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): October 12, 2006 (October 9, 2006)

FIRST ACCEPTANCE CORPORATION

(Exact Name of Registrant as Specified in Charter)

Delaware	1-6802	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 5.02. Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers.
	Item 9.01. Financial Statements and Exhibits.
SIGNATURE
INDEX TO EXHIBITS
EX-99.1 EMPLOYMENT AGREEMENT
EX-99.2 NONQUALIFIED STOCK OPTION AGREEMENT

Item 1.01 Entry Into a Material Definitive Agreement.

     On October 9, 2006, the Company entered into an Employment Agreement with Kevin P. Cohn. Pursuant to the terms of the Employment Agreement, Mr. Cohn will serve as Vice President, Chief Accounting Officer and Corporate Controller of the Company. For the fiscal year ending June 30, 2007, Mr. Cohn’s initial base salary will be $200,000 and he will be eligible to receive an annual bonus of up to $100,000. Mr. Cohn’s annual bonus will be no less than $50,000 for the fiscal year ending June 30, 2007 and $25,000 for the fiscal year ending June 30, 2008. The Company will also reimburse Mr. Cohn for certain expenses incurred in connection with his relocation to the Nashville, Tennessee area. Mr. Cohn also received a signing bonus of $75,000. The Employment Agreement is filed as Exhibit 99.1 to this report and incorporated herein by reference.

     The Company and Mr. Cohn also entered into a Nonqualified Stock Option Agreement, dated October 9, 2006, pursuant to which the Company granted Mr. Cohn an option to purchase 100,000 shares of the Company’s common stock at an exercise price of $11.13 per share, the closing price of the Company’s common stock on the New York Stock Exchange on October 9, 2006. The Nonqualified Stock Option Agreement is filed as Exhibit 99.2 to this report and incorporated herein by reference.

Item 5.02. Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers.

     Effective October 9, 2006, the Board of Directors of the Company appointed Edward Pierce as the Chief Financial Officer of the Company. Mr. Pierce has served as an Executive Vice President of the Company since September 13, 2006. From May 2001 through February 2006, Mr. Pierce, 49, served as Executive Vice President and Chief Financial Officer and as a director of BindView Development Corporation, a network security software development company. From November 1994 through January 2001, Mr. Pierce held various financial management positions, including Executive Vice President and Chief Financial Officer, with Metamor Worldwide Corporation, a global information technology services company. Metamor was acquired by PSINet Inc. in June 2000.

     Information with respect to the material terms of Mr. Pierce’s employment agreement is set forth under the caption “Item 1.01 Entry Into a Material Definitive Agreement” in the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on September 19, 2006, and is incorporated herein by reference. Mr. Pierce’s employment agreement is filed as Exhibit 99.1 to that report.

Item 9.01. Financial Statements and Exhibits.

     (d) Exhibits

99.1	Employment Agreement, dated October 9, 2006, by and between First Acceptance Corporation and Kevin P. Cohn
99.2	Nonqualified Stock Option Agreement, dated October 9, 2006, between First Acceptance Corporation and Kevin P. Cohn

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/ Stephen J. Harrison
	Stephen J. Harrison
	President and Chief Executive Officer

Date: October 11, 2006

INDEX TO EXHIBITS

Exhibit No.		Description
	99.1	Employment Agreement, dated October 9, 2006, by and between First Acceptance Corporation and Kevin P. Cohn
	99.2	Nonqualified Stock Option Agreement, dated October 9, 2006, between First Acceptance Corporation and Kevin P. Cohn

EX-99.1

Exhibit 99.1

EMPLOYMENT AGREEMENT

     THIS EMPLOYMENT AGREEMENT (this “Agreement”) is made as of October 9, 2006 by and between First Acceptance Corporation, a Delaware corporation (the “Company”), and Kevin P. Cohn (“Executive”).

     In consideration of 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”).

     2. Position and Duties.

     (a) During the Employment Period, Executive shall serve as Vice President, Chief Accounting Officer and Corporate Controller of the Company and shall have the normal duties, responsibilities, functions and authority of such positions, subject to the oversight of the Company’s board of directors (the “Board”) and Chief Financial Officer (the “CFO”).

     (b) During the Employment Period, Executive shall report to the CFO and 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 Company’s policies for the Company’s senior management, 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 initial base salary shall be $200,000 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 Board shall perform an annual review of Executive’s Base Salary based on Executive’s performance of Executive’s duties and the Company’s other compensation policies; provided that the Base Salary shall not be reduced below the Base Salary as then in effect.

     (b) During the Employment Period, Executive shall be eligible for an annual bonus of up to $100,000 payable to Executive with respect to each fiscal year of the Company (the “Annual Bonus”); provided, that the Annual Bonus (i) for the fiscal year ending June 30, 2007 shall be no less than $50,000 and (ii) for the fiscal year ending June 30, 2008 shall be no less than $25,000. In each year, the amount of the Annual Bonus shall be determined based upon

the Board’s evaluation of Executive’s personal performance and such other criteria as may be considered by the Board. Each such bonus shall be paid to Executive in the calendar year in which the fiscal year to which such bonus relates ends, 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 and profit sharing plan, and consideration (on an annual basis, as determined by the Board) for participation in any stock option plan) as are made available to the Company’s senior management. Executive shall be entitled to vacation in accordance with the Company’s vacation policies applicable to senior management.

     (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) The Company shall reimburse Executive for customary, documented out-of-pocket relocation expenses associated with Executive’s family’s transition to the Nashville, Tennessee area. Such expenses will include moving expenses, meals, closing costs, real estate commissions, attorney’s fees and other similar expenses incurred with the sale of Executive’s current residence. In aggregate such reimbursement shall not exceed $50,000. In addition to the above, the Company will reimburse Executive and his wife for the reasonable, documented expenses for (i) up to five house-hunting trips conducted prior to the date hereof and (ii) certain out-of-pocket expenses incurred in connection with the purchase of Executive’s residence in the Nashville metropolitan area (e.g., loan appraisal fees, credit report fees, tax service fees, loan processing fees, underwriting fees, closing fees, etc.), which such reimbursement shall not exceed $7,500 in the aggregate. The Company will reimburse and gross up Executive for any income taxes associated with the relocation expenses which are reimbursed by the Company pursuant to this Section 3(e). Any such reimbursement and gross up payments shall be in an amount equal to the quotient of (i) the pre-tax amount of any taxable payments made by the Company to Executive pursuant to this Section 3(e), divided by (ii) 0.6355.

