or developing businesses, and I further
agree not to disclose, publish or make use of any such knowledge or Confidential
Information at any time, including in any future employment, without the consent
of the Company.
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     (2) Non-Compete. In consideration of the parties’ various mutual promises
contained herein, including without limitation those involving Confidential
Information, I agree that upon the separation of my employment from the Company
(for whatever reason), I shall not enter into or engage in any phase of the
business conducted by the Company in any state in which the Company is
conducting business on the date of termination of my employment with the
Company, either as an individual for my own account, as a partner or joint
venturer, or as an employee, agent, officer, director, or substantial
shareholder of a corporation or otherwise for a period of one (1) year following
the date of my separation from the Company. As of the Effective Date of this
Agreement, the business conducted by the Company is defined as owning and
operating (i) insurance companies providing automobile insurance coverage of any
type or class, (ii) underwriting agencies (or managing general agencies) that
produce and administer automobile insurance, and (iii) retail agencies that sell
automobile insurance policies. My obligations set forth in this paragraph may be
excused only upon written consent of the President of the Company.
     (3) Non-Solicitation. In consideration of the parties’ various mutual
promises contained herein, including without limitation those involving
Confidential Information, I agree that upon the separation of my employment from
the Company (for whatever reason), I shall not directly or indirectly solicit
either (i) any employees of the Company to leave their employment with the
Company for employment with any other entity, or (ii) business in the area of
automobile insurance from any entity, organization or person which has
contracted with the Company, which has been doing business with the Company,
from which the Company was soliciting business at the time of my separation of
employment, or from which I knew or had reason to know that the Company was
going to solicit business at the time of my separation of employment, in each
case for a period of one (1) year from the date of my separation from the
Company.
     (4) Enforcement. I acknowledge and agree that any of the covenants
contained in this Section may be specifically enforced through injunctive
relief, but such right to injunctive relief shall not preclude Company from
other remedies which may be available to it.
     (5) Reformation. I agree and stipulate that the agreements and covenants
not to compete and not to solicit contained in this Section are fair and
reasonable in light of all of the facts and circumstances of the relationship
between me and the Company; however, I am aware that in certain circumstances
courts have refused to enforce certain terms of agreements not to compete and
agreements not to solicit. Therefore, in furtherance of, and not in derogation
of the provisions of this Section, I agree that in the event a court should
decline to enforce any provision of this Section, that this Section shall be
deemed to be modified or reformed to restrict my competition with the Company or
the Affiliated Entities to the maximum extent, as to time, geography and
business scope, that the court shall find enforceable; provided, however, in no
event shall the provisions of this Section be deemed to be more restrictive to
me than those contained herein.
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     C. I understand and agree that the Company shall have the right to and will
sue me for breach of this Agreement if I violate the provisions of
Section III(B), or otherwise fail to comply with this Agreement. I further
acknowledge that but for my agreements to comply with my obligations described
in this Section and this Agreement, the Company would not provide me with the
compensation, benefits and consideration set forth in Section I.
     D. I warrant that upon the separation of my employment, I will return to
the Company all company property in my possession, including, but not limited
to, company files, work product, computer equipment, computer software, cell
phones, pagers, corporate credit cards, identification cards, manuals, company
documents and company keys. I further agree to cooperate and work with Company’s
General Counsel to ensure my compliance with this Section III(D).
     E. I understand that the short-term disability, long-term disability and
life insurance coverage provided by the Company, if any, will end on the earlier
of November 30, 2005 or my termination. I also understand that the Company will
not pay for any business-related or other charges incurred by me after the
earlier of November 30, 2005 or my termination, unless such expenses are
expressly approved in advance by the Chief Executive Officer of the Company. I
further understand that I will cease to accrue vacation and/or Paid Time Off
(“PTO”) as of the date of my termination from the Company. Executive shall be
paid for any accrued, unused vacation and/or PTO within fourteen (14) days after
the Effective Date of this Agreement.
     F. This Agreement does not constitute an admission of any kind by the
Company, but is simply an accommodation that offers certain extra benefits to
which I would not otherwise be entitled in return for my agreeing to and signing
this document.
     G. I agree not to voluntarily make the terms and conditions or the
circumstances surrounding this Agreement known to anyone other than an attorney
and/or tax consultant from whom I receive counseling, or, if I am married, to my
spouse, or except as otherwise required by law. I acknowledge that any such
person must agree not to further disclose the terms of this Agreement.
     H. I agree not to make any statements that disparage the reputation of the
Company or any of the Company Released Parties, or their businesses or services.
I agree that any breach or violation of this non-disparagement provision shall
entitle the Company to sue me on this Agreement for the immediate recovery of
any damages caused by such breach.
     I. All payments and benefits under this Agreement are gross amounts and
will be subject to taxes and lawful deductions, if any.
     J. The venue for the litigation of any dispute arising out of this
Agreement shall be a court of competent jurisdiction in Dallas County, Texas. If
either party files a lawsuit in state court arising out of this Agreement, the
other party may remove the lawsuit to federal court to
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the extent jurisdiction exists. Texas law shall govern the interpretation and
enforcement of this Agreement.
     K. I am entering into this Agreement freely and voluntarily. I have
carefully read and understand all of the provisions of this Agreement. I
understand that it sets forth the entire agreement between me and the Company
and I represent that no other statements, promises, or commitments of any kind,
written or oral, have been made to me by the Company, or any of its agents, to
cause me to accept it. I acknowledge that I have been advised to consult legal
counsel concerning this Agreement prior to signing the Agreement, and that I
have had sufficient opportunity to do so. I understand that I may have up to
twenty-one (21) days from the date of this letter to consider this Agreement. I
understand that if I sign this Agreement, I will then have seven (7) days to
cancel it if I so choose. I may cancel this Agreement by delivering a written
notice of cancellation to the General Counsel of Company. However, if I elect to
cancel this Agreement, I understand I will not be entitled to any of the
benefits, compensation, or other consideration referenced in this Agreement. I
realize this Agreement is not effective or enforceable until the seven-day
period expires without revocation. I understand that this Agreement will not
become effective until the eighth day after I sign the Agreement without
revocation (the “Effective Date”). I understand that the Company will have no
duty to pay me or provide me with the compensation and benefits listed in
Section I until the Effective Date of this Agreement.
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I acknowledge acceptance of this Agreement by my signature below:
 

        George M. Daly  
Date
 

Agreed to and accepted on behalf of Affirmative Services, Inc.:

         
By:
       

       
 
       
Name:
       

       
Title:
       

       
Date:
       

       

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