EXHIBIT 10.1
EXECUTION COPY
EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED EMPLOYMENT
AGREEMENT (“Agreement”) between ZENITH NATIONAL
INSURANCE CORP., a Delaware corporation (hereinafter referred to as
“Zenith”), and STANLEY R. ZAX (hereinafter referred to
as “Employee”) is hereby amended and restated in its
entirety effective on the last date of execution set forth below
(the “Effective Date”).
RECITALS
WHEREAS, Employee is presently
employed as Chairman of the Board of Zenith Insurance Company, a
subsidiary of Zenith, pursuant to a written Employment Agreement
originally dated as of December 9, 1981, which agreement has
been extended and modified from time to time, and is also employed
as Chairman of the Board and President of Zenith and is an officer
of certain of its other subsidiaries (Zenith and all of its
subsidiaries collectively referred to hereinafter as
“Employer”); and
WHEREAS, Zenith and Employee deem it
in their respective best interests to extend the term of said
Employment Agreement at the present time and modify certain other
provisions thereof;
NOW, THEREFORE, it is agreed as
follows:
1.
Amended and Restated
Employment Agreement . The Agreement is hereby amended and restated in
its entirety and the term thereof is hereby extended as hereinafter
provided.
2.
Engagement and
Duties . During the Term of Employment as defined in
Paragraph 3 of this Agreement:
2.1 Employer hereby employs Employee and Employee does
hereby agree to be employed by Employer as Chairman of the Board,
President and Chief Executive Officer of Zenith and in such other
capacities at Zenith and at each of the corporations which comprise
Employer as shall hereafter be agreed upon by Employee, the Board
of Directors of Zenith (“Board”) and the boards of
directors of such other corporations.
2.2 Employee shall perform the normal duties of such
offices and such other executive duties as may from time to time be
assigned to him by and in accordance with instructions and
directions of the Board. Both Employee and Employer hereby
expressly recognize that the services described herein shall be
performed to the reasonable satisfaction of the
Board.
2.3 Employee shall perform the duties contemplated
hereunder at his principal office located in Los Angeles County,
California; provided, however, Employee
shall travel outside Los Angeles County to the
extent he reasonably deems it necessary or appropriate in the
performance of his duties hereunder.
2.4 Employee, during the Term of Employment, shall devote
his time, attention, energies, skill and best efforts to the
performance of his duties for and on behalf of
Employer.
3.
Term of
Employment . The term of employment hereunder shall be a
period commencing on the Effective Date and terminating
December 31, 2012 (“Expiration Date”), unless
sooner terminated as elsewhere provided herein (“Term of
Employment”).
4.
Compensation
. As full and complete consideration for the
performance of his duties and the rendition of any and all services
under this Agreement, Employee shall be compensated as
follows:
4.1 Employee shall be paid Two Million Five Hundred
Thousand Dollars ($2,500,000) per year, subject to such increases
as the Compensation Committee of the Board (“Compensation
Committee”) may from time to time determine (“Base
Compensation”).
4.2 In addition to the Base Compensation, Employee shall
be eligible for such bonuses under Zenith’s Executive Officer
Bonus Plan as may be awarded by the Compensation Committee pursuant
to the plan, and may also be awarded discretionary bonuses by the
Compensation Committee.
4.3 All compensation hereunder shall be paid by Employer,
as may be allocated by Employer from time to time among the
different corporations which comprise Employer, and shall comply
with all relevant governmental directives, rules and
regulations which may be in effect from time to time. All
Base Compensation shall be payable ratably twice each month, or
more or less often in accordance with the normal payroll practices
of Employer.
5.
Business
Expenses . Employee shall be reimbursed for reasonable and
necessary expenses duly incurred in connection with the duties to
be performed and the services to be rendered by Employee to
Employer under and pursuant to this Agreement, upon submission of
itemized expense statements in the manner and at times specified by
Employer for officers of Employer. In addition, Employee
shall be entitled to the exclusive full time use of one deluxe
automobile of his choice, to be replaced from time to time at
Employee’s discretion.