     (f) All amounts payable to Executive hereunder shall be subject to all withholding of the Company by law.

     (g) 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.

     (h) In addition to the Annual Bonus set forth above, Executive shall be entitled to a special one-time, non-recurring signing bonus, payable upon execution of this Agreement, in the amount of $75,000 (the “Signing Bonus”).

     (i) In the event Executive’s employment with the Company terminates prior to the first anniversary of the date of this Agreement by reason of Executive’s resignation (other than for Good Reason as defined below) or termination of Executive’s employment by the Company for Cause, Executive shall repay to the Company within 30 days of the termination of Executive’s employment the entire amount of the Signing Bonus.

     4. Term; Severance.

     (a) The Employment Period will continue until Executive’s resignation, death or Disability or the Board’s termination of the Employment Period at any time with or without Cause, in each case a “Separation” hereunder. Except as otherwise provided herein, any termination of the Employment Period by the Board shall be effective as specified in a written notice from the Board 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, 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 the product of (A) Executive’s then current Base Salary, times (B) two (2), 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, in connection with a Change of Control, then Executive shall be entitled to receive an amount equal to the product of (X) Executive’s then current Base Salary, times (Y) two (2), payable in one lump sum as of the effective date of such Change of Control, and (vi) continue to participate during the Severance Period (at the Company’s expense to the same extent as participation for other members of the Company’s senior management is at the Company’s expense) in all employee benefit programs made generally available to the Company’s senior management (other than bonus and incentive compensation plans) to the extent permitted under the terms of such programs and under applicable law; provided that 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 of Control” shall have the meaning ascribed to it in the Company’s 2002 Long Term Incentive Plan.

     (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, 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 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 Board and/or the CEO which specifically identifies the manner in which the Board and/or the CEO 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. Any determination of “Cause” must be made by the Board and may be made only after Executive has had an opportunity to address the Board with respect to an assertion of “Cause.”

     (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 Board 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.

     (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 the 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 (as defined below) 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 Board. 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 Board and, at the Company’s expense, perform all actions reasonably requested by the Board (whether during or after the Employment Period) to establish and confirm such ownership (including, without limitation, assignments, consents, powers of attorney and other instruments).

     7. Non-Compete, Non-Solicitation. In further consideration of the compensation to be paid to Executive hereunder, Executive acknowledges that in the course of

his employment with the Company he will become familiar with the trade secrets of the Company and its Subsidiaries and with other Confidential Information concerning the Company and its Subsidiaries and that his services have been and will be of special, unique and extraordinary value to the Company and its Subsidiaries. Therefore, Executive agrees that:

     (a) during the Employment Period and for the period commencing with the Separation and continuing until the first anniversary of the Separation (the “Noncompete Period”), Executive shall not, within the United States, directly or indirectly own any interest in, manage, control, participate in, consult with, render services for, or in any manner engage in any business that is involved in the development, marketing, retail sale, administration or underwriting of non-standard automobile insurance programs anywhere in the United States; provided that nothing herein shall prohibit Executive from being a passive owner of not more than 5% of the outstanding equity interests of any class of a corporation, partnership, limited liability company, or other entity, so long as Executive has no active participation in the business of such entity;

     (b) during the Noncompete Period, Executive shall not, other than in the course of performing his duties on behalf of the Company while an officer thereof, directly or indirectly through another person or entity (i) induce or attempt to induce any employee of the Company or any of its Subsidiaries, other than a member of Executive’s family, to leave the employ of the Company or any of its Subsidiaries, or in any way interfere with the relationship between the Company or any of its Subsidiaries and any employee thereof, (ii) hire any person, other than a member of Executive’s family, who was an employee of the Company or any of its Subsidiaries at any time during the one-year period immediately preceding the Separation, (iii) induce or attempt to induce any customer, supplier, licensee or other business relation of the Company or any of its Subsidiaries to cease doing business with the Company or any of its Subsidiaries, or (iv) directly or indirectly acquire or attempt to acquire an interest in any business relating to the business of the Company or any of its Subsidiaries and with which the Company or any of its Subsidiaries has entertained discussions, or has requested and received information, relating to the acquisition of such business by the Company or any Subsidiary in the two-year period immediately preceding the Separation;

     (c) if, at the time of enforcement of this Section 7, a court shall hold that the duration, scope or area restrictions stated herein are unreasonable under circumstances then existing, the parties agree that the maximum duration, scope or area reasonable under such circumstances shall be substituted for the stated duration, scope or area and that the court shall be allowed to revise the restrictions contained herein to cover the maximum period, scope and area permitted by law;

     (d) in the event of the breach by Executive of any of the provisions of this Section 7, the Company and its Subsidiaries, in addition and supplementary to other rights and remedies existing in their favor, shall be entitled to specific performance and/or injunctive or other equitable relief from a court of competent jurisdiction in order to enforce or prevent any violations of the provisions hereof (without posting a bond or other security). In addition, Executive agrees that, in the event of a breach or violation by Executive of this Section 7, the Noncompete Period shall be tolled until such breach or violation has been duly cured; and

     (e) the provisions of this Section 7 are in consideration of: (i) employment with the Company and (ii) additional good and valuable consideration as set forth in this Agreement. In addition, Executive agrees and acknowledges that the restrictions contained in Section 5, Section 6 and this Section 7 do not preclude Executive from earning a livelihood, nor do they unreasonably impose limitations on Executive’s ability to earn a living. In addition, Executive agrees and acknowledges that the potential harm to the Company of the non-enforcement of Section 5, Section 6 and/or this Section 7 outweighs any potential harm to Executive of its enforcement by injunction or otherwise. In addition, Executive acknowledges that he has carefully read this Agreement and has given careful consideration to the restraints imposed upon Executive by this Agreement and is in full accord as to their necessity for the reasonable and proper protection of confidential and proprietary information of the Company now existing or to be developed in the future. Executive expressly acknowledges and agrees that each and every restraint imposed by this Agreement is reasonable with respect to subject matter, time period and geographical area.

