THIS EMPLOYMENT
AGREEMENT (this “ Agreement ”) effective as of
January 1, 2008, is by and between First Acceptance
Corporation, a Delaware corporation (the “ Company
”), and Daniel L. Walker (“ Executive
”).
In consideration
of the continued employment of Executive by the Company, the grant
to Executive by the Company on the date hereof of a non-qualified
option to purchase shares of the Company’s common stock, and
the mutual covenants contained herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company and Executive, intending to be legally
bound, hereby agree as follows:
1.
Employment . The Company agrees to employ Executive, and
Executive accepts such employment, upon the terms and conditions
set forth in this Agreement, for the period beginning as of the
date hereof and ending upon his separation pursuant to
Section 4 hereof (the “ Employment Period
”).
(a) During
the Employment Period, Executive shall serve as Senior Vice
President — Operations of the Company and shall have the
normal duties, responsibilities, functions and authority of such
position.
(b) During
the Employment Period, Executive shall devote his best efforts and
his full business time and attention (except for time devoted to
charitable and non-profit activities and service as a director on
the board(s) of directors of companies (whether public or private)
other than the Company, in each case, in a manner that does not
interfere with the performance of his duties to the Company,
vacation periods in accordance with the terms set forth herein, and
periods of illness) to the business and affairs of the Company.
Executive shall perform his duties, responsibilities and functions
to the Company hereunder to the best of his abilities in a
diligent, trustworthy and businesslike manner.
3.
Compensation and Benefits .
(a) Commencing
on the date hereof and continuing throughout the Employment Period,
Executive’s base salary shall be $207,500 per annum (the
“ Base Salary ”). Executive’s Base Salary
shall be payable by the Company in regular installments consistent
with the Company’s general payroll practices.
Executive’s Base Salary for any partial year shall be pro
rated based upon the number of days elapsed in such year within the
Employment Period. The Company shall perform an annual review of
Executive’s Base Salary based on Executive’s
performance of his duties and the Company’s other
compensation policies; provided , that the Base Salary shall
not be reduced below $207,500.
(b) During
the Employment Period, Executive shall be eligible for an annual
bonus of up to 50.0% of the Base Salary payable to Executive with
respect to each fiscal year of the Company (the “ Annual
Bonus ”). In each year, the amount of the Annual Bonus
shall be determined based upon the Company’s evaluation of
Executive’s personal performance and such other criteria as
may be determined by the Company. Each such bonus shall be paid to
Executive reasonably promptly following the determination of the
amount of such bonus.
(c) During
the Employment Period, Executive shall be entitled to such health
and welfare benefits (including participation in any 401(k) plan,
profit sharing plan and/or stock purchase plan, and consideration
for participation in any stock option plan) as are made available
to the Company’s employees. Executive shall be entitled to
twenty (20) days of paid annual leave per year, accruing one
and two-thirds days per month.
(d) During
the Employment Period, the Company shall pay or reimburse Executive
for all reasonable expenses incurred by him in the course of
performing his duties and responsibilities under this Agreement
which are consistent with the Company’s policies in effect
from time to time with respect to travel, entertainment and other
business expenses, subject to the Company’s normal
requirements with respect to reporting and documentation of such
expenses.
(e) All
amounts payable to Executive hereunder shall be subject to all
withholding of the Company required by law.
(f) The
Company will indemnify and hold harmless Executive against all
expenses, liabilities and losses arising in connection with any
action, suit or proceeding that he is made a party to, or
threatened to be made a party to, by reason of his employment with
the Company or the fact that he, or a person of whom he is or was
the legal representative, is or was a director or officer of the
Company or is or was serving at the request of the Company as a
director, officer, employee, fiduciary, or agent of another
corporation or of a partnership, joint venture, trust or other
enterprise, in each case to the fullest extent provided for under
the Company’s articles of incorporation and bylaws, each as
in effect on the date of this Agreement.
(a) The
Employment Period will continue until Executive’s
resignation, death or Disability (as defined below) or the
Company’s termination of the Employment Period at any time
with or without Cause (as defined below), in each case a “
Separation ” hereunder. Except as otherwise provided
herein, any termination of the Employment Period by the Company
shall be effective as specified in a written notice from the
Company to Executive, but not sooner than the date on which the
notice is delivered.
