EXHIBIT 10.15
SEVERANCE COMPENSATION AGREEMENT
THIS SEVERANCE COMPENSATION AGREEMENT (the "Agreement") is between
First Acceptance Corporation, a Delaware corporation ("First Acceptance
Corporation"), and Xxxxxxx Xxxxx Xxxxxxxx, an individual (the "Executive").
First Acceptance Corporation and its majority-owned subsidiaries are hereinafter
collectively referred to as the "Companies."
RECITALS:
The Executive is currently employed by one of the Companies in an at
will employment relationship. First Acceptance Corporation has offered to expand
protection to the Executive in the form of severance benefits payable on
termination of employment under certain circumstances in consideration of
Executive's agreement to continue his employment under the terms of this
Agreement. The Executive desires to continue employment with the Companies under
such terms and conditions, and with the protection afforded to the Executive by
this Agreement.
AGREEMENT
NOW, THEREFORE, These Premises Considered, and in consideration of the
mutual covenants and promises in this Agreement, the sufficiency of which is
hereby acknowledged, the parties agree as follows:
1. Term of Agreement. This Agreement shall continue in effect for a
period of three years from date hereof (the "Initial Term"). Thereafter, this
Agreement shall automatically be extended for successive terms of one year (a
"Renewal Term"), except this Agreement may be terminated after the Initial Term
upon delivery of written notice of the termination of this
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Agreement by any of the Companies at least six months prior to the commencement
of any Renewal Term. If the Executive's employment is terminated during the term
of the Agreement, the date on which the Executive's employment terminates shall
be referred to as the "Date of Termination."
2. Severance Benefits. If during the term of this Agreement the
Executive leaves the employment of the Companies for Good Reason, as explained
in Section 3 of this Agreement, and the Executive signs the release (the
"Release") that is attached to and incorporated in this Agreement, the Executive
shall receive the following benefits (the "Severance Benefits"):
(a) An amount equal to the Executive's annual base salary. The
"annual base salary" of the Executive shall be defined as the
Executive's base rate of compensation in effect as of the Date of
Termination, but in no event less than the Executive's base rate of
compensation in effect as of the end of the last calendar quarter
preceding the Date of Termination;
(b) Payment of the Executive's monthly COBRA premiums for
continued health and dental insurance coverage for the shorter of the
following: (i) 12 months after the Date of Termination; (ii) until the
Executive no longer has coverage under COBRA; or (iii) until the
Executive becomes eligible for substantially similar coverage under a
subsequent employer's group health plan; and
(c) Outplacement services that are customary to Executive's
position.
Subject to the delivery of the executed Release by Executive, the
severance benefits described in subparagraphs (a) and (b) above shall be paid in
cash or good funds in equal monthly installments during the period that the
covenants set forth in Section 6 shall be in effect
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commencing on the first day of the calendar month that occurs thirty (30) days
after the Date of Termination; provided that the obligation of the Companies to
pay such severance benefits to the Executive shall be subject to termination
under the provisions of Section 6 hereof in the event the Executive should
violate the covenants set forth therein; and provided further that the payment
of such severance benefits shall be accelerated and payable in lump sum by the
Companies upon a breach of this Agreement as a result of the failure of a
successor (herein defined) to assume this Agreement as required in Section 9 of
this Agreement. The Companies shall withhold from any amounts payable under this
Agreement all federal, state, city or other income and employment taxes that
shall be required.
The Executive shall be entitled to the following in addition to and not
in limitation of the Severance Benefits: (i) accrued and unpaid base salary as
of the Date of Termination; (ii) accrued vacation and sick leave, if any, on
Date of Termination in accordance with the then current policy of the Companies
with respect to terminated employees generally; and (iii) vested benefits under
the Companies' employee benefit plans in which the Executive was a participant
on Date of Termination, which vested benefits shall be paid or provided for in
accordance with the terms of said employee benefit plans; and (iv) all optioned
shares not previously vested shall immediately become fully vested and
exercisable for all purposes as of the date of this termination.
The Executive shall not be entitled to receive Severance Benefits if
employment with the Companies is terminated by reason of death of Executive,
retirement of Executive as permitted under a retirement plan as then in effect
for the Companies, the Executive having reached the age of mandatory retirement
(if such requirement then exists for bona fide executives); or Disability of
Executive (herein defined); or by reason of termination of employment by the
Executive
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without Good Reason (herein defined); or by reason of termination of employment
by the Companies with Cause (herein defined).