     8. Executive’s Representations. Executive hereby represents and warrants to the Company that (i) the execution, delivery and performance of this Agreement by Executive do not and shall not conflict with, breach, violate or cause a default under any contract, agreement, instrument, order, judgment or decree to which Executive is a party or by which Executive is bound, (ii) Executive is not a party to or bound by any employment agreement, noncompete agreement, confidentiality agreement or any similar agreement with any other person or entity and (iii) upon the execution and delivery of this Agreement by the Company, this Agreement shall be the valid and binding obligation of Executive, enforceable in accordance with its terms, except as such enforceability may be limited by law (including bankruptcy, insolvency, reorganization, moratorium and similar laws relating to or affecting creditors generally or by general equity principles (regardless of whether such enforceability is considered in a proceeding in equity or at law)). Executive hereby acknowledges and represents that he has consulted with independent legal counsel regarding his rights and obligations under this Agreement.

     9. Survival. Sections 3(g), 4 through 18 (inclusive) and 20, and all rights of Executive to compensation and benefits relating to periods prior to the termination of the Employment Period, shall survive and continue in full force in accordance with their terms notwithstanding the termination of the Employment Period.

     10. Notices. All notices and other communications hereunder shall be in writing and shall be deemed duly given (a) on the date of delivery if delivered personally, or upon confirmation of receipt if delivered by telecopy or facsimile (but only if a copy of such telecopy or facsimile is delivered to the recipient by a recognized next-day courier service), (b) on the first business day following the date of dispatch if delivered by a recognized next-day courier service or (c) on the fifth business day following the date of mailing if delivered by registered or certified mail, return receipt requested, postage prepaid. All notices hereunder shall be delivered as set forth below, or pursuant to such other instructions as have been previously designated in writing to the party sending such notice by the party to receive such notice:

     Notices to Executive:

Kevin P. Cohn
4000 Flagstone Court
Franklin, TN 37069

     Notices to the Company:

First Acceptance Corporation
3813 Green Hills Village Drive
Nashville, Tennessee 37215
Fax: (615) 844-2898
Attention: CEO

or such other address or facsimile number or to the attention of such other person as the recipient party shall have specified by prior written notice to the sending party. Any notice under this Agreement shall be deemed to have been given when so delivered, sent or mailed.

     11. Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision or any action in any other jurisdiction, but this Agreement shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein.

     12. Complete Agreement. This Agreement, those documents expressly referred to herein and other documents of even date herewith embody the complete agreement and understanding among the parties and supersede and preempt any prior understandings, agreements or representations by or among the parties, written or oral, which may have related to the subject matter hereof in any way.

     13. No Strict Construction. The language used in this Agreement shall be deemed to be the language chosen by the parties hereto to express their mutual intent, and no rule of strict construction shall be applied against any party.

     14. Counterparts. This Agreement may be executed in separate counterparts, each of which is deemed to be an original and all of which taken together constitute one and the same agreement.

     15. Successors and Assigns. This Agreement is intended to bind and inure to the benefit of and be enforceable by Executive and the Company and their respective heirs, successors and assigns, provided that neither party may assign his or its rights or delegate his or its duties or obligations hereunder without the prior written consent of the other.

     16. Choice of Law. All issues and questions concerning the construction, validity, enforcement and interpretation of this Agreement and the exhibits and schedules hereto shall be governed by, and construed in accordance with, the internal laws of the State of Tennessee.

     17. Amendment and Waiver. The provisions of this Agreement may be amended or waived only with the prior written consent of the Company (as approved by the Board), its successors and assignees, and Executive, and no course of conduct or course of dealing or failure or delay by any party hereto in enforcing or exercising any of the provisions of this Agreement shall be deemed to be an implied waiver of any provision of this Agreement.

     18. Arbitration.

     (a) Except with respect to any dispute or claim under Section 5, Section 6 or Section 7 hereof in which Executive’s right to payments under Section 4(b) is not at issue (which dispute or claim may be pursued in any court of competent jurisdiction as specified below and with respect to which each party shall bear the cost of its own attorneys’ fees and expenses except as otherwise required by applicable law), each party hereto agrees that arbitration, conducted in Nashville, Tennessee, in accordance with the rules of the American Arbitration Association, shall be the sole and exclusive method for resolving any claim or dispute (“Claim”) arising out of or relating to the rights and obligations acknowledged and agreed to in this Agreement and the employment of Executive by the Company and its Subsidiaries (including, without limitation, disputes and claims regarding employment discrimination, sexual harassment, termination and discharge). The arbitrator shall be directed to issue a written decision to be delivered to both parties, addressing each issue disputed by the parties, stating the arbitrator’s findings and reasons therefor, and stating the nature and amount of any damages, compensation or other relief awarded (the “Final Determination”). The parties agree that the result of any arbitration hereunder shall be final, conclusive and binding on all of the parties hereto.

     (b) Any party hereto may institute litigation to enforce any Final Determination. Each party hereto hereby irrevocably submits to the jurisdiction of any United States District Court or state court of competent jurisdiction sitting in Nashville, Tennessee, and agrees that such court shall be the exclusive forum with respect to any dispute or claim under Section 5, Section 6 or Section 7 hereof and for the enforcement of any Final Determination. Each party hereto irrevocably consents to service of process by registered mail or personal service and waives any objection on the grounds of personal jurisdiction, venue or inconvenience of the forum. Each party hereto further agrees that each other party hereto may initiate litigation in any court of competent jurisdiction to execute any judicial judgment enforcing a Final Determination.

     19. Insurance. Each of the Company and its Subsidiaries, at its discretion, may apply for and procure in its own name and for its own benefit life and/or disability insurance on Executive in any amount or amounts considered available. In addition, Executive agrees to cooperate in any medical or other examination, supply any information, and to execute and deliver any applications or other instruments in writing as may be reasonably necessary to obtain and maintain such insurance.

     20. Excise Tax Gross-Up.

     (a) In the event that it shall be determined at any time that any payment by the Company to Executive pursuant to this Agreement or otherwise (the “Subject Payments”) in connection with a change in the ownership or effective control of the Company or in the ownership of a substantial portion of the assets of the Company within the meaning of Code Section 280G, would be subject to the excise tax imposed by Section 4999 of the Code (or any successor provision thereto) by reason of being considered a “parachute payment,” within the meaning of Section 280G of the Code (or any successor provision thereto) or to any similar tax imposed by state or local law (such tax or taxes being hereafter collectively referred to as the “Excise Tax”), then Executive shall be entitled to receive an additional payment in the amount determined, and payable in the manner, set forth in this Section 20 (collectively, the “Gross-Up Payment”). The Gross-Up Payment shall be in an amount such that, after reducing the amount of the Gross-Up Payment by all applicable U.S. federal, state and local taxes (computed at the maximum marginal rates applicable to Executive), including any Excise Tax imposed on the Gross-Up Payment, there remains an amount of Gross-Up Payment equal to the Excise Tax imposed on the Subject Payments. Any Gross-Up Payment shall be paid by the Company to Executive on the date that is ninety (90) days following the closing date of the transaction to which such Excise Tax relates.

