Document:

Exhibit 10.12

 

[Freedom Group, Inc. Letterhead]

 

PERSONAL & CONFIDENTIAL

NOT VALID UNLESS EXECUTED BY BOTH PARTIES

 

August 31, 2009

 

Mr. Paul
A. Miller

13202 Stable Brook Way

Herndon, VA 20171

 

Re:                             Purchase
and Separation Agreement and General Release

 

Dear Paul:

 

This letter agreement (this “Agreement”) confirms your
resignation from your employment with Freedom Group, Inc. (the “Company”)
and the Company’s subsidiaries, affiliates and related entities, and your
resignation from the Boards of Directors of the Company and its subsidiaries,
affiliates and related entities, in each case, effective as of August 31,
2009 (the “Separation Date”).  By
signing this Agreement, you agree to the terms and conditions set forth below.

 

A.                                   Purchase and
Sale of Company Stock and Options.  Subject to your compliance with the
obligations set forth in this Agreement, the Company agrees to the following:

 

1.                                       Vesting of
Common Stock.  Pursuant to
the terms of that certain Restricted Stock Agreement, dated December 12,
2007, as amended (the “Restricted Stock Agreement”), upon your
resignation from the Company on the Separation Date, 57,510 shares of your
restricted common stock of the Company (the “Common Stock”) granted
pursuant to the Restricted Stock Agreement shall vest (the “Vested
Common Stock”).  The remaining 22,684
shares of your restricted Common Stock shall remain unvested and shall be
cancelled effective upon the Separation Date (the “Unvested Common
Stock”).

 

2.                                       Vesting of
Options.  Pursuant to the terms of that
certain Non-Qualified Stock Option Award Agreement dated [May 14, 2008]
(the “Option Award Agreement”), upon your resignation from the
Company on the Separation Date, options to purchase the Common Stock granted
pursuant to the Option Award Agreement (the “Options”) (i) to
purchase 127,392 shares of Common Stock shall vest (the “Vested Options”)
and (ii) to purchase 171,918 shares of Common Stock 

 

1

 

shall remain unvested and shall be cancelled effective upon the Separation
Date (the “Unvested Options”).

 

3.                                       Purchase and
Sale.  On the terms and subject to
the conditions of this Agreement, the Company hereby agrees to purchase, and
you agree to sell to the Company, (i) all of the Vested Common Stock for
an aggregate price of $391,068.00 (the “Common Stock Purchase Price”)
and (ii) all of the Vested Options for an aggregate price of $541,416.00
(the “Option Purchase Price” and, collectively with the Common Stock
Purchase Price, the “Purchase Price”).

 

4.                                       Closing.  The closing of the purchase and sale of the
Vested Common Stock and Vested Options contemplated by this Agreement (the “Closing”)
shall take place on the Effective Date, as that term is defined in Section J(4) below.

 

5.                                       Delivery of and
Payment for the Company Stock.  At the Closing,

 

(a)                                  you will
deliver to the Company any certificates representing the Company Stock and/or
the Options; and

 

(b)                                 the Company
will pay you the Purchase Price by wire transfer of immediately available funds
to a bank account specified by you.

 

B.                                     Severance
Payment and Additional Payment.

 

1.                                       Severance
Payment. In accordance with Section 6(f) of the Employment
Agreement, the Company shall:

 

(a)                                  Continue to pay
to you your base salary of $350,000.00 per year from the Separation Date until
the one-year anniversary of the Separation Date in semi-monthly installments in
accordance with the Company’s standard payroll practices, and

 

(b)                                 Pay you at
Closing your accrued incentive compensation through August 31, 2009 in the
amount of $233,333.00.

 

2.                                       Additional
Payment. As a further inducement for you to enter into this Agreement, the
Company will pay to you, in addition to the Purchase Price and the Severance
Payment, the sum of $2,639,183.00, as follows:

 

(a)                                  At the
Closing:  $639,183.00;

 

(b)                                 On the first
anniversary of the Closing: 
$1,000,000.00;

 

(c)                                  On the second
anniversary of the Closing:  $500,000.00;
and

 

(d)                                 On the third
anniversary of the Closing:  $500,000.00

 

2

 

In each case, such payment will be by wire transfer of immediately
available funds to a bank account specified by you.  In the event that any such day is not a
business day, such payment shall be made on the next succeeding business day.

