EXHIBIT 10.7

SEVERANCE AGREEMENT

This Agreement (this “Agreement”) is dated as of May 20  , 2014, and confirms
the discussions between Trace Ledbetter (“Employee”) and T.B.A. Insurance Group,
Ltd., a Texas limited partnership (the “Company” or the “Employer”), regarding,
among other things, amounts payable upon the termination of Employee’s
employment with the Company.

WHEREAS, Employee is a key employee of the Company and an integral part of the
Company’s management;

WHEREAS, the Company desires to induce its key employees to remain employed by
the Company; and

WHEREAS, the Company desires to provide certain compensation to Employee in the
event of the termination of his employment under certain circumstances.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties covenant and agree as follows as of
the Effective Time (as defined below):

1.         Effective Time.  This Agreement shall become effective (the
“Effective Time”) immediately upon the closing of the proposed private common
stock offering (the “Private Offering”) by the Company’s ultimate parent entity,
State National Companies, Inc., a Delaware corporation (“SNCI”), provided (1)
that such closing occurs prior to July 30, 2014 and (2) the purchase price per
share of common stock sold to investors in the Private Offering implies an
enterprise value for SNCI immediately prior to such closing of at least $300
million.  If the Private Offering is not completed upon these terms, this
Agreement shall be void ab initio and of no further force or effect.

2.         Termination of Employment. 

(a)     General. Subject to the terms hereof, if (i) the Company terminates
Employee’s employment for any reason other than for Cause (as hereinafter
defined), death or “permanent physical disability” (as hereinafter defined) or
(ii) Employee resigns for Good Reason (as hereinafter defined), Employee shall
be entitled to severance pay equal to the Severance Benefit as defined in
Section 3.  The Severance Benefit shall be payable in a single lump sum on the
60th day following Employee’s date of termination; provided, however, Employee
has executed a release as described below in Section 25, and all applicable
review and revocation periods have expired by that date.  Subject to the terms
hereof, including Section 10, if Employee terminates or resigns from employment
for other than Good Reason, or is discharged for Cause, dies or terminates on
account of a permanent physical disability, Employee shall be entitled only to
the compensation earned by him as of the date of his termination and not to any
portion of the Severance Benefit.

(b)     Definitions.  For purposes of this Agreement, the following definitions
shall apply:

(i)         the terms “Cause” and “Change of Control” shall have the meanings
set forth in the State National Companies, Inc. 2014 Long-Term Incentive Plan;

 

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(ii)       Employee shall be deemed to have experienced a “permanent physical
disability” when Employee is unable to perform substantially all of his duties
as an employee of the Company for a continuous period of 180 days, by reason of
physical or mental illness or accident, in the Company’s reasonable discretion;
and

(iii)      Employee shall be deemed to have “Good Reason” upon the occurrence of
any of the following events, except for the occurrence of such an event in
connection with the termination or reassignment of Employee by the Company for
Cause:  (A) a material reduction by the Company of Employee’s base salary; (B) a
material reduction in Employee’s authority, duties and responsibilities; and (C)
the Company’s requiring Employee to be based anywhere other than within 50 miles
of Employee’s office location as of the Effective Time except for requirements
of reasonably required travel on the Company’s business.

3.         Severance Benefit. The Severance Benefit payable hereunder shall be
one (1) times the Employee’s base salary at the time of termination, except that
the Severance Benefit shall be increased to 1.75 times the Employee’s base
salary if the termination occurs during the two-year period immediately
following: (i) the Effective Time; or (ii) a Change of Control.  In no event
shall a Severance Benefit be paid if the Employee’s termination occurs more than
seven (7) years after the Effective Time or the termination is due to the
Employee’s death or permanent physical disability.  For purposes of this
Agreement, the term “Change of Control” shall have the meaning set forth in the
State National Companies, Inc. 2014 Long-Term Incentive Plan.

4.         Company Rules.  At all times during the course and scope of his
employment, Employee shall strictly adhere to and obey all of the Company’s
rules and regulations now in effect or subsequently promulgated by the Employer
governing the conduct of Company employees.