The Executive shall be under no duty or obligation to seek or accept
other employment and shall not be required to mitigate the amount of the
Severance Benefits provided under the Agreement by seeking employment or
otherwise; provided, however, that the Executive shall be required to notify the
Companies if the Executive becomes covered by a health or dental care program
providing substantially similar coverage, at which time health or dental care
continuation coverage provided under this Agreement shall cease.
3. Good Reason for Termination. In the event that the Executive's
employment relationship with the Companies is terminated for any of the reasons
described in this Section 3, the Executive shall be entitled to Severance
Benefits, subject to and described in Section 2 of this Agreement. "Good Reason"
shall constitute any of the following circumstances if they occur without the
Executive's express written consent during the term of this Agreement:
(a) The Executive no longer holds an executive level position with
executive level responsibilities with the Companies consistent with the
Executive's training and experience;
(b) The Companies require that the Executive's primary location of
employment be more than 50 miles from the location of the Executive's primary
location of employment on date of this Agreement;
(c) The failure of the Companies to provide the Executive, at a level
commensurate with the Executive's position, the incentive compensation
opportunities and employee benefits that are provided to other executives of
comparable rank with the Companies;
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(d) A breach by the Companies of any provision of this Agreement.
including without limitation, the failure of a successor to assume this
Agreement as required in Section 9 hereof;
(e) The termination of the Executive's employment by the Companies for
a reason other than: (i) death; (ii) retirement pursuant to a retirement plan as
then in effect for the Companies; (iii) Disability as explained in Section 4 of
this Agreement; (iv) the Executive has reached the age of mandatory retirement
(if such requirement then exists for bona fide executives); (v) for Cause, as
explained in Section 5 of this Agreement;
(f) A reduction by the Companies in the Executive's base salary in
effect as of the date of this Agreement; or
(g) The termination or non-renewal of this Agreement by the Companies.
The Executive must provide the Companies with written notice no later
than 45 calendar days after the Executive knows or should have known that Good
Reason has occurred. Following the Executive's Notice, the Companies shall have
45 calendar days to rectify the circumstances causing the Good Reason. If the
Companies fail to rectify the event(s) causing the Good Reason within the 45 day
period after the Executive's Notice, or if any of the Companies delivers to the
Executive written notice stating that the circumstances cannot or shall not be
rectified, the Executive shall be entitled to assert Good Reason and terminate
employment on or before 90 days after the delivery of the Executive's Notice.
Should Executive fail to provide the required Notice in a timely manner, Good
Reason shall not be deemed to have occurred as a result of that event. The
Initial Term or a Renewal Term shall not be deemed to have expired
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during the Notice period, however, as long as the Executive has provided Notice
within the Term.
4. Disability. For purposes of this Agreement, Disability means a
serious injury or illness that requires the Executive to be under the regular
care of a licensed medical physician and renders the Executive incapable of
performing the essential functions of the Executive's position for 12 months as
determined by the Board of Directors of the Companies in good faith and upon
receipt of and in reliance on competent medical advice from one or more
individuals selected by the Board of Directors, who are qualified to give
professional medical advice.
5. Cause. If the Executive's employment relationship with the Companies
is terminated by the Companies for Cause, as described below in this Section,
the Executive shall not be eligible for Severance Benefits and all rights of the
Executive and obligations of the Companies under this Agreement shall expire.
Cause means:
(a) The Executive has been convicted in a federal or state court of
a crime classified as a felony;
(b) Action or inaction by the Executive (i) that constitutes
embezzlement, theft, misappropriation or conversion of assets of the Companies
which alone or together with related actions or inactions involve assets of more
than a de minimis amount, or that constitutes fraud, gross malfeasance of duty,
or conduct grossly inappropriate to Executive's office; and (ii) such action or
inaction has adversely affected or is likely to adversely affect the business of
the Companies or has resulted or is intended to result in direct or indirect
gain or personal enrichment of the Executive to the detriment of the Companies;
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(c) The Executive has been grossly inattentive to, or in a grossly
negligent manner failed to competently perform, Executive's job duties and the
failure was not cured within 45 days after written notice from the Companies.
Any termination of the Executive's employment by the Companies for
Cause shall be communicated by a notice of termination (the "Notice of
Termination") to the Executive. The Notice of Termination shall be a written
notice indicating the specific termination provision of this Agreement relied
upon and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive's employment under
this provision.
