First Acceptance Corporation
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the Securities
Exchange Act of 1934 (Amendment No.
)
Filed by the Registrant
x
Filed by a Party other than the Registrant
o
Check the appropriate box:
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o Preliminary
Proxy Statement |
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o Confidential,
for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
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x Definitive
Proxy Statement
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o Definitive
Additional Materials
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o Soliciting
Material Pursuant to §240.14a-12
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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)(4) and 0-11.
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Title of each class of securities to which
transaction applies:
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Aggregate number of securities to which
transaction applies:
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Per unit price or other underlying value of
transaction computed pursuant to Exchange Act Rule 0-11
(set forth the amount on which the filing fee is calculated and
state how it was determined):
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Proposed maximum aggregate value of transaction:
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Fee paid previously with preliminary materials.
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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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(1) |
Amount Previously Paid:
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(2) |
Form, Schedule or Registration Statement No.:
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FIRST ACCEPTANCE CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD NOVEMBER 9, 2006
To our Stockholders:
The 2006 annual meeting of stockholders of First Acceptance Corporation will be held Thursday,
November 9, 2006, at 9:30 a.m., central time, at The Crescent Club, 200 Crescent Court,
17th Floor, Dallas, Texas 75201. At the meeting, stockholders will vote on the
following matters:
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Election of nine directors to serve until the next annual meeting of
stockholders or until their respective successors are duly elected and qualified; |
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Ratification of the appointment of Ernst & Young, LLP as our independent
auditors for the fiscal year ending June 30, 2007; 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 3, 2006 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.
By Order of the Board of Directors,
Thomas M. Harrison, Jr.
Secretary
Nashville, Tennessee
October 9, 2006
TABLE OF CONTENTS
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FIRST ACCEPTANCE CORPORATION
3813 GREEN HILLS VILLAGE DRIVE
NASHVILLE, TENNESSEE 37215
PROXY STATEMENT
The Board of Directors of First Acceptance Corporation is soliciting proxies to be used at the
2006 annual meeting of stockholders. This proxy statement and the enclosed proxy will be first
mailed to stockholders on or about October 9, 2006.
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 2006
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 3, 2006, 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, 47,584,763 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. Broker nonvotes also 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 form 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 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 (see page 4); and |
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for ratification of the appointment of Ernst & Young, LLP as our independent
auditors for the fiscal year ending June 30, 2007 (see page 16). |
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 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 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 on routine
matters, but may not vote your shares on nonroutine matters. Under the New York Stock Exchange
rules, the proposals relating to the election of directors and the ratification of the appointment
of Ernst & Young, LLP as our independent auditors are deemed to be routine matters with respect to
which brokers and nominees may exercise their voting discretion without receiving instructions from
the beneficial owner of the shares.
What Is a Broker Nonvote?
Under the 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 nonroutine matter, such action is referred to as a broker nonvote. Since the
election of directors and the ratification of Ernst & Young, LLP as our independent auditors are
routine matters, a broker may exercise their voting discretion on both matters without instructions
from you.
What Is the Effect of a Broker Nonvote?
Broker nonvotes will be counted for the purpose of determining the presence or absence of a
quorum, but will not be counted for determining the number of votes cast. A broker nonvote will
not affect the outcome of any proposal in the proxy statement, provided that a quorum has been
established.
2
STOCK OWNERSHIP
The following table shows the amount of our common stock beneficially owned (unless otherwise
indicated) by our current directors, our executive officers named in the Summary Executive
Compensation Table 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 3, 2006.
