8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 8-K

CURRENT REPORT
Pursuant To Section 13 or 15(d) of the
Securities Exchange Act of 1934

Date of report (Date of earliest event reported): April 6, 2005 (March 31, 2005)

FIRST ACCEPTANCE CORPORATION

(Exact Name of Registrant as Specified in Charter)

Delaware	001-12117	75-1328153
(State or Other Jurisdiction	(Commission File Number)	(I.R.S. Employer
of Incorporation)		Identification No.)

3813 Green Hills Village Drive
Nashville, Tennessee	37215
(Address of Principal Executive Offices)	(Zip Code)

(615) 844-2800

(Registrant’s Telephone Number, Including Area Code)

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

     Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

     o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

     o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

     o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

     o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

TABLE OF CONTENTS

	Item 1.01. Entry Into a Material Definitive Agreement.
	Item 9.01. Financial Statements and Exhibits.
SIGNATURE
INDEX TO EXHIBITS
EX-10 ESCROW AGREEMENT DATED MARCH 31, 2005

Item 1.01. Entry Into a Material Definitive Agreement.

     On March 31, 2005, First Acceptance Corporation (the “Company”) entered into an Escrow Agreement (the “Escrow Agreement”) with Stephen J. Harrison, the Chief Executive Officer and President and a director of the Company, and Thomas M. Harrison, Jr., the Executive Vice President and Secretary and a director of the Company (collectively, the “Harrisons”). Pursuant to that certain Agreement and Plan of Merger, dated as of December 15, 2003 (the “Merger Agreement”), the Company acquired USAuto Holdings, Inc. (“USAuto”). Under the terms of the Merger Agreement, the Harrisons were entitled to receive up to an additional 750,000 shares of the Company’s common stock (the “Shares”) upon the attainment of certain financial targets by USAuto and its subsidiaries. Attainment of the financial targets was to be determined by the Audit Committee of the Company’s Board of Directors and the Chief Financial Officer of the Company based upon the audited consolidated net income of USAuto for the twelve-month period ended December 31, 2004.

     The fiscal year of the Company and USAuto ends on June 30 each year and the financial statements of FAC and USAuto for the twelve-month period ended December 31, 2004 are not audited by the Company’s independent auditors. After consultation with the Audit Committee and the Company’s Chief Financial Officer, the Board of Directors has determined that it is impracticable and not in the best interest of the Company or its stockholders to obtain an audit of USAuto and its subsidiaries for the twelve-month period ended December 31, 2004 as set forth in the Merger Agreement. The Audit Committee of the Company’s Board of Directors and the Company’s Chief Financial Officer have reviewed the financial targets based upon unaudited financial information for the twelve-month period ended December 31, 2004 and the Audit Committee has determined that the financial targets have been achieved and the Harrisons are entitled to receive the Shares pursuant to the Merger Agreement.

     The Company and the Harrisons have agreed that it is in the best interest of the Company, its stockholders and the Harrisons that the Shares be issued to the Harrisons and held in escrow pursuant to the terms of the Escrow Agreement until completion of the audit of the Company’s financial statements for the fiscal year ended June 30, 2005. The Escrow Agreement is attached hereto as Exhibit 10.

Item 9.01. Financial Statements and Exhibits.

     (c) Exhibits

10 Escrow Agreement, dated March 31, 2005, by and among First Acceptance Corporation, Stephen J. Harrison and Thomas M. Harrison, Jr.

SIGNATURE

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.

FIRST ACCEPTANCE CORPORATION
By:	/s/ Charles D. Hamilton
	Charles D. Hamilton
	Senior Vice President, Chief Financial Officer and Treasurer

Date: April 6, 2005

INDEX TO EXHIBITS

Exhibit No.		Description
	10	Escrow Agreement, dated March 31, 2005, by and among First Acceptance Corporation, Stephen J. Harrison and Thomas M. Harrison, Jr.

EX-10

                                                                      EXHIBIT 10

                                ESCROW AGREEMENT

         THIS ESCROW  AGREEMENT (this "Agreement") is made as of March 31,
2005, by and among First Acceptance Corporation, a Delaware corporation ("FAC"),
and Stephen J. Harrison and Thomas M. Harrison, Jr. (collectively, the
"Harrisons").