6. Non-Competition.
(a) The Executive will not during the Restricted Period (herein
defined):
(i) become employed by a competitor company at any location
and directly solicit or sell non-standard personal automobile insurance
to any person or entity that was insured by any of the Companies within
one year prior to the Date or Termination, or directly provide services
related to non-standard personal automobile insurance to any such
person or entity; or
(ii) receive or earn compensation of any type directly arising
out of the purchase of non-standard personal automobile insurance by
any person or entity that was insured by the Companies at any time
within one year prior to the Date of Termination; or
(iii) solicit or induce any other employees of the Companies
to leave such employment or accept employment with any other person or
entity, or solicit or induce any insurance agent of the Companies to
offer, sell or market non-standard
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personal automobile insurance for a competitor company in the primary
market of the Companies.
"Competitor company" means an insurance company,
insurance agency, business, for profit or not for profit
organization (other than the Companies) that provides, or
offers to provide non-standard personal automobile insurance
to individuals or institutions.
"Non-standard personal automobile insurance" means
automobile insurance sold to individuals or institutions that
based primarily on their inability or unwillingness to obtain
coverage from standard carriers due to various factors,
including their need for monthly payment plans, their failure
to maintain continuous insurance coverage or their driving
record, and who in most cases are required by law to buy a
minimum amount (or limits) of automobile insurance coverage.
"Primary market area" means any state in which the
Companies derived more than $5 million in direct written
premiums from the sale of non-standard personal automobile
insurance to individuals or institutions in the most recent
complete fiscal year prior to the Date of Termination.
"Restricted Period" means a period of 12 months from
the Date of Termination.
"Employed" includes activities as an owner,
proprietor, employee, agent, solicitor, partner, member,
manager, principal, shareholder (owning more than 1% of the
outstanding stock), consultant, officer, director or
independent contractor.
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"Companies" means any company that is a subsidiary of
First Acceptance Corporation, now or in the future, and any
other company that has succeeded to the business of any of the
Companies.
(b) If the Executive is deemed to have materially breached the
non-competition covenants set forth in Section 6 of this Agreement, the
Companies may, in addition to seeking an injunction or any other remedy they may
have, withhold or cancel any remaining payments or benefits due to the Executive
pursuant to Section 2 of this Agreement. The Companies shall give prior or
contemporaneous written notice of such withholding or cancellation of payments
in accordance with Section 2 hereof. If the Executive violates any of these
restrictions, the Companies shall be further entitled to an immediate
preliminary and permanent injunctive relief, without bond, in addition to any
other remedy which may be available to the Companies.
(c) Both parties agree that the restrictions in this Agreement are
fair and reasonable in all respects, including the geographic and temporal
restrictions, and that the benefits described in this Agreement, to the extent
any separate or special consideration is necessary, are fully sufficient
consideration for the Executive's obligations under this Agreement.
7. Confidentiality. Executive will remain obligated under any
confidentiality or nondisclosure agreement with the Companies (or any of them)
that is currently in effect or to which the Executive may in the future be
bound. In the event that the Executive is at any time not the subject of a
separate confidentiality or nondisclosure agreement with the Companies (or any
of them), Executive expressly agrees that Executive shall not use for the
Executive's personal benefit, or disclose, communicate or divulge to, or use for
the direct or indirect benefit of any person, firm, association or company any
confidential or competitive material or
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information of the Companies or their subsidiaries, including without
limitation, any information regarding insureds or other customers, actual or
prospective, and the contents of their files; marketing, underwriting or
financial plans or analyses which is not a matter of public record; claims
practices or analyses which are not matters of public record; pending or past
litigation in which the Companies have been involved and which is not a matter
of public record; and all other strategic plans, analyses of operations,
computer programs, personnel information and other proprietary information with
respect to the Companies which are not matters of public record. Executive shall
return to the Companies promptly, and in no event later than the Date of
Termination, all items, documents, lists and other materials belonging to the
Companies or their subsidiaries, including but not limited to, credit, debit or
service cards, all documents, computer tapes, or other business records or
information, keys and all other items in the Executive's possession or control.
8. Successors of First Acceptance Corporation. First Acceptance
Corporation will require any successor (herein defined) to assume expressly and
agree to perform this Agreement in the same manner and to the same extent that
the Companies would be required to perform this Agreement if no such succession
had taken place. Failure of First Acceptance Corporation to obtain such
agreement prior to the effectiveness of any such succession shall be a breach of
this Agreement and shall entitle the Executive to terminate employment for Good
Reason and receive Severance Benefits as provided in Section 2 hereof. Reference
to the Companies in this Agreement shall include any successor which assumes and
agrees to perform this Agreement by operation of law or otherwise.