5.         Discoveries.  Employee agrees that he will promptly and fully inform
and disclose to the Employer all inventions, designs, improvements, ideas and
discoveries that he now has or may hereafter acquire during his employment under
this Agreement that pertain or relate to the business of Employer and/or its
affiliates, or to any experimental work carried on by the Employer and/or its
affiliates, whether conceived by Employee alone or with others and whether or
not conceived during regular working hours.  All such inventions, designs,
improvements, ideas and discoveries shall be the exclusive property of the
Employer.  Employee hereby irrevocably assigns, conveys and otherwise transfers
to the Employer, its respective  successors, licensees and assigns, or its
designee, all of Employee’s right, title and interest worldwide in and to any
and all inventions, designs, improvements, ideas and discoveries, whether or not
patentable or registrable under copyright or similar laws, which Employee may
solely or jointly conceive or develop or reduce to practice or cause to be
conceived or developed or reduced to practice while Employee is employed by the
Employer.  In accordance with the foregoing assignment, the Employer shall hold
all ownership to all rights, without limitation, in and to all of the
inventions, designs, improvements, ideas and discoveries.  Employee shall assist
the Employer in obtaining patents, copyrights or other protective rights on all
such inventions, designs, improvements, ideas and discoveries deemed necessary
by the Employer, and shall execute all documents and do all things necessary to
obtain letters patent, copyrights or other protective rights to vest the
Employer with full exclusive title thereto, and to protect the same against
infringement by others, all without further compensation or consideration.

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6.         Confidential Information.  In consideration of the restrictive
covenants contained herein, Employer promises to provide to Employee during the
course of his employment various confidential information, including the
Employer’s and/or its affiliates’ proprietary information, technical data, trade
secrets, confidential knowledge, know-how or any other confidential technical or
business information (“Confidential Information”).  By way of example, the term
“Confidential Information” may include:  formulas, patterns, devices, secret
inventions, processes, computer programs, compilations of information, records,
specifications, sales procedures, customer requirements, pricing techniques,
customer (and prospective customer) and supplier lists, methods of doing
business, research,  designs, data, charts, budgets, distributor names, pricing
and cost information, development information, production and manufacturing
information, sales and marketing information and other confidential
information.  Employee acknowledges that such Confidential Information is owned
and shall continue to be owned solely by the Employer and/or its respective
affiliate, and agrees that Employee does not have any ownership or other rights
in or to the Confidential Information.

7.         Restrictive Covenants During Employment.  During his employment with
the Company, Employee shall not, without the prior written consent of the
Company, either directly or indirectly:  (a) disclose or divulge to any person,
firm, corporation or other entity any of the Confidential Information of the
Employer and/ or its affiliates or use such information for any purpose
whatsoever except as required in the course and scope of his employment under
this Agreement; (b) make known to any person, firm, corporation or other entity
the names and/or addresses of any of the customers or prospective customers of
the Employer or any of its affiliates or any other confidential or business
information pertaining to said customers or prospective customers; (c) invest,
participate or engage in any business that is competitive with that of the
Employer or any of its affiliates or otherwise accept employment with or render
services to a competitor of the Employer or any of its affiliates as a director,
manager, officer, agent, employee, consultant or otherwise; (d) solicit or
attempt to solicit or accept business that is competitive with the business
being conducted by the Employer or any of its affiliates from any of the
customers or prospective customers of the Employer or its affiliates; or
(e) engage in other activity or conduct which creates a conflict of interest
between Employee and the business interests of the Employer and/or its
affiliates.

8.         Documents.  All files, records, documents, drawings, specifications,
information, data and similar items relating to the business of the Employer
and/or its affiliates, whether prepared by Employee or otherwise coming into his
possession, shall remain the exclusive property of the Employer and/or such
applicable affiliate.  Under no circumstances shall Employee remove from the
premises of the Employer or any of its affiliates any of the Employer’s or the
respective affiliate’s books, records, documents or customer (or prospective
customer) lists without the prior written permission of the Employer, nor shall
Employee make any copies of such books, records, documents or customer (or
prospective customer) lists for use outside of Employer’s office except as
specifically authorized in writing by Employer.  Any such books, records,
documents or other materials or copies thereof in Employee’s possession or under
his control shall be immediately returned to the Employer upon termination or
cessation of Employee’s employment.

