def14a
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant þ
Filed by a Party other than the Registrant o
Check the appropriate box:
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Preliminary Proxy Statement |
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
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Definitive Proxy Statement |
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Definitive Additional Materials |
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Soliciting Material Pursuant to §240.14a-12 |
First Acceptance Corporation
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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No fee required. |
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
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Per unit price or other underlying value of transaction computed pursuant to Exchange Act
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2)
and identify the filing for which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the Form or Schedule and the date of its
filing. |
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FIRST ACCEPTANCE CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD NOVEMBER 16, 2010
To our Stockholders:
The 2010 annual meeting of stockholders of First Acceptance Corporation will be held Tuesday,
November 16, 2010, at 10:00 a.m., central time, at our corporate headquarters, which are located at
3813 Green Hills Village Drive, Nashville, Tennessee 37215. Directions to the annual meeting can be
obtained by contacting Investor Relations by email through an information request at
http://phx.corporate-ir.net/phoenix.zhtml?c=120257&p=irol-infoReq or by phone at 1-800-321-0899. At
the meeting, stockholders will vote on the following matters:
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Election of the nine directors set forth in this proxy statement to serve until
the next annual meeting of stockholders or until their respective successors are duly
elected and qualified; |
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Approval of an increase in the number of shares authorized for issuance
pursuant to the First Acceptance Corporation Employee Stock Purchase Plan; |
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Ratification of the appointment of Ernst & Young LLP as our independent
auditors for the fiscal year ending June 30, 2011; and |
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Any other matters that may properly come before the meeting. |
Stockholders of record at the close of business on October 4, 2010 are entitled to notice of
and to vote at the meeting.
Your vote is important. Please COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD in the
enclosed stamped envelope in order that as many shares as possible will be represented.
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By Order of the Board of Directors, |
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Kevin P. Cohn |
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Secretary |
Nashville, Tennessee
October 15, 2010
* * * IMPORTANT NOTICE * * *
Regarding Internet Availability of Proxy Materials
for the 2010 Annual Meeting of Stockholders to be held on November 16, 2010
In accordance with rules issued by the Securities and Exchange Commission,
you may access our 2010 Annual Report, our Proxy Statement and our form of Proxy at
http://phx.corporate-ir.net/phoenix.zhtml?c=120257&p=proxy
In addition, we will provide a copy of any of the above materials to any stockholder at no charge
upon request by contacting Investor Relations by email through an information request at
http://phx.corporate-ir.net/phoenix.zhtml?c=120257&p=irol-infoReq
or by phone at 1-800-321-0899.
TABLE OF CONTENTS
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Director Compensation Table |
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APPENDIX A: AMENDED AND RESTATED FIRST ACCEPTANCE CORPORATION
EMPLOYEE STOCK PURCHASE PLAN |
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i
FIRST ACCEPTANCE CORPORATION
3813 GREEN HILLS VILLAGE DRIVE
NASHVILLE, TENNESSEE 37215
PROXY STATEMENT
The Board of Directors of First Acceptance Corporation (referred to herein as the Board or
the Board of Directors) is soliciting proxies to be used at the 2010 annual meeting of
stockholders. This proxy statement and the enclosed proxy card will be first mailed to stockholders
on or about October 15, 2010.
ABOUT THE MEETING
What Is the Purpose of the Annual Meeting?
At our annual meeting, stockholders will vote on the matters outlined in the accompanying
notice of meeting. In addition, our management will report on our performance during fiscal 2010
and respond to questions from stockholders.
Who Is Entitled to Vote?
Only stockholders of record at the close of business on the record date, October 4, 2010, are
entitled to receive notice of the annual meeting and vote the shares of common stock that they held
on that date at the meeting, or any postponement or adjournment of the meeting. Each outstanding
share of our common stock entitles its holder to cast one vote on each matter to be voted upon.
What Constitutes a Quorum?
For purposes of voting on all matters, the presence at the meeting, in person or by proxy, of
the holders of a majority of the shares of common stock outstanding on the record date will
constitute a quorum. As of the record date, 48,509,258 shares of our common stock were outstanding.
Proxies received but marked as abstentions will be included in the calculation of the number of
shares considered to be present at the meeting.
How Do I Vote?
If you complete and properly sign the accompanying proxy card and return the card to us, the
card will be voted as you direct. If you are a registered stockholder and attend the meeting, you
may deliver your completed proxy card in person. Street name stockholders who wish to vote at the
meeting will need to obtain a proxy card from the institution that holds their shares.
Can I Change My Vote After I Return My Proxy Card?
Yes. You can revoke your proxy at any time before it is exercised in any of three ways:
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by submitting written notice of revocation to the Assistant Secretary; |
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by submitting another proxy that is later dated and properly signed; or |
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by voting in person at the meeting. |
1
What Are the Boards Recommendations?
Unless you give other instructions on your proxy card, the persons named as proxy holders on
the proxy card will vote in accordance with the recommendations of the Board of Directors. The
Boards recommendations are set forth below, and a description of each item is included in this
proxy statement. In summary, the Board recommends a vote:
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for election of each of the nominated directors; |
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for approval of an increase in the number of shares authorized for issuance pursuant
to the First Acceptance Corporation Employee Stock Purchase Plan; |
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for ratification of the appointment of Ernst & Young LLP as our independent auditors
for the fiscal year ending June 30, 2011; |
With respect to any other matter that properly comes before the meeting, the proxy holders
will vote as recommended by the Board of Directors or, if no recommendation is given, in their own
discretion.
What Vote Is Required to Approve Each Proposal?
Each of the director nominees must receive affirmative votes from a plurality of the votes
cast to be elected. This means that the nine nominees receiving the greatest number of votes will
be elected as directors. The approval of the amendment to the First Acceptance Corporation
Employee Stock Purchase Plan and the ratification of the appointment of Ernst & Young LLP as our
independent auditors, as well as any other matter that properly comes before the meeting, in order
to be approved, must receive affirmative votes from a majority of the shares represented in person
or by proxy and entitled to vote on the matter. If you abstain from voting on the election of
directors, your abstention will have no effect on the outcome, provided that a quorum has been
established. If you abstain from voting on the amendment to the First Acceptance Corporation
Employee Stock Purchase Plan or the ratification of the appointment of Ernst & Young LLP as our
independent auditors, your abstention will have the same effect as a vote against the proposal.
Will My Shares Be Voted if I Do Not Sign and Return My Proxy Card?
If you are a registered stockholder and do not sign and return your proxy card, your shares
will not be voted at the annual meeting. If your shares are held in street name and you do not
issue instructions to your broker, your broker may vote your shares at its discretion.
What Is a Broker Nonvote?
Under current New York Stock Exchange rules, brokers and nominees may exercise their voting
discretion without receiving instructions from the beneficial owner of the shares on proposals that
are deemed to be routine matters. If a proposal is not a routine matter, the broker or nominee may
not vote the shares with respect to the proposal without receiving instructions from the beneficial
owner of the shares. If a broker turns in a proxy card expressly stating that the broker is not
voting on a non-routine matter, such action is referred to as a broker nonvote. Under current
New York Stock Exchange rules, the proposal relating to the ratification of the appointment of
Ernst & Young LLP as our independent auditors is deemed to be a routine matter with respect to
which brokers and nominees may exercise their voting discretion without receiving instructions from
the beneficial owner of the shares. The proposals relating to the election of directors and the
amendment to the First Acceptance Corporation Employee Stock Purchase Plan are deemed to be
non-routine matters, and brokers and nominees may not exercise their discretion to vote on those
proposals without receiving instructions from the beneficial owner of the shares.
2
STOCK OWNERSHIP
The following table shows the amount of our common stock beneficially owned (unless otherwise
indicated) by our current directors, our named executive officers listed in this proxy statement
and our current directors and executive officers as a group. Except as indicated in the table,
none of our stockholders beneficially owns more than 5% of our common stock. Except as otherwise
indicated, all information is as of October 4, 2010.
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Acquirable |
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Outstanding |
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Gerald J. Ford |
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16,073,465 |
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33.1 |
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Thomas M. Harrison, Jr. |
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6,999,999 |
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14.4 |
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Donald J. Edwards |
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536,666 |
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3,725,678 |
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Rhodes R. Bobbitt |
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172,661 |
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Tom C. Nichols |
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50,500 |
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Lyndon L. Olson, Jr. |
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5,000 |
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William A. Shipp, Jr. |
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16,501 |
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Harvey B. Cash |
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5,000 |
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Stephen J. Harrison |
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7,070,866 |
(7) |
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14.6 |
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Edward L. Pierce |
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530,837 |
(8) |
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50,000 |
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1.2 |
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Kevin P. Cohn |
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27,847 |
(9) |
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112,500 |
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Daniel L. Walker |
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34,667 |
(10) |
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40,000 |
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Keith E. Bornemann |
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17,006 |
(10) |
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14,000 |
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All current directors
and executive officers
As a group (13
persons) |
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31,541,015 |
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3,942,178 |
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67.6 |
% |
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Represents less than 1% of our outstanding common stock. |
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The number of shares shown includes shares that are individually or jointly owned, as
well as shares over which the individual has either sole or shared investment or voting
authority. |
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Reflects the number of shares that could be purchased by exercise of options
exercisable on October 4, 2010 or within 60 days thereafter under our stock incentive plan. |
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Pursuant to the rules of the Securities and Exchange Commission (the SEC), shares of
common stock that an individual owner has a right to acquire within 60 days pursuant to the
exercise of stock options are deemed to be outstanding for the purpose of computing the
ownership of that owner, but are not deemed outstanding for the purpose of computing the
ownership of any other individual owner. Likewise, the shares subject to options held by our
directors and executive officers that are exercisable within 60 days are all deemed
outstanding for the purpose of computing the percentage ownership of all executive officers
and directors as a group. |
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Includes 12,319,654 shares owned through Hunters Glen/Ford Ltd. (Hunters Glen);
1,793,446 shares owned through Turtle Creek Revocable Trust (Turtle Creek Trust); and
1,960,365 shares owned by Jeremy B. Ford, Mr. Fords son. Because Mr. Ford is one of two
general partners of Hunters Glen and the sole stockholder of Ford Diamond Corporation, a
Texas corporation and the other general partner of Hunters Glen, Mr. Ford is considered the
beneficial owner of the shares that Hunters Glen owns. Since Mr. Ford is trustee of Turtle
Creek Trust, Mr. Ford is considered the beneficial owner of the shares that Turtle Creek Trust
owns. Address: 200 Crescent Court, Suite 1365, Dallas, Texas 75201. |
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Includes 5,238,063 shares held by the Thomas M. Harrison, Jr. Family 2010 Grantor
Retained Annuity Trust and 1,761,936 shares held by the Thomas M. Harrison, Jr. Family 2009
Grantor Retained Annuity Trust. Address: c/o Bass, Berry & Sims PLC, 150 Third Avenue South,
Suite 2800, Nashville, Tennessee 37201. |
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Address: Flexpoint Ford, LLC, 676 N. Michigan Avenue, Suite 3300, Chicago, Illinois
60611. |
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Includes 50,980 shares of unvested restricted stock 4,775,417 shares held by the
Stephen J. Harrison 2010 Grantor Retained Annuity Trust and 2,228,966 shares held by the
Stephen J. Harrison 2009 Grantor Retained Annuity Trust. Address: c/o Bass, Berry & Sims PLC,
150 Third Avenue South, Suite 2800, Nashville, Tennessee 37201. |
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Includes 145,837 shares of unvested restricted stock. |
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Represents shares of unvested restricted stock. |
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Includes 27,734 and 14,233 shares of unvested restricted stock held by Messrs. Walker
and Bornemann, respectively. |
3
Section 16(a) Beneficial Ownership Reporting Compliance
The federal securities laws require our directors and executive officers and persons who own
more than 10% of our common stock to timely file with us and the SEC initial reports of ownership
and reports of changes in ownership. Based solely upon a review of filings with the SEC and written
representations that no other reports were required, we believe that all of our directors and
officers complied during fiscal 2010 with their reporting requirements.
CORPORATE GOVERNANCE
Corporate Governance Guidelines
We have adopted Corporate Governance Guidelines that outline the composition, operations and
responsibilities of the Board of Directors. The Nominating and Corporate Governance Committee has
authority to review considerations relating to Board size and membership criteria and, with input
from the Chairman and the other directors, is responsible for reviewing the skills and
characteristics required of directors by legal, regulatory and business requirements applicable to
our business. We do not have a formal policy with respect to the consideration of diversity in
identifying nominees to serve as a director, but the Nominating and Corporate Governance Committee
seeks to nominate persons with a diversity of experience and perspective who will contribute
knowledge, experience and skills to the Board of Directors in areas that are important to the
Company.
Our Bylaws provide maximum flexibility to the Board of Directors in choosing a Chairman of the
Board and a Chief Executive Officer. The Bylaws provide that such offices may be held by different
people or the same person, as determined by the Board. This flexibility allows the Board to
determine whether it is in the best interest of the Company and our stockholders to combine the
roles of Chief Executive Officer and Chairman of the Board in the same person. We currently have a
non-employee director serving as our Chairman of the Board and the Board of Directors believes that
the separation of the roles of Chairman of the Board and Chief Executive Officer enhances the
Boards oversight of the Company and our management, results in a greater role for the Board of
Directors in setting the Boards agenda and establishing Board priorities and procedures, and
improves the ability of the Board to carry out its roles and responsibilities on behalf of our
stockholders.
The Corporate Governance Guidelines require that at least a majority of the members of the
Board must be independent, as defined by applicable law and the standards of the New York Stock
Exchange. The Board has determined that each of Messrs. Bobbitt, Cash, Nichols, Olson and Shipp
are independent within the meaning of the rules of the New York Stock Exchange as currently in
effect. The Corporate Governance Guidelines also require that all of the members of the Audit,
Compensation, and Nominating and Corporate Governance Committees of the Board must be independent.
A copy of our Corporate Governance Guidelines may be found on the corporate governance page of our
website at www.firstacceptancecorp.com, and we will send a written copy of our Corporate Governance
Guidelines to any stockholder who requests a copy by delivering written notice to Investor
Relations, First Acceptance Corporation, 3813 Green Hills Village Drive, Nashville, Tennessee
37215.
The non-management members of the Board of Directors meet regularly in executive sessions. The
Chairman of the Board of Directors presides over executive sessions of the non-management
directors. Stockholders and all other interested parties may send communications to the Chairman of
the Board of Directors or to any of the non-management directors at 3813 Green Hills Village Drive,
Nashville, Tennessee 37215.
The Boards Role in Risk Oversight
The Board, as a whole and also through its standing committees, has an active role in
overseeing management of the Companys risks. The Board and its committees review material
operational, financial, compensation and compliance risks with our senior management. The
Compensation Committee is responsible for overseeing the management of risks related to our
compensation arrangements. The Audit Committee oversees management of financial risks, as well as
our policies with respect to risk assessment and risk management. The Nominating and Corporate
Governance Committee oversees our corporate compliance programs and manages risks
4
associated with the independence of our directors. Members of our management report directly
to the Board or the appropriate committee. The directors then use this information to understand,
identify, manage and attempt to mitigate risks.
Code of Business Conduct and Ethics
The Board has adopted a Code of Business Conduct and Ethics which outlines the principles,
policies and laws that govern our activities and establishes guidelines for professional conduct in
the workplace. The Code of Business Conduct and Ethics includes provisions relating to ethical
conduct, conflicts of interest, compliance with law and internal reporting of violations of the
code. The Code of Business Conduct and Ethics applies to directors as well as executive officers
and other employees. Every employee is required to read and certify that he or she has read and
understands, and will comply with, the Code of Business Conduct and Ethics. A copy of our Code of
Business Conduct and Ethics may be found on the corporate governance page of our website at
www.firstacceptancecorp.com, and we will send a written copy of our Code of Business Conduct and
Ethics to any stockholder who requests a copy by delivering written notice to Investor Relations,
First Acceptance Corporation, 3813 Green Hills Village Drive, Nashville, Tennessee 37215. We intend
to disclose amendments to or waivers from the Code of Business Conduct and Ethics for the benefit
of our executive officers or directors, if any, on our web site at www.firstacceptancecorp.com.
5
PROPOSAL 1 ELECTION OF DIRECTORS
The Board of Directors is comprised of nine members. The Board of Directors has nominated and
recommends to the stockholders Rhodes R. Bobbitt, Harvey B. Cash, Donald J. Edwards, Gerald J.
Ford, Stephen J. Harrison, Thomas M. Harrison, Jr., Tom C. Nichols, Lyndon L. Olson, Jr. and
William A. Shipp, Jr. for election to serve as directors until our next annual meeting of
stockholders and until such time as their respective successors are duly elected and qualified.
Each of the director nominees is currently a director and was elected by the stockholders at our
2009 annual meeting of stockholders.
If any of the nominees should become unable to accept election, the persons named in the proxy
may vote for such other person or persons as may be designated by the Board of Directors.