The term "successor" means any Person, as defined by Section 3(a)(9) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), that
either (i) becomes the Beneficial
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Owner, as defined by Rule 13d-3 of the General Rules and Regulations under the
Exchange Act, directly or indirectly, of the securities of First Acceptance
Corporation representing more than 50.1% of the combined voting power of the
then outstanding securities of First Acceptance Corporation; (ii) purchases or
otherwise acquires substantially all of the assets of the Companies such that
the Companies cease to function on a going forward basis as an insurance holding
company system that provides non-standard personal automobile insurance; or
(iii) survives a merger, consolidation or reorganization that results in less
than 50.1% of the combined voting power of First Acceptance Corporation or such
surviving entity being owned by stockholders of First Acceptance Corporation
immediately preceding such merger, consolidation or reorganization.
9. Notice. For purposes of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered by hand or commercial courier or
mailed by certified or registered mail, return receipt requested, postage
prepaid, addressed to the respective addresses as set forth below or to such
other address as one party may have furnished to the other in writing in
accordance herewith.
Notice to the Executive:
Xxxxxxx X. Xxxxxxxx
0000 Xxxxxx Xxxxx
Xxxxxxxxx, XX 00000
Notice to the Companies:
First Acceptance Corporation
Mailing Address:
0000 Xxxxx Xxxxx Xxxxxxx Xx.
Xxxxxxxxx, Xxxxxxxxx 00000
Attention: President and Chief Executive Officer
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10. Claims Procedure.
(a) The administrator for purposes of this Agreement shall be First
Acceptance Corporation ("Administrator"), whose address is 0000 Xxxxx Xxxxx
Xxxxxxx Xx., Xxxxxxxxx, Xxxxxxxxx, 00000, Telephone: (000) 000-0000. The "Named
Fiduciary" as defined in Section 402(a)(2) or ERISA, also shall be First
Acceptance Corporation. First Acceptance Corporation shall have the right to
designate one or more employees of the Companies as the Administrator and the
Named Fiduciary at any time, and to change the address and telephone number of
the same. First Acceptance Corporation shall give the Executive written notice
of any change in the Administrator and Named Fiduciary, or in the address or
telephone number of the same.
(b) The Administrator shall make all determinations as to the right
of any person to receive benefits under the Agreement. Any denial by the
Administrator of a claim for benefits by the Executive ("the claimant") shall be
stated in writing by the Administrator and delivered or mailed to the claimant
within ten (10) days after receipt of the claim, unless special circumstances
require an extension of time for processing the claim. If such an extension is
required, written notice of the extension shall be furnished to the claimant
prior to the termination of the initial 10-day period. In no event shall such
extension exceed a period of ten (10) days from the end of the initial period.
Any notice of denial shall set forth the specific reasons for the denial,
specific reference to pertinent provisions of this Agreement upon which the
denial is based, a description of any additional material or information
necessary for the claimant to perfect the claim, with an explanation of why such
material or information is necessary, and any explanation of claim review
procedures, written to the best of the Administrator's ability in a manner that
may be understood without legal or actuarial counsel.
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(c) A claimant whose claim for benefits has been wholly or partially
denied by the Administrator may request, within ten (10) days following the
receipt of such denial, in a writing addressed to the Administrator, a review of
such denial. The claimant shall be entitled to submit such issues or comments in
writing or otherwise, as the claimant shall consider relevant to a determination
of the claim, and the claimant may include a request for a hearing in person
before the Administrator. Prior to submitting the request, the claimant shall be
entitled to review such documents as the Administrator shall agree are pertinent
to the claim. The claimant may, at all stages of review, be represented by
counsel, legal or otherwise, of the claimant's choice. All requests for review
shall be promptly resolved. The Administrator's decision with respect to any
such review shall be set forth in writing and shall be mailed to the claimant
not later than ten (10) days following receipt by the Administrator of the
claimant's request unless special circumstances, such as the need to hold a
hearing, require an extension of time for processing, in which case the
Administrator's decision shall be so mailed not later than twenty (20) days
after receipt of such request.