 

C.                                     Company
Representations and Warranties.  The Company hereby represents and warrants to
you that:

 

1.                                       Corporate
Organization; Authority to Conduct Business.  The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Delaware.  The Company has all corporate
power and all material governmental licenses, authorizations, consents and
approvals required to carry on its business as now conducted and as proposed to
be conducted and to own, operate and lease its properties and assets.

 

2.                                       Authority.  The Company has the requisite corporate power
and authority to execute and deliver this Agreement and to perform its
obligations hereunder.

 

3.                                       Legal and
Binding Agreement.  This
Agreement has been duly executed and delivered by the Company and constitutes a
legal, valid and binding agreement of the Company, enforceable against the
Company in accordance with its terms.

 

D.                                    Miller
Representations and Warranties.  You hereby represent and warrant to the
Company that:

 

1.                                       Legal and
Binding Agreement.  This
Agreement has been duly executed and delivered by you and constitutes a legal,
valid and binding agreement by you, enforceable against you in accordance with
its terms.

 

2.                                       Title.  The Vested Common Stock, Unvested Common
Stock, Vested Options and Unvested Options constitute all of the outstanding
equity interests of the Company beneficially owned by you.  You own the Vested Common Stock and Vested
Options beneficially and of record, free and clear of any encumbrances and upon
the Closing will transfer to the Company good and valid title to the Common
Stock free and clear of any encumbrances.

 

3.                                       No Other
Representations.  Except as
set forth herein, no representations or warranties have been made to you by the
Company or any officer, employee, agent or affiliate of the Company with
respect to this Agreement or the transactions contemplated hereby.

 

E.                                      Miller’s
Obligations.

 

1.                                       Except as may
be required by law, you will not disclose the contents or substance of this
Agreement to anyone except members of your immediate family and any tax or
legal counsel you may consult regarding the meaning or effect hereof, and you
will instruct each of the foregoing not to disclose the same.

 

3

 

2.                                       You agree to
provide assistance to the Company and its subsidiaries, affiliates and related
entities by making yourself available on a reasonable basis to provide
information to, and to consult with, the Company and its subsidiaries,
affiliates and related entities on matters about which you have knowledge as a
result of your employment, including
but not limited to all matters (formal or informal) in connection with any
investigations, litigation (potential or ongoing) and administrative, regulatory or other proceedings which currently
exist, or which may have arisen prior to or which arise following the signing
of this Agreement.  Such cooperation will
include, but not be limited to, your willingness to be interviewed by
representatives of the Company and its subsidiaries, affiliates and
related entities and to participate in
any such proceedings by deposition or testimony.  Any reasonable expenses you incur as a result of such
assistance or cooperation will be borne by the Company.  In
the event that you are required to retain separate legal counsel with respect
to such deposition or testimony, the Company will reimburse you, or cause you
to be reimbursed, for such reasonable costs thereof.

 

3.                                       In the event
that you are subpoenaed or otherwise required by order of a court of competent
jurisdiction or other legal process to appear in connection with any matter or
proceeding involving the Company or its subsidiaries, affiliates and related
entities, you will notify the Company in accordance with the notice provisions
set forth in Section K(1) below at least fifteen (15) business
days in advance of such appearance, unless to do so would place you in
violation of the subpoena, court order or other legal process, in which case
you shall give as much notice as possible without placing yourself in violation
of the subpoena, court order or other legal process.

 

F.                                      Employment
Agreement; Management Board Member Agreement.

 

1.                                       Except as set
forth elsewhere in this Section F, the Executive Employment
Agreement entered into between you and Remington Arms Company, Inc. (“Remington”)
as of the 31st day of October, 2008 (the “Employment
Agreement”, capitalized terms used but not defined in this Section F
having the meanings set forth in the Employment Agreement) shall cease to have
any further force or effect as of the Separation Date, and by signing this
Agreement you are acknowledging that no further payments or other compensation
or benefits, other than as provided herein, are due to you thereunder or
hereunder.

 

2.                                       Subject to your
completion and submission of the appropriate election forms, you will be
permitted to continue your health, dental and prescription drug coverage under
the Remington’s Group Benefits Plan (as such Plan may be amended from time to
time) pursuant to COBRA (see Section I(5) below) at your
expense until the earlier of (i) the second anniversary of the Separation
Date, and (ii) the date you first become eligible for substantially
equivalent insurance coverage provided by any other entity following
termination.