9.         Post-Employment Restrictive Covenants.  In consideration of the
mutual promises herein, including the Company’s promise to provide Employee with
Confidential

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Information, upon termination or cessation of employment with the Company for
any reason and for a period of two (2) years immediately thereafter (except with
respect to subsection (a) of this Section 9, which covenant period shall be
perpetual), Employee shall not, without the prior written consent of the
Employer, directly or indirectly:

(a)       disclose or divulge to any person, firm, company, corporation or other
entity any of the Confidential Information of the Employer unless compelled to
disclose such information by law, or otherwise use such information for any
purpose whatsoever;

(b)       within the states the Company and/ or any of its affiliates now or
hereafter conducts business or actively prospects for business (the
“Territory”), invest or engage in, start, conduct, operate, manage or control
any business that is competitive with the Employer or any of its affiliates,
including any business that markets products and/or performs services in
competition with those marketed and/or performed by Company and/or its
affiliates within the Territory;

(c)       within the Territory, accept employment with or render services to a
competitor of the Employer or any of its affiliates as a director, manager,
officer, agent, employee, consultant or otherwise, including accepting
employment with or rendering services to a person, firm, company, corporation or
other entity that markets products and/or performs services in competition with
those marketed and/or performed by the Company and/or its affiliates within the
Territory;

(d)       disclose to any person, firm, company, corporation or other entity the
names and/or addresses of any of the customers or prospective customers of the
Employer or any of its affiliates or any other Confidential Information or
business information acquired by Employee during the course of his employment
with the Company pertaining to said customers or prospective customers;

(e)       on his own behalf or on the behalf of any person, firm, company,
corporation or other entity, contact, call on, solicit or take away or attempt
to contact, call on, solicit or take away, or accept business from, any of the
customers or prospective customers of the Employer or any of its affiliates or
any other person, firm, company, corporation or other entity whose business the
Employer or any of its affiliates was soliciting; or

(f)       on his own behalf or on the behalf of any other person, firm, company,
corporation or other entity, hire or solicit or in any manner whatsoever attempt
to influence or induce any current employee of the Employer or its affiliates,
or any person who has been an employee of the Employer and/or one of its
affiliates at any time during the twelve (12) months prior to Employee’s date of
termination or cessation of employment, to leave the employment of the Employer
or its affiliates.

10.       Modification of Restriction.  The post-employment restrictive
covenants contained in Section 9 of this Agreement are intended to limit
Employee’s right to compete only to the extent necessary to protect the
Employer’s business and goodwill.  The parties hereto agree that if any
post-employment restrictive covenant set forth in Section 9 herein is found to
be unreasonable as to scope, time period, territorial restraint or otherwise by
a court of competent

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jurisdiction, then Employee and Employer agree and submit to the reduction
thereof to such scope, time period or territory as is deemed reasonable by such
court.

11.       Acknowledgments.  Employee hereby acknowledges that his employment
under this Agreement is not for any definite period or successions of periods
and that no representative of the Company, other than the President or Chief
Executive Officer of the Company, has any authority to enter into any agreement
for employment for any specified period of time or to make an agreement contrary
to the terms and provisions of this Agreement.  Employee further acknowledges:
(a) that in the event his employment with Employer terminates for any reason, he
will be able to earn a livelihood without violating the post-employment
restrictive covenants contained in Section 9 of this Agreement; (b) that he is
capable of pursuing a career and earning a livelihood in other businesses or
industries within the Territory which are not competitive with the business of
the Employer or its affiliates; and (c) that his ability to earn a livelihood
without violating such restrictive covenants is a material condition to his
employment with the Employer.

12.       Survival.  The obligations contained in Section 6, Section 9, Section
10, Section 11, this Section 12, Section 14, Section 19, Section 21, Section 24,
Section 25, Section 26, Section 27, Section 28 and Section 29 hereof shall
survive cessation of employment and the termination of this Agreement.  In
addition, the termination of this Agreement shall not affect any of the rights
or obligations of either party arising prior to or at the time of the
termination of this Agreement.  The existence of any claim or cause of action of
Employee against the Employer, whether predicated on this Agreement or
otherwise, shall not constitute a defense to the enforcement by the Employer of
the restrictive covenants contained in this Agreement.