11. Arbitration. The parties to this Agreement agree that final and
binding arbitration shall be the sole recourse to settle any claim or
controversy arising out of or relating to a breach or the interpretation of this
Agreement, except as either party may be seeking injunctive relief. Either party
may file for arbitration. A claimant seeking relief on a claim for benefits,
however, must first follow the procedure in Section 11 hereof and may file for
arbitration within sixty (60) days following claimant's receipt of the
Administrator's written decision on review under Section 11(c) hereof, or if the
Administrator fails to provide any written decision under Section 11 hereof,
within 60 days of the date on which such written decision was required to be
delivered to the claimant as therein provided. The arbitration shall be held at
a mutually agreeable
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location, and shall be subject to and in accordance with the arbitration rules
then in effect of the American Arbitration Association; provided that if the
location cannot be agreed upon the arbitration shall be held in Nashville,
Tennessee. The arbitrator may award any and all remedies allowable by the cause
of action subject to the arbitration, but the arbitrator's sole authority shall
be to interpret and apply the provisions of this Agreement. In reaching its
decision the arbitrator shall have no authority to change or modify any
provision of this Agreement or other written agreement between the parties. The
arbitrator shall have the power to compel the attendance of witnesses at the
hearing. Any court having jurisdiction may enter a judgment based upon such
arbitration. All decisions of the arbitrator shall be final and binding on the
parties without appeal to any court. Upon execution of this Agreement, the
Executive shall be deemed to have waived any right to commence litigation
proceedings regarding this Agreement outside of arbitration or injunctive relief
without the express consent of First Acceptance Corporation. The Companies shall
pay all arbitration fees and the arbitrator's compensation. If the Executive
prevails in the arbitration proceeding, the Companies shall reimburse to the
Executive the reasonable fees and expenses of Executive's personal counsel for
his or her professional services rendered to the Executive in connection with
the enforcement of this Agreement.
12. Miscellaneous. Except insofar as this provision may be contrary to
applicable law, no sale, transfer, alienation, assignment, pledge,
collateralization or attachment of any benefits under this Agreement shall be
valid or recognized by the Companies.
(a) This Agreement is an unfunded deferred compensation arrangement
for a member of a select group of the Companies' management and any exemptions
under ERISA, as applicable to such arrangement, shall be applicable to this
Agreement. Nothing in this Agreement shall require or be deemed to require the
Companies or any of them to segregate,
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earmark or otherwise set aside any funds or other assets to provide for any
payments made or required to be made hereunder.
(b) Nothing in this Agreement shall be deemed to create an employment
agreement between the Executive and the Companies or any of them providing for
Executive's employment for any fixed duration, nor shall it be deemed to modify
or undercut the Executive's at will employment status with the Companies.
(c) Neither the provisions of this Agreement nor the severance benefits
provided hereunder shall reduce any amounts otherwise payable, or in any way
diminish the Executive's rights as an employee of the Companies, whether
existing now or hereafter, under any benefit, incentive, retirement, stock
option, stock bonus or stock purchase plan, or any employment agreement or other
plan or arrangement.
(d) This Agreement sets forth the entire agreement between the parties
with respect to the matters set forth herein. This Agreement may not be modified
or amended except by written agreement intended as such and signed by all
parties.
(e) This Agreement shall benefit and be binding upon the parties and
their respective directors, officers, employees, representatives, agents, heirs,
successors, assigns, devisees, and legal or personal representatives.
(f) The Companies, from time to time, shall provide government agencies
with such reports concerning this Agreement as may be required by law, and shall
provide Executive with such disclosure concerning this Agreement as may be
required by law or as the Companies may deem appropriate.
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(g) Executive and the Companies respectively acknowledge that each of
them has read and understand this Agreement, that they have each had adequate
time to consider this Agreement and discuss it with each of their attorneys and
advisors, that each of them understands the consequences of entering into this
Agreement, that each of them is knowingly and voluntarily entering into this
Agreement, and that they are each competent to enter into this Agreement.
(h) If any provision of this Agreement is determined to be
unenforceable, at the discretion of First Acceptance Corporation the remainder
of this Agreement shall not be affected but each remaining provision shall
continue to be valid and effective and shall be modified so that it is
enforceable to the fullest extent permitted by law. Moreover, in the event this
Agreement is determined to be unenforceable against any of the Companies, it
shall continue to be valid and enforceable against the other Companies.
(i) This Agreement will be interpreted as a whole according to its fair
terms. It will not be construed strictly for or against either party.
(j) Except to the extent that federal law controls, this Agreement is
to be construed according to Tennessee law.
IN WITNESS WHEREOF, the parties have duly executed this Agreement effective as
of the 24th day of August, 2004.
EXECUTIVE:
/s/ Xxxxxxx X. Xxxxxxxx
---------------------------------------
Name: Xxxxxxx X. Xxxxxxxx
----------------------------------
FIRST ACCEPTANCE CORPORATION
Dated: August 24, 2004 By: /s/ Xxxxxxx X. Xxxxxxxx
---------------------- ------------------------------------------
Its: President and Chief Executive Officer
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