Management has no reason to believe that any of the nominees named above will be unable to serve.
Certain information with respect to the nominees for election as directors is set forth below.
Rhodes R. Bobbitt, 65, has served as a director of the Company
since August 2004. From February 1987 until his retirement in June
2004, Mr. Bobbitt served as managing director and Dallas regional
office manager of the Private Client Service Group Credit Suisse
First Boston and its predecessor, Donaldson, Lufkin & Jenrette.
Prior to joining Donaldson, Lufkin & Jenrette, Mr. Bobbitt was vice
president of security sales in the Dallas office of Goldman Sachs &
Co. Mr. Bobbitt is a director of Hilltop Holdings, Inc. Mr.
Bobbitt has executive experience in finance and investments.
Harvey B. Cash, 71, has served as a director of the Company since
November 1996. Mr. Cash has been a general partner of InterWest
Partners, a venture capital fund, since 1986. Mr. Cash is a
director of Silicon Laboratories, Ciena Corporation, and Argo Group
International Holdings, Ltd. Mr. Cash has experience in strategic
planning, finance and investments. Mr. Cash was formerly a
director of Entarian Technologies, Inc., Airspan Networks, Inc. and
i2 Technologies, Inc.
Donald J. Edwards, 44, has served as a director of the Company
since July 2002. Mr. Edwards currently is the managing principal
for Flexpoint Ford, LLC (formerly Flexpoint Partners, LLC), a
Chicago-based private equity firm (Flexpoint Ford), and served as
our President and Chief Executive Officer from July 2002 through
April 2004. Prior to July 2002, Mr. Edwards served as a Principal
in GTCR Golder Rauner, a Chicago-based private equity firm, for
over five years. Mr. Edwards has experience in strategic planning,
management, finance and investments.
Gerald J. Ford, 66, has been Chairman of the Board of Directors and
a director of the Company since its formation in August 1996. Mr.
Ford served as our Chief Executive Officer from our formation until
July 2002. He currently is a private investor, and serves as
Chairman of the Board of Trustees of Southern Methodist University
and as a trustee of Southwestern Medical Foundation. Mr. Ford was
the Chairman of the Board, Chief Executive Officer and a director
of Golden State Bancorp Inc., a holding company whose primary asset
was its indirect ownership of California Federal Bank, from
September 1998 through November 2002. Mr. Ford is a director of
Freeport-McMoRan Copper & Gold, McMoRan Exploration Co., Scientific
Games Corporation and Hilltop Holdings, Inc. Mr. Ford has
experience in strategic planning, executive management, finance and
investments.
Stephen J. Harrison, 58, has served as our Chief Executive Officer
and a director of the Company since April 2004. Mr. Harrison served
as our President from April 2004 through February 2008. In 1995,
Mr. Harrison co-founded USAuto Insurance Company, Inc., predecessor
of USAuto Holdings, Inc. (USAuto Holdings), which we acquired in
April 2004. Mr. Harrison has over 30 years experience in insurance
and related industries, including automobile insurance and
insurance agency operations. From 1974 to 1991, he served in
various capacities with the Harrison Insurance Agency, a
family-owned multi-line insurance agency. From 1991 to 1993, Mr.
Harrison served as President of Direct Insurance Company, a
non-standard automobile insurance company. Mr. Harrison is the
brother of Thomas M. Harrison, Jr., a director of the Company. Mr.
Harrison has over 30 years experience in the insurance industry and
his day-to-day leadership as our Chief Executive Officer provides
him with intimate knowledge of our operations.
6
Thomas M. Harrison, Jr., 60, has served as a director of the
Company since April 2004. Mr. Harrison served as Executive Vice
President and Secretary of the Company from April 2004 until his
retirement in December 2007. Mr. Harrison co-founded USAuto
Insurance Company, Inc., predecessor to USAuto Holdings, in 1995
and served as Vice President and Secretary of USAuto Holdings from
1995 until December 2007. Mr. Harrison is the brother of Stephen J.
Harrison, who is our Chief Executive Officer and a director of the
Company. Mr. Harrison has over 30 years experience in the
insurance industry, including serving as an Executive Vice
President of the Company.
Tom C. Nichols, 63, has served as a director of the Company since
November 2005. Mr. Nichols has served as Chairman and Chief
Executive Officer of Carlile Holdings, Inc., a bank holding
company, and Carlile Bancshares, Inc. since March 2008. Mr. Nichols
served as President and a director of First United Bancorp and
Chairman, President and Chief Executive Officer of State National
Bancshares, Fort Worth from October 1996 to March 2008. Mr. Nichols
previously served as President of Ford Bank Group and as a director
of United New Mexico Financial Corporation. Mr. Nichols has
executive experience in strategic planning, management and finance.
Lyndon L. Olson, Jr., 63, has served as a director of the Company
since August 2004. Mr. Olson served as a senior advisor to
Citigroup, Inc., serving as a consultant to senior management, from
2001 to 2008. Mr. Olson served as United States Ambassador to
Sweden from 1998 until 2001. From 1990 to 1998, Mr. Olson served
with Citigroup as President and Chief Executive Officer of
Travelers Insurance Group Holdings, Inc. and Associated Madison
Companies, Inc. Prior to joining Citigroup, Mr. Olson served as
President of the National Group Corporation and Chief Executive
Officer of its National Group Insurance Company. Mr. Olson has
executive experience in strategic planning, management, insurance
regulatory compliance and finance, with particular emphasis on the
insurance industry.
William A. Shipp, Jr., 58, has served as a director of the Company
since August 2004. Mr. Shipp has been principal of W.A. Shipp, Jr.
& Co., a financial advisory firm, since July 1995 and has served as
Treasurer/Secretary of the Jack C. Massey Foundation since July
1999. From December 1983 to June 1995, Mr. Shipp served as Vice
President of Massey Investment Company. Prior to joining Massey
Investment Company, Mr. Shipp worked for more than eight years in
various audit and tax capacities for Ernst & Young LLP. Mr. Shipp
is a certified public accountant. Mr. Shipp has experience in
accounting, finance and investments.
Required Vote; Recommendation of the Board
The affirmative vote of a plurality of the votes cast by the stockholders entitled to vote at
the meeting is required for the election of directors. Abstentions will be counted in determining
whether there is a quorum, but will not be voted with respect to the proposal. Therefore, so long
as a quorum has been established, abstentions will have no effect on whether this proposal is
approved.
The Board of Directors recommends that you vote FOR each of the nominees.
7
How Are Our Directors Compensated?
Each non-employee director receives an annual retainer of $20,000, payable in equal, quarterly
installments in arrears. The Chairman of the Audit Committee of the Board of Directors receives an
additional annual retainer of $5,000, payable in equal, quarterly installments in arrears.
Non-employee directors also receive a fee of $2,000 for each Board of Directors meeting attended
and $1,000 for each Board committee meeting attended. In addition, non-employee directors other
than Messrs. Edwards, Ford and Thomas M. Harrison, Jr. receive an award pursuant to the Amended and
Restated First Acceptance Corporation 2002 Long Term Incentive Plan of 1,000 shares of restricted
stock on the date of each annual meeting of our stockholders. The restricted stock is subject to
forfeiture if the director ceases to serve as a director of the Company during the period of six
months following the date of the award, subject to certain exceptions.
The following table summarizes information with respect to the compensation paid to the
members of our Board in fiscal 2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fees Earned |
|
Stock |
|
|
|
|
or Paid in |
|
Awards |
|
|
Name |
|
Cash ($) |
|
($) (1) |
|
Total ($) |
Rhodes R. Bobbitt |
|
|
40,000 |
|
|
|
1,970 |
|
|
|
41,970 |
|
Harvey B. Cash |
|
|
32,000 |
|
|
|
1,970 |
|
|
|
33,970 |
|
Donald J. Edwards |
|
|
32,000 |
|
|
|
|
|
|
|
32,000 |
|
Gerald J. Ford |
|
|
28,000 |
|
|
|
|
|
|
|
28,000 |
|
Thomas M. Harrison, Jr. |
|
|
28,000 |
|
|
|
|
|
|
|
28,000 |
|
Thomas C. Nichols |
|
|
36,000 |
|
|
|
1,970 |
|
|
|
37,970 |
|
Lyndon L. Olson, Jr. |
|
|
30,000 |
|
|
|
1,970 |
|
|
|
31,970 |
|
William A. Shipp, Jr. |
|
|
45,000 |
|
|
|
1,970 |
|
|
|
46,970 |
|
|
|
|
(1) |
|
Represents the proportionate amount of the total value of stock awards to directors
recognized as an expense during fiscal 2010 for financial accounting purposes under
Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC)
718-20, Compensation Stock Compensation, disregarding for this purpose estimated
forfeitures relating to service-based vesting conditions. Compensation expense is equal
to the grant date fair value of the stock awards using the closing price for the
Companys common stock on the New York Stock Exchange on the date of grant ($1.97). As of
June 30, 2010, there were no unvested stock awards held by our non-employee directors. |
What Committees Has the Board Established?
The Board of Directors has standing Audit, Compensation, and Nominating and Corporate
Governance Committees. A copy of the charter for each committee may be found on the corporate
governance page of our website at www.firstacceptancecorp.com and is available to any stockholder
who requests a copy by delivering written notice to Investor Relations, First Acceptance
Corporation, 3813 Green Hills Village Drive, Nashville, Tennessee 37215.
Audit Committee. The principal functions of the Audit Committee are (i) to oversee our
accounting and financial reporting processes and audits of our financial statements; (ii) to engage
or discharge our independent auditors; (iii) to review the nature and scope of the audit,
including, but not limited to, a determination of the effectiveness of the audit effort through
meetings held at least annually with independent auditors, and a determination through discussion
with the auditors that no unreasonable restrictions were placed on the scope or implementation of
their examinations; (iv) to oversee and review the independence, qualifications and performance of
the auditors; (v) to pre-approve all auditing and non-auditing services to be provided by our
independent auditors; (vi) to review our financial statements and disclosures in our periodic
reports with management and our independent auditors; (vii) to review our policies with respect to
risk assessment, risk management and the quality and adequacy of our internal controls and
processes through discussions with and reports from our independent auditors and management; (viii)
to establish procedures for handling any complaints relating to accounting, internal controls or
auditing matters and to ensure that such complaints are treated confidentially and anonymously;
(ix) to review material changes in accounting and reporting principles and practices and discuss
with management and outside auditors the selection, application and disclosure of critical
accounting policies and practices used in our financial
statements; (x) to retain, at our expense, outside counsel, auditors or other experts,
consultants or advisors as it deems
8
necessary or appropriate in the performance of its duties; and
(xi) to report to the full Board of Directors on the results of its reviews. The Audit Committee
operates under a written charter adopted by the full Board of Directors. Members of the Audit
Committee are Messrs. Bobbitt, Nichols and Shipp, all of whom are independent directors. Mr. Shipp
is an audit committee financial expert, as defined in Item 407(d)(5)(ii) of Regulation S-K. During
fiscal 2010, the Audit Committee met six times.
Compensation Committee. The functions of the Compensation Committee include reviewing and
approving the Companys compensation policies, the compensation arrangements for senior management
and directors, the compensation and benefit plans in which officers and directors are eligible to
participate, and awards under (and otherwise administering) such plans. The Compensation Committee
operates under a written charter adopted by the full Board of Directors. Members of the
Compensation Committee are Messrs. Cash, Nichols and Olson, all of whom are independent directors.
During fiscal 2010, the Compensation Committee met two times.
Nominating and Corporate Governance Committee. The Nominating and Corporate Governance
Committee is responsible for identifying qualified individuals to serve as directors; reviewing the
qualifications of incumbent directors and those candidates proposed by a director, executive
officer or stockholder; making recommendations to the full Board of Directors regarding such
candidates; recommending the candidates that will serve on the various committees of the Board;
reviewing Board composition; and reviewing the management succession plan of the Company.
When determining whether to nominate a current director to be reelected as a director, the
Nominating and Corporate Governance Committee must review the performance of the director during
the prior year using performance criteria established by the Nominating and Corporate Governance
Committee which, at a minimum, shall include:
|
|
|
attendance at Board and Committee meetings; |
|
|
|
|
preparedness for Board and Committee meetings; |
|
|
|
|
quality of objectivity in exercising business judgment; |
|
|
|
|
participation at Board and Committee meetings; and |
|
|
|
|
candor toward other directors, management and professionals retained by the Company. |
The Nominating and Corporate Governance Committee has no specifically defined process for
identifying and evaluating nominees, but it seeks to identify potential candidates for membership
on the Board through conversations with members of the Board, senior management and other
constituencies. The Nominating and Corporate Governance Committee may from time to time engage a
third party to identify or evaluate or assist in identifying or evaluating potential nominees. The
Nominating and Corporate Governance Committee is also responsible for reviewing the qualifications
and performance of incumbent directors to determine whether to recommend them to the Board of
Directors as nominees for re-election.
The Nominating and Corporate Governance Committee also considers nominees proposed by our
stockholders in accordance with the provisions contained in our bylaws and certificate of
incorporation. Nominations made by stockholders must be made by written notice setting forth the
information required by our bylaws and certificate of incorporation received by the secretary of
the Company at least 60 days in advance of the annual meeting of stockholders, or (if later) within
ten days after the first public notice of that meeting is sent to stockholders. Stockholders may
propose nominees for consideration by the Nominating and Corporate Governance Committee by
submitting the names and supporting information to: Investor Relations, First Acceptance
Corporation, 3813 Green Hills Village Drive, Nashville, Tennessee 37215.
In addition, the Nominating and Corporate Governance Committee is responsible for reviewing
and recommending corporate governance policies for the Company; reviewing potential conflicts of
interest involving directors or executive officers of the Company; evaluating Board performance,
including the effectiveness of current Board policies and practices; and reviewing any regulatory
requirements relating to the continuing education of directors. The Nominating and Corporate
Governance Committee operates under a written charter adopted by the full Board of Directors.
Members of the Nominating and Corporate Governance Committee are Messrs. Bobbitt, Cash
and Shipp, all of whom are independent directors. During fiscal 2010, the Nominating and
Corporate Governance Committee met two times.
9
How Often Did the Board Meet During Fiscal 2010?
The Board of Directors met five times during fiscal 2010. Each of the directors attended at
least 75% of the aggregate of all meetings of the Board of Directors and all meetings of the
committees on which the director served. All of the directors attended our 2009 annual meeting of
stockholders.
How Do I Communicate with the Board?
Stockholders and all other interested parties can send communications to the Board of
Directors and, if applicable, to specified individual directors c/o First Acceptance Corporation,
3813 Green Hills Village Drive, Nashville, Tennessee 37215. All stockholder communications will be
forwarded directly to the Board of Directors or, if applicable, to specified individual directors.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In accordance with our Related Party Transaction Policy, our Nominating and Corporate
Governance Committee is responsible for reviewing and approving the terms and conditions of all
transactions involving the Company and our executive officers, directors and beneficial owners of
5% or more of our common stock and their affiliates. The Nominating and Corporate Governance
Committee considers all relevant information and facts available regarding a related party
transaction, and takes into account factors that it deems to be appropriate, including, without
limitation, whether the transaction is on terms no less favorable to the Company than could be
obtained from unaffiliated third parties and whether the transaction is reasonably expected to
benefit the Company. Approval of the Nominating and Corporate Governance Committee is not required
for compensation paid to any director of the Company for services rendered to the Company in his
capacity as a director if the compensation is required to be disclosed in the Companys proxy
statement pursuant to applicable SEC rules. The Nominating and Corporate Governance Committee is
also not required to approve any compensation paid to an executive officer of the Company if the
compensation is required to be reported in the Companys proxy statement pursuant to applicable SEC
rules or if the executive officer is not an immediate family member of another executive officer or
director of the Company, the compensation would be required to be included in the Companys proxy
statement if the executive officer was a named executive officer and the Companys Compensation
Committee approved such compensation.
Donald J. Edwards, our former President and Chief Executive Officer and a current director,
was terminated as our President and Chief Executive Officer on April 30, 2004. In connection with
Mr. Edwards separation from the Company, we entered into a Separation Agreement with Mr. Edwards.
Pursuant to the terms of the Separation Agreement, we agreed to reimburse Flexpoint Partners, LLC,
now known as Flexpoint Ford, LLC, an entity controlled by Mr. Edwards, for all expenses incurred by
Flexpoint Ford pursuant to the lease for its office space located in Chicago, Illinois. The lease
expired on August 31, 2009. During the 2010 fiscal year, we paid Flexpoint Ford an aggregate of
$196,154 pursuant to the Separation Agreement.