13.       Severability.  If any provision, section, paragraph or subparagraph of
this Agreement is adjudged by any court of competent jurisdiction to be void,
illegal or unenforceable, in whole or in part, this adjudication shall not
affect the validity of the remainder of this Agreement, including any other
provision, section, paragraph or subparagraph.  Each provision, section,
paragraph and subparagraph of this Agreement is separable from every other
provision, section, paragraph and subparagraph, and constitutes a separate and
distinct covenant.

14.       Injunctive Relief.  The Company and Employee agree that the services
to be rendered by Employee on behalf of the Company under this Agreement are
strictly personal and that this Agreement has been entered into because of the
special and peculiar fitness and experience of Employee therefor, and as a
result of a breach of any of the restrictive covenants set forth herein, the
Company will suffer irreparable harm which cannot be adequately or solely
measured by rules of law.  Therefore, the Company and Employee agree that, in
the event Employee shall breach or violate any of the restrictive covenants set
forth herein, the Company, in addition to all the remedies which may be
available to it, and without waiver of any claim for money damages or the
necessity of securing or posting a bond or any other security in connection with
such remedy, may proceed against Employee by injunction or other appropriate
remedy to prevent Employee from violating such provisions.

15.       Waiver of Rights.  If in one or more instances either party fails to
insist that the other party perform any of the terms of this Agreement, such
failure shall not be construed as a waiver by such party of any past, present or
future right granted under this Agreement, and the obligations of both parties
shall continue in full force and effect.

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16.       Applicability.  This Agreement shall be binding upon and shall inure
to the benefit of the parties and their successors, permitted assigns,
executors, administrators and personal representatives. This Agreement is
personal in nature and neither of the parties hereto shall, without the written
consent of the other, assign or transfer this Agreement or any rights or
obligations hereunder; provided, however, that in the event of a merger,
consolidation or transfer or sale of all or substantially all of the assets of
the Company, this Agreement shall inure to the benefit of and be binding upon
the successor to the Company’s business and/or assets.

17.       Notices.  Any notice or communication required or permitted hereunder
shall be given in writing and shall be (a) sent by first class registered or
certified United States mail, postage prepaid, (b) sent by overnight or express
mail or expedited delivery service, (c) delivered by hand or (d) transmitted by
facsimile, addressed to the respective party at such party’s address or
facsimile number set forth on the signature page hereto, or to such other
address or facsimile number as hereafter shall be designated in writing by the
applicable party in accordance with this Section 17.  Any such notice or
communication shall be deemed to have been given as of the date of receipt by
the addressee thereof or, if earlier, as of the date of first attempted delivery
during normal business hours at the address and in the manner provided above.

18.       Entire Agreement.  Except solely with respect to the release agreement
to be executed by Employee pursuant to Section 25 below, this Agreement
constitutes the entire agreement between the parties hereto, including any and
all agreements discussed and/or previously made with T.B.A. Insurance, Inc., or
any other entity related in any way to T.B.A. Insurance, Inc., or State National
Insurance Company, or to any of their subsidiaries, affiliates or related
companies, relating to the subject matter hereof and supersedes all prior
agreements and understandings, whether oral or written, with respect to the
same.

19.       Governing Law.  This Agreement, and the rights and obligations of the
parties hereto, shall be governed by and construed and enforced in accordance
with the laws of the State of Texas, without regard to the conflict of laws
rules of that state.

20.       Counterparts.  This Agreement may be executed in counterparts
(including by facsimile or portable document format (“PDF”)), each of which
shall be deemed an original and both of which together shall constitute one and
the same instrument.  At the request of a party, the other party will confirm
facsimile or PDF counterparts by signing a duplicate original document.