 

4

 

3.                                       Each of the
following sections of the Employment Agreement will continue in full force and
effect according to their terms as if set forth in their entirety in this
Agreement:

 

(a)                                  your
obligations under Sections 7 (Unauthorized Disclosure),
8 (Non-Competition), 9 (Non-Solicitation of Employees),
10 (Non-Solicitation of Customers), 11 (Return of Property),
12 (Non-Disparagement), 13 (Failure to Comply with Covenants) and
14 (Intellectual Property); provided, however, that, the limitations set forth in the Employment
Agreement not withstanding, your obligations in respect of each such section
shall continue for a period of three years following the Separation Date;

 

(b)                                 your rights
under Section 17 (Indemnification); and

 

(c)                                  the mutual
obligations and understandings under Section 18 (Compliance with Section 409A),
Section 19(a) (Arbitration), (b) (Governing Law; Consent to
Jurisdiction) and (c) (Taxes).

 

4.                                       The Management
Board Member Agreement entered into between you and Bushmaster Holdings, LLC,
effective as of August 1, 2008, shall cease to have any further force or
effect as of the Separation Date, and by signing this Agreement you are
acknowledging that no further payments or other compensation or benefits, other
than as provided herein, are due to you thereunder or hereunder

 

G.                                     General Release
and Waiver.  You
acknowledge that the payments and benefits provided for in Sections B
and F above are conditioned upon your executing a General Release and
Waiver which is attached to this Agreement as “Exhibit A.”

 

H.                                    Mutual
Obligations and Understandings.

 

1.                                       Without
limiting the obligations set forth in Section F(3)(a) above,
you represent that you have not disparaged, and will not disparage, directly or
indirectly, the Company or any of the other Releasees (as defined in Exhibit A),
and you will not make any comments or statements, written or oral, that reflect
adversely on any of them, nor will you make any comments or statements, written
or oral, regarding the Company or any of the other Releasees in any public
forum, other than factual statements about your responsibilities and
information about the Company or any of the other Releasees that is in the
public domain, without the prior written approval of the undersigned or his
designee.  The Company agrees that the
Company’s controlling shareholders, directors and officers will not, directly
or indirectly, disparage you.

 

2.                                       By entering
into this Agreement, neither the Company nor any of the other Releasees admits,
and each specifically denies, any liability, wrongdoing or violation of any
law, statute, regulation or policy. 
Nothing herein shall be deemed to constitute an admission of wrongdoing
by the Company or any of the other 

 

5

 

Releasees.  Neither this
Agreement nor any of its terms shall be used as an admission or introduced as
evidence as to any issue of law or fact in any proceeding, suit or action,
other than an action to enforce this Agreement.

 

3.                                       You agree that
if you materially breach any provision of this Agreement or the provisions of
the Employment Agreement that expressly survive, in addition to any other legal
or equitable remedy the Company or the other Releasees may have, you will
reimburse the Company and/or the other Releasees for all of its/their
reasonable attorneys’ fees and costs incurred to enforce this Agreement and/or
the surviving provisions of the Employment Agreement, to the fullest extent
permitted by applicable law.  In the
event that the Company materially breaches any provision of this Agreement, in
addition to any other legal or equitable remedy you may have, the Company will
reimburse you for all of your reasonable attorneys’ fees and costs incurred to
enforce this Agreement, to the fullest extent permitted by applicable law.

 

I.                                         Obligations
Unrelated to this Agreement.  Regardless of whether you sign this
Agreement, the following shall apply:

 

1.                                       You will be
paid for all earned but unused vacation days as of the Separation Date; provided; however, that such payment is deemed part of the
payments to be paid pursuant to Section B.

 

2.                                       You are deemed
to have resigned from all officer and director positions at the Company and its
subsidiaries, affiliates and related entities, effective as of the Separation
Date.  Should your signature be required
on any other document to effect the foregoing, you will provide it immediately
upon request.

 

3.                                       You are
required to return to the undersigned all records, materials and other property
you have in your possession or control that are the property of the Company and
its subsidiaries, affiliates and related entities as soon as possible.

 

4.                                       You will comply
with the surviving obligations set forth in the Employment Agreement as if set
forth in their entirety in this Agreement. 
(See Section F(3) above.)