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Acquirable |
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Outstanding |
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Within 60 |
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Percent of |
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Shares(1) |
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Days(2) |
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Class(3) |
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Stephen J. Harrison |
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6,999,999 |
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50,006 |
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14.8 |
% |
Thomas M. Harrison, Jr. |
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6,999,999 |
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50,006 |
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14.8 |
% |
Michael J. Bodayle |
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1,421 |
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William R. Pentecost |
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2,765 |
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20,000 |
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Randy L. Reed |
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469 |
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20,000 |
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Rhodes R. Bobbitt |
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168,661 |
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Harvey B. Cash |
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1,000 |
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Donald J. Edwards |
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536,666 |
(6) |
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3,725,678 |
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8.3 |
% |
Gerald J. Ford |
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15,673,220 |
(7) |
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32.9 |
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Tom C. Nichols |
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10,500 |
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Lyndon L. Olson, Jr. |
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22,000 |
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William A. Shipp, Jr. |
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16,000 |
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All directors and executive officers
as a group (14 persons) |
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30,482,699 |
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3,885,690 |
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66.7 |
% |
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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 3, 2006 or within 60 days thereafter under our stock option plan. |
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Pursuant to the rules of the Securities and Exchange Commission, or 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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Reflects shares held by the Stephen J. Harrison 2006 Grantor Retained Annuity Trust.
Address: 3813 Green Hills Village Drive, Nashville, Tennessee 37215. |
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Reflects shares held by the Thomas M. Harrison, Jr. 2006 Grantor Retained Annuity Trust.
Address: 3813 Green Hills Village Drive, Nashville, Tennessee 37215. |
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Address: Flexpoint Partners, LLC, 676 N. Michigan Avenue, Suite 3300, Chicago, Illinois
60611. |
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Includes 563,728 shares owned by Mr. Ford; 11,919,409 shares owned through Hunters Glen/Ford
Ltd. (Hunters Glen); 1,229,718 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. |
3
Section 16(a) Beneficial Ownership Reporting Compliance
The federal securities laws require our directors and 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 2006 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 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 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 Thomas M.
Harrison, Jr., Secretary, 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 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.
Code of Business Conduct and Ethics
The Board has adopted a Code of Business Conduct and Ethics that 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 annually that he or she has
read, understands and will comply with the code. 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 Thomas M. Harrison, Jr., Secretary, 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 chief
executive officer or senior financial officers, if any, on our web site at
www.firstacceptancecorp.com.
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
2005 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.
4
Certain information with respect to the nominees for election as directors is set forth below.
Rhodes R. Bobbitt, 61, 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 Affordable Residential
Communities Inc.
Harvey B. Cash, 67, 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, i2 Technologies, Inc., Ciena
Corporation, Staktek Holdings, Inc. and Argonaut Group, Inc.
Donald J. Edwards, 40, has served as a director of the company
since July 2002. Mr. Edwards currently is the managing principal
for Flexpoint Partners, LLC, a Chicago-based private equity firm,
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.
Gerald J. Ford, 62, 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 Affordable Residential Communities Inc.
Stephen J. Harrison, 54, has served as President and Chief
Executive Officer and a director of the company since April 2004.
In 1995, Mr. Harrison co-founded USAuto Insurance Company, Inc.,
predecessor of USAuto Holdings, Inc. (USAuto Holdings), which we
acquired in April 2004, and has served as President and Chief
Executive Officer of USAuto Holdings since its inception. 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.,
who is Executive Vice President, Secretary and a director of the
company.
Thomas M. Harrison, Jr., 56, has served as Executive Vice
President, Secretary and a director of the company since April
2004. In 1995, Mr. Harrison co-founded USAuto Insurance Company,
Inc., predecessor to USAuto Holdings, which we acquired in April
2004, and has served as Vice President and Secretary of USAuto
Holdings since its inception. He has over 30 years experience in
insurance and related industries, including automobile insurance
and insurance agency operations. From 1976 to 1995, Mr. Harrison
served in various capacities with the Harrison Insurance Agency, a
family-owned multi-line insurance agency. Mr. Harrison is the
brother of Stephen J. Harrison, who is President, Chief Executive
Officer and a director of the company.
Tom C. Nichols, 59, has served as a director of the company since
November 2005. Mr. Nichols has been Chairman, President and Chief
Executive Officer of State National Bancshares, Inc. since October
1996. Mr. Nichols has 35 years of highly diversified and
progressively responsible experience in the banking and finance
industry.