(b) In the
event that the Company terminates Executive’s employment
without Cause or Executive resigns with Good Reason (as defined
below) within twelve (12) months following the occurrence of
an event described in Section 4(f) , Executive shall be
entitled to:
(i) receive
his Base Salary through the effective date of the
Separation,
(ii) receive
compensation, in accordance with Company policy, for any accrued
and unused vacation as of the date of the Separation,
(iii) reimbursement
for expenses in accordance with Section 3(d)
,
(iv) any
accrued and unpaid bonus owed to Executive as of the date of the
Separation,
(v) receive
an amount equal to Executive’s then current Base Salary,
payable in regular installments in accordance with the
Company’s general payroll practices in effect on the date of
the Separation, for the period commencing on the day immediately
following the Separation and continuing through the first
anniversary of the Separation (the “ Severance Period
”); provided , that if the Company terminates
Executive’s employment without Cause or Executive resigns
with Good Reason, in each case, within twelve (12) months
following a Change in Control (as defined below), then Executive
shall be entitled to receive an amount equal to two hundred percent
(200%) of Executive’s then current Base Salary payable in one
lump sum as of the effective date of such Change in Control,
and
(vi) continue
to participate during the Severance Period (at the Company’s
expense to the same extent as participation for other employees of
the Company is at the Company’s expense) in all employee
benefit programs made generally available to the Company’s
employees (other than bonus and incentive compensation plans) to
the extent permitted under the terms of such programs and under
applicable law (it being understood that if Executive is unable to
participate in any such plan by reason of prohibitions under the
terms of such programs or under applicable law, the Company shall,
in lieu of such participation, pay to Executive an amount in cash
equivalent to the value of such participation); provided ,
that if the Company terminates Executive’s employment without
Cause or Executive resigns with Good Reason, in each case, within
twelve (12) months following a Change in Control, then Executive
shall continue to participate (at the Company’s expense to
the same extent as participation for other employees of the Company
is at the Company’s expense) in all employee benefit programs
made generally available to the Company’s employees (other
than bonus and incentive compensation plans) to the extent
permitted under the terms of such programs and under applicable law
for a period of twenty-four (24) months following the
effective date of such Change in Control.
Executive will be
entitled to the amounts payable pursuant to clauses (v) and
(vi) of this Section 4(b) if and only if Executive
has executed and delivered to the Company a General Release in form
and substance substantially similar to Exhibit A
attached hereto. Notwithstanding the foregoing, all such rights to
payments pursuant to clauses (v) and (vi) of this
Section 4(b) shall cease in the event that the Company
determines that Executive has breached any provision of
Section 5 , Section 6 or
Section 7 hereof. For purposes hereof, “
Change in Control ” means any transaction or event
constituting a “Change in Control” as defined in the
Company’s 2002 Long Term Incentive Plan, as
amended.
(c) In the
event Executive ceases to be employed by the Company for any reason
other than a termination by the Company without Cause or
Executive’s resignation for Good Reason within twelve
(12) months following the occurrence of an event described in
Section 4(f) , Executive shall be entitled to receive
only his Base Salary through the effective date of the Separation,
compensation, in accordance with Company policy, for any accrued
and unused vacation, reimbursement for expenses in accordance with
Section 3(d) , and any accrued and unpaid
bonus,
and Executive
shall not be entitled to any other salary, compensation or benefits
from the Company or its Subsidiaries (as defined below)
thereafter.
(d) Except as
otherwise expressly provided herein, all of Executive’s
rights to salary, bonuses, fringe benefits and other compensation
hereunder which would otherwise accrue or become payable after the
Separation shall cease upon such termination (other than those
expressly required under applicable law, such as COBRA).
(e) For
purposes of this Agreement, “ Cause ” shall mean
(i) Executive’s commission of a felony or a crime
involving moral turpitude, (ii) any act of dishonesty or fraud
on the part of Executive that has caused material harm to the
Company, and/or (iii) the willful and continued failure by
Executive to substantially perform his duties and obligations under
this Agreement (other than any such failure resulting from
incapacity due to physical or mental illness), or the gross
negligence or willful misconduct by Executive with respect to the
Company or any of its Subsidiaries, after a demand by the Company
that specifically identifies the manner in which the Company
believes that he has not substantially performed his duties or has
committed gross negligence or willful misconduct and the failure by
Executive to cure such failure within 30 days after delivery
of such demand.