10
EXECUTIVE OFFICERS
The following table sets forth certain information concerning our current executive officers.
|
|
|
|
|
|
|
Name |
|
Age |
|
Position |
Stephen J. Harrison
|
|
|
58 |
|
|
Chief Executive Officer |
Edward L. Pierce
|
|
|
53 |
|
|
President |
Kevin P. Cohn
|
|
|
41 |
|
|
Senior Vice President and Chief Financial
Officer |
Daniel L. Walker
|
|
|
47 |
|
|
Senior Vice President Operations |
Keith E. Bornemann
|
|
|
38 |
|
|
Vice President and Corporate Controller |
Stephen J. Harrison has served as our Chief Executive Officer and a director of the Company
since April 2004. Mr. Harrison served as our President from April 2004 through February 2008. In
1995, Mr. Harrison co-founded USAuto Insurance Company, Inc., predecessor of USAuto Holdings, Inc.,
which we acquired in April 2004. Mr. Harrison has over 30 years experience in insurance and related
industries, including automobile insurance and insurance agency operations. From 1974 to 1991, he
served in various capacities with the Harrison Insurance Agency, a family-owned multi-line
insurance agency. From 1991 to 1993, Mr. Harrison served as President of Direct Insurance Company,
a non-standard automobile insurance company. Mr. Harrison is the brother of Thomas M. Harrison,
Jr., a director of the Company.
Edward L. Pierce has served as our President since February 2008. Mr. Pierce served as
Executive Vice President of the Company from August 2006 to February 2008 and Chief Financial
Officer from October 2006 to February 2008. From May 2001 through February 2006, Mr. Pierce served
as Executive Vice President and Chief Financial Officer and as a director of BindView Development
Corporation, a publicly-traded network security software development company. From November 1994
through January 2001, Mr. Pierce held various financial management positions, including Executive
Vice President and Chief Financial Officer, with Metamor Worldwide Corporation, a publicly-traded
global information technology services company. Previously, Mr. Pierce was Corporate Controller of
American Oil and Gas Corporation and a Senior Audit Manager at Arthur Andersen & Co.
Kevin P. Cohn has served as our Senior Vice President, Chief Financial Officer and Secretary
since February 2008. Mr. Cohn served as Chief Accounting Officer and Corporate Controller of the
Company from October 2006 to February 2008. From May 2001 through May 2006, he served as Vice
President, Chief Accounting Officer and Corporate Controller of BindView Development Corporation, a
publicly-traded network security software development company. From December 1997 until February
2001, Mr. Cohn was employed by Metamor Worldwide Inc., a publicly-traded global information
technology services company, where he was Vice President, Chief Accounting Officer and Corporate
Controller. Before that, Mr. Cohn was employed with Ernst & Young LLP as an Audit Manager.
Daniel L. Walker has served as our Senior Vice President Operations since October 2007
having responsibilities for both claims and underwriting. Mr. Walker served as our Senior Vice
President Claims from July 2007 to October 2007 and Vice President Claims from March 2007 to
July 2007. He has over 20 years claims experience, and served as Chief Claim Officer for Canal
Insurance Company from August 2002 to March 2007.
Keith E. Bornemann has served as Vice President Corporate Controller of the Company since
November 2008 and Corporate Controller of the Company from February 2008 to November 2008. Mr.
Bornemann served as Assistant Controller of the Company from January 2007 to February 2008. He has
over 15 years of accounting, finance and internal audit experience, and was employed from January
2005 to January 2007 by Sachem, Inc., a privately-held global manufacturing company, where he was
Manager of Finance and Internal Audit. From July 1995 to December 2004, Mr. Bornemann was employed
with Ernst & Young LLP, most recently as an Audit Senior Manager.
11
AUDIT COMMITTEE REPORT
The Audit Committee of the Board of Directors is composed of three directors who are
independent directors as defined under the applicable rules of the Securities Exchange Commission
and the New York Stock Exchange. The Audit Committee operates under a written charter adopted by
the full Board of Directors. The Audit Committees responsibilities include oversight of our
independent auditors and internal audit function, as well as oversight of our financial reporting
process on behalf of the full Board of Directors. Management has the primary responsibility for the
financial statements and the reporting process. Our independent auditors are responsible for
expressing an opinion on the conformity of our audited financial statements to generally accepted
accounting principles.
In this context, for fiscal 2010, the Audit Committee reviewed and discussed with management
and the independent auditors the audited financial statements. Management represented to the Audit
Committee that our consolidated financial statements were prepared in accordance with accounting
principles generally accepted in the United States. The Audit Committee reviewed a report on the
effectiveness of our internal control over financial reporting and Managements Annual Report on
Internal Control Over Financial Reporting and Ernst and Youngs Report of Independent Registered
Public Accounting Firm, which are included in our Annual Report on Form 10-K for the year ended
June 30, 2010.
The Audit Committee discussed with the independent auditors the matters required to be
discussed by Statement on Auditing Standards No. 114. The Audit Committee has received the written
disclosures and the letter from the independent accountant required by applicable requirements of
the Public Company Accounting Oversight Board regarding the independent accountants communications
with the Audit Committee concerning independence, and has discussed with the independent accountant
the independent accountants independence. The Audit Committee has considered whether the
independent auditors provision of non-audit services to the Company is compatible with maintaining
the auditors independence.
In reliance on the reviews and discussions referred to above, the Audit Committee recommended
to the full Board of Directors that the audited financial statements be included in our Annual
Report on Form 10-K for the year ended June 30, 2010, which was filed with the SEC.
THE AUDIT COMMITTEE
Rhodes R. Bobbitt
Tom C. Nichols
William A. Shipp, Jr.
The foregoing report of the Audit Committee shall not be deemed incorporated by reference by
any general statement incorporating by reference the proxy statement into any filing under the
Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent that the
Company specifically incorporates this information by reference, and shall not otherwise be deemed
filed under such acts.
12
EXECUTIVE COMPENSATION
Compensation Committee Report
The Compensation Committee of the Company has reviewed and discussed the Compensation
Discussion and Analysis required by Item 402(b) of Regulation S-K with management and, based upon
such review and discussions, the Compensation Committee recommended to the Board that the
Compensation Discussion and Analysis be included in this Proxy Statement.
THE COMPENSATION COMMITTEE
Harvey B. Cash
Tom C. Nichols
Lyndon L. Olson, Jr.
Compensation Discussion and Analysis
Overview of Compensation Process. The Compensation Committee of our Board of Directors is
responsible for establishing the compensation arrangements for our employees, including our
executive officers, and reviewing and making recommendations to the full Board of Directors
regarding non-employee director compensation. The Compensation Committee is also responsible for
the administration of our stock incentive plans and other compensation plans in which our employees
participate. It is the responsibility of the Compensation Committee to determine whether, in its
judgment, our executive compensation policies are reasonable and appropriate, meet the stated
objectives of those policies and effectively serve our best interests and the best interests of our
stockholders. Each member of the Compensation Committee is an independent director as defined
under the applicable rules of the New York Stock Exchange and our Corporate Governance Guidelines,
a non-employee director as defined in Rule 16b-3 of the rules promulgated under the Securities
Exchange Act of 1934, and an outside director for the purposes of the Internal Revenue Code of
1986, in each case as determined by our Board of Directors.
The Compensation Committee reviews our compensation policies on an annual basis and the
compensation of individual executives is reviewed annually in light of the compensation policies
for that year. In setting and reviewing executive compensation, in addition to corporate
performance, the Compensation Committee believes it is appropriate to consider the level of
experience and responsibilities of each executive, as well as the personal contributions a
particular individual may make to the corporate enterprise. No relative weight is assigned to
quantitative or qualitative factors considered by the Compensation Committee in reaching its
decisions. The Company did not engage a compensation consultant or engage in benchmarking of
comparable companies in determining the compensation of its executive officers during fiscal 2010.
Role of Executive Officers in Compensation Decisions. The Compensation Committee makes all
decisions regarding the compensation of our executive officers. The Compensation Committee
annually evaluates the performance of our executive officers, and our chief executive officer and
president provide the Compensation Committee with their assessment of the performance of our
executive officers other than themselves. Decisions regarding the compensation of employees other
than our executive officers are made by our chief executive officer and president in consultation
with other members of management.
What Is Our Philosophy of Executive Officer Compensation?
The Compensation Committee believes that the primary objectives of our executive compensation
policies should be:
|
|
|
To attract and retain talented executives by providing compensation that is,
overall, competitive with the compensation provided to executives at companies of
comparable position in our industry, while maintaining compensation within levels
that are consistent with our annual budget, financial objectives and operating
performance; |
|
|
|
|
To provide appropriate incentives for executives to work toward the achievement
of our annual financial performance and business goals; and |
13
|
|
|
To align the interests of executives with those of our stockholders and the
long-term interests of the company by providing long-term incentive compensation in
the form of stock options, restricted stock or other equity-based long-term
incentive compensation. |
The Compensation Committee is committed to a strong link between our financial and strategic
objectives and our compensation and benefit practices. It is the Committees objective to have a
substantial portion of each executive officers compensation contingent upon our performance, as
well as upon his or her individual performance. Accordingly, the Compensation Committees
compensation philosophy for an executive officer emphasizes an overall analysis of the executives
performance for the prior year, his or her projected role and responsibilities, required impact on
execution of our strategy, total cash and equity compensation internally, and other factors the
Compensation Committee deems appropriate.
Elements of 2010 Executive Compensation. For the fiscal year ended June 30, 2010, the
principal components of compensation for our executive officers were:
Base Salary. We provide executive officers with base salaries to compensate them for
services provided during the year. The base salaries of our executive officers are established by
the terms of employment agreements between the Company and those executives. These employment
agreements provide for a minimum base salary, adjusted for such increases as the Compensation
Committee shall determine to be appropriate. The Compensation Committee generally reviews the base
salaries of our executive officers on an annual basis. In determining whether an increase in base
compensation for the executive officers is appropriate, the Compensation Committee considers the
performance of the Company and the executive officer during the prior year, the executive officers
level of base salary relative to other executive officers of the Company, and the recommendations
of the chief executive officer and president. Based upon these factors, the Compensation Committee
approved base salaries for our executive officers for calendar years 2010 and 2009 as follows.
|
|
|
|
|
|
|
|
|
|
|
2010 |
|
2009 |
Name |
|
Base Salary ($) |
|
Base Salary ($) |
Stephen J. Harrison |
|
|
500,000 |
|
|
|
500,000 |
|
Edward L. Pierce |
|
|
400,000 |
|
|
|
400,000 |
|
Kevin P. Cohn |
|
|
250,000 |
|
|
|
250,000 |
|
Daniel L. Walker |
|
|
240,000 |
|
|
|
240,000 |
|
Keith E. Bornemann |
|
|
160,000 |
|
|
|
160,000 |
|
Cash Bonus. The Compensation Committee considers that compensation should be linked to
operating performance. To achieve this link with regard to short-term performance, the Compensation
Committee relies on cash bonuses awarded to our executive officers and other key employees.
Pursuant to the terms of their employment agreements with the Company, the maximum total bonus
award that Stephen J. Harrison, Edward L. Pierce, Kevin P. Cohn, Daniel L. Walker and Keith E.
Bornemann were eligible to receive for fiscal 2010 was 100% of base salary for Mr. Harrison, 75% of
base salary for Mr. Pierce, 66.7% of base salary for Mr. Cohn, 50% of base salary for Mr. Walker
and 35% of base salary for Mr. Bornemann. The Compensation Committee did not use performance-based
objectives or individual goals to determine bonuses for our executive officers for the 2010 fiscal
year. All bonuses paid to our executive officers for the 2010 fiscal year were determined by the
Compensation Committee on a discretionary basis. In determining the cash bonuses to be paid to the
executive officers for the 2010 fiscal year, the Compensation Committee considered the Companys
results of operations during the year and the Compensation Committees subjective determination of
each executive officers individual performance during the year, including the performance of the
area of the Company for which they have responsibility, individual leadership, and contribution to
the Company as a whole. The Compensation Committee approved the following bonuses to our executive
officers for fiscal 2010: Mr. Harrison, $120,000; Mr. Pierce, $110,000; Mr. Cohn, $60,000; Mr.
Walker, $85,000; and Mr. Bornemann, $30,500. The cash bonuses paid for fiscal 2010 to the named
executive officers are reflected in the Summary Compensation Table.
Equity Awards. Equity awards, including stock options and restricted common stock
(restricted stock awards), are the principal vehicle for payment of long-term compensation for
our executive officers. The Compensation Committee believes stock-based incentive compensation
should be structured so as to closely align the interests of the executive officers with the
interests of our stockholders. All equity awards are granted pursuant to incentive plans approved
by our stockholders. The Compensation Committee determines the equity award grants to
14
the executive officers and takes into account the recommendations of the chief executive
officer and president prior to approving awards of stock-based incentive compensation. Equity
awards are granted in part to reward the senior executives for their long-term strategic management
of the Company, and to motivate the executives to improve stockholder value. The Compensation
Committee may also grant an award to an executive officer upon the commencement of his or her
employment with the Company or upon a change in his or her duties or responsibilities with the
Company.
During fiscal 2010, the Compensation Committee and the Companys stockholders approved a
value-for-value option exchange whereby certain outstanding stock options held by our executive
officers were exchanged for an aggregate of 119,651 shares of restricted common stock. The
Compensation Committee approved the option exchange because it determined that the options were and
had been for a significant time underwater (i.e., stock options with an exercise price that was
greater than our stock trading price) and were therefore not effective as incentives to motivate
and retain the members of our senior management. Although the options were not likely to be
exercised as long as our stock trading price was lower than the applicable exercise price, the
options continued to impact our financial statements and had the potential to dilute our
stockholders interests for up to the full remaining term of the options, while delivering little
or no retentive or incentive value and no opportunity to recapture value from the associated
compensation expense. The Compensation Committee believed the option exchange provided a more
cost-effective retentive and incentive value than simply issuing incremental equity awards or
paying additional cash compensation. Stock awards granted during fiscal 2010 to the named
executive officers are reflected in the Summary Compensation Table and Grants of Plan-Based Awards
Table.
401(k) Plan. The Company maintains a 401(k) plan that provides for a matching
contribution by the Company of 100% of the participants voluntary salary contributions of the
first 3% of the participants salary contributed by the participant, plus 50% of the next 2% of
salary, up to the maximum voluntary salary contribution established by the U.S. Department of
Labor.
Perquisites and Other Benefits. The Company does not generally provide material perquisites
that are not, in the Compensation Committees view, integrally and directly related to the
executive officers duties. Our executive officers participate in broad-based benefit programs
that are generally available to our salaried employees, including health, dental, disability and
life insurance programs.
Benefits Upon Termination of Employment. We have employment agreements with our executive
officers. These agreements generally provide that if the executive is terminated without cause or
resigns for good reason (as defined in the employment agreements), the executive will receive
certain severance payments and benefits. The Compensation Committee believes that the severance
provisions contained in the employment agreements are an important element in attracting and
retaining executive officers. See Potential Payments Upon Termination or Change in Control for
information with respect to potential payments and benefits under these employment agreements and
our other compensation arrangements upon the termination of our executive officers.
Tax and Accounting Matters. Section 162(m) of the Internal Revenue Code of 1986, enacted as
part of the Omnibus Budget Reconciliation Act of 1993, generally disallows a tax deduction to
public companies for compensation over $1,000,000 paid to the chief executive officer and the four
other most highly compensated executive officers. Under Internal Revenue Service regulations,
qualifying performance-based compensation will not be subject to the deduction limit if certain
requirements are met. The Compensation Committee expects to continue to monitor the application of
Section 162(m) to executive compensation and will take appropriate action if it is warranted in the
future. We operate our compensation programs with the intention of complying with Section 409A of
the Internal Revenue Code of 1986.
Employment Agreements
We have employment agreements with each of our executive officers. The employment agreements
provide for a minimum base salary, adjusted for such increases as the Compensation Committee
determines to be appropriate. The employment agreements provide that the Company will employ the
executive until the executives termination of employment with the Company. In the event the
executives employment with the Company is terminated for any reason, including termination by the
Company for or without cause, resignation by the executive for or without good reason, or the
executives death or disability, he will be entitled to receive his accrued but unpaid base salary,
bonus
15
and vacation pay through the effective date of termination, and unreimbursed
employment-related expenses. In the event the executives employment with the Company is
terminated by the Company for cause (as defined under Potential Payments Upon Termination or
Change in Control) or by the executive without good reason (as defined under Potential Payments
Upon Termination or Change in Control), the Company shall have no further obligations under the
employment agreement. In the event the executives employment with the Company is terminated by
the Company without cause, by the executive for good reason, or as the result of death or
disability or in connection with a change in control (as defined under Potential Payments Upon
Termination or Change in Control), the employment agreement provides that the executive will be
entitled to severance payments and benefits as described below under Potential Payments Upon
Termination or Change in Control. Payment of the severance payments and benefits generally is
conditioned upon the executives compliance with other provisions of his employment agreement,
which include limitations upon his use and disclosure of confidential information, solicitation of
employees, interference with the Companys business opportunities and an obligation not to compete
with the business of the Company for a specified period following termination of employment.