Lyndon L. Olson, Jr., 59, has served as a director of the company
since August 2004. Mr. Olson has served as a senior advisor to
Citigroup, Inc., serving as a consultant to senior management,
since 2001. 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 Holdings and the Associated Madison Companies. Prior to
joining Citigroup, Mr. Olson served as president of the National
Group Corporation and chief executive officer of its National Group
Insurance Company.
5
William A. Shipp, Jr., 54, 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 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. Mr. Shipp is a
certified public accountant.
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 and broker nonvotes 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 and broker nonvotes
will have no effect on whether this proposal is approved.
The Board of Directors recommends that you vote FOR each of the nominees.
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. Ford and Edwards receive an award pursuant to our 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.
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 Thomas M. Harrison, Jr., Secretary, 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 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 401(h)(2) of Regulation S-K. During fiscal 2006, the Audit Committee met seven
times.
6
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 2006, the Compensation Committee met one time.
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:
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attendance at Board and Committee meetings; |
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preparedness for Board and Committee meetings; |
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quality of objectivity in exercising business judgment; |
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participation at Board and Committee meetings; and |
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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 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. Nominations made by
stockholders must be made by written notice setting forth the information required by our
certificate of incorporation received by the secretary of the company at least 120 days in advance
of the anniversary date of the proxy statement for the previous years annual meeting for an
election of directors at an annual meeting, or within ten days of the date on which notice of a
special meeting for the election of directors is first given to stockholders for an election of
directors at a special meeting. Stockholders may propose nominees for consideration by the
Nominating and Corporate Governance Committee by submitting the names and supporting information
to: Secretary, 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 director
conflicts of interest; 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 2006, the Nominating and Corporate Governance Committee met three times.
7
How Often Did the Board Meet During Fiscal 2006?
The Board of Directors met six times during fiscal 2006. 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 other than Mr. Olson attended our
2005 annual meeting of stockholders.
How Do I Communicate with the Board?
Stockholders 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
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 provide Mr. Edwards and his family
with medical and dental insurance coverage through July 1, 2007 on terms consistent with the
insurance provided to our other senior executives. We also agreed to reimburse Flexpoint Partners,
LLC, an entity controlled by Mr. Edwards, for all expenses incurred by Flexpoint Partners pursuant
to the lease for its office space located in Chicago, Illinois. The lease expires on August 31,
2009. During the 2006 fiscal year, we paid Mr. Edwards and Flexpoint Partners an aggregate of
$204,368 pursuant to the Separation Agreement.
Effective May 1, 2004, we entered into an Advisory Services Agreement with Flexpoint Partners
pursuant to which Flexpoint Partners renders advisory services to us in connection with financings,
mergers and acquisitions and other related matters. Pursuant to the Advisory Services Agreement,
we pay Flexpoint Partners a quarterly fee of $62,500 and reimburse it for its reasonable expenses
incurred in connection with providing those advisory services. The Advisory Services Agreement
expires on April 30, 2008. The Advisory Services Agreement may be terminated by us if Flexpoint
Partners fails or refuses to perform its services pursuant to the agreement, does any act, or fails
to do any act, which results in an indictment for or conviction of a felony or other similarly
serious offense or upon the written agreement of Flexpoint Partners. Flexpoint Partners may
terminate the agreement upon our written consent or if we are in material breach of our obligations
thereunder. During the 2006 fiscal year, we paid Flexpoint Partners advisory services fees of
$250,000 and reimbursed it for $20,600 of expenses pursuant to the Advisory Services Agreement.
8
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 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 2006, 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 discussed with the
independent auditors the matters required to be discussed by Statement on Auditing Standards No. 61
(Communication with Audit Committees). In addition, the Audit Committee received from the
independent auditors the written disclosures and the letter required by Independence Standards
Board Standard No. 1 (Independence Discussions with Audit Committees) and has discussed with them
their independence from the company and its management. 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, 2006, which was filed with the SEC.