6.
Employee
Benefits.
6.1 Employee shall be entitled to participate in all
employee insurance, retirement and other benefit plans for which he
qualifies and which may be in effect from time to time.
Notwithstanding the foregoing, nothing contained in this Agreement
shall prohibit or limit the right of Employer to discontinue,
modify or amend any plan or benefit in its absolute discretion at
any time, provided, however, that any such discontinuance,
modification or amendment shall apply to employees of
Employer
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generally, or to a defined group of such
employees, and shall not apply solely to Employee.
6.2 Employee shall be entitled each year to vacation in
accordance with standard employment practices, during which time
his compensation shall be paid in full. Each vacation shall
be taken during a period mutually satisfactory to both Employer and
Employee.
6.3 During the Term of Employment, Employer shall provide
Employee with life insurance coverage with an aggregate face amount
equal to at least $6,125,000, except for such lower amounts that
may be consented to by Employee from time to time. Employer
shall also pay any taxes imposed on Employee by reason of receiving
such life insurance coverage over the amount otherwise provided to
Employee under the Employer’s standard group life insurance
program.
6.4 The Board has adopted a policy that, for security
reasons, Employee is to use the aircraft owned by Employer (the
“Company Aircraft”) for all of his business and
personal travel whenever possible. Consistent with this
policy, Employee shall be entitled to use the Company Aircraft for
both business and personal travel provided that (i) Employee
may only use the Company Aircraft for personal travel for up to 125
hours of flight time per calendar year unless otherwise determined
by the Board and (ii) Employer shall impute income to Employee
for such personal use based on the Standard Industry Fare Level
(“SIFL”) rates in accordance with Internal Revenue
Regulations section 1.61-21(g).
7.
Death During
Employment . If Employee should die during the Term of
Employment, Employer shall pay (a) to Employee’s spouse,
if living or (b) if his spouse is not then living, to his then
living issue by right of representation or (c) if none of the
above are then living, to his estate a cash lump sum payment equal
to: (1) one year’s Base Compensation at the rate
in effect at his death and (2) one year’s bonus.
(For these purposes, “bonus” shall mean the highest
annual bonus paid or payable to Employee for the three calendar
years immediately preceding the year of Employee’s
death.) In addition, for a period of two years from
Employee’s death, Employer shall continue to provide
Employee’s family with the same level of medical, dental and
vision insurance benefits that they were receiving through Employer
immediately prior to Employee’s death.
8.
Termination by
Employer .
8.1 Termination by Employer due to Disability
. Should Employer terminate the Term of
Employment prior to the Expiration Date due to
“Disability” (as defined below) Employer shall pay
to Employee a cash lump sum payment equal to: (1) one
year’s Base Compensation at the rate in effect at termination
(reduced by any amounts payable to Employee pursuant to any
long-term disability plan in effect at the time of such
termination) and (2) one year’s bonus. (For these
purposes, “bonus” shall mean the highest annual bonus
paid or payable to Employee for the three calendar years
immediately preceding the year of termination.) In
addition, for a period of two years
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from Employee’s termination of employment,
Employer shall continue to provide Employee and his family with the
same level of life, medical, dental a nd
vision insurance benefits that they were receiving through Employer
immediately prior to Employee’s termination of
employment.
Definition of
Disability .
For the purposes of this Agreement, “ Disability” shall
mean Employee’s absence from employment with
the Employer which: (i) was due to his inability to
engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment which can be
expected to result in death or can be expected to last for a
continuous period of not less than twelve (12) months; or
(ii) resulted from a medically determinable physical or mental
impairment which can be expected to result in death or can be
expected to last for a continuous period of not less than twelve
(12) months, and caused Employee to receive income replacement
benefits for a period of not less than three (3) months under
an accident and health plan covering the Employer’s
employees or (iii) qualifies as a disability under the
Employer’s Long Term Disability Plan.