     (b) All determinations required to be made under this Section 20, including whether an Excise Tax is payable by Executive and the amount of such Excise Tax and the amount of any associated Gross-Up Payment, shall be made by a nationally recognized accounting firm (the “Accounting Firm”) selected by the Company. All fees and expenses of the Accounting Firm shall be borne solely by the Company. The Company and Executive shall each provide the Accounting Firm access to and copies of any books, records and documents in the possession of the Company or Executive, as the case may be, reasonably requested by the Accounting Firm, and otherwise cooperate with the Accounting Firm in connection with the preparation and issuance of the determinations and calculations contemplated by this Section 20(b). The federal, state and local income or other tax returns filed by Executive and the Company shall be prepared and filed on basis consistent with the determination of the Accounting Firm with respect to the Excise Tax payable by Executive.

* * * * *

     IN WITNESS WHEREOF, the parties hereto have executed this Employment Agreement as of the date first written above.

FIRST ACCEPTANCE CORPORATION
 

/s/ Stephen J. Harrison

By: Stephen J. Harrison 

Its: Chief Executive Officer 

/s/ Kevin P. Cohn

Kevin P. Cohn 

Exhibit A

GENERAL RELEASE

     I, Kevin P. Cohn, in consideration of and subject to the performance by First Acceptance Corporation, a Delaware corporation (together with its Subsidiaries, the “Company”), of its material obligations under the Employment Agreement, dated as of October 9, 2006 (the “Agreement”), do hereby release and forever discharge as of the date hereof the Company and all present and former directors, officers, agents, representatives, employees, successors and assigns of the Company and its direct or indirect owners (collectively, the “Released Parties”) to the extent provided below.

1. I understand that any payments or benefits paid or granted to me under clauses (v) and (vi) of Section 4(b) of the Agreement represent, in part, consideration for signing this General Release and are not salary, wages or benefits to which I was already entitled. I understand and agree that I will not receive the payments and benefits specified in clauses (v) and (vi) of Section 4(b) of the Agreement unless I execute this General Release and do not revoke this General Release within the time period permitted hereafter or breach this General Release.

2. Except as provided in paragraph 4 below, I knowingly and voluntarily release and forever discharge the Company and the other Released Parties from any and all claims, controversies, actions, causes of action, cross-claims, counter-claims, demands, debts, compensatory damages, liquidated damages, punitive or exemplary damages, other damages, claims for costs and attorneys’ fees, or liabilities of any nature whatsoever in law and in equity, both past and present (through the date of this General Release) and whether known or unknown, suspected, or claimed against the Company or any of the Released Parties which I, my spouse, or any of my heirs, executors, administrators or assigns, may have, which arise out of or are connected with my employment with, or my separation from, the Company (including, but not limited to, any allegation, claim or violation, arising under: Title VII of the Civil Rights Act of 1964, as amended; the Civil Rights Act of 1991; the Age Discrimination in Employment Act of 1967, as amended (including the Older Workers Benefit Protection Act); the Equal Pay Act of 1963, as amended; the Americans with Disabilities Act of 1990; the Family and Medical Leave Act of 1993; the Civil Rights Act of 1866, as amended; the Worker Adjustment Retraining and Notification Act; the Employee Retirement Income Security Act of 1974; any applicable Executive Order Programs; the Fair Labor Standards Act; or their state or local counterparts; or under any other federal, state or local civil or human rights law, or under any other local, state, or federal law, regulation or ordinance; or under any public policy, contract or tort, or under common law; or arising under any policies, practices or procedures of the Company; or any claim for wrongful discharge, breach of contract, infliction of emotional distress, defamation; or any claim for costs, fees, or other expenses, including attorneys’ fees incurred in these matters) (all of the foregoing collectively referred to herein as the “Claims”).

3. I represent that I have made no assignment or transfer of any right, claim, demand, cause of action or other matter covered by paragraph 2 above.

4. I agree that this General Release does not waive or release any rights or claims that I may have under the Age Discrimination in Employment Act of 1967 which arise after the date I execute this General Release. I acknowledge and agree that my separation from employment with the Company in compliance with the terms of the Agreement shall not serve as the basis for any claim or action (including, without limitation, any claim under the Age Discrimination in Employment Act of 1967).

5. In signing this General Release, I acknowledge and intend that it shall be effective as a bar to each and every one of the Claims hereinabove mentioned or implied. I expressly consent that this General Release shall be given full force and effect according to each and all of its express terms and provisions, including those relating to unknown and unsuspected Claims (notwithstanding any state statute that expressly limits the effectiveness of a general release of unknown, unsuspected and unanticipated Claims), if any, as well as those relating to any other Claims hereinabove mentioned or implied. I acknowledge and agree that this waiver is an essential and material term of this General Release and that without such waiver the Company would not have agreed to the terms of the Agreement. I further agree that in the event I should bring a Claim seeking damages against the Company, or in the event I should seek to recover against the Company in any Claim brought by a governmental agency on my behalf, this General Release shall serve as a complete defense to such Claims. I further agree that I am not aware of any pending charge or complaint of the type described in paragraph 2 hereof as of the execution of this General Release.

6. I agree that neither this General Release, nor the furnishing of the consideration for this General Release, shall be deemed or construed at any time to be an admission by the Company, any Released Party or myself of any improper or unlawful conduct.

7. I agree that I will forfeit all amounts payable by the Company pursuant to the Agreement if I challenge the validity of this General Release. I also agree that if I violate this General Release by suing the Company or the other Released Parties, I will pay all costs and expenses of defending against the suit incurred by the Released Parties, including reasonable attorneys’ fees, and return all payments received by me pursuant to the Agreement.

8. I agree that this General Release is confidential and agree not to disclose any information regarding the terms of this General Release, except to my immediate family and any tax, legal or other counsel I have consulted regarding the meaning or effect hereof or as required by law, and I will instruct each of the foregoing not to disclose the same to anyone.