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.
9
EXECUTIVE COMPENSATION
Report of the Compensation Committee on Executive Compensation
Decisions regarding compensation of our executive officers are made by the Compensation
Committee of our Board of Directors. Each member of the Compensation Committee is an independent
director. It is the responsibility of the Compensation Committee to determine whether, in its
judgment, the executive compensation policies are reasonable and appropriate, meet their stated
objectives and effectively serve our best interests and the best interests of our stockholders.
The Compensation Committee also is responsible for administering our stock incentive plans.
What Is Our Philosophy of Executive Officer Compensation?
The Compensation Committee believes that the primary objectives of our executive compensation
policies should be:
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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; |
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To provide appropriate incentives for executives to work toward the achievement
of our annual financial performance and business goals based on our annual budget;
and |
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To more closely align the interests of executives with those of stockholders and
the long-term interests of the company by providing long-term incentive
compensation in the form of stock options or other equity-based long-term incentive
compensation. |
The Compensation Committee believes that our executive compensation policies should be
reviewed annually in light of our financial performance and our annual budget. The compensation of
individual executives should then be reviewed annually by the Compensation Committee in light of
its executive compensation policies for that year.
The Compensation Committee believes that, in setting and reviewing executive compensation, in
addition to corporate performance, 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 success of the corporate enterprise. Such qualitative factors as leadership
skills, analytical skills, and organizational development are deemed to be important qualitative
factors to take into account in considering levels of compensation. The chief executive officer
presents to the Compensation Committee his assessment of the other executives, their
accomplishments and individual and corporate performance. No relative weight is assigned to these
qualitative factors, which are applied subjectively by the Compensation Committee.
Base Salary. Base compensation for Stephen J. Harrison and Thomas M. Harrison, Jr. is
established by the terms of employment agreements between the company and those executives. These
agreements provide for a minimum base salary, adjusted for such increases as the Compensation
Committee shall determine to be appropriate. Base compensation for our other executive officers is
determined by the Compensation Committee in its discretion. In determining whether an increase in
base compensation for the executive officers is appropriate, the Compensation Committee will review
recommendations of management and consult with the chief executive officer. After taking into
consideration these recommendations and consultations, the contributions of each executive and the
performance of the company, the Compensation Committee will subjectively determine appropriate
levels of base compensation. In fiscal 2006, the Compensation Committee increased the base salary
of Randy L. Reed, our Senior Vice President, Sales and Marketing, by 15.4%. The Compensation
Committee did not increase the base salaries of any other
10
executive officers. The Compensation Committee did not assign any relative weight to the
quantitative and qualitative factors applied in reaching its base compensation decisions.
Annual Bonus. The Compensation Committee considers that compensation should be linked
primarily to operating performance. To achieve this link with regard to short-term performance, the
Compensation Committee relies on cash bonuses awarded to executive officers. Pursuant to the terms
of their employment agreement, Stephen J. Harrison and Thomas M. Harrison, Jr. are entitled to
annual bonuses equal to 100% and 50%, respectively, of their annual salary. They may receive an
additional bonus at the discretion of the Compensation Committee. Bonuses for other executive
officers are determined by the Compensation Committee in its discretion. For the fiscal year ended
June 30, 2006, bonuses approved by the Compensation Committee ranged from 16% to 45% of base
salary.
Stock Options and 401(k) Plan. Stock options and contributions under our 401(k) plan are the
principal vehicle for payment of long-term compensation. The 401(k) plan provides for a matching
contribution by us 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. The
Compensation Committee believes that long-term stock-based incentive compensation should be
structured so as to closely align the interests of the executives with the interests of our
stockholders and, in particular, to provide only limited value in the event that our stock price
fails to increase over time. The Compensation Committee determines the award of stock option grants
to the executive officers and takes into account the recommendations of the chief executive officer
prior to approving annual awards of long-term stock-based incentive compensation. During fiscal
2006, the Compensation Committee did not award any stock options.
