EXHIBIT
10.7
EMPLOYMENT
AGREEMENT
THIS EMPLOYMENT AGREEMENT (the
“Agreement”), made and entered into as of January 1,
2005, by and between AmTrust Financial Services, Inc. a Delaware
corporation, with its principal office located at 59 Maiden Lane, 6
th Floor, New York, New York 10038
(“AmTrust” or “Company”) and Barry D.
Zyskind (“Executive”).
WHEREAS, AmTrust has determined that it is in
the best interests of the Company and its stockholders to employ
Executive and to set forth in this Agreement the obligations and
duties of both Company and Executive; and
WHEREAS, AmTrust wishes to assure itself of the
services of Executive for the period hereinafter provided, and
Executive is willing to be employed by Company for said period,
upon the terms and conditions provided in this
Agreement;
NOW, THEREFORE, in consideration of the premises
and mutual covenants contained herein and for other good and
valuable consideration, the receipt of which is mutually
acknowledged, Company and Executive (individually a
“Party” and together the “Parties”) agree
as follows:
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(a)
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“Beneficiary” means the
person or persons named by Executive pursuant to Section 15 below
or, in the event that no such person is named who survives
Executive, his estate.
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(b)
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“Board” means the Board
of Directors of AmTrust.
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(i)
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Executive’s conviction of a
felony involving an act or acts of dishonesty on his part and
resulting in gain or personal enrichment at the expense of
Company;
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(ii)
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willful and continued failure of
Executive to perform his obligations under this Agreement,
resulting in demonstrable material economic harm to
Company;
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(iii)
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a willful and material breach by
Executive of the provisions of Sections 12 or 13 below to the
demonstrable and material detriment of Company.
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Notwithstanding the foregoing, in no event shall
Executive’s failure to perform the duties associated with his
position caused by his mental or physical disability constitute
Cause for his termination.
For the purposes of this Section 1(c), no act or
failure to act on the part of Executive shall be considered
“willful” unless it is done, or omitted to be done, by
him in bad faith or without reasonable belief that his action or
omission was in the best interests of Company. Any act or failure
to act based upon authority given pursuant to a resolution adopted
by the Board or based upon the advice of counsel for Company shall
be conclusively presumed to be done, or omitted to be done, by
Executive in good faith and in the best interests of
Company.
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(d)
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“Code” means the
Internal Revenue Code of 1986, as amended from time to
time.
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(e)
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“Disability” means the
illness or other mental or physical disability of Executive, as
determined by a physician acceptable to Company and Executive,
resulting in his failure during the Employment Term (i) to perform
substantially his applicable material duties under this Agreement
for a period of six consecutive months and (ii) to return to the
performance of his duties within thirty (30) days after receiving
written notice of termination.
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(f)
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“Employment Term” means
the period specified in Section 2(b) below.
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(g)
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“Fiscal Year” means the
fiscal year of the Company.
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(h)
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“Good Reason” means, at
any time during the Employment Term, in each case without
Executive’s prior written consent or his
acquiescence:
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(i)
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reduction in his then current
Salary;
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(ii)
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diminution, reduction or other
adverse change in the bonus or incentive compensation opportunities
available to Executive (with respect to the level of bonus or
incentive compensation opportunities, the applicable performance
criteria and otherwise the manner in which the bonuses and
incentive compensation are determined) in the aggregate from those
available as the date hereof in accordance with Section 4(a)
below;
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(iii)
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Company’s failure to pay
Executive any amounts otherwise vested and due him hereunder or
under any plan or policy of Company;
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(iv)
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diminution of Executive’s
titles, position, authorities or responsibilities, including not
serving on the Board;
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(v)
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assignment to Executive of duties
incompatible with his position of President;
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(vi)
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imposition of a requirement that
Executive report other than to the full Board;
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(vii)
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a material breach of the Agreement
by Company that is not cured within 10 business days after written
notification by Executive of such breach; or
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(i)
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“Salary” means the
annual salary provided for in Section 3 below, as adjusted from
time to time.
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(j)
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“Spouse” means, during
the Term of Employment, the woman who as of any relevant date is
legally married to Executive.
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(k)
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“Subsidiary” means any
corporation of which Company owns, directly or indirectly, more
than fifty percent (50%) of its voting stock.
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2.
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EMPLOYMENT TERM, POSITIONS AND
DUTIES
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(a)
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Employment of Executive. Company
hereby employs Executive, and Executive hereby accepts employment
with Company, in the positions and with the duties and
responsibilities set forth below and upon such other terms and
conditions as are hereinafter stated. Executive shall render
services to Company principally at Company’s corporate
headquarters, but he shall do such traveling on behalf of Company
as shall be reasonably required in the course of the performance of
his duties hereunder.
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(b)
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Employment Term. The initial
Employment Term shall commence as of January 1, 2005 and shall
terminate on December 31, 2009 (the “Initial Employment
Term”). Upon expiration of the initial Employment Term, this
Agreement shall renew automatically for successive three year terms
(“Successive Employment Terms”), unless either party
has provided one hundred eighty (180) days written notice of its of
his intention not to renew prior to the expiration of the Initial
Employment Term or any Successive Employment Term. The Initial
Employment Term and each Successive Employment Term, collectively,
shall constitute the Employment Term.
