Document:

First Amendment to Restated Employment Agreement

 

Exhibit 10.5

EXECUTION COPY

FIRST AMENDMENT TO THE 2005 AMENDED AND RESTATED

EMPLOYMENT AGREEMENT

          First Amendment, dated as of September 28, 2005 (this “Amendment”), to the 2005 Amended and
Restated Employment Agreement, dated as of April 15, 2005, between Avatar Properties Inc., a
Florida corporation (the “Company”), and Jonathan Fels (the “Employee”).

W I T N E S S E T H:

          WHEREAS, the Company and the Employee entered into the 2005 Amended and Restated Employment
Agreement (the “Agreement”), dated as of April 15, 2005; and

          WHEREAS, the Company and the Employee desire to amend the Agreement to correct an inaccurate
cross reference.

          NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants and obligations
hereinafter set forth, the Company and the Employee, intended to be legally bound, hereby agree as
follows:

          1. Section 6(e) of the Agreement is amended by deleting the words “Sections 6(c)(i) and
6(c)(ii)” in clause (i) of the third sentence of Section 6(e) and replacing them with “Sections
6(d)(i) and 6(d)(ii)”.

          2. Except as expressly set forth herein, the Agreement remains unmodified and in full force
and effect.

          3. This Amendment shall be subject to, and governed by, the laws of the State of Florida
applicable to contracts made and to be performed in the State of Florida, regardless of where the
Employee is in fact required to work.

          4. This Amendment may be executed in one or more counterparts, each of which shall be deemed
to be an original, but all of which taken together shall constitute one and the same instrument.

          IN WITNESS WHEREOF, the parties hereto have duly executed this Amendment as of the date first
above written.

	 	 	 	 	 	 	 	 	 
	 	 	AVATAR PROPERTIES INC.	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	By:	 	   /s/ Gerald D. Kelfer	 	 
	 	 	 	 	 	 	 
	 

	 	 	 	Name:
	 	Gerald D. Kelfer	 	 
	 

	 	 	 	Title:
	 	Chairman of the Board	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	  /s/ Jonathan Fels	 	 
	 	 	 	 	 
	 	 	 	 	  Jonathan FelsFirst Amendment to Restated Employment Agreement

 

Exhibit 10.6

EXECUTION COPY

FIRST AMENDMENT TO THE 2005 AMENDED AND RESTATED

EMPLOYMENT AGREEMENT

          First Amendment, dated as of September 28, 2005 (this “Amendment”), to the 2005 Amended and
Restated Employment Agreement, dated as of April 15, 2005, between Avatar Properties Inc., a
Florida corporation (the “Company”), and Michael F. Levy (the “Employee”).

W I T N E S S E T H:

          WHEREAS, the Company and the Employee entered into the 2005 Amended and Restated Employment
Agreement (the “Agreement”), dated as of April 15, 2005; and

          WHEREAS, the Company and the Employee desire to amend the Agreement to correct an inaccurate
cross reference.

          NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants and obligations
hereinafter set forth, the Company and the Employee, intended to be legally bound, hereby agree as
follows:

          1. Section 6(e) of the Agreement is amended by deleting the words “Sections 6(c)(i) and
6(c)(ii)” in clause (i) of the third sentence of Section 6(e) and replacing them with “Sections
6(d)(i) and 6(d)(ii)”.

          2. Except as expressly set forth herein, the Agreement remains unmodified and in full force
and effect.

          3. This Amendment shall be subject to, and governed by, the laws of the State of Florida
applicable to contracts made and to be performed in the State of Florida, regardless of where the
Employee is in fact required to work.

          4. This Amendment may be executed in one or more counterparts, each of which shall be deemed
to be an original, but all of which taken together shall constitute one and the same instrument.

          IN WITNESS WHEREOF, the parties hereto have duly executed this Amendment as of the date first
above written.

	 	 	 	 	 	 	 	 	 
	 	 	AVATAR PROPERTIES INC.	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	By:	 	   /s/ Gerald D. Kelfer	 	 
	 	 	 	 	 	 	 
	 

	 	 	 	Name:
	 	Gerald D. Kelfer	 	 
	 

	 	 	 	Title:
	 	Chairman of the Board	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	  /s/ Michael F. Levy	 	 
	 	 	 	 	 
	 	 	 	 	  Michael F. Levy<PAGE>

                                                                EXHIBIT 10.1

                               FIRST AMENDMENT TO
                              EMPLOYMENT AGREEMENT

         THIS FIRST AMENDMENT TO EMPLOYMENT AGREEMENT (the "Amendment") is made
and entered into as of the 15th day of August 2005, between DIRECT GENERAL
CORPORATION, a Tennessee corporation (the "Company") and BARRY D. ELKINS (the
"Employee").