How is Our Chief Executive Officer Compensated?
The Compensation Committee believes that the compensation of our chief executive officer is
consistent with its general policies concerning executive compensation and is appropriate in light
of our financial objectives and performance. Awards of long-term incentive compensation to our
chief executive officer are considered concurrently with awards to other executive officers and
follow the same general policies as such other long-term incentive awards. The terms of Mr.
Harrisons compensation are set forth in his employment agreement. The Compensation Committee did
not make any changes to Mr. Harrisons base salary during 2006. Mr. Harrisons annual bonus is
based 50% upon qualitative factors and 50% on subjective factors to be determined by the
Compensation Committee. For fiscal 2006, Mr. Harrison earned a bonus of $225,000, or 45% of his
base salary.
How Are We Addressing Internal Revenue Code Limits on Deductibility of Compensation?
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 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 does not believe that any of the executive compensation
arrangements for fiscal 2006 will result in the loss of a tax deduction pursuant to Section 162(m).
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.
Harvey B. Cash
Tom C. Nichols
Lyndon L. Olson, Jr.
11
Employment Agreements
In connection with the acquisition of USAuto Holdings, the we entered into Employment
Agreements with each of Stephen J. Harrison, our President and Chief Executive Officer, and Thomas
M. Harrison, Jr., our Executive Vice President and Secretary. Each of the Employment Agreements
provides that the executive will serve in his current position until his resignation, death or
disability (as defined in the Employment Agreements) or until his termination by the Board of
Directors, at any time with or without cause (as defined in the Employment Agreements). Under the
Employment Agreements, Stephen J. Harrison and Thomas M. Harrison, Jr. receive an annual base
salary of $500,000 and $300,000, respectively, and are entitled to an annual bonus of up to 100%
and 50%, respectively, of such base salary based upon the executives attainment of performance
based objectives and targets, as established by the Board of Directors.
If the executives employment is terminated by the company without cause or by the executive
with good reason (as defined in the Employment Agreements), the executive is entitled to continue
to receive (i) his then current base salary until the later of April 30, 2009 and the second
anniversary of the date of termination of employment and (ii) a lump sum payment for each 12-month
period that falls within the severance period equal to the bonus paid to the executive for the
fiscal year immediately preceding the year in which the termination of employment occurs. In
addition, we have agreed to pay the executives an additional amount, if any, for any excise taxes
as a result of the foregoing payments. The executive also shall be entitled to continue to receive
all employee benefits during the severance period. If the executives employment is terminated by
the company due to disability, the executive is entitled to continue to receive 60% of his then
current base salary and continuation of all employee benefits until the later of April 30, 2009 and
the second anniversary of the date of termination of employment.
12
Summary Executive Compensation Table
The following table provides information as to annual, long-term or other compensation for our
Chief Executive Officer and our four other highest paid executive officers during the 2006 fiscal
year.