 

5.                                       Your coverage
under the Remington Group Benefits Plan will continue until August 31,
2009.  You will be given separate
information regarding your right to continue your coverage, as required by the
Consolidated Omnibus Budget Reconciliation Act of 1986 (“COBRA”).  If you decline to enter into this Agreement,
the premiums will be your sole responsibility. 
In such instance, you may be eligible for a COBRA subsidy in accordance
with the American Recovery and Reinvestment Act of 2009 (the “Stimulus Act”),
which was signed into law on February 17, 2009, and which permits eligible
employees to pay only thirty-five percent (35%) of their COBRA premiums for up
to nine (9) months.  Separate
information will be provided to you about this benefit as well.

 

6

 

6.                                       You are fully
vested in your account balances under the Remington Arms Company 401(k) Plan.

 

7.                                       Your
participation in all other benefit plans will cease as of the Separation Date.

 

J.                                        Consideration
Period.  By signing this Agreement in
the space provided below and returning it to the undersigned, you are
confirming your acceptance of the terms and conditions set forth herein, and
you are acknowledging the following:

 

1.                                       Because the
obligations as set out in this Agreement (including Exhibit A)
represent a complete waiver and release of all claims that you have against the
Company and the other Releasees based on your employment and the cessation
thereof, you should review it carefully before signing.  You can take up to twenty-one (21) days from
your receipt of this Agreement to consider its meaning and effect and to
determine whether or not you wish to enter into it.  During that time, you are advised to consult
with an attorney.  If you desire to
accept this offer then you must sign and return this Agreement no later than
the 21st day of September, 2009.

 

2.                                       If you sign
this Agreement before the end of the twenty-one (21) day consideration period,
you are doing so voluntarily.

 

3.                                       In addition,
you may take up to seven (7) days after signing this Agreement to revoke
your signature.  Any revocation shall be
made in writing to the undersigned.

 

4.                                       This Agreement
will not become effective, and your rights to payments under Sections B
and F(2) will not accrue, until after the seven (7) day period
expires without revocation.  Provided
that you sign this Agreement within the consideration period and do not revoke
your signature, the eighth (8th) day following the end of the revocation period will be the “Effective
Date”.

 

5.                                       If you elect
not to sign this Agreement, or if you revoke your signature, you will not
receive the payments or benefits described in Sections B and F(2).

 

K.                                    Miscellaneous.

 

1.                                       All notices,
requests and other communications to any party hereunder shall be in writing
(including facsimile transmission) and shall be given,

 

if to the Company, to:

 

Freedom Group, Inc.

870 Remington Drive

P.O. Box 700

Madison, NC  27025-0700

Attention:  General Counsel

 

7

 

With a copy to (which shall not constitute notice):

 

Cerberus Capital Management, L.P.

299 Park Avenue

New York, NY  10171

Facsimile No.:  (212) 891-1540

Attn:  George Kollitides

 

With an additional copy to (which shall not constitute notice):

 

Milbank, Tweed, Hadley & McCloy LLP

One Chase Manhattan Plaza

New York, NY  10005

Facsimile No.:  (212) 822-5735

Attn:  Roland Hlawaty, Esq.

 

if to you, to:

 

Paul
A. Miller

13202 Stable Brook Way

Herndon, VA 20171

 

2.                                       This Agreement
(including Exhibit A) constitutes the entire agreement between the
parties with respect to the subject matter hereof and supersedes all prior
negotiations, representations or agreements relating thereto, whether written
or oral, with the exception of any agreements expressly described herein as
having created continuing rights and obligations.  You represent that in executing this
Agreement, you have not relied on any promise, representation, inducement,
agreement or statement not set forth herein. 
No amendment or modification of this Agreement shall be valid or binding
upon the parties unless in writing and signed by both parties.

 

3.                                       No failure by
any party to insist upon strict compliance with any term of this Agreement,
enforce any right, or seek any remedy upon any default of the other will
affect, or constitute a waiver of, the first party’s right to insist upon such
strict compliance, enforce that right, or seek that remedy with respect to that
default or any prior, contemporaneous, or subsequent default.  No custom or practice of the parties at
variance with any provision of this Agreement will affect or constitute a
waiver of any party’s right to demand strict compliance with all provisions of
this Agreement.

 

4.                                       In the event
that any one or more of the provisions of this Agreement is held to be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions will not in any way be affected or impaired thereby.  Moreover, if any one or more of the provisions
contained in this Agreement is held to be excessively broad as to duration,
scope, activity or subject, such 

 

8

 

provisions will be construed by limiting and reducing them so as to be
enforceable to the maximum extent compatible with applicable law.