9. Any non-disclosure provision in this General Release does not prohibit or restrict me (or my attorney) from responding to any inquiry about this General Release or its underlying facts and circumstances by the Securities and Exchange Commission (SEC), the National Association of Securities Dealers, Inc. (NASD), any other self-regulatory organization or governmental entity.

10. I agree to reasonably cooperate with the Company in any internal investigation or administrative, regulatory or judicial proceeding. I understand and agree that my

cooperation may include, but not be limited to, making myself available to the Company upon reasonable notice for interviews and factual investigations; appearing at the Company’s request to give testimony without requiring service of a subpoena or other legal process; volunteering to the Company pertinent information; and turning over to the Company all relevant documents which are or may come into my possession all at times and on schedules that are reasonably consistent with my other permitted activities and commitments. I understand that in the event the Company asks for my cooperation in accordance with this provision, the Company will reimburse me solely for reasonable travel expenses, including lodging and meals, upon my submission of receipts.

11. Notwithstanding anything in this General Release to the contrary, this General Release shall not relinquish, diminish, or in any way affect any rights or claims arising out of any breach by the Company or by any Released Party of the Agreement.

12. In the event the Company breaches its obligation to make payments to me pursuant to Section 4(b) of the Agreement in accordance with the terms and subject to the conditions set forth in the Agreement, and such breach is not cured within 15 days after written notice by me to the Company in accordance with the notice provisions set forth in the Agreement, then this General Release shall terminate and be of no further force or effect.

13. Whenever possible, each provision of this General Release shall be interpreted in, such manner as to be effective and valid under applicable law, but if any provision of this General Release is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision or any other jurisdiction, but this General Release shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein.

BY SIGNING THIS GENERAL RELEASE, I REPRESENT AND AGREE THAT:

1.	I HAVE READ IT CAREFULLY;
2.	I UNDERSTAND ALL OF ITS TERMS AND KNOW THAT I AM GIVING UP IMPORTANT RIGHTS, INCLUDING BUT NOT LIMITED TO, RIGHTS UNDER THE AGE DISCRIMINATION IN EMPLOYMENT ACT OF 1967, AS AMENDED; TITLE VII OF THE CIVIL RIGHTS ACT OF 1964, AS AMENDED; THE EQUAL PAY ACT OF 1963; THE AMERICANS WITH DISABILITIES ACT OF 1990; AND THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED;
3.	I VOLUNTARILY CONSENT TO EVERYTHING IN IT;
4.	I HAVE BEEN ADVISED TO CONSULT WITH AN ATTORNEY BEFORE EXECUTING IT AND HAVE DONE SO, OR, AFTER CAREFUL READING AND CONSIDERATION, I HAVE CHOSEN NOT TO DO SO OF MY OWN VOLITION;
5.	I HAVE HAD AT LEAST 21 DAYS FROM THE DATE OF MY RECEIPT OF THIS RELEASE SUBSTANTIALLY IN ITS FINAL FORM ON

___, ___TO CONSIDER IT AND THE CHANGES MADE SINCE THE ___, ___VERSION OF THIS RELEASE ARE NOT MATERIAL AND WILL NOT RESTART THE REQUIRED 21-DAY PERIOD;

6.	I UNDERSTAND THAT I HAVE SEVEN DAYS AFTER THE EXECUTION OF THIS RELEASE TO REVOKE IT AND THAT THIS RELEASE SHALL NOT BECOME EFFECTIVE OR ENFORCEABLE UNTIL THE REVOCATION PERIOD HAS EXPIRED;
7.	I HAVE SIGNED THIS GENERAL RELEASE KNOWINGLY AND VOLUNTARILY AND WITH THE ADVICE OF ANY COUNSEL RETAINED TO ADVISE ME WITH RESPECT TO IT; AND
8.	I AGREE THAT THE PROVISIONS OF THIS GENERAL RELEASE MAY NOT BE AMENDED, WAIVED, CHANGED OR MODIFIED EXCEPT BY AN INSTRUMENT IN WRITING SIGNED BY AN AUTHORIZED REPRESENTATIVE OF THE COMPANY AND BY ME.

DATE: ___________ ____, _______

Kevin P. Cohn 

EX-99.2

Exhibit 99.2

NONQUALIFIED STOCK OPTION AGREEMENT
FIRST ACCEPTANCE CORPORATION 2002 LONG TERM INCENTIVE PLAN

     1. Grant of Option. Pursuant to the First Acceptance Corporation 2002 Long Term Incentive Plan (the “Plan”) for employees, consultants and outside directors of First Acceptance Corporation, a Delaware corporation (the “Company”), the Company hereby grants to

KEVIN P. COHN (the “Participant”),

an option to purchase shares of Common Stock, par value $.01 per share (“Common Stock”), of the Company as follows:

On the date hereof, the Company grants to the Participant an option (the “Option” or “Stock Option”) to purchase 100,000 full shares (“Optioned Shares”) of Common Stock at an Option Price equal to Eleven Dollars and Thirteen Cents ($11.13) per share (subject to adjustment as provided in the Plan). The Date of Grant of this Stock Option is October 9, 2006.

The “Option Period” shall commence on the Date of Grant and shall expire on the date immediately preceding the tenth (10^th) anniversary of the Date of Grant. The Stock Option is a Nonqualified Stock Option.

     2. Capitalized Terms. The capitalized terms used herein that are defined in the Plan shall have the same meanings assigned to them in the Plan as in effect on the date hereof; any amendments to the Plan shall not affect this Stock Option unless agreed to in writing by the Participant. If there is a conflict between any of the terms and provisions of this Stock Option and the Plan, the terms and provisions of this Stock Option shall govern.

     3. Vesting; Time of Exercise.

     (a) Except as specifically provided in this Agreement and Section 15.6 of the Plan, the Optioned Shares shall vest, and the Stock Option shall become exercisable, as follows:

     i. Twenty-five percent (25%) of the total Optioned Shares shall vest, and that portion of the Stock Option shall become exercisable, on the first four anniversaries of the Date of Grant, provided the Participant is employed by (or, if the Participant is a consultant or an Outside Director, is providing services to) the Company or a Subsidiary from the Date of Grant to each such applicable anniversary date; provided that, (A) fifty percent (50%) of the Optioned Shares not previously vested shall vest, and that portion of the Stock Option shall become exercisable, if not previously exercisable, upon the Participant’s Termination of Service by the Company without Cause during the Participant’s first year of employment with the Company and (B) twenty-five percent (25%) of the Optioned Shares not previously vested shall vest, and that portion of the Stock Option shall become exercisable, if not previously exercisable, upon the Participant’s Termination of Service by the Company without Cause following the Participant’s first anniversary of employment with the Company.