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Annual Compensation |
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Long-Term |
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Compensation |
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All Other |
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Number of Stock |
Name and Principal Position |
|
Year |
|
Salary |
|
Bonus(1) |
|
Compensation(2) |
|
Options Granted |
Stephen J. Harrison |
|
|
2006 |
|
|
$ |
500,000 |
|
|
$ |
225,000 |
|
|
$ |
8,787 |
|
|
|
|
|
President and Chief Executive Officer(3) |
|
|
2005 |
|
|
$ |
500,000 |
|
|
$ |
282,152 |
|
|
$ |
9,625 |
|
|
|
|
|
|
|
|
2004 |
|
|
$ |
83,333 |
|
|
$ |
|
|
|
$ |
2,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas M. Harrison, Jr. |
|
|
2006 |
|
|
$ |
300,000 |
|
|
$ |
100,000 |
|
|
$ |
8,125 |
|
|
|
|
|
Executive Vice President and Secretary |
|
|
2005 |
|
|
$ |
300,000 |
|
|
$ |
84,645 |
|
|
$ |
6,750 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William R. Pentecost |
|
|
2006 |
|
|
$ |
191,650 |
|
|
$ |
30,000 |
|
|
$ |
6,708 |
|
|
|
|
|
Chief Information Officer |
|
|
2005 |
|
|
$ |
187,294 |
|
|
$ |
20,000 |
|
|
$ |
2,875 |
|
|
|
50,000 |
|
|
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|
|
|
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|
|
|
|
|
|
|
|
|
Randy L. Reed |
|
|
2006 |
|
|
$ |
175,000 |
|
|
$ |
40,000 |
|
|
$ |
5,950 |
|
|
|
|
|
Senior Vice President Sales and
Marketing |
|
|
2005 |
|
|
$ |
148,154 |
|
|
$ |
35,000 |
|
|
$ |
3,204 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael J. Bodayle |
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|
2006 |
|
|
$ |
164,300 |
|
|
$ |
41,667 |
|
|
$ |
5,750 |
|
|
|
|
|
Chief Financial Officer Insurance
Company Operations |
|
|
2005 |
|
|
$ |
164,300 |
|
|
$ |
8,000 |
|
|
$ |
2,652 |
|
|
|
|
|
|
|
|
(1) |
|
Reflects bonuses earned during the fiscal year.
|
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(2) |
|
Other compensation includes matching amounts paid under our 401(k) Plan. |
|
(3) |
|
Stephen J. Harrison became President and Chief Executive Officer, and Thomas M. Harrison, Jr.
became Executive Vice President and Secretary, on April 30, 2004. |
Compensation Committee Interlocks and Insider Participation
During fiscal 2006, 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.
Option Grants for Fiscal 2006
There were no options granted during fiscal 2006 under the 2002 Long Term Incentive Plan.
13
Stock Option Exercises for Fiscal Year 2006 and Fiscal Year-End Values
The table below sets forth the following information with respect to the value of stock
options held by named executive officers at June 30, 2006. None of the named executive officers
exercised stock options during 2006.
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Number of Securities Underlying |
|
Value of Unexercised |
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Unexercised Options at |
|
In-The-Money Options at |
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June 30, 2006 |
|
June 30, 2006(1) |
|
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Shares |
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Acquired |
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on |
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Value |
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|
Name |
|
Exercise |
|
Realized |
|
Exercisable |
|
Unexercisable |
|
Exercisable |
|
Unexercisable |
Stephen J. Harrison |
|
|
|
|
|
|
|
|
|
|
43,338 |
|
|
|
56,662 |
|
|
$ |
222,757 |
|
|
$ |
291,243 |
|
Thomas M. Harrison, Jr. |
|
|
|
|
|
|
|
|
|
|
43,338 |
|
|
|
56,662 |
|
|
$ |
222,757 |
|
|
$ |
291,243 |
|
William R. Pentecost |
|
|
|
|
|
|
|
|
|
|
10,000 |
|
|
|
40,000 |
|
|
$ |
36,500 |
|
|
$ |
146,000 |
|
Randy L. Reed |
|
|
|
|
|
|
|
|
|
|
10,000 |
|
|
|
40,000 |
|
|
$ |
36,500 |
|
|
$ |
146,000 |
|
|
|
|
(1) |
|
The aggregate dollar value of the options held at year-end are calculated as the
difference between the fair market value of the common stock as reported on The New York Stock
Exchange on June 30, 2006 ($11.78) and the respective exercise prices of the stock options,
multiplied by the number of shares subject to the options. |
Equity Compensation Plan Information
The following table summarizes information with respect to our equity compensation plans as of
June 30, 2006.