Compensation Risk Assessment. The Compensation Committee has reviewed our compensation plans
and policies to determine whether they encourage excessive or inappropriate risk taking by our
employees, including our named executive officers. This assessment included a review of our
business and the design of our incentive plans and policies. Our compensation arrangements include
base salaries at levels that the Compensation Committee believes provides employees with a steady
income so that they are not encouraged to focus on short-term performance criteria to the detriment
of other important Company measures. The performance measures used in our incentive-based
compensation arrangements are based primarily upon Company measures, which we believe encourages
executives and other employees to focus on overall corporate performance rather than individual
performance or the performance of a specific part of our business, provide for payments based upon
multiple levels of performance, and are capped at a specified percentage of annual salary. Based
upon its review, the Compensation Committee has determined that our compensation plans and
policies, taken as a whole, are not reasonably likely to have a material adverse effect on the
Company.
Compensation Committee Interlocks and Insider Participation
During fiscal 2010, the Compensation Committee of the Board of Directors was composed of
Harvey B. Cash, Tom C. Nichols and Lyndon L. Olson, Jr. None of these persons has at any time been
an officer or employee of the Company or any of its subsidiaries. In addition, there are no
relationships among our executive officers, members of the Compensation Committee or entities whose
executives serve on the Board of Directors or the Compensation Committee that require disclosure
under applicable SEC regulations.
16
Summary Compensation Table Fiscal Years 2008 2010
The following table sets forth compensation for fiscal years 2010, 2009 and 2008 earned by (i)
our chief executive officer, (ii) our chief financial officer, and (iii) our three next highest
paid executive officers.
|
|
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|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock |
|
|
Option |
|
|
Incentive Plan |
|
|
All Other |
|
|
|
|
|
|
|
|
|
|
Salary |
|
|
Bonus |
|
|
Awards |
|
|
Awards |
|
|
Compensation |
|
|
Compensation |
|
|
|
|
Name and Principal Position |
|
Year |
|
|
($) |
|
|
($) |
|
|
($) (1) |
|
|
($) (2) |
|
|
($) |
|
|
($) |
|
|
Total ($) |
|
Stephen J. Harrison |
|
|
2010 |
|
|
|
500,000 |
|
|
|
120,000 |
|
|
|
44,969 |
|
|
|
|
|
|
|
|
|
|
|
9,800 |
(3) |
|
|
674,769 |
|
Chief Executive Officer |
|
|
2009 |
|
|
|
500,000 |
|
|
|
|
|
|
|
95,143 |
|
|
|
|
|
|
|
225,000 |
|
|
|
9,500 |
|
|
|
829,643 |
|
|
|
|
2008 |
|
|
|
500,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,100 |
|
|
|
509,100 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Edward L. Pierce |
|
|
2010 |
|
|
|
400,000 |
|
|
|
110,000 |
|
|
|
129,699 |
|
|
|
|
|
|
|
|
|
|
|
9,800 |
(3) |
|
|
649,499 |
|
President |
|
|
2009 |
|
|
|
400,000 |
|
|
|
65,000 |
|
|
|
51,300 |
|
|
|
|
|
|
|
135,000 |
|
|
|
9,500 |
|
|
|
660,800 |
|
|
|
|
2008 |
|
|
|
350,000 |
|
|
|
100,000 |
|
|
|
1,216,000 |
|
|
|
178,830 |
|
|
|
|
|
|
|
9,100 |
|
|
|
1,853,930 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kevin P. Cohn |
|
|
2010 |
|
|
|
250,000 |
|
|
|
60,000 |
|
|
|
54,859 |
|
|
|
|
|
|
|
|
|
|
|
9,800 |
(3) |
|
|
374,659 |
|
Senior Vice President, Chief |
|
|
2009 |
|
|
|
250,000 |
|
|
|
46,663 |
|
|
|
|
|
|
|
|
|
|
|
78,337 |
|
|
|
9,500 |
|
|
|
384,500 |
|
Financial Officer and Secretary |
|
|
2008 |
|
|
|
225,000 |
|
|
|
83,750 |
|
|
|
|
|
|
|
402,368 |
|
|
|
|
|
|
|
9,100 |
|
|
|
720,218 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Daniel L. Walker |
|
|
2010 |
|
|
|
240,000 |
|
|
|
85,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
325,000 |
|
Senior Vice President - |
|
|
2009 |
|
|
|
223,750 |
|
|
|
41,597 |
|
|
|
86,668 |
|
|
|
|
|
|
|
50,903 |
|
|
|
|
|
|
|
402,918 |
|
Operations |
|
|
2008 |
|
|
|
203,750 |
|
|
|
65,000 |
|
|
|
|
|
|
|
178,830 |
|
|
|
|
|
|
|
|
|
|
|
447,580 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Keith E. Bornemann |
|
|
2010 |
|
|
|
160,000 |
|
|
|
30,500 |
|
|
|
6,186 |
|
|
|
|
|
|
|
|
|
|
|
8,280 |
(3) |
|
|
204,966 |
|
Vice President and Corporate |
|
|
2009 |
|
|
|
147,500 |
|
|
|
21,187 |
|
|
|
34,665 |
|
|
|
|
|
|
|
25,813 |
|
|
|
6,001 |
|
|
|
235,166 |
|
Controller |
|
|
2008 |
|
|
|
122,500 |
|
|
|
25,000 |
|
|
|
|
|
|
|
62,591 |
|
|
|
|
|
|
|
77,995 |
|
|
|
288,086 |
|
|
|
|
(1) |
|
Represents the aggregate grant date fair value of restricted stock awards granted during each
respective fiscal year computed in accordance with FASB ASC 718-20. Aggregate compensation
expense is equal to the closing price of the Companys Common Stock on the New York Stock
Exchange on the date of grant multiplied by the number of shares of restricted stock granted. |
|
(2) |
|
Represents the aggregate grant date fair value of option awards granted during each
respective fiscal year computed in accordance with FASB ASC 718-20. Aggregate compensation
expense is equal to the grant date fair value of the options estimated using the Black-Scholes
option pricing model. See Note 4 to our consolidated financial statements in our Annual Report
on Form 10-K for the year ended June 30, 2010 for the assumptions made in determining option
values. |
|
(3) |
|
Represents the matching amounts paid by the Company under our 401(k) Plan. |
17
Grants of Plan-Based Awards Fiscal Year 2010
The following table sets forth information concerning each grant of an equity award made to a
named executive officer in fiscal 2010.
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|
|
|
|
|
|
|
|
|
|
|
Estimated Future Payouts |
|
|
|
|
|
|
|
|
|
|
|
|
Under Non-Equity Incentive |
|
|
|
|
|
|
|
|
|
|
|
|
Plan Awards |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock |
|
Exercise |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards: |
|
or Base |
|
Grant Date |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of |
|
Price of |
|
Fair Value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares of |
|
Stock and |
|
of Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock or |
|
Option |
|
and Option |
|
|
Grant |
|
Threshold |
|
Maximum |
|
Units |
|
Awards |
|
Awards |
Name |
|
Date |
|
($) |
|
($) |
|
(#) |
|
($)/sh (1) |
|
($) (1) |
Stephen J. Harrison |
|
|
11/18/09 |
|
|
|
|
|
|
|
|
|
|
|
22,827 |
(2) |
|
|
1.97 |
|
|
|
44,969 |
|
|
Edward L. Pierce |
|
|
11/18/09 |
|
|
|
|
|
|
|
|
|
|
|
65,837 |
(2) |
|
|
1.97 |
|
|
|
129,699 |
|
|
Kevin P. Cohn |
|
|
11/18/09 |
|
|
|
|
|
|
|
|
|
|
|
27,847 |
(2) |
|
|
1.97 |
|
|
|
54,859 |
|
|
Daniel L. Walker |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Keith E. Bornemann |
|
|
11/18/09 |
|
|
|
|
|
|
|
|
|
|
|
3,140 |
(3) |
|
|
1.97 |
|
|
|
6,186 |
|
|
|
|
(1) |
|
Grant date fair value is equal to the product of the number of shares of restricted
stock issued and the closing price for the Companys Common Stock on the New York Stock
Exchange on the date of grant. |
|
(2) |
|
Restricted stock award granted under the Amended and Restated First Acceptance
Corporation 2002 Long Term Incentive Plan. Pursuant to the restricted stock award
agreements, the shares vest in equal 25% installments over a four-year period beginning on
the first anniversary of the respective date of grant. Unvested restricted stock will vest
under certain circumstances, including termination of employment of Messrs. Stephen J.
Harrison, Pierce and Cohn, as applicable, as described within the Potential Payments Upon
Termination or Change in Control section. |
|
(3) |
|
Restricted stock award granted under the Amended and Restated First Acceptance
Corporation 2002 Long Term Incentive Plan. Pursuant to the restricted stock award
agreement, the shares vest in equal 20% installments over a five-year period beginning on
the first anniversary of the date of grant. Unvested restricted stock will vest under
certain circumstances, including termination of employment of Mr. Bornemann, as described
within the Potential Payments Upon Termination or Change in Control section. |
18
Outstanding Equity Awards at Fiscal Year-End Fiscal Year 2010
The following table sets forth information concerning outstanding equity awards held by our
named executive officers at June 30, 2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards |
|
Stock Awards |
|
|
Number of |
|
Number of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities |
|
Securities |
|
|
|
|
|
|
|
|
|
Number |
|
Market Value |
|
|
Underlying |
|
Underlying |
|
|
|
|
|
|
|
|
|
of Shares or |
|
of Shares or |
|
|
Unexercised |
|
Unexercised |
|
Option |
|
Option |
|
Units of Stock |
|
Units of Stock That |
|
|
Options (#) |
|
Options (#) |
|
Exercise |
|
Expiration |
|
That Have |
|
Have |
Name |
|
Exercisable |
|
Unexercisable |
|
Price ($) |
|
Date |
|
Not Vested (#) |
|
Not Vested ($) |
Stephen J. Harrison |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,153 |
(1) |
|
|
22,491 |
(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22,827 |
(1) |
|
|
39,034 |
(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Edward L. Pierce |
|
|
50,000 |
|
|
|
50,000 |
(3) |
|
|
3.04 |
|
|
|
3/18/18 |
|
|
|
160,000 |
(4) |
|
|
273,600 |
(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
65,837 |
(4) |
|
|
112,581 |
(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kevin P. Cohn |
|
|
112,500 |
|
|
|
112,500 |
(3) |
|
|
3.04 |
|
|
|
3/18/18 |
|
|
|
27,847 |
(5) |
|
|
47,618 |
(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Daniel L. Walker |
|
|
40,000 |
|
|
|
60,000 |
(6) |
|
|
3.04 |
|
|
|
3/18/18 |
|
|
|
27,734 |
(7) |
|
|
47,424 |
(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Keith E. Bornemann |
|
|
14,000 |
|
|
|
21,000 |
(6) |
|
|
3.04 |
|
|
|
3/18/18 |
|
|
|
11,093 |
(7) |
|
|
18,969 |
(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,140 |
(8) |
|
|
5,369 |
(2) |
|
|
|
(1) |
|
The Company issued 17,537 and 22,827 restricted shares to Mr. Stephen J. Harrison on
February 10, 2009 and November 18, 2009, respectively. Pursuant to the restricted stock
award agreements, the shares issued vest in equal 25% installments over a four-year period
beginning on the first anniversary of the respective date of grant. Unvested restricted
stock will vest under certain circumstances, including termination of employment of Mr.
Stephen J. Harrison, as described within the Potential Payments Upon Termination or Change
in Control section. |
|
(2) |
|
Market value based on a closing share price of $1.71 for the Companys Common Stock on
the New York Stock Exchange on June 30, 2010. |
|
(3) |
|
Messrs. Pierce and Cohn were granted an option to purchase 100,000 and 225,000 shares,
respectively, on March 18, 2008. The options vest in equal 25% installments over a
four-year period beginning on the first anniversary of the date of grant. |
|
(4) |
|
The Company issued 400,000 and 65,837 restricted shares to Mr. Pierce on March 18, 2008
and November 18, 2009, respectively. Pursuant to the restricted stock award agreements, of
the 400,000 shares issued on March 18, 2008, 160,000 shares vested on July 1, 2009 and
80,000 shares vested on each of October 1, 2009 and 2010 and an additional 80,000 shares
vest on October 1, 2011, while the 65,837 shares issued on November 18, 2009 vest in equal
25% installments over a four-year period beginning on the first anniversary of the date of
grant. Unvested restricted stock will become fully exercisable under certain circumstances,
including termination of employment of Mr. Pierce, as described within the Potential
Payments Upon Termination or Change in Control section. |
|
(5) |
|
The Company issued 27,847 restricted shares to Mr. Cohn on November 18, 2009. Pursuant
to the restricted stock award agreement, the shares issued vest in equal 25% installments
over a four-year period beginning on the first anniversary of the date of grant. Unvested
restricted stock will vest under certain circumstances, including termination of employment
of Mr. Cohn, as described within the Potential Payments Upon Termination or Change in
Control section. |
|
(6) |
|
Messrs. Walker and Bornemann were granted an option to purchase 100,000 and 35,000
shares, respectively, on March 18, 2008. The options vest in equal 20% installments over a
five-year period beginning on the first anniversary of the date of grant. |
|
(7) |
|
The Company issued 34,667 and 13,866 restricted shares to Messrs. Walker and Bornemann,
respectively, on February 10, 2009. Pursuant to the restricted stock award agreements, the
shares vest in equal installments over a five-year period beginning on the first
anniversary of the date of grant. Unvested restricted stock will become fully exercisable
under certain circumstances, including termination of employment of Messrs. Walker or
Bornemann, as applicable, as described within the Potential Payments Upon Termination or
Change in Control section. |
|
(8) |
|
The Company issued 3,140 restricted shares to Mr. Bornemann on November 18, 2009.
Pursuant to the restricted stock award agreement, the shares vest in equal installments
over a five-year period beginning on the first anniversary of the date of grant. Unvested
restricted stock will become fully exercisable under certain circumstances, including
termination of employment of Mr. Bornemann, as described within the Potential Payments
Upon Termination or Change in Control section. |
19
Option Exercises and Stock Vested Fiscal Year 2010
The following table sets forth information concerning each equity award held by a named
executive officer that vested in fiscal 2010. No awards were exercised during fiscal 2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards |
|
Stock Awards |
|
|
Number of |
|
|
|
|
|
Number of |
|
|
|
|
Shares |
|
Value |
|
Shares |
|
Value |
|
|
Acquired on |
|
Realized on |
|
Acquired on |
|
Realized on |
Name |
|
Exercise (#) |
|
Exercise ($) |
|
Vesting (#) |
|
Vesting ($) |
Stephen J. Harrison |
|
|
|
|
|
|
|
|
|
|
15,000 |
(1) |
|
|
32,100 |
(2) |
|
|
|
|
|
|
|
|
|
|
|
4,384 |
(1) |
|
|
9,075 |
(3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Edward L. Pierce |
|
|
|
|
|
|
|
|
|
|
160,000 |
(4) |
|
|
342,400 |
(2) |
|
|
|
|
|
|
|
|
|
|
|
15,000 |
(4) |
|
|
32,100 |
(2) |
|
|
|
|
|
|
|
|
|
|
|
80,000 |
(4) |
|
|
192,000 |
(5) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kevin P. Cohn |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Daniel L. Walker |
|
|
|
|
|
|
|
|
|
|
6,933 |
(6) |
|
|
14,351 |
(3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Keith E. Bornemann |
|
|
|
|
|
|
|
|
|
|
2,773 |
(7) |
|
|
5,740 |
(3) |
|
|
|
(1) |
|
The Company issued 15,000, 17,537 and 22,827 restricted shares to Mr. Stephen J.
Harrison on October 1, 2008, February 10, 2009 and November 18, 2009, respectively.
Pursuant to the restricted stock award agreements, the 15,000 shares issued on October 1,
2008 vested on July 1, 2009 and of the 17,537 shares issued on February 10, 2009, 4,384
shares vested on February 10, 2010, while the remaining unvested shares will vest in equal
25% installments on each anniversary of the respective date of grant. Pursuant to the
restricted stock award agreement, the 22,827 shares issued on November 18, 2009 vest in
equal 25% installments over a four-year period beginning on the first anniversary of the
date of grant. Unvested restricted stock will vest under certain circumstances, including
termination of employment of Mr. Stephen J. Harrison, as described within the Potential
Payments Upon Termination or Change in Control section. |
|
(2) |
|
Value realized on vesting based on a closing share price of $2.14 for the Companys
Common Stock on the New York Stock Exchange on July 1, 2009. |
|
(3) |
|
Value realized on vesting based on a closing share price of $2.07 for the Companys
Common Stock on the New York Stock Exchange on February 10, 2010. |
|
(4) |
|
The Company issued 400,000, 15,000 and 65,837 restricted shares to Mr. Pierce on March
18, 2008, October 1, 2008 and November 18, 2009, respectively. Pursuant to the restricted
stock award agreements, of the 400,000 shares issued on March 18, 2008, 160,000 shares
vested on July 1, 2009 and 80,000 shares vested on each of October 1, 2009 and 2010 and an
additional 80,000 shares vest on October 1, 2011, while the 15,000 shares issued on October
1, 2008 vested on July 1, 2009. Pursuant to the restricted stock award agreement, the
65,837 shares issued on November 18, 2009 vest in equal 25% installments over a four-year
period beginning on the first anniversary of the date of grant. Unvested restricted stock
will become fully exercisable under certain circumstances, including termination of
employment of Mr. Pierce, as described within the Potential Payments Upon Termination or
Change in Control section. |
|
(5) |
|
Value realized on vesting based on a closing share price of $2.40 for the Companys
Common Stock on the New York Stock Exchange on October 1, 2009. |
|
(6) |
|
The Company issued 34,667 restricted shares to Mr. Walker on February 10, 2009.