For purposes of this Stock Option, “Cause” shall be given the same meaning assigned to such term in the Employment Agreement, dated as of October 9, 2006, by and between the Company and the Participant (the “Employment Agreement”).

     ii. All of the Optioned Shares not previously vested shall immediately become fully vested, and this Stock Option shall become fully exercisable, if not previously exercisable, upon the effective date of a Change of Control, provided the Participant is employed by (or, if the Participant is a consultant or an Outside Director, is providing services to) the Company or a Subsidiary from the Date of Grant to the effective date of such Change of Control.

     4. Term; Forfeiture. Except as otherwise provided in this Agreement, the portion of this Option that is not exercisable, or does not become exercisable, on the date of the Participant’s Termination of Service, will, together with the related unvested Optioned Shares, expire, terminate, and be forfeited on that date. The exercisable portion of the Stock Option that relates to Optioned Shares that are or become vested on the date of the Participant’s Termination of Service, will terminate and be forfeited at the first of the following to occur:

     (a) 5 p.m. on the date the Option Period terminates;

     (b) 5 p.m. on the date that is twelve (12) months following the Participant’s Termination of Service by the Company for Cause; or

     (c) 5 p.m. on the date that is twenty-four (24) months following the date of the Participant’s Termination of Service for any reason other than by the Company for Cause, including a Termination of Service due to the Participant’s death or disability and Termination of Service by the Company without Cause.

     5. Who May Exercise. Subject to the terms and conditions set forth in Sections 3 and 4 above, during the lifetime of the Participant, the Stock Option may be exercised only by the Participant, or by the Participant’s guardian or personal or legal representative, or by any transferee as permitted under Section 8 herein. If the Participant’s Termination of Service is due to his death prior to the date specified in Section 4(a) hereof, or the Participant dies prior to the termination dates specified in Sections 4(a) — (c) hereof, and the Participant has not exercised the Stock Option as to the maximum number of vested Optioned Shares as set forth in Section 3 hereof as of the date of death, the following persons may exercise the exercisable portion of the Stock Option on behalf of the Participant at any time prior to the earliest of the dates specified in Section 4 hereof: the personal representative of his estate, or the person who acquired the right to exercise the Stock Option by bequest or inheritance or by reason of the death of the Participant or a transferee as permitted in Section 8 herein; provided that the Stock Option shall remain subject to the other terms of this Agreement, Section 15.6 of the Plan and applicable laws, rules, and regulations.

     6. No Fractional Shares. The Stock Option may be exercised only with respect to full shares, and no fractional share of stock shall be issued.

     7. Manner of Exercise. Subject to such administrative regulations as the Committee may from time to time adopt, the Stock Option may be exercised by the delivery of written notice to the Committee setting forth the number of shares of Common Stock with respect to which the Stock Option is to be exercised, the date of exercise thereof (the “Exercise Date”) which shall be the day upon which such notice is given in accordance herewith. On the Exercise Date, the Participant shall deliver to the Company consideration with a value equal to the total Option Price of the shares to be purchased, payable as follows: (a) cash, check, bank draft, or money order payable to the order of the Company, (b) Common Stock owned by the Participant on the Exercise Date, valued at its Fair Market Value on the Exercise Date, and which the Participant has not acquired from the Company within six (6) months prior to the Exercise Date, (c) if the Optioned Shares are other than Nonpublicly Traded, by delivery (including by FAX) to the Company or its designated agent of an executed irrevocable option exercise form together with irrevocable instructions from the Participant to a broker or dealer, reasonably acceptable to the Company, to sell certain of the shares of Common Stock purchased upon exercise of the Stock Option or to pledge such shares as collateral for a loan and promptly deliver to the Company the amount of sale or loan proceeds necessary to pay such purchase price, and/or (d) in any other form of valid consideration that is acceptable to the Committee in its sole discretion.

     Upon payment of all amounts due from the Participant, the Company shall cause certificates for the Optioned Shares then being purchased to be delivered to the Participant (or the person exercising the Participant’s Stock Option in the event of his death) at its principal business office as soon as practicable (but in no case more than three (3) days) after the Exercise Date in order to permit timely sales under applicable exchange rules or to permit timely participation in any liquidity event. The obligation of the Company to deliver shares of Common Stock shall, however, be subject to the condition that if at any time the Company shall determine in its discretion that the listing, registration, or qualification of the Stock Option or the Optioned Shares upon any securities exchange or under any state or federal law, or the consent or approval of any governmental regulatory body, is necessary as a condition of, or in connection with, the Stock Option or the issuance or purchase of shares of Common Stock thereunder, then the Stock Option may not be exercised in whole or in part unless such listing, registration, qualification, consent, or approval shall have been effected or obtained free of any conditions not reasonably acceptable to the Committee.

     8. Transfer and Assignment. Except as otherwise provided in this Section 8, this Stock Option may not be assigned, transferred, pledged, hypothecated, or otherwise conveyed or encumbered by the Participant, except by will or by the laws of descent and distribution. Notwithstanding the foregoing, this Stock Option may be transferred, assigned or otherwise conveyed to (i) any of the Participant’s Immediate Family Members, (ii) a trust or trusts for the exclusive benefit of such Immediate Family Members, (iii) a partnership in which the only partners are (1) such Immediate Family Members and/or (2) entities, a majority of the beneficial ownership of which is owned by Immediate Family Members, (iv) an entity exempt from federal income tax pursuant to Section 501(c)(3) of the Code, or (v) a split interest trust or pooled income fund described in Section 2522(c)(2) of the Code; provided, that (x) there shall be no consideration for any such transfer, (y) subsequent transfers may not be made hereunder except those by will or the laws of descent and distribution, and (z) a Termination of Service of Participant shall continue to

have the effects in Sections 3 and 4 as if Participant had not transferred, assigned or otherwise conveyed this Stock Option.