                                    RECITALS

         WHEREAS, Employee has served the Company as the Chief Financial Officer
since September 1993 and a Senior Vice President since February 2001 and
Employee's employment is governed under the terms of that certain Employment
Agreement dated July 21, 2003 (the "Employment Agreement"); and

         WHEREAS, the Board of Directors of the Company believes it would be in
the best interest of the Company to allow Employee to focus on the growth and
development of the Company; and

         WHEREAS, the Board of Directors has designated the position of Senior
Vice President - Business Strategies and Development and has appointed Employee
to that position; and

         WHEREAS, this Amendment modifies the Employment Agreement to reflect
Employee's change in title; and

         NOW, THEREFORE, for good and valuable consideration, receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:

1.       Any reference to "Senior Vice President and Chief Financial Officer" in
         the Employment Agreement, is hereby amended by replacing it in its
         entirety with "Senior Vice President - Business Strategies and
         Development."

2.       Exhibit A of the Employment Agreement is hereby amended by replacing it
         in its entirely with Exhibit A of this Amendment.

3.       The Employment Agreement as amended by this First Amendment constitutes
         the complete and entire understanding of the Company and Employee
         concerning Employee's employment with the Company and supercedes all
         previous agreements whether oral or written, between Company and
         Employee in this regard. Except as expressly modified hereinabove, all
         other terms and conditions of the Employment Agreement shall remain in
         full force and effect.

         IN WITNESS WHEREOF, the parties have executed this First Amendment to
Employment Agreement as of the date and year first written above written.

DIRECT GENERAL CORPORATION                                 EMPLOYEE

By:    /s/ Tammy R. Adair                           /s/ Barry D. Elkins
      ------------------------------                ----------------------------
Name:   Tammy R. Adair                              Barry D. Elkins
Title:  President

<PAGE>

                                   EXHIBIT "A"

                     EMPLOYEE'S DUTIES AND RESPONSIBILITIES

DUTIES AND RESPONSIBILITIES OF SENIOR VICE PRESIDENT - BUSINESS STRATEGIES AND
DEVELOPMENT INCLUDE THE FOLLOWING:

1.       GENERAL BUSINESS ACTIVITIES. Assists and advises, if requested by the
         Chief Executive Officer, President, or Chief Operations Officer in
         planning, organizing, implementing, and controlling the Company's
         general business objectives and activities.

2.       DEVELOPING RESPONSIBILITIES. As requested by the Board of Directors,
         the Chief Executive Officer or President, Employee may be asked to
         perform other duties and responsibilities for the Company and its
         subsidiaries that are consistent with the role of Senior Vice President
         - Business Strategies and Development.<PAGE>
                                                                 EXHIBIT 10.2

                              EMPLOYMENT AGREEMENT

         THIS AGREEMENT is hereby made and entered into as of the 15th day of
August, 2005, by and between DIRECT GENERAL CORPORATION, a Tennessee corporation
("Company") and J. TODD HAGELY, a natural person residing in the state of
Tennessee ("Employee"). Company and Employee are entering into this Agreement in
order to set forth, in definitive written form, their respective rights and
obligations in what each of them intends to be a long-term, mutually beneficial
and amicable employment relationship. Consideration for this Agreement consists
of the employment of Employee, and the agreements and undertakings herein made
by the parties. The sufficiency, adequacy and receipt of said consideration are
by execution hereof acknowledged by Company and by Employee, each of which
enters into this Agreement with the intention of being bound hereby and agrees
as follows:

         1. EMPLOYMENT. Company hereby employs Employee as a Senior Vice
President and Chief Financial Officer of Direct General Corporation, and
Employee hereby accepts such employment.

         2. TERM. Unless terminated pursuant to Section 12, Employee's term of
employment as a Senior Vice President and Chief Financial Officer of Direct
General Corporation on the terms hereinafter set forth shall be for a period of
five (5) years (the "Term") beginning on August 15, 2005.