(f) For
purposes of this Agreement, “ Good Reason ”
shall mean (i) the Company reduces the amount of
Executive’s compensation in a manner that constitutes a
breach of this Agreement, or otherwise fails to perform in any
material respect or breaches in any material respect its other
obligations under this Agreement, if such failure or breach is not
cured within 30 days after notice by Executive to the Company of
such failure or breach; (ii) the Company assigns to Executive
any duties materially inconsistent with his position, duties,
responsibilities and status with the Company, reduces his
authority, changes his reporting responsibilities, titles or
offices, or removes Executive from any such positions (except in
connection with the termination of his employment by the Company
for Cause, by Executive other than for Good Reason, or as a result
of Executive’s death or Disability) or (iii) the Company
changes Executive’s place of work to a location more than 50
miles from the Company’s current corporate headquarters.
Notwithstanding anything contained herein to the contrary,
Executive may not terminate his employment with the Company
pursuant to Section 4(f)(ii) within the six
(6) month period immediately following a Change in Control of
the Company.
(g) For
purposes of this Agreement, “ Disability ” shall
mean Executive’s incapacitation or other absence from his
full-time duties hereunder 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.
(h) Executive
shall not be required to mitigate the amount of any payment
provided for in this Agreement by seeking other employment or
otherwise, nor shall the amount of any payment provided for herein
be reduced by any compensation earned by Executive as a result of
employment by another employer or by retirement benefits after the
date of Separation or otherwise.
(i) To the extent
required to comply with Section 409A of the Internal Revenue Code
of 1986, as amended (the “ Code ”), any payments
under this Section 4 that would otherwise be made prior to
the six-month anniversary of the date of Executive’s
“separation from service,” within the meaning of
Section 409A of the Code, shall instead be made on the six-month
anniversary of such “separation from service.” In
addition, if and to the extent required to prevent a violation of
Section 409A of the Code, Executive will pay the entire cost of any
health insurance benefits provided under this Section 4 for
the first six (6) months after the effective date of such
“separation from service,” within the meaning of
Section 409A of the Code, and the Company will reimburse Executive
for the Company’s share of such costs on the six-month
anniversary of Executive’s “separation from
service,” within the meaning of Section 409A of the
Code.
5.
Confidential Information . Executive acknowledges that the
information, observations and data (including trade secrets) to be
obtained by him while employed by the Company and/or any of its
Subsidiaries concerning the business or affairs of the Company
and/or its Subsidiaries (“ Confidential Information
”) are the property of the Company and its Subsidiaries.
Therefore, Executive agrees that he shall not disclose to any
person, other than in the course of the performance of his duties
to the Company, or use for his own purposes any Confidential
Information, unless and to the extent that (i) the
Confidential Information becomes generally known to and available
for use by the public other than as a result of Executive’s
acts or omissions or (ii) such disclosure or use is authorized
by the Company. Executive shall deliver to the Company at the
termination of the Employment Period, or at any other time the
Company may request, all memoranda, notes, plans, records, reports,
computer tapes, printouts and software and other documents and data
(and copies thereof) embodying or relating to the Confidential
Information, Work Product (as defined below) or the business of the
Company or any of its Subsidiaries which Executive may then possess
or have under his control. For purposes of this Agreement, “
Subsidiary ” shall mean any corporation or other
entity of which the securities or other ownership interests having
the voting power to elect a majority of the board of directors or
other governing body are, at the time of determination, owned by
the Company directly or through one of more
Subsidiaries.
6.
Inventions, Patents and Other Intellectual Property .
Executive acknowledges that all discoveries, concepts, ideas,
inventions, innovations, improvements, developments, methods,
designs, analyses, drawings, reports, patent applications,
copyrightable work and mask work (whether or not including any
Confidential Information) and all registrations or applications
related thereto, and all other proprietary information and all
similar or related information (whether or not patentable) which
relate to the Company’s or any of its Subsidiaries’
actual or anticipated business, research and development or
existing or future products or services and which are conceived,
developed or made by Executive (whether alone or jointly with
others) while employed by the Company and/or its Subsidiaries,
whether before or after the date of this Agreement (“ Work
Product ”), belong to the Company or such Subsidiary.
Executive shall promptly disclose such Work Product to the Company
and, at the Company’s expense,
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