     9. Rights as Stockholder. The Participant will have no rights as a stockholder with respect to any shares covered by the Stock Option until the issuance of a certificate or certificates to the Participant for the Optioned Shares, subject to the Company’s obligation to issue such certificate(s) as soon as practicable in accordance with Section 7 above. The Optioned Shares shall be subject to the terms and conditions of this Agreement regarding such Optioned Shares. Except as otherwise provided in Section 10 hereof, no adjustment shall be made for dividends or other rights for which the record date is prior to the issuance of such certificate or certificates.

     10. Adjustment of Number of Optioned Shares and Related Matters. The number of shares of Common Stock covered by the Stock Option, and the Option Prices thereof, shall be subject to adjustment in accordance with Articles 11 — 13 of the Plan.

     11. Nonqualified Stock Option. The Stock Option shall not be treated as an Incentive Stock Option.

     12. Voting. The Participant, as record holder of some or all of the Optioned Shares following exercise of this Stock Option, has the exclusive right to vote, or consent with respect to, such Optioned Shares until such time as the Optioned Shares are transferred in accordance with this Agreement; provided, however, that this Section shall not create any voting right where the holders of such Optioned Shares otherwise have no such right.

     13. Community Property. Each spouse individually is bound by, and such spouse’s interest, if any, in any Optioned Shares is subject to, the terms of this Agreement. Nothing in this Agreement shall create a community property interest where none otherwise exists.

     14. Dispute Resolution. Any dispute, controversy or claim arising out of or in relation to or in connection with this Agreement, including without limitation any dispute as to the construction, validity, interpretation, enforceability or breach of this Agreement, shall be exclusively and finally settled by arbitration, and any party may submit such dispute, controversy or claim, including a claim for indemnification under this Section 14, to arbitration.

     (a) Arbitrators. The arbitration shall be heard and determined by one arbitrator, who shall be impartial and who shall be selected by mutual agreement of the parties; provided, however, that if the dispute involves more than $2,000,000, then the arbitration shall be heard and determined by three (3) arbitrators. If three (3) arbitrators are necessary as provided above, then (i) each side shall appoint an arbitrator of its choice within thirty (30) days of the submission of a notice of arbitration and (ii) the party-appointed arbitrators shall in turn appoint a presiding arbitrator of the tribunal within thirty (30) days following the appointment of the last party-appointed arbitrator. If (x) the parties cannot agree on the sole arbitrator, (y) one party refuses to appoint its party-appointed arbitrator within said thirty (30) day period or (z) the party-appointed arbitrators cannot reach agreement on a presiding arbitrator of the tribunal, then the appointing authority for the implementation of such

procedure shall be the Senior United States District Judge for the Middle District of Tennessee, who shall appoint an independent arbitrator who does not have any financial interest in the dispute, controversy or claim. If the Senior United States District Judge for the Middle District of Tennessee refuses or fails to act as the appointing authority within ninety (90) days after being requested to do so, then the appointing authority shall be the Chief Executive Officer of the American Arbitration Association, who shall appoint an independent arbitrator who does not have any financial interest in the dispute, controversy or claim. All decisions and awards by the arbitration tribunal shall be made by majority vote.

     (b) Proceedings. Unless otherwise expressly agreed in writing by the parties to the arbitration proceedings:

     (i) The arbitration proceedings shall be held in Nashville, Tennessee, at a site chosen by mutual agreement of the parties, or if the parties cannot reach agreement on a location within thirty (30) days of the appointment of the last arbitrator, then at a site in Nashville, Tennessee chosen by the arbitrator(s);

     (ii) The arbitrator(s) shall be and remain at all times wholly independent and impartial;

     (iii) The arbitration proceedings shall be conducted in accordance with the Commercial Arbitration Rules of the American Arbitration Association, as amended from time to time;

     (iv) Any procedural issues not determined under the arbitral rules selected pursuant to item (iii) above shall be determined by the law of the place of arbitration, other than those laws which would refer the matter to another jurisdiction;

     (v) The costs of the arbitration proceedings (including reasonable attorneys’ fees and costs) shall be borne in the manner determined by the arbitrator(s);

     (vi) The decision of the arbitrator(s) shall be reduced to writing; final and binding without the right of appeal; the sole and exclusive remedy regarding any claims, counterclaims, issues or accounting presented to the arbitrator(s); made and promptly paid in United States dollars free of any deduction or offset; and any costs or fees incident to enforcing the award shall, to the maximum extent permitted by law, be charged against the party resisting such enforcement;

     (vii) The award shall include interest from the date of any breach or violation of this Agreement, as determined by the arbitral award, and from the date of the award until paid in full, at 6% per annum; and

     (viii) Judgment upon the award may be entered in any court having jurisdiction over the person or the assets of the party owing the judgment or

application may be made to such court for a judicial acceptance of the award and an order of enforcement, as the case may be.

     (c) Acknowledgment Of Parties. Each party acknowledges that he or it has voluntarily and knowingly entered into an agreement to arbitration under this Section 14 by executing this Agreement.

     15. Participant’s Representations. Notwithstanding any of the provisions hereof, the Participant hereby agrees that he will not exercise the Stock Option granted hereby, and that the Company will not be obligated to issue any shares to the Participant hereunder, if the exercise thereof or the issuance of such shares shall constitute a violation by the Participant or the Company of any provision of any law or regulation of any governmental authority or any rule of any stock exchange or inter-dealer quotation system on which such shares are listed or traded, provided that the foregoing shall not be deemed to be a limitation of any other obligation of the Company hereunder.

     16. Investment Representation. Unless the Common Stock is issued to him in a transaction registered under applicable federal and state securities laws, by his execution hereof, the Participant represents and warrants to the Company that all Common Stock which may be purchased hereunder will be acquired by the Participant for investment purposes for his own account and not with any intent for resale or distribution in violation of federal or state securities laws. Unless the Common Stock is issued to him in a transaction registered under the applicable federal and state securities laws, all certificates issued with respect to the Common Stock shall bear an appropriate restrictive investment legend and shall be held indefinitely, unless they are subsequently registered under the applicable federal and state securities laws or the Participant obtains an opinion of counsel, in form and substance satisfactory to the Company and its counsel, that such registration is not required.

     17. Lock Up. In connection with an underwritten public offering of Common Stock, upon the request of the Company or the principal underwriter managing such public offering, no shares of Common Stock received by the Participant under this Award Agreement may be sold, offered for sale or otherwise disposed of without the prior written consent of the Company or such underwriter, as the case may be, for up to one hundred eighty (180) days after the effectiveness of the registration statement filed in connection with such offering, if all of the Company’s directors and officers agree to be similarly bound, and releases from any and all lock-up agreements in connection with such offering are granted on a pro-rata basis.