         3. EXCLUSIVITY. Employee shall devote all of his time during reasonable
business hours to performance of his duties under this Agreement. Nothing herein
shall restrict Employee, with the Company's prior written consent (which the
Company shall not unreasonably withhold, it being the belief of the parties that
Employee's service on a reasonable number of such boards furthers his interests
and the Company's interests) from service on charitable or civic organization
boards of directors. It is further understood that Employee may be elected to
serve as an officer or director by appropriate corporate action of the Company
or any one or more of the Company's affiliates and, if elected, will so serve
without additional salary or other compensation.

         4. DUTIES AND RESPONSIBILITIES. Employee will render services
customarily performed by and consistent with the title of a Senior Vice
President and Chief Financial Officer. Employee's duties and responsibilities
will include (but not by way of limitation) those set forth on Exhibit "A" to
this Agreement and he shall use his good faith and diligent efforts to perform
such duties and responsibilities set forth on Exhibit "A" hereto and such other
duties and responsibilities as the Board of Directors, Chief Executive Officer
or President shall prescribe. As used throughout this Agreement, the terms
"Board of Directors" or "Board," the terms "Chief Executive Officer" or "CEO"
and the term "President" shall mean the Board, CEO or President of the Company.

                  So long as Employee is employed by the Company, whether within
the Term of this Agreement or otherwise, and for a period of twelve (12) months
following Employee's termination of employment for any reason, Employee shall
not make any statement that is disparaging about the Company, any of its
officers, directors, or shareholders, including, but not limited to, any
statement that disparages the products, services, finances, financial condition,
capabilities or other aspect of the businesses of the Company or its affiliates.
During the same period Employee will not engage in any conduct that is intended
to inflict harm upon the professional or personal reputation of the Company or
any of its officers, directors, shareholders or employees.

         5. ANNUAL BASE SALARY. During the term of Employee's employment
hereunder, the Company or an affiliate of the Company will pay Employee a base
salary of One Hundred and Eighty Thousand Dollars ($180,000) per year, payable
as nearly as practical in equal installments and with the frequency then used by
the Company in paying its and its affiliates' other full-time employees. It is
intended by the parties that base salary and other compensation herein provided
shall compensate Employee for all services rendered as a Senior Vice President
and Chief Financial Officer and any other position he may serve as director or
officer of the Company and its affiliates.

                  (a)      Six-Month Review. The Board of Directors or the
                           Compensation Committee of the Board of Directors
                           shall, on or around February 15, 2006, increase such
                           base salary to $190,000 if appropriate based on a
                           review of employees attainment of established goals
                           and objectives. In framing the decision on whether to
                           increase the base salary to be paid to Employee, the
                           Board or Compensation Committee shall take into
                           account Employee's performance of the duties and
                           responsibilities listed on Exhibit "A" hereto, his
                           contribution toward the attainment of the Company's
                           goals and objectives as may be determined from time
                           to time by the Board of Directors, Chief Executive
                           Officer or President and other identified goals and
                           objectives as determined by the Chief Executive
                           Officer or President.

                  (b)      Annual Review. The Board of Directors or the
                           Compensation Committee of the Board of Directors of
                           the Company shall annually review such base salary
                           and may increase or decrease such annual base salary,
                           but shall not decrease it to less than $180,000.

<PAGE>
         6. Stock Options. Subject to the discretion and approval of the Board
of Directors or the Compensation Committee, during the term of Employee's
employment hereunder, the Company will grant to Employee Incentive Stock Options
("ISOs") for the purchase of Twenty Thousand (20,000) shares of common stock of
the Company. Unless otherwise determined by the Board of Directors or the
Compensation Committee in accordance with the Plan (defined below), the per
share exercise price for said ISOs shall be equal to the fair market value (as
defined in the Plan) of the Company's common stock on the date of grant. The
vesting schedule and other terms of the said ISOs shall be determined by the
Company's Board of Directors or the Compensation Committee, and shall be
determined in accordance with the terms of the Company's 2003 Equity Incentive
Plan (the "Plan").

         7. EMPLOYEE AND FRINGE BENEFITS. During the term of this Agreement,
Company or an affiliate shall:

                  (a)      Provide Employee the opportunity to participate in
                           the same medical, health, hospitalization and other
                           insurance coverage and retirement plans in which
                           Company or its affiliates provide to their other
                           full-time employees the opportunity to participate;

                  (b)      allow Employee to take Paid Time Off (which includes
                           vacation days) in the same manner as is provided for
                           other senior officers of the Company and its
                           affiliates; and

                  (c)      reimburse Employee for reasonable out-of-pocket
                           expenses he incurs on behalf of himself or the
                           Company in connection with his performance of his
                           duties and responsibilities of his employment under
                           this Agreement, subject to the applicable
                           reimbursement policy in effect at the time.