21.       Interpretation.  In this Agreement, (i) “including” does not denote or
signify any limitation; (ii) “Section” is a reference to a Section in this
Agreement, unless otherwise stated; (iii) “herein,” “hereunder,” “hereof” and
similar terms are references to this Agreement as a whole, and not to any
particular provision of this Agreement; (iv) “affiliates” shall include each
party’s, or the subject person’s or entity’s, respective successors, heirs,
employees, agents, representatives, attorneys, officers, directors, partners,
members, managers, related insurance and financial services entities and
businesses, direct and indirect subsidiaries and parents, and assigns, as
applicable; (v) “prospective customer” shall mean any person or entity that (a)
holds a contract with the Company or any of its affiliates or had a written
contract proposal made to it by the Company or any of its affiliates within the
previous six (6) months; and (b) that Employee either had contact with or
received confidential information about during the last six (6) months of
Employee’s employment; and (vi) “Company” includes any successors to or assigns
of the

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Company.  Whenever required by the context, pronouns and any variation thereof
shall be deemed to refer to the masculine, feminine or neuter, and the singular
shall include the plural, and vice versa.  The titles of the Sections of this
Agreement are for convenience of reference only and are not to be considered in
construing this Agreement.

22.       Costs.  If any action at law or in equity is necessary to enforce or
interpret the terms of this Agreement, the prevailing party shall be entitled to
recover from the other party reasonable attorneys’ fees and expenses in addition
to any other relief to which he or it may be entitled.

23.       Modification.  No alteration or modification to any of the provisions
of this Agreement shall be valid unless made in writing and signed by each party
hereto.

24.       Confidentiality of this Agreement.  In consideration of the Severance
Benefit described above, Employee agrees that the existence of, and terms of
this Agreement, shall be and remain confidential, and shall not be disclosed by
Employee to any person or entity other than Employee’s spouse, attorney,
accountant and/ or tax return preparer, if such persons have agreed to keep such
information confidential, and except as may be required by law or judicial
process.

25.       Release.  Notwithstanding any provision herein to the contrary, as a
condition to receiving any Severance Benefit hereunder, Employee shall, and
hereby agrees to, execute a release agreement in the form specified by the
Company in its sole discretion.

26.       Withholding.  The Severance Benefit hereunder shall be reduced by all
applicable income, employment or other taxes withheld by the Company from such
payment.

27.       Compliance with Section 280G of the Code.  If any payment, benefit or
distribution of any type to or for the benefit of Employee, whether paid or
payable, provided or to be provided, or distributed or distributable pursuant to
the terms of this Agreement or any other plan or agreement (collectively, the
“Parachute Payments”) would cause Employee to be the recipient of an excess
parachute payment within the meaning of Section 280G(b) of the Internal Revenue
Code (the “Code”), the amount of such Parachute Payments shall be reduced so
that the maximum amount of the Parachute Payments (after reduction) shall be one
dollar less than the amount which would cause Employee to be the recipient of an
excess parachute payment.  Any such reductions or eliminations shall occur in
the following order:

(a)     first, reducing or eliminating any cash payments under this Agreement
(with the payments to be made furthest in the future being reduced first);

(b)     first, reducing or eliminating any cash payments under any other plans
or agreements (with the payments to be made furthest in the future being reduced
first);

(c)     then by reducing or eliminating any accelerated vesting of
performance-based stock options or substantially similar awards (with the most
recently granted options or awards being reduced first);

(d)     then by reducing or eliminating any accelerated vesting of
performance-based restricted stock awards or substantially similar awards (with
the most recently granted awards being reduced first);

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(e)     then by reducing or eliminating any accelerated vesting of service-based
stock options or substantially similar awards (with the most recently granted
options or awards being reduced first);

(f)     then by reducing or eliminating any accelerated vesting of service-based
restricted stock awards or substantially similar awards (with the most recently
granted awards being reduced first); and

(g)     then by reducing or eliminating any other remaining Parachute Payments;

provided, that no such reduction or elimination shall apply to any non-qualified
deferred compensation amounts (within the meaning of Section 409A of the Code)
to the extent such reduction or elimination would accelerate or defer the timing
of the payment in manner that does not comply with Section 409A of the Code.