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(i)
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Until the date of termination of his
employment hereunder, Executive shall be employed as President and
Chief Executive Officer reporting to the full Board. In his
capacity as President and Chief Executive Officer, Executive shall
have the customary powers, responsibilities and authorities of
presidents of corporations of the size, type and nature of Company
including, without limitation, authority, in conjuction with the
Board as appropriate, to hire and terminate other employees of
Company.
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(ii)
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During the Employment Term, Company
shall use its best efforts to secure the election of Executive to
the Board. During the Employment Term, if the Board forms an
executive or similar committee, Executive shall serve
thereon.
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(i)
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Executive recognizes that, during
the Employment Term, he owes an undivided duty of loyalty to
Company and agrees to devote substantially all of his business time
and attention as is reasonably necessary to the performance of his
duties and responsibilities and to use his best efforts to promote
and develop the business of Company and its affiliates;
and
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(ii)
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Nothwithstanding the foregoing,
nothing shall preclude Executive from (a) serving on the boards of
a reasonable number of trade associations, charitable organizations
and/or businesses not in competition with Company, (b) engaging in
charitable activities and community affairs and (c) managing his
personal investments and affairs; provided, however, that, such
activities do not materially interfere with the proper performance
of his duties and responsibilities specified in Section 2 (c)
above.
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(a)
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Initial Salary. Executive shall
receive from Company a Salary, payable in accordance with the
regular payroll practices of Company, in a minimum amount of
$600,000.
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(b)
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Salary Increases. Executive shall be
entitled to a salary review annually commencing on the first
anniversary of the Effective Date of this Agreement. Such salary
review shall be based entirely on merit and any salary adjustments
shall be determined by the Board or compensation committee thereof.
Any amount to which Executive’s Salary is increased, as
provided in this Section 3(b) or otherwise, shall not thereafter be
reduced without his consent, and the term “Salary” as
used in this Agreement shall refer to his Salary as thus
increased.
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(a)
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Annual Profit Bonus. Provided that
the pre-tax profit of Company equals or exceeds the target profit
for the subject Fiscal Year set forth herein, Company shall pay
Executive an amount equal to two percent (2%) of the
Company’s pre-tax profit for each Fiscal Year or portion
thereof during the Employment Term, subject to a maximum amount
equal to two and one half times Executive’s Salary as of the
end of the Fiscal Year. For purposes of computing the Profit Bonus,
profit means Company’s revenues less expenses determined in
accordance with generally accepted accounting principles on a
consistent basis. The Annual Profit Bonus for each Fiscal Year
shall be paid no later than one hundred twenty (120) days as of the
end of the Fiscal Year. The target profit for each Fiscal Year of
the Employment Term is as follows:
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Fiscal Year 2005:
$20 million
Fiscal Year 2006:
$22 million
Fiscal Year 2007 $24.2 million
Fiscal Year 2008:
$26.6 million
Fiscal Year 2009:
$29.3 million
The target profit for Successive Employment
Terms shall be determined by the Board or the compensation
committee thereof, provided that the target profit for any Fiscal
Year may not be increased by more than 10% from the target profit
for the prior Fiscal Year without the express written consent of
Executive.
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(b)
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Special Bonus. Executive shall be
eligible to receive additional bonuses during the Employment Term.
The Board or the compensation committee thereof shall determine, in
its discretion, the occasion for payment, and the amount, of any
such bonus.
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During the Employment Term, Executive shall be
eligible to participate in any long-term incentive compensation
plan established by Company for the benefit of Executive or, in the
absence thereof, under any such plan established for the benefit of
members of the senior management of Company.
During the Employment Term, Executive shall be
eligible to receive grants of options to purchase shares of
Company’s stock and awards of shares of Company’s
stock, either or both as determined by the Board or Options
Committee thereof, under and in accordance with the terms of
applicable plans of Company and related option and award
agreements. It is the intention of Company to grant stock options
to Executive during the Employment Term.
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7.
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EXPENSE REIMBURSEMENT; CERTAIN OTHER
COSTS
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During the Employment Term, Executive shall be
entitled to prompt reimbursement by Company for all reasonable
out-of-pocket expenses incurred by him in performing services under
this Agreement, upon his submission of such accounts and records as
may be reasonably required by Company.
During the Employment Term, Company shall
provide Executive with the following perquisites:
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(a)
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an office of a size and with
furnishings and other appointments, and personal secretarial and
other assistance, at least equal to that provided to Executive by
Company as of the date hereof; and
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(b)
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payment of and the use of an
automobile and payment of related expenses on the same terms as in
effect on the date hereof or, if more favorable to Executive, as
made available generally to other executive officers of Company and
its affiliates at any time thereafter, but in no event to exceed,
in total, One Thousand Dollars ($1,000) per month.
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9.
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EMPLOYEE BENEFIT PLANS
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(a)
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General. During the Employment Term,
Executive shall be entitled to participate in all employee benefit
plans and programs made available to Company’s senior
executives or to its employees generally, as such plans or programs
may be in effect from time to time, including, without limitation,
pension and other retirement plans, profit-sharing plans, savings
and similar plans, group life insurance, hospitalization insurance,
surgical insurance, major and excess major medical insurance,
dental insurance, short-term and long-term disability insurance,
sick leave (including salary continuation arrangements), holidays,
vacation (not less than four weeks in any calendar year) and any
other employee benefit plans or programs that may be sponsored by
Company from time to time, including plans that supplement the
above-listed
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