         WHEREAS, FAC, the Harrisons and certain other parties entered into that
certain Agreement and Plan of Merger, dated as of December 15, 2003 (the "Merger
Agreement"), pursuant to which FAC acquired USAuto Holdings, Inc., a Delaware
corporation ("USAuto"); and

         WHEREAS, pursuant to Section 1.7(a) of the Merger Agreement, the
Harrisons are entitled to receive up to an additional 750,000 shares of FAC
common stock (the "Shares") upon the attainment of targeted levels of "Adjusted
EBITDA" of USAuto and its subsidiaries, as defined in the Merger Agreement; and

         WHEREAS, pursuant to the Merger Agreement, Adjusted EBITDA was to be
determined by the Audit Committee of the Board of Directors of FAC (the "Audit
Committee") and FAC's Chief Financial Officer based upon the audited
consolidated net income of USAuto and its subsidiaries for the twelve-month
period ended December 31, 2004 (the "Earnout Period"); and

         WHEREAS, the fiscal year of FAC and USAuto ends on June 30 each year
and the financial statements of FAC and USAuto for the Earnout Period are not
audited by FAC's independent auditor; and

         WHEREAS, the Audit Committee has reviewed the computation of Adjusted
EBITDA for the Earnout Period, as determined by FAC's Chief Financial Officer
based upon unaudited financial information, and reviewed such computation with
FAC's independent auditor and the Audit Committee has determined that it
believes the Adjusted EBITDA target set forth in the Merger Agreement has been
met and the Harrisons are entitled to receive all of the Shares; and

         WHEREAS, after consultation with the Audit Committee and FAC's Chief
Financial Officer, the Board of Directors of FAC has determined that it is
impracticable for FAC to obtain an audit of the consolidated net income of
USAuto and its subsidiaries for the Earnout Period as set forth in the Merger
Agreement and that, if it were practicable to obtain such an audit, the
financial burden of obtaining such an audit is not in the best interest of FAC
or its stockholders; and

         WHEREAS, the Harrisons have agreed with the Audit Committee's
calculation of Adjusted EBITDA for the Earnout Period, but FAC and the Harrisons
have determined that it is in the best interest of FAC, its stockholders and the
Harrisons that the Shares be issued to the Harrisons and held in escrow pending
the completion of the audit of FAC's financial statements for the fiscal year
ended June 30, 2005; and







         WHEREAS, FAC and the Harrisons desire to enter into this Agreement to
establish an escrow fund on the terms and conditions set forth in this
Agreement.

         NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements contained herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, and
intending to be legally bound hereby, the parties hereto do hereby agree as
follows:

         1. ESCROW. Upon execution of this Agreement and without any further act
of the Harrisons, FAC shall cause its transfer agent and registrar to issue
350,000 shares of FAC common stock to each of Stephen J. Harrison and Thomas M.
Harrison, Jr. and to deposit the Shares with FAC, such deposit to constitute an
escrow fund (the "Escrow Fund") to be governed by the terms and conditions of
this Agreement. Upon execution of this Agreement, the Harrisons shall deliver to
FAC executed stock powers for the certificates representing the Shares. FAC
hereby agrees to act as escrow agent and to hold, safeguard and disburse the
Escrow Fund pursuant to the terms and conditions of this Agreement, and shall
treat the Escrow Fund as a trust fund in accordance with the terms of this
Agreement and not as the property of FAC or the Harrisons. Any cash dividends,
dividends payable in securities or other distributions in kind made in respect
of the Shares shall be added to the Escrow Fund. The Harrisons shall have voting
rights with respect to the Shares (and on any voting securities added to the
Escrow Fund) so long as the Shares or other securities are held in the Escrow
Fund.

         2. ESCROW PERIOD. This Agreement shall continue in effect and the
Escrow Fund shall remain in existence until the date FAC files its Annual Report
on Form 10-K for the fiscal year ending June 30, 2005 with the Securities and
Exchange Commission (the "Termination Date"); provided, that the Escrow Fund
shall continue to be maintained, to the extent set forth in Section 4 hereof, in
the event that there exists any dispute as of that date.

         3. CLAIMS AGAINST ESCROW FUND. In the event that, on or prior to the
Termination Date, FAC determines that it is necessary to restate FAC's financial
statements contained in its reports filed with the Securities and Exchange
Commission for any period during the Earnout Period in a manner that affects
Adjusted EBIDTA for the Earnout Period, the Audit Committee and FAC's Chief
Financial Officer will determine Adjusted EBITDA for the Earnout Period, giving
effect to such restatement, determine whether USAuto and its subsidiaries have
met the Adjusted EBITDA target set forth in the Merger Agreement and determine
the number of Shares, if any, to which the Harrisons are entitled pursuant to
the Merger Agreement. In the event that, as a result of such a determination,
the Audit Committee determines that the Harrisons are not entitled to receive
all of the Shares, the Audit Committee, together with FAC's Chief Financial
Officer, will prepare and deliver to the Harrisons a calculation of Adjusted
EBITDA for the Earnout Period and the number of Shares to which the Harrisons
are entitled pursuant to the Merger Agreement (the "Earn-Out Statement"). Upon
delivery of the Earn-Out Statement, FAC and its Chief Financial Officer will
make available to the Harrisons all records and work papers used in preparing
the Earn-Out Statement for the purpose of reviewing such calculations. If the
Harrisons disagree with the calculation of Adjusted EBITDA for the Earn-Out
Period, the Harrisons shall, within 30 days after receipt of the Earn-Out
Statement, deliver a written notice (a "Disagreement Notice") to the Audit
Committee setting forth the Harrisons'