28.       Compliance with Section 409A of the Code.  The provisions of this
Section 28 shall apply solely to the extent that a payment under this Agreement
is subject to Section 409A of the Code.

(a)       General Suspension of Payments.  If Employee is a “specified
employee,” as such term is defined within the meaning of Section 409A of the
Code, any payments or benefits payable or provided as a result of Employee’s
termination of employment that would otherwise be paid or provided prior to the
first day of the seventh month following such termination (other than due to
death) shall instead be paid or provided on the earlier of (i) the six months
and one day following Employee’s termination, (ii) the date of Employee’s death,
or (iii) any date that otherwise complies with Section 409A of the Code. 

(b)       Separation from Service.  For purposes of this Agreement, any
reference to “termination” of Employee’s employment shall be interpreted
consistent with the meaning of the term “separation from service” in Section
409A(a)(2)(A)(i) of the Code and no portion of the Severance Payments shall be
paid to Employee prior to the date such Employee incurs a separation from
service under Section 409A(a)(2)(A)(i) of the Code.

(c)       Installment Payments.  For purposes of Section 409A of the Code and
the regulations and other guidance thereunder and any state law of similar
effect (including without limitation Treasury Regulations Section
1.409A-2(b)(2)(iii)), all payments made under this Agreement (whether severance
payments or otherwise) will be treated as a right to receive a series of
separate payments and, accordingly, each installment payment under this
Agreement will at all times be considered a separate and distinct payment.

(d)       General.  Notwithstanding anything to the contrary in this Agreement,
it is intended that the severance benefits and other payments payable under this
Agreement satisfy, to the greatest extent possible, the exemptions from the
application of Section 409A of the Code provided under Treasury Regulations
Sections 1.409A-1(b)(4), 1.409A-1(b)(5), and 1.409A-(b)(9) and this Agreement
will be construed to the greatest extent possible as consistent with those
provisions.  The commencement of payment or provision of any payment or benefit
under this Agreement shall be deferred to the minimum extent

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necessary to prevent the imposition of any excise taxes or penalties on the
Company or Employee.

29.       Right to Recover Payments.  Upon any breach by Employee of the
post-employment restrictive covenants contained in Section 9 of this Agreement,
all amounts paid to Employee as a Severance Benefit shall immediately be due and
repayable to the Company by Employee, and shall be paid, in full in immediately
available funds, by Employee to the Company without condition.  Nothing within
this Section 29 shall prevent or limit the Company’s rights to enforce the
post-employment restrictive covenants through injunctive or any other means
available in law or at equity.  Employee acknowledges that the Company will have
no adequate means of protecting its rights under this Agreement other than by
securing an injunction (a court order prohibiting Employee from violating the
Agreement).  Accordingly, Employee agrees that the Company is entitled to
enforce this Agreement by obtaining a temporary, preliminary and/or permanent
injunction and any other appropriate equitable relief, in addition to the other
relief to which it may be entitled.  Employee acknowledges that the Company’s
recovery of damages will not be an adequate means to redress a breach of this
Agreement.  Nothing contained in this paragraph, however, shall prohibit the
Company from pursuing any remedies in addition to injunctive relief, including
recovery of damages.

 [Signature Page Follows]

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

 

 

 

 

 

 

 

 

EMPLOYER:

 

 

 

T.B.A. INSURANCE GROUP, LTD.

 

 

 

 

By:  SNC Financial GP, LLC, its general partner

 

 

 

 

 

By:

     /s/ Terry Ledbetter

 

 

 

 

 

 

Name:

     Terry Ledbetter

 

 

 

 

 

 

Title:

     President

 

 

 

 

 

 

Address:

1900 L. Don Dodson Drive

 

 

Bedford, Texas 76021

 

 

Attn:

 

 

 

 

 

 

Facsimile:

 

 

 

 

 

 

 

 

EMPLOYEE:

 

 

 

        /s/ Trace Ledbetter

 

Trace Ledbetter

 

 

 

 

Address:

     8216 Meadowbrook Dr.

 

 

 

 

 

     Fort Worth, TX 76120

 

 

 

 

Facsimile:

 

 

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