Pursuant to the restricted stock award agreement, 6,933 shares vested on February 10, 2010,
while the remaining unvested shares will vest in equal 20% installments on each anniversary
of the date of grant. Unvested restricted stock will become fully exercisable under certain
circumstances, including termination of employment of Mr. Walker, as described within the
Potential Payments Upon Termination or Change in Control. |
|
(7) |
|
The Company issued 13,866 and 3,140 restricted shares to Mr. Bornemann on February 10,
2009 and November 18, 2009, respectively. Pursuant to the restricted stock award agreement,
of the 13,866 shares issued on February 10, 2009, 2,773 shares vested on February 10, 2010,
while the remaining unvested shares will vest in equal 20% installments on each anniversary
of the date of grant. Pursuant to the restricted stock award agreement, the 3,140 shares
issued on November 18, 2009 vest in equal 20% installments over a five-year period
beginning on the first anniversary of the date of grant. Unvested restricted stock will
vest under certain circumstances, including termination of employment of Mr. Bornemann, as
described within the Potential Payments Upon Termination or Change in Control section. |
20
Equity Compensation Plan Information
The following table summarizes information with respect to our equity compensation plans as of
June 30, 2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of |
|
|
|
|
|
|
Securities To Be |
|
Weighted |
|
Number of Securities |
|
|
Issued Upon |
|
Average |
|
Remaining Available |
|
|
Exercise of |
|
Exercise Price |
|
For Future Issuance |
|
|
Outstanding |
|
of Outstanding |
|
Under Equity |
Plan Category |
|
Options |
|
Options |
|
Compensation Plans |
Equity compensation plans approved by security holders |
|
|
4,560,678 |
|
|
$ |
3.06 |
|
|
|
2,739,501 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity compensation plans not approved by security holders |
|
|
|
|
|
|
|
|
|
|
|
|
Potential Payments Upon Termination or Change in Control
The Companys named executive officers are subject to written employment agreements that set
forth the consideration payable to such named executive officers in connection with the termination
of their employment. Payments of these amounts generally are conditioned upon the named executive
officers compliance with the other provisions of his employment agreement, which include
limitations upon his use and disclosure of confidential information, solicitation of employees,
interference with the Companys business opportunities and an obligation not to compete with the
business of the Company for a specified period following termination of employment. In addition,
the stock award agreements to which each of the named executive officers is a party include certain
provisions that address the rights of the named executive officers upon termination.
Description of Potential Payments on Termination or Change in Control. The discussion below
outlines the amount of compensation payable to each of the named executive officers of the Company
in the event of a termination of employment or following a change in control. Except as otherwise
noted, the discussion below applies to each of the named executive officers.
Payments Made Upon Any Termination of Employment. Regardless of the manner in which a
named executive officers employment with the Company is terminated, he will be entitled to receive
the following amounts:
|
|
|
accrued but unpaid base salary through the effective date of termination; |
|
|
|
|
accrued but unpaid bonus owed to the executive as of the date of termination; |
|
|
|
|
accrued but unpaid vacation pay; and |
|
|
|
|
unreimbursed employment-related expenses. |
Payments Made Upon Termination of a Named Executive Officer for Cause. The Company
may terminate each named executive officer for cause, which is defined as:
|
|
|
his conviction of a felony or a crime involving moral turpitude; |
|
|
|
|
his act of dishonesty or fraud that has caused material harm to the Company; |
|
|
|
|
his willful and continued failure to substantially perform duties and obligations
under his employment agreement (other than any such failure resulting from incapacity
due to physical or mental illness); or |
|
|
|
|
his uncured gross negligence or willful misconduct. |
If a named executive officer were terminated for cause, he would not be entitled to receive
any amounts other than as listed under Payments Made Upon Any Termination of Employment above.
Payments Made Upon Resignation of a Named Executive Officer Without Good Reason. Each
named executive officer may resign at any time. If his resignation were not for good reason (as
defined below), he would not be entitled to receive any amounts other than as listed under
Payments Made Upon Any Termination of Employment above.
21
The term good reason is defined in the named executive officers employment agreements as:
|
|
|
a reduction in the amount of the executives compensation in a manner that
constitutes a breach of his employment agreement; |
|
|
|
|
a material uncured breach of the Companys obligations under the employment
agreement; |
|
|
|
|
an assignment of duties materially inconsistent with his position, duties,
responsibilities and status with the Company, a reduction of his authority, a material
change in his reporting responsibilities, titles or offices, or removal of him from any
such positions (except in connection with the termination of his employment for cause,
resignation of his employment other than for good reason or as a result of his death or
disability); or |
|
|
|
|
a requirement that he relocate his place of work to a location more than 50 miles
from the Companys current corporate headquarters (25 miles with respect to Mr. Stephen
J. Harrison). |
And, solely with respect to Mr. Stephen J. Harrisons employment agreement, as:
|
|
|
a change in control (as defined below) of the Company (other than one that he
approved or voted in favor of in his capacity as a director and/or stockholder of the
Company); or |
|
|
|
|
removal from the Board other than for cause or is not reelected to the Board at the
end of his term of service thereon. |
Payments Made Upon Disability of a Named Executive Officer. In the event of a named
executive officers disability (defined as executives incapacitation or other absence from his
full-time duties for six consecutive months or for at least 180 days during any 12-month period, in
either case as a result of a mental or physical illness or injury), he would be entitled to:
|
|
|
all amounts under Payments Made Upon Any Termination of Employment above. |
The term disability is defined under Mr. Stephen J. Harrisons employment agreement as:
|
|
|
an inability to engage in any substantial gainful activity by reason of any
medically physical or mental impairment which can be expected to result in death or can
be expected to last for a continuous period of not less than twelve (12) months; |
|
|
|
|
the receipt of income replacement benefits for a period of not less than three (3)
months under an accident and health plan sponsored by the Company which covers
employees of the Company by reason of any medically determinable physical or mental
impairment which can be expected to result in death or can be expected to last for a
continuous period of not less than twelve (12) months; or |
|
|
|
|
totally disabled, as determined by the Social Security Administration. |
In the event of Mr. Stephen J. Harrisons disability, he would also be entitled to:
|
|
|
payments during the severance period (as defined below) in an amount equal to 60%
of his initial base salary, payable in regular installments, net of any benefits he
receives from disability insurance; |
|
|
|
|
participate during the severance period in all employee health benefit programs made
generally available to the Companys senior management; and |
|
|
|
|
the immediate vesting of all options granted pursuant to his nonqualified stock
option agreement. |
The term severance period is defined under Mr. Stephen J. Harrisons employment agreement as
the second anniversary of the termination of his employment.
In the event of a named executive officers total and permanent disability (as defined
below), he would also be entitled to:
|
|
|
the immediate termination of all remaining restrictions set forth and relating to
all restricted stock awards granted to him. |
22
The term total and permanent disability is defined under the Amended and Restated First
Acceptance Corporation 2002 Long Term Incentive Plan as a person being qualified for long-term
disability benefits under the Companys or one of its subsidiaries disability plans or insurance
policies; or, if no such plan or policy is then in existence or if such person is not eligible to
participate in such plan or policy, that the person is incapacitated and absent from his or her
duties with the Company or any of its subsidiaries on a full time basis for a period of six (6)
continuous months or for at least one hundred eighty (180) days during any twelve (12) month period
as a result of mental or physical illness or physical injury, as determined in good faith by the
Compensation Committee.
Payments Made Upon Death of a Named Executive Officer. In the event of a named
executive officers death, his estate would be entitled to:
|
|
|
all amounts under Payments Made Upon Any Termination of Employment above; and |
|
|
|
|
the immediate termination of all remaining restrictions set forth and relating to
all restricted stock awards granted to him. |
In the event of Mr. Stephen J. Harrisons death, his estate would also be entitled to:
|
|
|
a bonus in the amount equal to the annual bonus he would have been entitled to had
he remained an employee for the entire year, multiplied by the number of days in such
year prior to the date of death, divided by 365. |
Payments Made Upon Retirement of a Named Executive Officer. In the event of a named
executive officers retirement, he would be entitled to:
|
|
|
all amounts under Payments Made Upon Any Termination of Employment above; and |
|
|
|
|
the immediate termination of all remaining restrictions set forth and relating to
all restricted stock awards granted to him. |
Payments Made Upon Termination Without Cause or Resignation for Good Reason. In the
event of a named executive officers termination without cause or resignation for good reason, he
would be entitled to:
|
|
|
all amounts under Payments Made Upon Any Termination of Employment above; and |
|
|
|
|
the immediate termination of all remaining restrictions set forth and relating to
all restricted stock awards granted to him. |
In the event of Mr. Stephen J. Harrisons termination without cause or resignation for good
reason, he would also be entitled to:
|
|
|
a payment equal to the product of his then current base salary, times two (2),
payable in one lump sum as of the effective date of termination or resignation; |
|
|
|
|
a payment equal to the product of his annual bonus paid for the fiscal year
immediately preceding the fiscal year in which the termination or resignation occurs,
times two (2), payable in one lump sum as of the effective date of termination or
resignation; |
|
|
|
|
participate through the second anniversary of termination or resignation in all
employee health benefit programs made generally available to the Companys senior
management; and |
|
|
|
|
an additional payment for any excise taxes resulting from the foregoing payments if
the foregoing payments are made in connection with a change in control of the Company. |
In the event of Messrs. Pierce or Cohns termination without cause or resignation for good
reason, he would also be entitled to:
|
|
|
a payment equal to the product of his then current base salary, times two (2),
payable in regular installments through the first anniversary of termination or
resignation (if the termination or resignation is in connection with a change in
control (as defined below) of the Company and occurs within twelve (12) months of such
change in control, then the payment is payable in one lump sum as of the effective date
of the termination or resignation); |
23
|
|
|
participate through the first anniversary of termination or resignation in all
employee health benefit programs made generally available to the Companys senior
management; |
|
|
|
|
an additional payment for any excise taxes resulting from the foregoing payments if
the foregoing payments are made in connection with a change in control of the Company;
and |
|
|
|
|
the vesting of 25% of their unvested options upon a termination without cause
pursuant to the terms of their respective nonqualified stock option agreement. |
In the event of Mr. Walkers termination without cause or resignation for good reason, he
would also be entitled to:
|
|
|
a payment equal to his then current base salary payable in regular installments
through the first anniversary of termination or resignation (if the termination or
resignation is in connection with a change in control (as defined below) of the
Company and occurs within twelve (12) months of such change in control, then a payment
equal to the product of his then current base salary, times 200 percent, is payable in
one lump sum as of the effective date of the termination or resignation); and |
|
|
|
|
participate through the first anniversary of termination or resignation in all
employee health benefit programs made generally available to the Companys employees
(if termination or resignation is in connection with a change in control of the Company
and occurs within twelve (12) months of such change in control, then participation
through the second anniversary of termination or resignation in all employee health
benefit programs made generally available to the Companys employees). |
In the event of Mr. Bornemanns termination without cause or resignation for good reason, he
would also be entitled to:
|
|
|
a payment equal to his then current base salary payable in regular installments
through the first anniversary of termination or resignation (if the termination or
resignation is in connection with a change in control (as defined below) of the
Company and occurs within twelve (12) months of such change in control, then a payment
equal to the product of his then current base salary, times 150 percent, is payable in
one lump sum as of the effective date of the termination or resignation); and |
|
|
|
|
participate through the first anniversary of termination or resignation in all
employee health benefit programs made generally available to the Companys employees. |
The term change in control is defined under the Amended and Restated First Acceptance
Corporation 2002 Long Term Incentive Plan as:
|
|
|
any consolidation, merger or share exchange of the Company in which the holders of a
majority of the Companys outstanding voting power prior to such transaction do not own
at least a majority of the outstanding voting power of the Company or any successor
thereto following such transaction; |
|
|
|
|
any sale, lease, exchange or other transfer (excluding transfer by way of pledge or
hypothecation) in one transaction or a series of related transactions, of all or
substantially all of the assets of the Company; |
|
|
|
|
the approval by the stockholders of the Company of any plan or proposal for the
liquidation or dissolution of the Company; |
|
|
|
|
the cessation of control (by virtue of their not constituting a majority of
directors) of the Board by the individuals who (a) at July 1, 2002 were directors or
(b) become directors after July 1, 2002 and whose election or nomination for election
by the Companys stockholders was approved by a vote of at least two-thirds of the
directors then in office who were directors on July 1, 2002 or whose election or
nomination for election was previously so approved; or |
|
|
|
|
the acquisition of beneficial ownership (within the meaning of Rule 13d-3 under the
Securities Exchange Act of 1934) of an aggregate of 50% or more of the voting power of
the Companys outstanding voting securities by any person or group (as such term is
used in Rule 13d-5 under the Securities Exchange Act of 1934) who beneficially owned
less than 50% of the voting power of the Companys outstanding voting securities on
July 1, 2002. |
24
Provided, however, that notwithstanding the foregoing, an acquisition shall not constitute a
change in control if the acquiror is (a) a trustee or other fiduciary holding securities under an
employee benefit plan of the Company and acting in such capacity; (b) a subsidiary of the Company
or a corporation owned, directly or indirectly, by the stockholders of the Company in substantially
the same proportions as their ownership of voting securities of the Company; or (c) in a Title 11
bankruptcy proceeding, the appointment of a trustee or the conversion of a case involving the
Company to a case under Chapter 7.
Pursuant to the terms of each named executive officers nonqualified stock option agreement,
upon the effective date of a change in control, all unvested options granted to him will
immediately become fully vested and exercisable provided that he is employed by (or, if he is a
consultant or an outside director, is providing services to) the Company or a subsidiary from the
grant date to the effective date of the change in control.
Pursuant to the terms of each named executive officers restricted stock award agreement, upon
the effective date of a change in control, all restrictions set forth and relating to such
restricted stock awards granted to him will immediately be terminated.
Summary of Potential Payments on Termination or Change in Control. The following tables set
forth the estimated benefits to which each named executive officer is entitled in the event that
(i) the Company terminates the named executive officer without cause or the named executive officer
resigns for good reason, (ii) the Company terminates the named executive officer without cause or
the named executive officer resigns for good reason in connection with a change in control of the
Company, or (iii) the Company terminates the named executive officer for cause or the named
executive officer resigns without good reason, or as a result of disability, death or retirement of
the named executive officer, assuming that the triggering event took place on and as of June 30,
2010.
25
Termination Without Cause or Resignation For Good Reason
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continued |
|
|
|
|
|
|
|
|
|
|
|
|
Additional |
|
Benefit |
|
Accelerated |
|
Accelerated |
|
|
|
|
|
|
|
|
Severance |
|
Plan |
|
Stock Option |
|
Restricted |
|
|
|
|
Bonus |
|
Payment |
|
Coverage |
|
Vesting |
|
Stock Vesting |
|
|
Name |
|
($) (1) |
|
($) (2) |
|
($) (3) |
|
($) (4) |
|
($) (5) |
|
Total ($) |
Stephen J. Harrison |
|
|
450,000 |
|
|
|
1,000,000 |
|
|
|
14,136 |
|
|
|
|
|
|
|
61,525 |
|
|
|
1,525,661 |
|
Edward L. Pierce |
|
|
|
|
|
|
800,000 |
|
|
|
10,712 |
|
|
|
|
|
|
|
386,181 |
|
|
|
1,196,893 |
|
Kevin P. Cohn |
|
|
|
|
|
|
500,000 |
|
|
|
10,712 |
|
|
|
|
|
|
|
47,618 |
|
|
|
558,330 |
|
Daniel L. Walker |
|
|
|
|
|
|
240,000 |
|
|
|
6,874 |
|
|
|
|
|
|
|
47,424 |
|
|
|
294,298 |
|
Keith E. Bornemann |
|
|
|
|
|
|
160,000 |
|
|
|
10,493 |
|
|
|
|
|
|
|
24,338 |
|
|
|
194,831 |
|
|
|
|
(1) |
|
In the case of Mr. Stephen J. Harrison, includes the receipt of the accrued and unpaid
bonuses and a lump sum payment equal to the bonus paid to the executive for the fiscal year
immediately preceding the year in which the termination of employment occurs times two (2).