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|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Securities |
|
|
|
|
|
|
|
|
|
|
|
Remaining Available For |
|
|
|
Number of Securities To |
|
|
Weighted Average |
|
|
Future Issuance Under |
|
|
|
Be Issued Upon Exercise |
|
|
Exercise Price of |
|
|
Equity Compensation Plans |
|
|
|
of Outstanding Options, |
|
|
Outstanding Options, |
|
|
(excluding securities reflected |
|
Plan Category |
|
Warrants and Rights |
|
|
Warrants and Rights |
|
|
in column(a)) |
|
|
|
(a) |
|
|
(b) |
|
|
(c) |
|
Equity compensation plans
approved by security holders |
|
|
4,080,678 |
|
|
$ |
3.37 |
|
|
|
3,977,322 |
|
Equity compensation plans not
approved by security holders |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
4,080,678 |
|
|
$ |
3.37 |
|
|
|
3,977,322 |
|
|
|
|
|
|
|
|
|
|
|
14
Comparison of Cumulative Total Returns
The following graph compares the performance of our common stock with the performance of a
market index and a peer group index. The market index is the Russell 3000 Index, and the peer
group index is the S&P 500 Property & Casualty Index. The graph covers the period from June 30,
2001 through June 30, 2006 and assumes that $100 was invested on June 30, 2001 in our common stock,
the Russell 3000 Index and the S&P Property & Casualty Insurance Index and that all dividends were
reinvested.
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6/30/01 |
|
6/30/02 |
|
6/30/03 |
|
6/30/04 |
|
6/30/05 |
|
6/30/06 |
First Acceptance Corporation |
|
|
100 |
|
|
|
92 |
|
|
|
129 |
|
|
|
166 |
|
|
|
224 |
|
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|
279 |
|
Russell 3000 |
|
|
100 |
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|
|
83 |
|
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|
83 |
|
|
|
100 |
|
|
|
109 |
|
|
|
119 |
|
S&P Property & Casualty
Insurance |
|
|
100 |
|
|
|
93 |
|
|
|
89 |
|
|
|
106 |
|
|
|
120 |
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|
127 |
|
15
PROPOSAL 2 RATIFICATION OF INDEPENDENT AUDITORS
The Audit Committee has selected Ernst & Young, LLP to serve as our independent auditors for
the current fiscal year, and the stockholders are requested to ratify this appointment. The Audit
Committee of the Board of Directors approved the engagement of Ernst & Young as our independent
registered public accounting firm for the fiscal year ended June 30, 2006 effective September 27,
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.
KPMG LLP (KPMG) was previously the principal accountant for the Company. On September 27,
2005, the Audit Committee of the Board of Directors of the company terminated KPMGs appointment as
our independent registered public accounting firm.
The audit reports of KPMG on the consolidated financial statements of the company as of and
for the years ended June 30, 2005 and June 30, 2004 did not contain an adverse opinion or
disclaimer of opinion, and were not qualified or modified as to uncertainty, audit scope or
accounting principles. The audit report of KPMG on managements assessment of the effectiveness of
internal control over financial reporting and the effectiveness of internal control over financial
reporting as of June 30, 2005 did not contain an adverse opinion or disclaimer of opinion, and was
not qualified or modified as to uncertainty, audit scope or accounting principles.
In connection with the audits of the fiscal years ended June 30, 2005 and June 30, 2004, and
the subsequent interim period through September 27, 2005, there were no disagreements with KPMG on
any matter of accounting principles or practices, financial statement disclosure or auditing scope
or procedure, which disagreements, if not resolved to the satisfaction of KPMG, would have caused
KPMG to make reference in connection with its opinion to the subject matter of the disagreement.
In connection with the audits of the fiscal years ended June 30, 2005 and June 30, 2004, and during
the subsequent interim period through September 27, 2005, there were no reportable events as
defined in Item 304(a)(1)(v) of Regulation S-K.
Fees Billed to Us by Ernst & Young, LLP During 2006 and KPMG LLP During 2005
Audit Fees. The aggregate audit fees billed by Ernst & Young and KPMG, respectively, for the
fiscal years ended June 30, 2006 and June 30, 2005 were $739,750 and $788,500. The fees include
professional services and expenses for annual audits and quarterly reviews of our financial
statements.