         8. INCENTIVE COMPENSATION. The Board of Directors or the Compensation
Committee shall, annually consider, but not be obligated to pay, an incentive
payment to Employee to be paid in one lump sum, payable promptly after action by
the Board or Compensation Committee and subject to a maximum of fifty percent
(50%) of Employee's base annual salary. In framing its decision on the amount of
incentive compensation to be paid to Employee, if any, the Board or Compensation
Committee shall take into account Employee's performance of the duties and
responsibilities listed on Exhibit "A" hereto, his contribution toward the
attainment of the Company's goals and objectives as may be determined from time
to time by the Board of Directors, Chief Executive Officer or President, which
objectives may be established in connection with any executive cash bonus plan
adopted by the Board of Directors or Compensation Committee under the 2003
Equity Incentive Plan or otherwise, and the Company's profitability. No
incentive compensation shall become payable hereunder until and unless the Board
of Directors or the Compensation Committee shall award it.

         9. USE OF EMPLOYEE'S NAME, ETC. Employee hereby grants the Company and
its affiliates the right during the term of this Agreement to make use of, and
to permit others to make use of the, Employee's name, pictures, photographs, and
other likenesses, and voice, in connection with the advertising, publicity and
exploitation of any Company or affiliate's products, or in connection with the
use or implementation of any of the Employee's services hereunder or the
proceeds thereof. The right to use any of the foregoing shall continue as a
non-exclusive and non-compensable right for one (1) year after termination of
Employee's employment with Company by Employee's resignation or termination of
such employment by Company for cause, and for six (6) months following
termination of Employee's employment by the Company without cause; provided,
however, in such event, Company shall not, directly or indirectly, represent
Employee as endorsing any product or service without the Employee's written
consent, which shall not be unreasonably withheld.

         10. INSURANCE. Employee shall cooperate with the Company if it applies
for, in its own name or otherwise, but at its expense, keyman life, health,
accident or other insurance covering Employee, and acknowledges that the Company
may do so for any amount that it deems desirable. Unless otherwise agreed,
Employee and his family will have no right, title or interest in or to such
insurance. Employee shall, if requested, assist the Company in procuring such
insurance by submitting from time to time to the customary medical, physical and
other examinations, and by signing such applications, statements and other
instruments as insurer may require.

         11. RECORDS. Upon termination of this Agreement, Employee shall not be
entitled to keep or preserve any record, document or other instrument of
Company, or any copy thereof, or any other property owned or leased by Company
or any affiliate and shall return all such property to the Company.

         12. TERMINATION.

                  (a)      For Cause. Company may terminate employment of
                           Employee "for cause" upon the occurrence of any of
                           the following:

                           (i)      Employee's refusal to perform, or failure to
                                    satisfactorily perform, in a normal business
                                    manner those duties assigned to him by the
                                    Board of Directors, Chief Executive Officer
                                    or President;

                                       2
<PAGE>

                           (ii)     Employee's failure or refusal to obey and
                                    comply with the instructions, rules and
                                    regulations of Company or any affiliate as
                                    promulgated in good faith by the Board of
                                    Directors, the Chief Executive Officer or
                                    the President respecting the operations of
                                    Company or any affiliate; or

                           (iii)    Employee's engaging in any unlawful conduct
                                    in connection with his duties of employment
                                    with Company or any affiliate, or any acts
                                    of dishonesty in connection therewith,
                                    conviction of a felony, or of a misdemeanor
                                    involving moral turpitude.

                           If Employee's employment terminates "for cause" as
                           described above then this Agreement shall terminate
                           and Employee shall receive base compensation accrued
                           through the date of termination.

                  (b)      Death or Disability. This Agreement shall terminate
                           without other or further liability of any party
                           hereto upon the death or permanent disability of
                           Employee. As herein used, the term "permanent
                           disability" shall mean physical or mental impairment
                           of Employee to such an extent that he is thereby
                           unable to perform his normal duties and obligations
                           under this Agreement for a period of one hundred and
                           twenty (120) cumulative days during any twelve (12)
                           month period.