In the case of Messrs. Pierce, Cohn, Walker and Bornemann, includes the receipt of the
accrued and unpaid bonuses as stipulated in their respective employment agreements. |
|
(2) |
|
In the case of Messrs. Stephen J. Harrison, Pierce and Cohn, includes the receipt of an
amount equal to the then current base salary times two (2). In the case of Messrs. Walker
and Bornemann, includes the receipt of the then current base salary. |
|
(3) |
|
Represents the estimated maximum aggregate amount of the named executive officers
payable share of all medical, dental, health and disability insurance payables by the
Company for the benefit of the named executive officer and members of his immediate family
until the second anniversary of the date of termination of employment in the case of Mr.
Stephen J. Harrison, and for the period of twelve (12) months after the termination date in
the case of Messrs. Pierce, Cohn, Walker and Bornemann; also includes the continuation of
all employee health benefit programs generally available to similarly situated employees
during the defined post-termination period. |
|
(4) |
|
Information regarding outstanding unexercisable options held by each named executive
officer is set forth in the Outstanding Equity Awards at Fiscal Year-End table above. Stock
options that have vested on an accelerated basis are exercisable within either twelve (12)
or twenty-four (24) months, pursuant to the respective stock option agreement, following
the date of the termination of service (which for purposes of this table is June 30, 2010).
Consequently, the amounts included in this column represent the maximum profit the named
executive officer would have received had he (i) exercised any of these options that were
in-the-money and (ii) sold the underlying stock at $1.71 per share on June 30, 2010. All
stock options held on June 30, 2010 that vested were out-of-the-money. |
|
(5) |
|
Market value based on a closing share price of $1.71 for the Companys Common Stock on
the New York Stock Exchange on June 30, 2010. |
26
Termination Without Cause or Resignation for Good Reason Resulting From a Change in Control
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continued |
|
|
|
|
|
|
|
|
|
|
|
|
Additional |
|
Benefit |
|
Accelerated |
|
Accelerated |
|
|
|
|
|
|
|
|
Severance |
|
Plan |
|
Stock Option |
|
Restricted |
|
|
|
|
Bonus |
|
Payment |
|
Coverage |
|
Vesting |
|
Stock Vesting |
|
|
Name |
|
($) (1) |
|
($) (2) |
|
($) (3) |
|
($) (4) |
|
($) (5) |
|
Total ($) |
Stephen J. Harrison |
|
|
450,000 |
|
|
|
1,000,000 |
|
|
|
14,136 |
|
|
|
|
|
|
|
61,525 |
|
|
|
1,525,661 |
|
Edward L. Pierce |
|
|
|
|
|
|
800,000 |
|
|
|
10,712 |
|
|
|
|
|
|
|
386,181 |
|
|
|
1,196,893 |
|
Kevin P. Cohn |
|
|
|
|
|
|
500,000 |
|
|
|
10,712 |
|
|
|
|
|
|
|
47,618 |
|
|
|
558,330 |
|
Daniel L. Walker |
|
|
|
|
|
|
480,000 |
|
|
|
13,748 |
|
|
|
|
|
|
|
47,424 |
|
|
|
541,172 |
|
Keith E. Bornemann |
|
|
|
|
|
|
240,000 |
|
|
|
10,493 |
|
|
|
|
|
|
|
24,338 |
|
|
|
274,831 |
|
|
|
|
(1) |
|
In the case of Mr. Stephen J. Harrison, includes the receipt of the accrued and unpaid
bonuses and a lump sum payment equal to the bonus paid to the executive for the fiscal year
immediately preceding the year in which the termination of employment occurs times two (2).
In the case of Messrs. Pierce, Cohn, Walker and Bornemann, includes the receipt of the
accrued and unpaid bonuses as stipulated in their respective employment agreements. |
|
(2) |
|
In the case of Messrs. Stephen J. Harrison, Pierce, Cohn and Walker, includes the
receipt of an amount equal to their then current base salary times two (2). In the case of
Mr. Bornemann, includes the receipt of an amount equal to their then current base salary
times 150 percent. |
|
(3) |
|
Represents the estimated maximum aggregate amount of the named executive officers
payable share of all medical, dental, health and disability insurance payables by the
Company for the benefit of the named executive officer and members of his immediate family
until the second anniversary of the date of termination of employment in the case of
Messrs. Stephen J. Harrison and Walker, and for the period of twelve (12) months after the
termination date in the case of Messrs. Pierce, Cohn and Bornemann; also includes the
continuation of all employee health benefit programs generally available to similarly
situated employees during the defined post-termination period. |
|
(4) |
|
Information regarding outstanding unexercisable options held by each named executive
officer is set forth in the Outstanding Equity Awards at Fiscal Year-End table above. Stock
options that have vested on an accelerated basis are exercisable within either twelve (12)
or twenty-four (24) months, pursuant to the respective stock option agreement, following
the date of the termination of service (which for purposes of this table is June 30, 2010).
Consequently, the amounts included in this column represent the maximum profit the named
executive officer would have received had he (i) exercised any of these options that were
in-the-money and (ii) sold the underlying stock at $1.71 per share on June 30, 2010. All
stock options held on June 30, 2010 that vested were out-of-the-money. |
|
(5) |
|
Market value based on a closing share price of $1.71 for the Companys Common Stock on
the New York Stock Exchange on June 30, 2010. |
27
|
|
Termination For Cause or Resignation Without Good Reason, or Resulting From Disability,
Death or Retirement |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continued |
|
|
|
|
|
|
|
|
|
|
|
|
Additional |
|
Benefit |
|
Accelerated |
|
Accelerated |
|
|
|
|
|
|
|
|
Severance |
|
Plan |
|
Stock Option |
|
Restricted |
|
|
|
|
Bonus |
|
Payment |
|
Coverage |
|
Vesting |
|
Stock Vesting |
|
|
Name |
|
($) (1) |
|
($)(2) |
|
($) (3) |
|
($)(4) |
|
($) (5) |
|
Total ($) |
Stephen J. Harrison |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cause or Resignation Without Good Reason |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Disability |
|
|
|
|
|
|
300,000 |
|
|
|
14,136 |
|
|
|
|
|
|
|
61,525 |
|
|
|
375,661 |
|
Death |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
61,525 |
|
|
|
61,525 |
|
Retirement |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
61,525 |
|
|
|
61,525 |
|
Edward L. Pierce |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cause or Resignation Without Good Reason |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Disability |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
386,181 |
|
|
|
386,181 |
|
Death |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
386,181 |
|
|
|
386,181 |
|
Retirement |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
386,181 |
|
|
|
386,181 |
|
Kevin P. Cohn |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cause or Resignation
Without Good Reason |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Disability |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
47,618 |
|
|
|
47,618 |
|
Death |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
47,618 |
|
|
|
47,618 |
|
Retirement |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
47,618 |
|
|
|
47,618 |
|
Daniel L. Walker |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cause or Resignation
Without Good Reason |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Disability |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
47,424 |
|
|
|
47,424 |
|
Death |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
47,424 |
|
|
|
47,424 |
|
Retirement |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
47,424 |
|
|
|
47,424 |
|
Keith E. Bornemann |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cause or Resignation
Without Good Reason |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Disability |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24,338 |
|
|
|
24,338 |
|
Death |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24,338 |
|
|
|
24,338 |
|
Retirement |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24,338 |
|
|
|
24,338 |
|
|
|
|
(1) |
|
Includes the receipt of the accrued and unpaid bonuses as stipulated in their
respective employment agreements. |
|
(2) |
|
In the case of Mr. Stephen J. Harrison, includes the receipt of 60% of his initial base
salary, net of any benefits received from disability insurance, as stipulated in his
employment agreement. |
|
(3) |
|
In the case of Mr. Stephen J. Harrison, represents the estimated maximum aggregate
amount of his payable share of all medical, dental, health and disability insurance
payables by the Company for the benefit of him and members of his immediate family until
the second anniversary of the date of termination of employment. |
|
(4) |
|
Information regarding outstanding unexercisable options held by each named executive
officer is set forth in the Outstanding Equity Awards at Fiscal Year-End table above.
Stock options that have vested on an accelerated basis are exercisable within either twelve
(12) or twenty-four (24) months, pursuant to the respective stock option agreement,
following the date of the termination of service (which for purposes of this table is June
30, 2010). Consequently, the amounts included in this column represent the maximum profit
the named executive officer would have received had he (i) exercised any of these options
that were in-the-money and (ii) sold the underlying stock at $1.71 per share on June 30,
2010. All stock options held on June 30, 2010 that vested were out-of-the-money. |
|
(5) |
|
Market value based on a closing share price of $1.71 for the Companys Common Stock on
the New York Stock Exchange on June 30, 2010. |
28
PROPOSAL 2 APPROVAL OF THE AMENDMENT TO THE FIRST ACCEPTANCE CORPORATION EMPLOYEE STOCK
PURCHASE PLAN
The Company believes that broad-based ownership of equity interests in the Company by its
employees provides a substantial motivation for superior performance by more closely aligning the
economic interests of those employees with the overall performance of the Company and the interests
of the stockholders of the Company. In order to encourage ownership of the Companys common stock
by its employees, the Board of Directors and stockholders of the Company previously approved the
First Acceptance Corporation Employee Stock Purchase Plan, as amended, which we will refer to as
the plan. As of October 1, 2010, 200,000 shares of common stock were authorized for issuance
under the plan and a total of 157,763 shares of common stock had been issued pursuant to the plan,
resulting in 42,237 shares of common stock remaining available for issuance under the plan. The
Board of Directors has reviewed the plan and determined that, in order to encourage continued
participation in the plan by the Companys employees, the Company should amend the plan to increase
the number of shares authorized for issuance under the plan from 200,000 shares to 400,000 shares.
If approved by the stockholders, the amendment will become effective November 16, 2010.
Summary of the Material Provisions of the Plan, as Amended
The following summary of the material provisions of the plan is qualified in its entirety by
reference to the text of the plan, as amended, which is attached to this proxy statement as
Appendix A.
Participation; Awards under the Plan. Pursuant to the plan, each employee of the Company or a
subsidiary of the Company (including executive officers of the Company) having at least six (6)
months of continuous service prior to January 1 or July 1 of each year (each a Commencement
Date), except for employees whose customary employment is 20 hours per week or less or whose
customary employment is not for more than five months in any calendar year, is eligible to
participate in the plan. Holders of 5% or more of the outstanding shares of common stock are not
eligible to participate in the plan. The Company and its subsidiaries currently have approximately
1,050 employees who are eligible to participate in the plan.
Eligible employees may elect to deduct from their compensation an after-tax amount of not less
than $25.00 per bi-weekly payroll period (or $25.00 per semi-monthly payroll period) and not more
than 15% of their base pay on the Commencement Date for each six-month option period starting on
each such Commencement Date (each such six-month period is referred to in the plan as an Option
Period). The dollar amount deducted is credited to the participants Contribution Account (as
defined in the plan). In addition, a participant who has neither discontinued nor withdrawn his or
her contributions during each Option Period is permitted to make one lump sum contribution during
each Option Period (except during the last 30 days of the Option Period), as long as the aggregate
amount of contributions does not exceed 15% of the participants base pay on the Commencement Date
(expressed as base pay for the applicable payroll period) multiplied by the number of payroll
periods during that Option Period.
On the Grant Date (the first trading date of each Option Period), each participant in the plan
shall be deemed to receive an option to purchase shares of common stock in accordance with the
terms of the plan. On the Exercise Date (the last trading day of each Option Period), the amount
deducted from each participants salary and any additional amounts contributed on a lump-sum basis
over the course of the period will be used to purchase shares of common stock at a purchase price
(the Exercise Price) equal to the lesser of (a) 100% of the Closing Market Price (as defined in
the plan) of the shares of common stock on the Exercise Date and (b) 100% of the Closing Market
Price of the shares of common stock on the Grant Date. On an Exercise Date, all options shall be
automatically exercised, except for options which are cancelled when a participant withdraws the
balance of his or her Contribution Amount or which are otherwise terminated under the provisions of
the plan (such as upon the termination of a participants employment for any reason except death,
disability, or retirement at or after age 65).
Participants rights under the plan are subject to the following limitations: (i) subject to
certain adjustments, the maximum number of shares of common stock which may be purchased by a
participant on an Exercise Date is 3,000 shares; (ii) no participant is allowed to purchase, during
a calendar year, stock under the plan having a market value in excess of $25,000, as determined on
the Grant Date; (iii) no option may be granted to a participant who would own 5% or more of the
common stock of the Company immediately after the option is granted and (iv) no participant may
assign, transfer or otherwise alienate any rights under the plan or any options granted to him or
her
29
thereunder, except by will or the laws of descent and distribution, and such options must be
exercised during the participants lifetime only by him or her.
Upon termination of a participants employment, the employee shall cease being a participant
under the plan, and the balance of the employees Contribution Account shall be paid to the
participant as soon as practical after termination. An option granted to such a participant shall
be null and void from the date of termination. Upon the death, retirement or disability of a
participant, the participant or his or her legal representative may withdraw the balance in his or
her Contribution Account or may use the accumulated balance to purchase stock under the plan. Any
remaining money that is insufficient to purchase a whole share is returned to such participant or
his or her legal representative. Nothing in the plan is to be construed so as to give an employee
the right to be retained in the service of the Company.
Administration. The plan is administered by a Plan Administrator, which Plan Administrator is
currently the Compensation Committee of the Board of Directors. The Plan Administrator does not,
however, have the discretion to deny the right to participate in the plan to any employee who meets
the eligibility criteria.
Adjustments. In the case of a stock split, stock dividend, reclassification,
recapitalization, merger, reorganization or other change in the Companys structure affecting the
common stock, appropriate adjustments will be made by the Plan Administrator in the number of
shares reserved for issuance under the plan and calculation of the Exercise Price.
Amendment. The Board of Directors of the Company has the right to amend or terminate the plan
at any time, but cannot make an amendment to increase the number of shares reserved under the plan
(except pursuant to certain changes in the capital structure of the Company) without the approval
of the Companys stockholders. If the plan is terminated, all options outstanding at the time of
termination shall become null and void, and the balance in each participants Contribution Account
shall be paid to that participant.
Certain U.S. Federal Income Tax Consequences
The following is a brief summary of the Federal income tax aspects of awards made under the
plan based upon the Federal income tax laws in effect on the date hereof. This summary is not
intended to be exhaustive and does not describe state or local tax consequences.
A holder will not recognize income for Federal tax purposes when shares are purchased. Income
may be recognized when a holder disposes of his or her stock. If shares of stock are disposed of
before a statutory holding period is met, ordinary income is recognized in an amount equal to the
difference between the price paid for the shares and the market value of the shares on the date
such shares were purchased. If shares are disposed of after meeting the holding period
requirement, the holder receives ordinary taxable income in the calendar year of disposition equal
to the excess of the fair market value of such shares of common stock on the day of disposition
over the price paid for such shares. In either case, (i) if a holders disposition is by gift,
such holder will have no further income tax consequences and (ii) in the case of a sale of such
shares, the difference between the net proceeds on the date of the disposition and the holders tax
basis in such shares (including ordinary income recognized in the disposition) will be taxable as
capital gain or loss.
If an employee leaves contributions in the plan to purchase common stock after he or she
retires, the tax consequences depend on whether the termination date is within three months of the
Exercise Date. If the termination is not more than three months prior to the Exercise Date, the
tax consequences are described above. However, if the termination date is more than three months
prior to the Exercise Date, the holder is treated as exercising a non-qualified option and is taxed
on the Exercise Date on the excess of market value of the stock on that date over the price paid.
30
Required Vote; Recommendation of the Board
Approval of this proposal requires the affirmative vote of a majority of the shares
represented in person or by proxy and entitled to vote on the matter. A properly executed proxy
marked ABSTAIN with respect to this proposal will have the same effect as a vote against the
proposal. Broker nonvotes will not affect this proposal. However, as discussed elsewhere in this
proxy statement, both abstentions and broker nonvotes will factor into the determination of the
existence of a quorum.
The Board of Directors recommends that you vote FOR approval of the amendment to the First
Acceptance Corporation Employee Stock Purchase Plan.
31
PROPOSAL 3 RATIFICATION OF INDEPENDENT AUDITORS
The Audit Committee has selected Ernst & Young LLP (Ernst & Young) to serve as our
independent auditors for the current fiscal year, and the stockholders are requested to ratify this
appointment. Ernst & Young has served as our independent registered public accounting firm since
September 2005. A representative of Ernst & Young is expected to be present at the annual meeting,
will have an opportunity to make a statement if he or she so desires and is expected to be
available to respond to appropriate questions. Stockholders should recognize that the ratification
of the appointment of Ernst & Young does not preclude the Audit Committee from subsequently
determining to change independent auditors if the Audit Committee determines such action to be in
the best interests of the Company and its stockholders.