     18. Participant’s Acknowledgments. The Participant acknowledges receipt of a copy of the Plan, which is annexed hereto, and represents that he or she is familiar with the terms and provisions thereof.

     19. Law Governing. This Agreement shall be governed by, construed, and enforced in accordance with the laws of the State of Delaware (excluding any conflict of laws rule or principle of Delaware law that might refer the governance, construction, or interpretation of this agreement to the laws of another state).

     20. No Right to Continue Service or Employment. Nothing herein shall be construed to confer upon the Participant the right to continue in the employ or to provide services to the Company or any Subsidiary, whether as an employee or as a consultant or as an Outside Director, or interfere with or restrict in any way the right of the Company or any Subsidiary to discharge the Participant as an employee, consultant or Outside Director at any time.

     21. Legal Construction. In the event that any one or more of the terms, provisions, or agreements that are contained in this Agreement shall be held by a Court of competent jurisdiction to be invalid, illegal, or unenforceable in any respect for any reason, the invalid, illegal, or unenforceable term, provision, or agreement shall not affect any other term, provision, or agreement that is contained in this Agreement and this Agreement shall be construed in all respects as if the invalid, illegal, or unenforceable term, provision, or agreement had never been contained herein.

     22. Covenants and Agreements as Independent Agreements. Each of the covenants and agreements that is set forth in this Agreement shall be construed as a covenant and agreement independent of any other provision of this Agreement. The existence of any claim or cause of action of the Participant against the Company, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by the Company of the covenants and agreements that are set forth in this Agreement.

     23. Entire Agreement. This Agreement, together with the Plan, supersde any and all other prior understandings and agreements, either oral or in writing, between the parties with respect to the subject matter hereof and constitute the sole and only agreements between the parties with respect to the said subject matter. All prior negotiations and agreements between the parties with respect to the subject matter hereof are merged into this Agreement and the Plan. Each party to this Agreement acknowledges that no representations, inducements, promises, or agreements, orally or otherwise, have been made by any party or by anyone acting on behalf of any party, which are not embodied in this Agreement or the Plan and that any agreement, statement or promise that is not contained in this Agreement or the Plan shall not be valid or binding or of any force or effect.

     24. Parties Bound. The terms, provisions, and agreements that are contained in this Agreement shall apply to, be binding upon, and inure to the benefit of the parties and their respective heirs, executors, administrators, legal representatives, and permitted successors and assigns, subject to the limitation on assignment expressly set forth herein.

     25. Modification. No change or modification of this Agreement shall be valid or binding upon the parties unless the change or modification is in writing and signed by the parties.

     26. Headings. The headings that are used in this Agreement are used for reference and convenience purposes only and do not constitute substantive matters to be considered in construing the terms and provisions of this Agreement.

     27. Gender and Number. Words of any gender used in this Agreement shall be held and construed to include any other gender, and words in the singular number shall be held to include the plural, and vice versa, unless the context requires otherwise.

     28. Notice. Any notice required or permitted to be delivered hereunder shall be deemed to be delivered only when actually received by the Company or by the Participant, as the case may be, at the addresses set forth below, or at such other addresses as they have theretofore specified by written notice delivered in accordance herewith:

     a. Notice to the Company shall be addressed and delivered as follows:

First Acceptance Corporation
3813 Green Hills Village Drive
Nashville, Tennessee 37215
Attn: Secretary
Facsimile: (615) 844-2898

     b. Notice to the Participant shall be addressed and delivered as set forth on the signature page.

     29. Tax Requirements. The Participant, upon exercise of any portion of the Stock Option, shall be required to pay the Company the amount of all taxes which the Company is required to withhold as a result of the exercise of the Stock Option; such obligation to pay such taxes may be satisfied by any of the following or any combination thereof: (a) the delivery of cash to the Company in an amount that equals or exceeds (to avoid the issuance of fractional shares under (c) below) the required tax withholding obligation of the Company; (b) if the Company, in its sole discretion, so consents in writing, the actual delivery by the exercising Participant to the Company of shares of Common Stock other than (i) Restricted Stock or (ii) Common Stock that the Participant owns but has acquired from the Company within six months prior to the date of exercise, which shares so delivered have an aggregate Fair Market Value that equals or exceeds (to avoid the issuance of fractional shares under (c) below) the required tax withholding payment; or (c) the Company’s withholding of a number of shares to be delivered upon the exercise of the Stock Option, which shares so withheld have an aggregate Fair Market Value that equals (but does not exceed) the required tax withholding payment; provided that, shares cannot be withheld in connection with the exercise of a Stock Option in excess of the minimum number required for tax withholding, and to permit the Stock Option to be accounted for as a fixed award. Any such withholding payments with respect to the exercise of any portion of the Stock Option in cash or by actual delivery of shares of Common Stock shall be required to be made within thirty (30) days after the delivery to the Participant of any certificate representing the shares of Common Stock acquired upon exercise of the Stock Option. The Company may, in its discretion, withhold such taxes from any other remuneration paid by the Company or a Subsidiary to the Participant.

     30. Option Cash-out. The Company may only make provisions for a cash payment to the holder of this Stock Option, as contemplated by Article 11 or Section 12.3 of the Plan, in the event and subject to the consummation of the sale of substantially all of the assets or capital stock of the Company for cash.

     31. Failure to Pay Option Price; Notice to Participant. Section 8.3(c) of the Plan shall not apply to this Option unless the Participant receives from the Company written notice of an event giving rise to the forfeiture right described in Section 8.3(c) of the Plan and the Participant fails to cure such event within five (5) days after his receipt of such notice.

* * * * * * * *

     IN WITNESS WHEREOF, the Company has caused this Award Agreement to be executed by its duly authorized officer, and the Participant, to evidence his consent and approval of all the terms hereof, has duly executed this Agreement, as of the date specified in Section 1 hereof.

FIRST ACCEPTANCE CORPORATION
By:	/s/ Stephen J. Harrison

Name:   Stephen J. Harrison

Title:   Chief Executive Officer

/s/ Kevin P. Cohn

KEVIN P. COHN 

Address: 4000 Flagstone Court
Franklin, TN 37069