Audit-Related Fees. There were no audit-related fees billed by Ernst & Young for the fiscal
year ended June 30, 2006. The aggregate fees billed by KPMG for audit-related services for the
fiscal year ended June 30, 2005 were $12,778. These fees related to the review of compliance
documentation relating to Section 404 of the Sarbanes-Oxley Act of 2002 and the review of a
Registration Statement on Form S-8 filed with the Securities and Exchange Commission.
Tax Fees. There were no tax fees billed by Ernst & Young for the fiscal year ended June 30,
2006. The aggregate fees billed by KPMG for tax services for the fiscal year ended June 30, 2005
were $59,000. These fees related to the preparation of federal and state income tax returns for
the company.
All Other Fees. No amounts were billed by Ernst & Young or KPMG during the fiscal years ended
June 30, 2006 and 2005 that would be categorized as All Other Fees.
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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 and KPMG during fiscal 2006 and 2005.
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. Broker nonvotes will not affect this proposal, provided that a quorum has been
established. 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.
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 2007 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 11, 2007 will be considered for inclusion in our proxy statement and form of proxy
relating to the 2007 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 August
25, 2007, 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.
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Financial Statements Available. A copy of our 2006 Annual Report to Stockholders containing
our Annual Report on Form 10-K for the year ended June 30, 2006 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 2006 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 the
annual report or 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:
Thomas M. Harrison, Jr.
Secretary
First Acceptance Corporation
3813 Green Hills Village Drive
Nashville, TN 37215
(615) 844-2811
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FIRST ACCEPTANCE CORPORATION
Proxy Solicited on Behalf of the Board of Directors of
the Company for the Annual Meeting, November 9, 2006
You are encouraged to specify your vote by marking the appropriate box ON
THE REVERSE SIDE 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 Proposal 2. 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.
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6 DETACH PROXY CARD HERE 6
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Mark, Sign, Date and Return the Proxy Card Promptly Using the Enclosed Envelope. |
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Votes MUST be indicated(x) in Black or Blue ink. |
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1. Election of Directors (Proposal No. 1) |
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FOR all nominees listed below |
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WITHHOLD AUTHORITY to vote |
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*EXCEPTIONS |
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for all nominees listed below |
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Nominees: |
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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. |
(INSTRUCTIONS: To withhold authority to vote for any individual nominee,
mark the Exceptions box and write that nominees name in the space provided below).
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FOR |
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AGAINST |
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ABSTAIN |
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To ratify the election of Ernst & Young LLP as
independent auditors for the Company for the fiscal year ending June 30, 2007 |
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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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To change your address, please mark this box. |
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To include any comments, please mark this box. |
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SCAN LINE
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Joint owners must each sign. Please sign your name(s) EXACTLY
as your name(s) appear(s) on this card. When signing as attorney,
trustee, executor, administrator, guardian, or corporate officer
please give your FULL title. (PLEASE SIGN, DATE, AND MAIL TODAY.) |
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Share Owner sign here |
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Co-Owner sign here |
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
9, 2006 at 9:30 a.m. local time, at The Crescent Club, 200 Crescent Court,
17th Floor, Dallas, Texas 75201.
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.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
FIRST ACCEPTANCE CORPORATION
PROXY
BOARD OF DIRECTORS PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS
AT 9:30 AM, THURSDAY, NOVEMBER 9, 2006
THE CRESCENT CLUB, 200 CRESCENT COURT, 17TH FLOOR, DALLAS, TEXAS 75201
The undersigned hereby constitutes and appoints each of Stephen J. Harrison and Thomas M. Harrison, Jr. 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 The Crescent Club, 200 Crescent
Court, 17th Floor, Dallas, Texas 75201, on November 9, 2006 at 9:30 a.m. local 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 nominees for
director and FOR Proposal 2.
(SEE REVERSE SIDE)
FIRST ACCEPTANCE CORPORATION
P.O. BOX 11018
NEW YORK, N.Y. 10203-0018