                  (c)      Resignation. This Agreement shall terminate upon
                           Employee's voluntary resignation without other or
                           further liability of any party hereto, except for and
                           to the extent that specific provisions hereof
                           contemplate their survival following termination.

                  (d)      Without Just Cause. In addition to the foregoing,
                           Company may terminate employment of Employee at any
                           time "without just cause". Termination "without just
                           cause" means termination of Employee's employment by
                           Company that is initiated by Company and is not for
                           one of the above-enumerated reasons. If Employee's
                           employment terminates "without just cause" as
                           described above then this Agreement shall terminate
                           and Employee shall receive base compensation accrued
                           through the date of termination and a continuation of
                           his base salary through the relevant period of
                           non-competition imposed by Section 17(a)(ii)a) of
                           this Agreement or the end of the Term, whichever is
                           earlier (any continuation salary is subject to the
                           usual and customary applicable federal and state
                           withholding, FICA and Medicare tax deductions, and
                           other applicable employment related deductions), but
                           Employee shall not be entitled to receive any other
                           compensation from the Company, unless provided for in
                           this Agreement.

                  (e)      Effect of Termination on Employee or Fringe Benefits.
                           Upon termination of this Agreement for any reason,
                           the Company's obligation to provide any employee or
                           fringe benefits provided for herein shall cease,
                           although Employee shall retain any rights provided
                           for in any employee benefit plan document, which
                           includes, but is not limited to, accrued Paid Time
                           Off, if any.

                           (i)      EMPLOYEE BENEFIT PLANS. Employee's
                                    participation in all employee benefit plans
                                    shall cease in accordance with the
                                    provisions of such plan documents, except
                                    that Employee's medical, health, and
                                    hospital coverage for himself and family
                                    shall continue during any period of time
                                    that his base salary is continued pursuant
                                    to Section 12(d) (termination "without just
                                    cause") hereof, with the same premium or
                                    contribution rate payable by Employee to the
                                    Company as the Company's full time employees
                                    are required to pay to the Company for the
                                    same coverage during the same time period.

                           (ii)     PAID TIME OFF. Employee shall be paid for
                                    any PTO hours accrued through the date of
                                    termination in accordance with the Company's
                                    policy for payment of PTO in effect at that
                                    time. Employee shall not accrue PTO hours
                                    during any period of time that his base
                                    salary is continued pursuant to Section
                                    12(d) (termination "without just cause")
                                    hereof.

                           (iii)    BUSINESS EXPENSES. Company shall reimburse
                                    Employee any reasonable out-of-pocket
                                    expenses he incurred on behalf of himself or
                                    the Company prior to or after termination of
                                    this Agreement, so long as such expenses are
                                    bona fide and incurred in connection with
                                    the performance of his duties and
                                    responsibilities hereunder.

         13. INVENTIONS AND CREATIONS. Employee agrees that all inventions,
discoveries, improvements, ideas and other contributions (herein called
collectively "Inventions") whether or not patented or patentable, copyrighted or
copyrightable, or otherwise protectable in law, which are conceived, made,
developed or acquired by Employee, either individually or jointly, during his
employment with the Company or any affiliate and which relate in any manner to
the business of the Company or any affiliate,

                                       3
<PAGE>

shall belong to the Company or appropriate affiliate, and by execution hereof
Employee assigns and transfers to the Company his entire right, title and
interest in the Inventions.

         14. REMEDIES. Employee acknowledges that legal remedies for the breach
of this Agreement would be inadequate and that in addition to other remedies
provided by law or equity, upon a breach by Employee of any of the covenants
contained in this Agreement, the Company or appropriate affiliate shall be
entitled to an injunction against Employee prohibiting any further breach of
this Agreement.

         15. AMENDMENT AND ASSIGNMENT. This Agreement may be amended only by a
writing signed by both parties hereto. This Agreement, and the rights, duties
and obligations shall not be assignable by Employee because the services to be
rendered hereunder are unique and personal. There is no prohibition on
assignment by Company to one of its affiliates, and its rights, duties and
obligations hereunder shall be binding upon, and inure to the benefit of,
Company and its successors and assigns.

         16. CONFIDENTIAL INFORMATION. Employee has entered into that certain
Confidentiality Agreement dated as of January 22, 2003 and shall comply with
said Confidentiality Agreement in accordance with its terms as related to its
subject matter.