8.2 Termination by Employer
For Cause
. Should Employer terminate the Term of
Employment prior to the Expiration Date “For Cause” (as
defined below), Employer shall pay to Employee in complete
satisfaction of Employer’s obligations under this Agreement
and without waiving any rights which it or its subsidiaries may
have against Employee, the compensation which would otherwise be
payable to him pursuant to Paragraph 4.1 of this Agreement up to
the end of the month in which such termination occurs and Employer
shall not be obligated to make any payments to Employee pursuant to
Paragraph 4.2 of this Agreement.
Definition of For
Cause .
For the purposes of this
Agreement, “For Cause” shall mean
(1) Employee’s willful failure to substantially perform
his duties or any other willful and material breach of this
Agreement by Employee (other than a failure or breach resulting
from his incapacity due to physical or mental illness, injury or
similar incapacity), which failure or breach is not cured after the
passage of a reasonable period of time to cure contained in a
written demand from the Board that specifically describes such
failure or breach; (2) Employee’s participation in
activities that are competitive with Employer’s business,
which participation is not cured after the passage of a reasonable
period of time to cure contained in a written demand from the Board
that specifically describes such conduct; (3) Employee’s
conviction of a felony; or (4) Employee’s violation of
his duty to maintain confidentiality as required by Paragraph
15.
8.3 Termination by Employer other than due to Disability
or For Cause .
Should Employer terminate the Term
of Employment prior to the Expiration Date for any reason other
than due to Disability pursuant to Paragraph 8.1 or For Cause
pursuant to Paragraph 8.2, Employer shall pay to Employee a
cash lump sum payment equal to: (1) two years’
Base Compensation at the rate in effect at termination and
(2) two years’ bonus. (For these purposes,
“bonus” shall mean the highest annual bonus paid or
payable to Employee for the three calendar years immediately
preceding the year of termination.) In addition, for a
period of two years from Employee’s termination of
employment, Employer shall continue to provide Employee and his
family with the same
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level of life, medical, dental and vision
insurance benefits that they were receiving through Employer
immediately prior to Employee’s termination of
employment.
9.
Termination by
Employee.
9.1 Termination by Employee for Good
Reason . Should
Employee terminate the Term of Employment prior to the Expiration
Date for “Good Reason” (as defined below), Employer
shall pay to Employee a cash lump sum payment equal to:
(1) two years’ Base Compensation at the rate in effect
at termination and (2) two years’ bonus. (For
these purposes, “bonus” shall mean the highest annual
bonus paid or payable to Employee for the three calendar years
immediately preceding the year of termination.) In addition,
for a period of two years from Employee’s termination of
employment, Employer shall continue to provide Employee and his
family with the same level of life, medical, dental and vision
insurance benefits that they were receiving through Employer
immediately prior to Employee’s termination of
employment.
Definition of Good
Reason . For
the purposes of this Agreement, “Good Reason” shall
mean (a) material diminution in Employee Base Compensation;
(b) material diminution in authority, duties, responsibilities
or reporting relationship; (c) material diminution in the
budget over which Employee has authority; (d) material change
in geographic work location; or (e) any other material breach
of this Agreement by Employer.
9.2 Other Termination by Employee . Should
Employee terminate the Term of Employment prior to the Expiration
Date for any reason other than set forth above, Employee will not
be entitled to the additional payments set forth above.
However, if Employee indicates in terminating the Term of
Employment that he is retiring, Employer and Employee shall enter
into the post-retirement consulting agreement set forth in
Paragraph 11.
10.
Prorated and Prior Year Bonus
Payments.