Fees Billed to Us by Ernst & Young LLP For Fiscal 2010 and 2009
Audit Fees. The aggregate audit fees billed by Ernst & Young for the fiscal years ended June
30, 2010 and 2009 were $651,950 and $765,000, respectively. The fees include professional services
and expenses for annual audits, including internal control over financial reporting, and quarterly
reviews of our financial statements.
Audit-Related Fees. Audit-related fees billed by Ernst & Young for the fiscal years ended
June 30, 2010 and 2009 were $25,000 and $25,000, respectively. These fees related to the audit of
the Companys 401(k) plan.
Tax Fees. The aggregate tax fees billed by Ernst & Young for the fiscal years ended June 30,
2010 and 2009 were $69,500 and $79,500, respectively. These fees related primary to the preparation
of fiscal year federal and state income tax returns for the Company.
All Other Fees. Other fees billed by Ernst & Young for the fiscal year ended June 30, 2010
were $760,000. These fees related to transaction advisory services. No amounts were billed by Ernst
& Young during the fiscal year ended June 30, 2009 that would be categorized as All Other Fees.
Audit Committee Pre-Approval Policies and Procedures.
Our Audit Committee has adopted a policy, contained in its Restated Charter, which provides
that our Audit Committee must pre-approve all audit and non-audit services provided to the Company
by our independent auditors. This policy is administered by our senior management, which reports
throughout the year to the Audit Committee. The Audit Committee pre-approved all audit and
non-audit services provided by Ernst & Young.
Auditor Rotation Policies
Ernst & Young maintains partner rotation policies in accordance with the rules promulgated by
the SEC. Such rules have required rotation of the lead audit partner after five years of
assignment to the engagement.
Required Vote; Recommendation of the Board
Approval of this proposal requires the affirmative vote of a majority of the shares
represented in person or by proxy and entitled to vote on the matter. A properly executed proxy
marked ABSTAIN with respect to this proposal will have the same effect as a vote against the
proposal. However, as discussed elsewhere in this proxy statement, both abstentions and broker
nonvotes will factor into the determination of the existence of a quorum.
The Board of Directors recommends that you vote FOR the ratification of the appointment of
Ernst & Young LLP as First Acceptance Corporations independent auditors.
32
OTHER MATTERS
As of the date of this proxy statement, we know of no business that will be presented for
consideration at the annual meeting other than the items referred to above. If any other matter is
properly brought before the meeting for action by stockholders, proxies in the enclosed form
returned to us will be voted in accordance with the recommendation of the Board of Directors or, in
the absence of such a recommendation, in accordance with the judgment of the proxy holder.
ADDITIONAL INFORMATION
Stockholder Proposals for the 2011 Annual Meeting. Pursuant to Rule 14a-8(e) of the Securities
Exchange Act of 1934, stockholder proposals submitted in accordance with applicable rules and
regulations for presentation at our next annual meeting and received at our executive offices no
later than June 17, 2011 will be considered for inclusion in our proxy statement and form of proxy
relating to the 2011 annual meeting.
For other stockholder proposals to be timely (but not considered for inclusion in our proxy
statement), a stockholders notice must be received at our executive offices no later than 60 days
before our annual meeting or (if later) within ten days after the public notice of that meeting is
sent to the stockholders of the Company, and should otherwise comply with the advance notice
provisions of our certificate of incorporation. For proposals that are not timely filed, we retain
discretion to vote the proxies that we receive. For proposals that are timely filed, we retain
discretion to vote the proxies that we receive, provided (1) we include in our proxy statement
advice on the nature of the proposal and how we intend to exercise our voting discretion and (2)
the proponent does not issue a proxy statement.
Proxy Solicitation Costs. The proxies being solicited hereby are being solicited by us. We
will bear the cost of soliciting proxies in the enclosed form. Our officers and regular employees
may, but without compensation other than their regular compensation, solicit proxies by mail,
personal conversations, telephone, telex, facsimile or electronic means. Upon request, we will
reimburse brokerage firms and others for their reasonable expenses in forwarding solicitation
material to the beneficial owners of our common stock.
Financial Statements Available. A copy of our 2010 Annual Report to Stockholders containing
our Annual Report on Form 10-K for the year ended June 30, 2010 and other information accompanies
this proxy statement.
Householding Information. As permitted by the SECs proxy statement rules, we will deliver
only one copy of our 2010 Annual Report to Stockholders or this proxy statement to two or more
stockholders who share an address, unless we have received contrary instructions from one or more
of the stockholders. We will deliver promptly, upon written or oral request, a separate copy of our
2010 Annual Report to Stockholders or this proxy statement to a stockholder at a shared address to
which a single copy of the documents was delivered. Conversely, stockholders sharing an address who
are receiving multiple copies of our annual reports or proxy statements may request delivery of a
single copy.
Requests in this regard should be addressed to:
Investor Relations
First Acceptance Corporation
3813 Green Hills Village Drive
Nashville, Tennessee 37215
1-800-321-0899
33
Appendix A
AMENDED AND RESTATED FIRST ACCEPTANCE CORPORATION
EMPLOYEE STOCK PURCHASE PLAN
Article I
INTRODUCTION
1.1 Establishment of Plan. First Acceptance Corporation, a Delaware corporation (the
Company) with its principal offices located in Nashville, Tennessee, adopts the following
employee stock purchase plan for its eligible employees. This Plan shall be known as the Amended
and Restated First Acceptance Corporation Employee Stock Purchase Plan.
1.2 Purpose. The purpose of this Plan is to provide an opportunity for eligible employees of
the Employer to become shareholders in the Company. It is believed that broad-based employee
participation in the ownership of the business will help to achieve the unity of purpose conducive
to the continued growth of the Employer and to the mutual benefit of its employees and
shareholders.
1.3 Qualification. This Plan is intended to be an employee stock purchase plan which
qualifies for favorable Federal income tax treatment under Section 423 of the Code and is intended
to comply with the provisions thereof, including the requirement of Section 423(b)(5) of the Code
that all Employees granted options to purchase Stock under the Plan have the same rights and
privileges with respect to such options.
1.4 Rule 16b-3 Compliance. This Plan is intended to comply with Rule 16b-3 under the
Securities Exchange Act of 1934, and should be interpreted in accordance therewith.
Article II
DEFINITIONS
As used herein, the following words and phrases shall have the meanings specified below:
2.1 Board of Directors. The Board of Directors of the Company.
2.2 Closing Market Price. The closing price of the Stock as reported in the consolidated
trading of the New York Stock Exchange or such market or exchange on which the Stock is then traded
on the date specified; provided that if there should be any material alteration in the present
system of reporting sales prices of such Stock, or if such Stock should no longer be listed on the
New York Stock Exchange or any other market or exchange, the market value of the Stock as of a
particular date shall be determined in such a method as shall be specified by the Plan
Administrator.
2.3 Code. The Internal Revenue Code of 1986, as amended from time to time.
2.4 Commencement Date. The first day of each Option Period. The first Commencement Date
shall be February 1, 2005. Thereafter, Option Periods shall begin on each July 1 and January 1.
2.5 Contribution Account. The account established on behalf of a Participant to which shall
be credited the amount of the Participants contribution, pursuant to Article V.
2.6 Effective Date. February 1, 2005.
2.7 Employee. Any person employed by the Employer for a period of six (6) months.
2.8 Employer. The Company and any corporation (i) which is a Subsidiary of the Company, (ii)
which is authorized by the Board of Directors to adopt this Plan with respect to its Employees, and
(iii) which adopts this Plan. The term Employer shall include any corporation into which an
Employer may be merged or consolidated or to which all or substantially all of its assets may be
transferred, provided that the surviving or transferee corporation would qualify as a subsidiary
under Section 2.18 hereof and that such corporation does not affirmatively disavow this Plan.
2.9 Exercise Date. The last trading date of each Option Period on the New York Stock Exchange
or such market or exchange on which the Stock is then traded.
2.10 Exercise Price. The price per share of the Stock to be charged to Participants at the
Exercise Date, as determined in Section 6.3.
2.11 Five-Percent Shareholder. An Employee who owns five percent (5%) or more of the total
combined voting power or value of all classes of stock of the Company or any Subsidiary thereof.
In determining this five percent test, shares of stock which the Employee may purchase under
outstanding options, as well as stock attributed to the Employee under Section 424(d) of the Code,
shall be treated as stock owned by the Employee in the numerator, but shares of stock which may be
issued under options shall not be counted in the total of outstanding shares in the denominator.
2.12 Grant Date. The first trading date of each Option Period on the New York Stock Exchange
or such market or exchange on which the Stock is then traded.
2.13 Option Period. The first Option Period shall begin on February 1, 2005 and end on June
30, 2005. Thereafter, Option Periods shall be successive six (6) month periods commencing on July
1 and ending on December 31 and commencing on January 1 and ending on June 30.
2.14 Participant. Any Employee of an Employer who has met the conditions for eligibility as
provided in Article IV and who has elected to participate in the Plan.
2.15 Plan. Amended and Restated First Acceptance Corporation Employee Stock Purchase Plan.
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2.16 Plan Administrator. The committee composed of one or more individuals to whom authority
is delegated by the Board of Directors to administer the Plan. The initial committee shall be the
Compensation Committee of the Board of Directors.
2.17 Stock. Those shares of common stock of the Company which are reserved pursuant to
Section 6.1 for issuance upon the exercise of options granted under this Plan.
2.18 Subsidiary. Any corporation (other than the Company) in an unbroken chain of
corporations beginning with the Company if, at the time of the granting of the option, each of the
corporations other than the last corporation in the chain owns stock possessing fifty percent (50%)
or more of the combined voting power of all classes of stock in one of the other corporations in
such chain.
Article III
SHAREHOLDER APPROVAL
3.1 Shareholder Approval Required. This Plan must be approved by the shareholders of the
Company within the period beginning twelve (12) months before and ending twelve (12) months after
its adoption by the Board of Directors.
3.2 Shareholder Approval for Certain Amendments. Without the approval of the shareholders of
the Company, no amendment to this Plan shall increase the number of shares reserved under the Plan,
other than as provided in Section 10.3. Approval by shareholders must occur within one (1) year of
such amendment or such amendment shall be void ab initio, comply with applicable provisions of the
corporate charter and bylaws of the Company, and comply with Delaware law prescribing the method
and degree of shareholder approval required for issuance of corporate stock or options.
Article IV
ELIGIBILITY AND PARTICIPATION
4.1 Conditions. Each Employee shall become eligible to become a Participant on the
Commencement Date next following the date on which he is employed by the Employer for a period of
six (6) months. No Employee who is a Five-Percent Shareholder shall be eligible to participate in
the Plan. Notwithstanding anything to the contrary contained herein, no individual who is not an
Employee shall be granted an option to purchase Stock under the Plan.
4.2 Application for Participation. Each Employee who becomes eligible to participate shall be
furnished a summary of the Plan and an enrollment form. If such Employee elects to participate
hereunder, he shall complete such form and file it with his Employer no later than fifteen (15)
days prior to the next Commencement Date. The completed enrollment form shall indicate the amount
of Employee contributions authorized by the Employee. If no new enrollment form is filed by a
Participant in advance of any Option Period after the initial Option Period, that Participant shall
be deemed to have elected to continue to participate with the same contribution previously elected
(subject to the limit of 15% of base pay). If any Employee does
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not elect to participate in any given Option Period, he may elect to participate on any future
Commencement Date so long as he continues to meet the eligibility requirements.
4.3 Date of Participation. All Employees who elect to participate shall be enrolled in the
Plan commencing with the first pay date after the Commencement Date following their submission of
the enrollment form. Upon becoming a Participant, the Participant shall be bound by the terms of
this Plan, including any amendments whenever made.
4.4 Acquisition or Creation of Subsidiary. If the stock of a corporation is acquired by the
Company or another Employer so that the acquired corporation becomes a Subsidiary, or if a
Subsidiary is created, the Subsidiary in either case shall automatically become an Employer and its
Employees shall become eligible to participate in the Plan on the first Commencement Date after the
acquisition or creation of the Subsidiary, as the case may be. Notwithstanding the foregoing, the
Board of Directors may by appropriate resolutions (i) provide that the acquired or newly created
Subsidiary shall not be a participating Employer, (ii) specify that the acquired or newly created
Subsidiary will become a participating Employer on a Commencement Date other than the first
Commencement Date after the acquisition or creation, or (iii) attach any condition whatsoever to
eligibility of the employees of the acquired or newly created Subsidiary, except to the extent such
condition would not comply with Section 423 of the Code.
Article V
CONTRIBUTION ACCOUNT
5.1 Employee Contributions. The enrollment form signed by each Participant shall authorize
the Employer to deduct from the Participants compensation an after-tax amount during each payroll
period not less than one percent (1%) nor more than an amount which is fifteen percent (15%) of the
Participants base pay on the Commencement Date. A Participants base pay shall be determined
before subtracting any elective deferrals to a qualified plan under Section 401(k) of the Code,
salary reduction contributions to a cafeteria plan under Section 125 of the Code or elective
deferrals to a nonqualified deferred compensation plan. The dollar amount deducted each payday
shall be credited to the Participants Contribution Account. Participant contributions will not be
permitted to commence at any time during the Option Period other than on the Commencement Date.
Unless otherwise determined by the Plan Administrator with respect to an Option Period, no interest
will accrue on any contributions or on the balance in a Participants Contribution Account.
5.2 Modification of Contribution Rate. No change shall be permitted in a Participants amount
of withholding except upon a Commencement Date, and then only if the Participant files a new
enrollment form with the Employer at least fifteen (15) days in advance of the Commencement Date
designating the desired withholding rate. Notwithstanding the foregoing, a Participant may notify
the Employer at any time (except during the periods from June 21 through June 30 and December 22
through December 31) that he wishes to discontinue his contributions. This notice shall be in
writing and on such forms as provided by the Employer and shall become effective as of a date
provided on the form not more than fifteen (15) days following its receipt by the Employer. The
Participant shall become eligible to recommence contributions on the next Commencement Date.
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5.3 Withdrawal of Contributions. A Participant may elect to withdraw the balance of his
Contribution Account at any time during the Option Period prior to the Exercise Date (except during
the periods from June 21 through June 30 and December 22 through December 31). The option granted
to a Participant shall be canceled upon his withdrawal of the balance in his Contribution Account.
This election to withdraw must be in writing on such forms as may be provided by the Employer. If
contributions are withdrawn in this manner, further contributions during that Option Period will be
discontinued in the same manner as provided in Section 5.2, and the Participant shall become
eligible to recommence contributions on the next Commencement Date.
5.4 Limitations on Contributions. During each Option Period, the total contributions by a
Participant to his Contribution Account shall not exceed fifteen percent (15%) of the Participants
base pay for the Option Period. If a Participants total contributions should exceed this limit,
the excess shall be returned to the Participant after the end of the Option Period, without
interest.
Article VI
ISSUANCE AND EXERCISE OF OPTIONS
6.1 Reserved Shares of Stock. The Company shall reserve four hundred thousand (400,000)
shares of Stock for issuance upon exercise of the options granted under this Plan.
6.2 Issuance of Options. On the Grant Date each Participant shall be deemed to receive an
option to purchase Stock with the number of shares and Exercise Price determined as provided in
this Article VI, subject to the maximum limits specified in Section 6.6(a). All such options shall
be automatically exercised on the following Exercise Date, except for options which are canceled
when a Participant withdraws the balance of his Contribution Account or which are otherwise
terminated under the provisions of this Plan.
6.3 Determination of Exercise Price. The Exercise Price of the options granted under this
Plan for any Option Period shall be the lesser of:
(i) one hundred percent (100%) of the Closing Market Price of the Stock on the Exercise
Date; or
(ii) one hundred percent (100%) of the Closing Market Price of the Stock on the Grant
Date.
6.4 Purchase of Stock. On an Exercise Date, all options shall be automatically exercised,
except that the options of a Participant who has terminated employment pursuant to Section 7.1 or
who has withdrawn all his contributions shall expire. The Contribution Account of each Participant
shall be used to purchase the maximum number of shares of Stock, determined up to three decimal
places, determined by dividing the Exercise Price into the balance of the Participants
Contribution Account.
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6.5 Terms of Options. Options granted under this Plan shall be subject to such amendment or
modification as the Employer shall deem necessary to comply with any applicable law or regulation,
including but not limited to Section 423 of the Code, and shall contain such other provisions as
the Employer shall from time to time approve and deem necessary; provided, however, that any such
provisions shall comply with Section 423 of the Code.
6.6 Limitations on Options. The options granted hereunder are subject to the following
limitations:
(a) The maximum number of shares of Stock which may be purchased by any Participant on
an Exercise Date shall be three thousand (3,000) shares. This maximum number of shares
shall be adjusted upon the occurrence of an event described in Section 10.3.
(b) No Participant shall be permitted to accrue the right to purchase during any
calendar year Stock under this Plan (or any other Plan of the Employer or a Subsidiary which
is qualified under Section 423 of the Code) having a market value of greater than
twenty-five thousand dollars ($25,000.00) (as determined on the Grant Date for the Option
Period during which each such share of Stock is purchased) as provided in Section 423(b)(8)
of the Code.