         17. NONCOMPETITION. Employee acknowledges that he has specialized
knowledge and experience in the Company's or its affiliates' business, that his
reputation and contacts within the industry are considered to be of great value
to the Company, and that if his knowledge, experience, reputation or contacts
are used to compete with the Company or any of its affiliates, then serious and
irreparable harm would be caused to the Company or its affiliates.

                  (a)      Restrictions.

                           (i)      Employee's Resignation. Except as otherwise
                                    provided below, if Employee voluntary
                                    resigns his employment with the Company,
                                    Employee, shall not, during the term of this
                                    Agreement and for a period of TWELVE (12)
                                    MONTHS thereafter, without prior written
                                    consent of the Company, directly or
                                    indirectly own, manage operate, finance,
                                    join, control or participate in the
                                    ownership, management, operation, financing
                                    or control of, or be connected with as an
                                    officer, director, employee, partner,
                                    principal, agent, representative, consultant
                                    or otherwise, any business or enterprise
                                    principally engaged in providing
                                    property/casualty insurance on nonstandard
                                    automobile risks or the financing of
                                    premiums thereof; provided that this
                                    restriction shall apply only with respect to
                                    the states in which the Company or its
                                    affiliates are providing any such services
                                    at the time this Agreement is terminated.
                                    During such TWELVE (12) MONTH PERIOD,
                                    Employee shall not solicit any employee of
                                    the Company or its affiliates to leave
                                    his/her employment with the Company or such
                                    affiliate. Nothing herein shall prevent
                                    Employee's acquiring, for investment
                                    purposes, equity interests in any such
                                    business or enterprise so long as (i) no
                                    such equity interest exceeds five percent
                                    (5%) of the investee's business or
                                    enterprise's equity and (ii) Employee does
                                    not have any relationship with such
                                    investee's business or enterprise that is
                                    otherwise restricted by this paragraph.

                           (ii)     Termination Other Than Resignation.

                                    a)       If Employee is terminated "without
                                             just cause" or for any other reason
                                             other than employee's voluntary
                                             resignation, Employee shall not,
                                             during the term of this Agreement
                                             and for a period of SIX (6) MONTHS
                                             thereafter, without prior written
                                             consent of the Company, directly or
                                             indirectly own, manage operate,
                                             finance, join, control or
                                             participate in the ownership,
                                             management, operation, financing or
                                             control of, or be connected with as
                                             an officer, director, employee,
                                             partner, principal, agent,
                                             representative, consultant or
                                             otherwise, any business or
                                             enterprise principally engaged in
                                             providing property/casualty
                                             insurance on nonstandard automobile
                                             risks or the financing of premiums
                                             thereof; provided that this
                                             restriction shall apply only with
                                             respect to the states in which this
                                             Company or its affiliates are
                                             providing any such services at the
                                             time this Agreement is terminated.
                                             For a period of TWELVE (12) MONTHS
                                             after such termination, Employee
                                             shall not solicit any employee of
                                             the Company, including any
                                             affiliate of the Company, to leave
                                             his/her employment with the
                                             Company. Nothing herein shall
                                             prevent Employee's acquiring, for
                                             investment purposes, equity
                                             interests in any such business or
                                             enterprise so long as (i) no such
                                             equity interest exceeds five
                                             percent (5%) of the investee's
                                             business or enterprise's equity and
                                             (ii) Employee does not have any
                                             relationship with such investee's
                                             business or enterprise that is
                                             otherwise restricted by this
                                             paragraph.

                                       4
<PAGE>
                                 b)    If Employee is terminated "for cause,"
                                       Employee shall not, during the term of
                                       this Agreement and for a period of TWELVE
                                       (12) MONTHS after such termination,
                                       solicit any employee of the Company,
                                       including any affiliate of the Company,
                                       to leave his/her employment with the
                                       Company.

               (b)   Remedies For Breach. The parties hereto recognize that the
                     services to be rendered under this Agreement by Employee
                     are of a special and unique character; and in the event the
                     Employee shall violate any of the restrictions set forth in
                     this Section 17, then Company may, in any court of
                     competent jurisdiction, obtain damages for any breach of
                     this Agreement, enforce the specific performance hereof, or
                     enjoin Employee from performing any prohibited act
                     hereunder. Nothing herein contained shall be construed to
                     prevent Company's election of any such remedy in law or in
                     equity in the event of the breach of this Section 17 by
                     Employee.