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calculation of Adjusted EBITDA for the Earnout Period. The Audit Committee and
the Harrisons will use reasonable best efforts to resolve any disagreements as
to the calculation of Adjusted EBITDA for the Earnout Period, but if they do not
obtain a final resolution of all disagreements within 30 days after the
Disagreement Notice is delivered to the Audit Committee, FAC and the Harrisons
will jointly retain FAC's independent auditor (the "Auditor") to resolve any
remaining disagreements. FAC and the Harrisons will direct the Auditor to render
a determination within 30 days of its retention, and FAC, the Harrisons and
their respective agents will cooperate with the Auditor during its engagement.
The Auditor will consider only those items and amounts which were set forth in
the Earn-Out Statement and/or Disagreement Notice and for which a disagreement
between the parties still remains. The Audit Committee and the Harrisons shall
each submit a binder to the Auditor promptly (and in any event within 30 days
after the Auditor's retention), which binder shall contain such party's
calculation of Adjusted EBITDA for the Earnout Period, and information,
arguments, and support for such party's position. The Auditor shall review such
binders and base its determination solely on the information contained therein.
In resolving any disputed item, the Auditor may not assign a value to any item
greater than the greatest value for such item claimed by either party or less
than the smallest value for such item claimed by either party. The Auditor's
determination will be based on the definition of Adjusted EBITDA included in the
Merger Agreement. The determination of the Auditor will be conclusive and
binding upon FAC and the Harrisons. FAC, on the one hand, and the Harrisons, on
the other hand, shall each bear one-half of all fees, costs and expenses of the
Auditor.

         4. DISBURSEMENT OF ESCROW FUND. If the Audit Committee delivers an
Earnout Statement to the Harrisons on or prior to the Termination Date, the
Shares shall continue to be held in the Escrow Fund until FAC and the Harrisons
resolve any disputes as set forth in Section 3. Following such resolution, the
Shares shall be distributed to the Harrisons or to FAC for cancellation, as
applicable. If, on or prior to the Termination Date, the Audit Committee does
not deliver an Earnout Statement to the Harrisons, FAC shall deliver the entire
Escrow Fund to the Harrisons.

         5. NOTICES. All notices and other communications pursuant to this
Agreement shall be in writing and shall be deemed given if delivered personally,
sent by nationally recognized, overnight courier, or mailed by registered or
certified mail (return receipt requested), postage prepaid, to the parties at
the following addresses (or at such other address for a party as shall be
specified by notice hereunder):

         To FAC:                            First Acceptance Corporation
                                            c/o William A. Shipp, Jr.
                                            5123 Virginia Way, Suite B22
                                            Brentwood, Tennessee 37027

         with a copy to:                    Bass, Berry & Sims PLC
                                            315 Deaderick Street, Suite 2700
                                            Nashville, Tennessee 37238-3001
                                            Attention:  J. James Jenkins, Jr.



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         If to Harrisons:                   Stephen J. Harrison
                                            First Acceptance Corporation
                                            3813 Green Hills Village Drive
                                            Nashville, Tennessee 37215

                                            Thomas M. Harrison, Jr.
                                            First Acceptance Corporation
                                            3813 Green Hills Village Drive
                                            Nashville, Tennessee 37215

All such notices and other communications shall be deemed to have been delivered
upon receipt by the receiving party.

         6. SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of
and be binding upon the successors and assigns of the parties hereto.

         7. GOVERNING LAW. This Agreement shall be governed by and interpreted
in accordance with the laws of the State of Tennessee as such laws are applied
to agreements between Tennessee residents entered into and to be performed
entirely in Tennessee without regard to the principles of conflict of laws
thereof.

         8. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which  when so executed shall constitute an original
hereof, but all of which together shall constitute one agreement.

         9. ENTIRE AGREEMENT. This Agreement constitutes the entire
understanding and agreement of the parties with respect to the subject matter of
this Agreement and supersedes all prior agreements or understandings, written or
oral, between the parties with respect to the subject matter hereof.

         10. WAIVERS. No waiver by any party hereto of any condition or of any
breach of any provision of this Agreement shall be effective unless in writing.
No waiver by any party of any such condition or breach, in any one instance,
shall be deemed to be a further or continuing waiver of any such condition or
breach or a waiver of any other condition or breach of any other provision
contained herein.

         11.  AMENDMENT. This Agreement may be amended only with the written
consent of FAC and the Harrisons.




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         IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the day and year first above written.


FIRST ACCEPTANCE CORPORATION


By: /s/ William A. Shipp, Jr.
   --------------------------------------------------
Name: William A. Shipp, Jr.
Title: Chairman of the Audit Committee of the Board of Directors




/s/ Stephen J. Harrison
- -----------------------------------------------------
Stephen J. Harrison



/s/ Thomas M. Harrison, Jr.
- -----------------------------------------------------
Thomas M. Harrison, Jr.







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