(c) No option may be granted to a Participant if the Participant immediately after the
option is granted would be a Five-Percent Shareholder.
(d) No Participant may assign, transfer or otherwise alienate any options granted to
him under this Plan, otherwise than by will or the laws of descent and distribution, and
such options must be exercised during the Participants lifetime only by him.
6.7 Pro-Rata Reduction of Optioned Stock. If the total number of shares of Stock to be
purchased under option by all Participants on an Exercise Date exceeds the number of shares of
Stock remaining authorized for issuance under Section 6.1, a pro-rata allocation of the shares of
Stock available for issuance will be made among Participants in proportion to their respective
Contribution Account balances on the Exercise Date, and any money remaining in the Contribution
Accounts shall be returned to the Participants.
6.8 State Securities Laws. Notwithstanding anything to the contrary contained herein, the
Company shall not be obligated to issue shares of Stock to any Participant if to do so would
violate any State securities law applicable to the sale of Stock to such Participant. In the event
that the Company refrains from issuing shares of Stock to any Participant in reliance on this
Section, the Company shall return to such Participant the amount in such Participants Contribution
Account that would otherwise have been applied to the purchase of Stock.
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Article VII
TERMINATION OF PARTICIPATION
7.1 Termination of Employment. Any Employee whose employment with the Employer is terminated
during the Option Period prior to the Exercise Date for any reason except death, disability or
retirement at or after age 65 shall cease being a Participant immediately. The balance of that
Participants Contribution Account shall be paid to such Participant as soon as practical after his
termination. The option granted to such Participant shall be null and void.
7.2 Death. If a Participant should die while employed by the Employer, no further
contributions on behalf of the deceased Participant shall be made. The legal representative of the
deceased Participant may elect to withdraw the balance in said Participants Contribution Account
by notifying the Employer in writing prior to the Exercise Date in the Option Period during which
the Participant died (except during the periods from June 21 through June 30 and December 22
through December 31). In the event no election to withdraw is made on or before the June 20 or
December 21 preceding the Exercise Date, the balance accumulated in the deceased Participants
Contribution Account shall be used to purchase shares of Stock in accordance with Section 6.4.
7.3 Retirement. If a Participant should retire from the employment of the Employer at or
after attaining age 65, no further contributions on behalf of the retired Participant shall be
made. The Participant may elect to withdraw the balance in his Contribution Account by notifying
the Employer in writing prior to the Exercise Date in the Option Period during which the
Participant retired (except during the periods from June 21 through June 30 and December 22 through
December 31). In the event no election to withdraw is made on or before the June 20 or December 21
preceding the Exercise Date, the balance accumulated in the retired Participants Contribution
Account shall be used to purchase shares of Stock in accordance with Section 6.4.
7.4 Disability. If a Participant should terminate employment with the Employer on account of
disability, as determined by reference to the definition of disability in the Employers
long-term disability plan, no further contributions on behalf of the disabled Participant shall be
made. The Participant may elect to withdraw the balance in his Contribution Account by notifying
the Employer in writing prior to the Exercise Date in the Option Period during which the
Participant became disabled (except during the periods from June 21 through June 30 and December 22
through December 31). In the event no election to withdraw is made on or before the June 20 or
December 21 preceding the Exercise Date, the balance accumulated in the disabled Participants
Contribution Account shall be used to purchase shares of Stock in accordance with Section 6.4.
Article VIII
OWNERSHIP OF STOCK
8.1 Stock Certificates. As soon as practical after the Exercise Date, the Plan Administrator
will, in its sole discretion, either credit a share account maintained for the benefit of each
Participant or issue certificates to each Participant for the number of shares of Stock purchased
under the Plan by such Participant during an Option Period. Such determination by
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the Plan Administrator shall apply equally to all shares of Stock purchased during the Option
Period. Certificates may be issued, at the request of a Participant, in the name of the
Participant, jointly in the name of the Participant and a member of the Participants family, to
the Participant as custodian for the Participants child under the Gift to Minors Act, or to the
legal representative of a deceased Participant. No certificate shall be issued for fractional
shares of Stock, and any such fractional share shall be converted into cash based upon the Closing
Market Price on the date a certificate is issued to the Participant.
8.2 Premature Sale of Stock. If a Participant (or former Participant) sells or otherwise
disposes of any shares of Stock obtained under this Plan:
(i) prior to two (2) years after the Grant Date of the option under which such shares
were obtained, or
(ii) prior to one (1) year after the Exercise Date on which such shares were obtained,
that Participant (or former Participant) must notify the Employer immediately in writing concerning
such disposition.
8.3 Restrictions on Sale. The Plan Administrator may, in its sole discretion, place
restrictions on the sale or transfer of shares of Stock purchased under the Plan during any Option
Period by notice to all Participants of the nature of such restrictions given in advance of the
Commencement Date of such Option Period. The restrictions may prevent the sale, transfer or other
disposition of any shares of Stock purchased during the Option Period for a period of up to two
years from the Grant Date, subject to such exceptions as the Plan Administrator may determine
(e.g., termination of employment with the Employer). If certificates are issued pursuant
to Section 8.1 for shares that are restricted, the certificates shall contain an appropriate legend
disclosing the nature and duration of the restriction. Any such restrictions and exceptions
determined by the Plan Administrator shall be applicable equally to all shares of Stock purchased
during the Option Period for which the restrictions are first applicable. In addition, such
restrictions and exceptions shall remain applicable during subsequent Option Periods unless
otherwise determined by the Plan Administrator. If the Plan Administrator should change or
eliminate the restrictions for a subsequent Option Period, notice of such action shall be given to
all Participants.
8.4 Transfer of Ownership. A Participant who purchases shares of Stock under this Plan shall
be transferred at such time substantially all of the rights of ownership of such shares of Stock in
accordance with the Treasury regulations promulgated under Section 423 of the Code as in effect on
the Effective Date. Such rights of ownership shall include the right to vote, the right to receive
declared dividends, the right to share in the assets of the Employer in the event of liquidation,
the right to inspect the Employers books and the right to pledge or sell such Stock subject to the
restrictions in the Plan.
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Article IX
ADMINISTRATION AND AMENDMENT
9.1 Administration. The Plan Administrator shall (i) administer the Plan, (ii) keep records
of the Contribution Account balance of each Participant, (iii) keep records of the share account
balance of each Participant, (iv) interpret the Plan, (v) determine all questions arising as to
eligibility to participate, amount of contributions permitted, determination of the Exercise Price,
and all other matters of administration, and (vi) determine whether to place restrictions on the
sale and transfer of Stock and the nature of such restrictions, as provided in Section 8.3. The
Plan Administrator shall have such duties, powers and discretionary authority as may be necessary
to discharge the foregoing duties, and may delegate any or all of the foregoing duties to any
individual or individuals (including officers or other Employees who are Participants). The Board
of Directors shall have the right at any time and without notice to remove or replace any
individual or committee of individuals serving as Plan Administrator. All determinations by the
Plan Administrator shall be conclusive and binding on all persons. Any rules, regulations, or
procedures that may be necessary for the proper administration or functioning of this Plan that are
not covered in this Plan document shall be promulgated and adopted by the Plan Administrator.
9.2 Amendment. The Board of Directors of the Employer may at any time amend the Plan in any
respect, including termination of the Plan, without notice to Participants. If the Plan is
terminated, all options outstanding at the time of termination shall become null and void and the
balance in each Participants Contribution Account shall be paid to that Participant.
Notwithstanding the foregoing, no amendment of the Plan as described in Section 3.2 shall become
effective until and unless such amendment is approved by the shareholders of the Company.
Article X
MISCELLANEOUS
10.1 Expenses. The expenses of administering the Plan shall be paid by the Participants
except as determined by the Plan Administrator in its sole discretion.
10.2 No Contract of Employment. Nothing in this Plan shall be construed to constitute a
contract of employment between an Employer and any Employee or to be an inducement for the
employment of any Employee. Nothing contained in this Plan shall be deemed to give any Employee
the right to be retained in the service of an Employer or to interfere with the right of an
Employer to discharge any Employee at any time, with or without cause, regardless of the effect
which such discharge may have upon him as a Participant of the Plan.
10.3 Adjustment Upon Changes in Stock. The aggregate number of shares of Stock reserved for
purchase under the Plan as provided in Section 6.1, and the calculation of the Exercise Price as
provided in Section 6.3, shall be adjusted by the Plan Administrator (subject to direction by the
Board of Directors) in an equitable manner to reflect changes in the capitalization of the Company,
including, but not limited to, such changes as result from merger,
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consolidation, reorganization, recapitalization, stock dividend, dividend in property other than
cash, stock split, combination of shares, exchange of shares and change in corporate structure. If
any adjustment under this Section 10.3 would create a fractional share of Stock or a right to
acquire a fractional share of Stock, such fractional share shall be disregarded and the number of
shares available under the Plan and the number of shares covered under any options granted pursuant
to the Plan shall be the next lower number of shares, rounding all fractions downward.
10.4 Employers Rights. The rights and powers of any Employer shall not be affected in any
way by its participation in this Plan, including but not limited to the right or power of any
Employer to make adjustments, reclassifications, reorganizations or changes of its capital or
business structure or to merge or to consolidate or to dissolve, liquidate or sell, or transfer all
or any part of its business or assets.
10.5 Limit on Liability. No liability whatever shall attach to or be incurred by any past,
present or future shareholders, officers or directors, as such, of the Company or any Employer,
under or by reason of any of the terms, conditions or agreements contained in this Plan or implied
therefrom, and any and all liabilities of any and all rights and claims against the Company, an
Employer, or any shareholder, officer or director as such, whether arising at common law or in
equity or created by statute or constitution or otherwise, pertaining to this Plan, are hereby
expressly waived and released by every Participant as a part of the consideration for any benefits
under this Plan; provided, however, no waiver shall occur, solely by reason of this Section 10.5,
of any right which is not susceptible to advance waiver under applicable law.
10.6 Gender and Number. For the purposes of the Plan, unless the contrary is clearly
indicated, the use of the masculine gender shall include the feminine, and the singular number
shall include the plural and vice versa.
10.7 Governing Law. The validity, construction, interpretation, administration and effect of
this Plan, and any rules or regulations promulgated hereunder, including all rights or privileges
of any Participants hereunder, shall be governed exclusively by and in accordance with the laws of
the State of Delaware, except that the Plan shall be construed to the maximum extent possible to
comply with Section 423 of the Code and the Treasury regulations promulgated thereunder.
10.8 Headings. Any headings or subheadings in this Plan are inserted for convenience of
reference only and are to be ignored in the construction of any provisions hereof.
10.9 Severability. If any provision of this Plan is held by a court to be unenforceable or is
deemed invalid for any reason, then such provision shall be deemed inapplicable and omitted, but
all other provisions of this Plan shall be deemed valid and enforceable to the full extent possible
under applicable law.
10
FIRST ACCEPTANCE CORPORATION
Proxy Solicited on Behalf of the Board of Directors of the Company
for the Annual Meeting, November 16, 2010
You are encouraged to specify your vote by marking the appropriate box BELOW but you need not
mark any box if you wish to vote in accordance with the Board of Directors recommendations which
are FOR the election of the named nominees as directors and FOR Proposals 2 and 3. The Proxies
cannot vote your shares unless you sign and return this card. This Proxy may be revoked in writing
at anytime prior to the voting thereof.
First Acceptance Corporation
FIRST ACCEPTANCE CORPORATION
THIS IS YOUR PROXY
Dear Stockholder:
Your Proxy is being solicited by the Board of
Directors of First Acceptance Corporation for
the Annual Meeting of Stockholders to be held on
November 16, 2010, at 10:00 a.m., central time,
at our corporate headquarters, which are located
at 3813 Green Hills Village Drive, Nashville,
Tennessee 37215.
Enclosed with this Proxy is a Proxy Statement
containing important information about the
matters that you are being asked to approve.
Your vote is important. Whether or not you plan
to attend the Annual Meeting, you can be sure
your shares are represented at the meeting by
promptly returning your completed Proxy card
prior to the Annual Meeting.
Please mark the boxes on the Proxy card below to
indicate how your shares are to be voted, then
sign the card, detach it and return your Proxy
card in the enclosed envelope.
Thank you in advance for your prompt
consideration of these matters.
81508
▼ FOLD AND DETACH HERE ▼
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Please mark your votes as
indicated in this example
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1. Election of Directors (Proposal No. 1) |
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WITHHOLD FOR ALL |
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*EXCEPTIONS |
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Nominees: |
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01 Rhodes R. Bobbitt
02 Harvey B. Cash
03 Donald J. Edwards
04 Gerald J. Ford
05 Stephen J. Harrison
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06 Thomas M. Harrison, Jr.
07 Tom C. Nichols
08 Lyndon L. Olson, Jr.
09 William A. Shipp, Jr.
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(INSTRUCTIONS: To withhold authority to vote for any
individual nominee, mark the Exceptions box above and
write that nominees name in the space provided below.)
*Exceptions
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To approve an increase in the number of shares
authorized for issuance pursuant to the First Acceptance
Corporation Employee Stock Purchase Plan.
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To ratify the appointment of Ernst & Young LLP as
independent auditors for the Company for the fiscal year
ending June 30, 2011.
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This Proxy, when properly executed, will be voted in the
manner directed herein and will authorize the Proxies to
take action in their discretion upon other matters that
may properly come before the meeting. If no direction is
made, the Proxy will be voted in accordance with the
recommendations of the Board of Directors. Proxies are
authorized to vote upon matters incident to the conduct
of the meeting, such as approval of one or more
adjournments of the meeting for the purposes of obtaining
additional stockholder votes.
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Mark Here for
Address Change or Comments
SEE REVERSE
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NOTE: Please sign as name appears hereon. Joint owners should each sign. When signing as
attorney, executor, administrator, trustee or guardian, please give full title as such.
You can now access your First Acceptance Corporation account online.
Access your First Acceptance Corporation account online via Investor ServiceDirect®
(ISD).
BNY Mellon Shareowner Services, the transfer agent for First Acceptance Corporation, now makes it
easy and convenient to get current information on your shareholder account.
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View account status
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View payment history for dividends |
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View certificate history
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View book-entry information
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Obtain a duplicate 1099 tax form |
Visit us on the web at http://www.bnymellon.com/shareowner/isd
For Technical Assistance Call 1-877-978-7778 between 9am-7pm
Monday-Friday Eastern Time
Investor ServiceDirect ®
Available 24 hours per day, 7 days per week
TOLL FREE NUMBER: 1-800-370-1163
Choose MLinkSM for fast, easy and secure 24/7 online access
to your future proxy materials, investment plan statements, tax
documents and more. Simply log on to Investor ServiceDirect®
at www.bnymellon.com/shareowner/isd where step-by-step
instructions will prompt you through enrollment.
Important notice regarding the Internet availability of proxy materials for the Annual Meeting of
Stockholders. The Proxy Statement and the 2010 Annual Report to Stockholders are available at:
http://phx.corporate-ir.net/phoenix.zhtml?c=120257&p=proxy
▼ FOLD AND DETACH HERE ▼
FIRST ACCEPTANCE CORPORATION
P R O X Y
BOARD OF DIRECTORS PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS
AT 10:00 AM, CENTRAL TIME, TUESDAY, NOVEMBER 16, 2010
FIRST ACCEPTANCE CORPORATION, 3813 GREEN HILLS VILLAGE DRIVE,
NASHVILLE, TENNESSEE 37215
The undersigned hereby constitutes and appoints each of Stephen J. Harrison and Kevin P.
Cohn his or her true and lawful agents and proxies with full power of substitution in each to
represent the undersigned, with all the powers which the undersigned would possess if personally
present, and to vote the Common Stock of First Acceptance Corporation held of record by the
undersigned on the record date, at the Annual Meeting of Stockholders of First Acceptance
Corporation, to be held at First Acceptance Corporation, 3813 Green Hills Village Drive, Nashville,
Tennessee 37215, on November 16, 2010, at 10:00 a.m., central time, and at any adjournment or
postponement thereof, on all matters coming before said meeting.
ELECTION OF DIRECTORS: To elect each of Rhodes R. Bobbitt, Harvey B. Cash, Donald J. Edwards,
Gerald J. Ford, Stephen J. Harrison, Thomas M. Harrison, Jr., Tom C. Nichols, Lyndon L. Olson, Jr.
and William A. Shipp, Jr. to serve until the next Annual Meeting of Stockholders and until their
successors are duly elected and qualified or their earlier death, resignation or removal from
office.
The Board of Directors recommends a vote FOR the election of all named nominees for director
and FOR Proposals 2 and 3.
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Address Change/Comments |
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BNY MELLON SHAREOWNER SERVICES
P.O. BOX 3550
SOUTH HACKENSACK, NJ 07606-9250
(Continued and to be marked, dated and signed, on the other side)
81508