               (c)   Judicial Modification and Severability. If any provision of
                     Section 17 shall be held to be invalid or unenforceable,
                     the remaining provisions hereof shall nevertheless continue
                     to be valid and enforceable as though the invalid or
                     unenforceable parts had not been included herein. In the
                     event the terms of this Section 17 relating to duration,
                     subject matter, or territory shall be declared by a court
                     of competent jurisdiction to exceed the maximum duration,
                     subject matter, or territory, such court deems reasonable
                     and enforceable, then the provision(s) deemed unenforceable
                     shall be amended to reflect the maximum duration, subject
                     matter or territory which shall be enforceable.

         18. APPLICABLE LAW. This Agreement is subject to and not in abrogation
of the applicable laws of the United States of America and shall be construed
and enforced in accordance with the laws of the State of Tennessee.

         19. INDEMNITY. To the extent permitted by law and the Company's charter
and bylaws, the Company will indemnify the Employee against any claim or
liability including, but not limited to, any claim regarding the use by Company
or any affiliate of the Employee's name or likeness and will hold the Employee
harmless from and pay any expenses (including, without limitation, legal fees
and court costs), judgments, fines, penalties, settlements and other amounts
arising out of or in connection with any act or omission of the Employee
performed or made in good faith on behalf of the Company or any affiliate
pursuant to this Agreement. The Company or any affiliate will not be obligated
to pay the Employee's legal fees and related charges of counsel during any
period that the Company or an affiliate furnished, at its expense, counsel to
defend the Employee; but any counsel furnished by the Company or affiliate must
be reasonably satisfactory to the Employee.

         20. BINDING EFFECT. This Agreement shall be binding upon, and inure to
the benefit of, the parties hereto, and to the affiliates of the Company, and
their respective heirs, successors, assigns, and personal legal representatives.

         21. SEVERABILITY. In addition to the applicability of Section 17(c)
hereof, should any other provision of this Agreement be determined to be
invalid, illegal or unenforceable by a court of competent jurisdiction, then
such provision shall be amended by the parties hereto so as to make it valid,
legally enforceable but keeping it as close to its original meaning as possible.
The invalidity, illegality or unenforceability of any such provisions shall not
affect, in any manner, the other provisions herein contained which shall remain
in full force and effect.

         22. WAIVER. No failure by the Company or other affiliate to insist upon
the strict performance of any term or condition of this Agreement or to exercise
any right or remedy available to it will constitute a waiver. No breach or
default of any provision of this Agreement will be waived, altered or modified,
and neither the Company nor any affiliate will waive any of its rights, except
by a written instrument executed by the Company or such affiliate. No waiver of
any breach or default will affect or alter any term or condition of this
Agreement, and such term or condition will continue in full force and effect
with respect to any other then existing or subsequent breach or default thereof.

         23. MISCELLANEOUS

               (a)      Notices. All notices under or in connection with this
                        Agreement shall be in writing and may be delivered
                        personally or sent by mail, courier, electronic mail,
                        fax, or other written means of communication to the
                        parties at their addresses set forth below, or to such
                        other addresses and fax numbers as to which notice is
                        given:

                        (i)      if to the COMPANY:

                                 Direct General Corporation
                                 Attention:  William Adair, CEO
                                 2813 Business Park Drive, Building I
                                 Memphis, Tennessee 38118
                                 Fax: (901) 541-3382

                                       5
<PAGE>

                                    WITH COPY TO:

                                    Attn: Ronald F. Wilson, General Counsel
                                    Direct General Corporation
                                    1281 Murfreesboro Road
                                    Nashville, Tennessee 37217
                                    Fax: (615) 366-3722

                           (ii)     if to the EMPLOYEE:

                                    J. Todd Hagely
                                    740 Glen Oaks Drive
                                    Franklin, Tennessee 37067

                           Notice will be deemed given on receipt.

                  (b)      Headings. Section headings are for purposes of
                           convenient reference only and will not affect the
                           meaning or interpretation of any provision of this
                           Agreement.

                  (c)      Merger Clause. This Agreement, its Exhibit(s), and
                           the Confidentiality Agreement referred to in Section
                           16 hereof, constitute the entire agreement of the
                           parties with respect to employment matters and
                           supersedes any and all prior agreements or
                           understandings between them, as related to Employee's
                           employment. This Agreement is not intended to amend,
                           and does not amend, any document referred to in it.