10.1 If a termination under Sections 7, 8 or 9, other than
under Section 8.2 (Termination by Employer For Cause) or under
Section 9.2 (Other Termination by Employee) occurs in a given
year on a date on or after July 1 of such year, Employee shall
be entitled to receive a prorated bonus payment for such year
. The prorated bonus payment will be an amount that is
(1) equal to the highest annual bonus paid to Employee for the
three calendar years immediately preceding the year of termination
and (2) prorated from the beginning of the year of termination
to the date of termination.
10.2 If a termination under Sections 7, 8 or 9, other than
under Section 8.2 (Termination by Employer For Cause) or under
Section 9.2 (Other Termination by Employee) occurs after the
end of a given year but before the annual bonus for such year has
been paid, Employee shall be entitled to receive such annual
bonus. In the event the amount of the annual bonus has
already been determined in good faith by the Compensation Committee
prior to Employee’s termination, then the annual bonus paid
to Employee shall be equal to the amount so determined. If,
however, the annual bonus for
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such year has not yet been so determined, then
the amount of annual bonus shall be equal to the highest annual
bonus paid to Employee for the three calendar years immediately
preceding such given year.
10.3 It is agreed that the bonus amounts referred to in
Section 10.1 and 10.2 above shall be in addition to the other
bonus payments that may become payable pursuant to other sections
of this Agreement.
11.
Post-Retirement Consulting
Agreement.
Notwithstanding anything in this Agreement to the contrary, upon
(a) the retirement of Employee at any time prior to the
Expiration Date or (b) upon the expiration of the Term of
Employment at the Expiration Date, Employee and Employer shall
enter into a consulting agreement substantially in the form
attached hereto effective as of the date of such retirement or the
Expiration Date, as applicable.
12.
Change in
Control . In the event of a Change in Control (as defined
below) at any time during the Term of Employment, all stock option
rights, stock appreciation rights, restricted stock and any and all
other similar rights theretofore granted to Employee shall vest
and, if applicable, become exercisable in full.
For purposes of this Agreement, a Change in
Control shall mean either (i) a merger or consolidation of
Zenith with or into another company or corporation, other than
(a) a merger or consolidation which would result in the voting
securities of Zenith outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity) at
least 75% of the combined voting power of the voting securities of
Zenith or such surviving entity outstanding immediately after such
merger or consolidation or (b) a merger or consolidation
effected to implement a recapitalization of Zenith (or similar
transaction) in which no “person” (as such term is used
in Sections 13(d) and 14(d) of the Securities Exchange
Act of 1934, as amended) acquires more than 50% of the combined
voting power of Zenith’s then outstanding securities; or
(ii) an assignment of this Agreement by Zenith under the
provisions of Paragraph 19.2 hereof; or (iii) the sale of all
or substantially all of Zenith’s assets; or (iv) a
change in the identities of a majority of the members of the Board
within a one-year period or less; or (v) any other transaction
which would require any party or affiliated group of parties to
obtain approval from, or require such transactions to be presented
for approval by, the California Insurance Commissioner (assuming
there is no preemption of California insurance laws by Federal
Law).
13.
Excise Tax
. Notwithstanding anything to the contrary
in this Agreement, in the event that Employee becomes entitled to
severance payments, if any of the severance payments will be
subject to the tax (the “Excise Tax”) imposed by
Section 4999 of the Internal Revenue Code of 1986, as amended
(the “Code”), Zenith shall pay to Employee an
additional amount (the “Gross-Up Payment”) such that
the net amount retained by Employee, after deduction of any Excise
Tax on the Total Payments (as hereinafter defined) and any federal,
state and local income and other tax and Excise Tax upon the
payment provided for herein, shall be equal to the Total
Payments. For purposes of determining whether any of the
Total Payments will be subject to the Excise Tax and the
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amount of such Excise Tax, (i) any other
payments or benefits received or to be received by Employee in
connection with a Change in Control or Employee’s termination
of employment (whether pursuant to the terms of this Agreement or
any other plan, arrangement or agreement with Employer, any person
whose acti