         24. ARBITRATION. Any dispute, controversy or claim arising between the
parties hereto concerning the terms of this Agreement, other than with respect
to Section 17 hereof, shall be determined by binding arbitration in accordance
with the then-current rules and regulations promulgated by the American
Arbitration Association.

         25. FURTHER ASSURANCES. The parties hereto shall execute such other and
further documents, and take such further actions, as may be reasonably necessary
in order to carry out the intentions of this Agreement.

         IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and date first above written.

                                         DIRECT GENERAL CORPORATION

 /s/ Karen A. Moody                     By: /s/ Tammy R. Adair
--------------------------                  -----------------------------------
Witness:                                Name: Tammy R. Adair
                                        Title: President

                                        EMPLOYEE:

 /s/ Matthew P. McClure                 By: /s/ J. Todd Hagely
--------------------------                  -----------------------------------
Witness:                                    J. Todd Hagely

                                       6
<PAGE>

                                   EXHIBIT "A"

                     EMPLOYEE'S DUTIES AND RESPONSIBILITIES

DUTIES AND RESPONSIBILITIES OF CHIEF FINANCIAL OFFICER AND SENIOR VICE PRESIDENT
INCLUDE THE FOLLOWING:

1.       FINANCIAL PLANNING AND ACCOUNTING PRACTICES. Reports to the Chief
         Executive Officer and President and makes recommendations to the
         Company's Board of Directors, Audit Committee of the Board, Chief
         Executive Officer and President regarding financial planning and
         accounting practices for the Company and its subsidiaries. Oversees the
         implementation of such planning and practices as directed by the
         Company's Board of Directors, Audit Committee, Chief Executive Officer
         or President. Such responsibilities may include, but are not limited
         to, budgeting, forecasting, and cash flow projections of Direct General
         Corporation and its subsidiaries.

2.       FINANCIAL OVERSIGHT. Monitors the preparation and content of the
         financial statements of the Company and its subsidiaries and oversees
         the tracking and use of the Company's assets.

3.       REGULATORY REPORTING. Assists in and ensures that monthly, quarterly
         and annual state statutory and other regulatory reports are prepared
         and issued in a timely and efficient manner. Oversees implementation of
         all necessary and appropriate procedures to ensure accuracy and
         compliance with all state and federal finance, accounting and tax
         regulations.

4.       INTERNAL CONTROLS. With the participation of the Company's management,
         including the Chief Executive Officer and President, oversees the
         design and maintenance of an effective internal control structure for
         financial reporting purposes.

5.       REVENUE PLANNING. In consultation with the Company's Chief Executive
         Officer or President, makes recommendations, and, if requested,
         oversees the implementation of plans and strategies to increase the
         Company's revenues.

6.       FINANCIAL ADVICE. Serves, if requested by the Company's Board of
         Directors, Audit Committee, Chief Executive Officer or President as
         advisor on financial matters and recommends appropriate strategies and
         courses of action.

7.       ADMINISTRATION OF PERSONNEL. Supervises the Company's Controller and
         Treasurer and has general administrative oversight responsibility for
         the Company's treasury and accounting staff.

8.       FINANCIAL AND SEC REPORTING AND COMPLIANCE. Oversees and assists in the
         preparation of all the Company's financial statements and periodic
         reports for financial and Securities Exchange Commission reporting
         purposes. Directs and ensures compliance with regulations and practices
         related to SEC compliance and certifications.

9.       POLICY ENFORCEMENT. Assists in enforcement of the Company's policies,
         practices and procedures related to finance, accounting, and tax
         matters.

10.      GENERAL BUSINESS ACTIVITIES. Assists and advises, if requested by the
         Chief Executive Officer or President, in planning, organizing,
         implementing, and controlling the Company's general business objectives
         and activities.

11.      SECONDARY AND DEVELOPING RESPONSIBILITIES. Although Employee's primary
         activities shall be focused on the foregoing list of duties and
         responsibilities, as the business needs of the Company grow and
         develop, and as requested by the Board of Directors, the Chief
         Executive Officer or President, Employee may be asked to perform other
         duties and responsibilities for the Company and its subsidiaries that
         are not currently foreseen and not specifically identified on this
         Exhibit "A", but that nevertheless are consistent with the role of
         Chief Financial Officer and/or Senior Vice President.

                                       7

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