 

5.                                       This Agreement
will be binding upon, inure to the benefit of, and be enforceable by and
against the respective heirs, legal representatives, successors and assigns of
the parties to this Agreement.

 

6.                                       This Agreement
may be executed in counterparts (which may be exchanged by facsimile or email),
each of which shall be deemed an original and both of which when taken together
shall constitute one and the same instrument.

 

7.                                       This Agreement
will be governed by and construed in accordance with the laws of the State of
Delaware without regard to the conflict of law principles thereof.  Any dispute arising under this Agreement will
be resolved in accordance with Section 19(a) of the Employment
Agreement, as if set forth in its entirety in this Agreement, and any such
action or proceeding shall be heard in the State of Delaware.

 

8.                                       Nothing in this
Agreement shall restrict you from providing consultation services to the
Company after the Separation Date, for no additional remuneration, upon the
mutual agreement of you and the Company.

 

	
   

  	
  Sincerely,

  
	
   

  	
   

  
	
   

  	
  FREEDOM
  GROUP, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Theodore H.
  Torbeck

  
	
   

  	
  Name:
  Theodore H. Torbeck

  
	
   

  	
  Title: Chief Executive
  Officer

  

 

 

I am signing this Agreement knowingly, voluntarily and with full
understanding of its terms and effects. 
I have not relied on any representations or statements not set forth
herein.

 

 

	
  /s/
  Paul A. Miller

  	
   

  
	
  Paul A. Miller

  	
   

  
	
   

  	
   

  
	
  Date:

  	
  9/9/2009

  	
   

  
			

 

9

 

EXHIBIT A

 

GENERAL RELEASE AND WAIVER OF CLAIMS

 

In consideration of the payment by Remington Arms Company, Inc. (“Remington”)
of the severance and other benefits to me as set forth in Sections B
and F of the Agreement to which this GENERAL RELEASE AND WAIVER OF CLAIMS
(this “Release”) is attached as Exhibit A, I, PAUL A.
MILLER, agree to and do finally and completely release and forever discharge
Remington, and its direct and indirect parents (including Freedom Group, Inc.
and Cerberus Capital Management, L.P.) and its/their subsidiaries and its/their
affiliates, and its/their respective officers, members, managers, directors,
partners, shareholders, investors, principals, executives, consultants,
employees and agents, and any of their respective predecessors and successors
in interest and assigns (collectively, the “Releasees”) from any and all
liabilities, claims, obligations, demands, and causes of action of any and
every kind or nature whatsoever, in law, equity or otherwise, known or unknown,
suspected or unsuspected, disclosed and undisclosed, which I now have, own or
hold or claim to have, own or hold, against each or any of the Releasees or
arising from and/or relating to my employment with Remington and any of the
other Releasees and termination of that employment.

 

This Release includes, without limiting the generality of the
foregoing, (a) claims arising under any provision of federal, state, or
local law, any federal, state or local anti-discrimination statute, ordinance
or regulation, the Age Discrimination in Employment Act of 1967 (“ADEA”),
the Americans with Disabilities Act, Title VII of the Civil Rights Act of 1964,
the Civil Rights Act of 1991 and the Civil Rights Act of 1866, the Employee
Retirement Income Security Act of 1974, the New York State Human Rights Law,
and the New York Labor Laws, and the North Carolina Equal Employment Practices
Act and the North Carolina Labor Laws, the Virginia Human Rights Act and the
Virginia Labor Laws, and any other similar state or local employment law (if
and to the extent applicable and as any of the foregoing may be amended from
time to time), and any similar federal, state, or local statutes, ordinances or
regulations, or claims in the nature of a breach of contract, claims for
wrongful discharge, emotional distress, defamation, fraud or breach of the
covenant of good faith and fair dealing, tort and wage or benefit claims (other
than the payments to which I am entitled under the Employment Agreement); (b) my
waiver of all rights to post-termination benefits, and (c) my waiver of
any claims to other severance or termination payments or benefits.

 

Notwithstanding the foregoing, this Release does not include actions
brought by me (or my personal representative) to enforce any rights I have (a) under
the Agreement, (b) to secure vested benefits under any other employee
benefit plan of Remington of which I am a participant except as otherwise
released in accordance with the preceding paragraph, (c) to seek
indemnification under the Remington’s bylaws or other corporate governance
documents, or (d) to seek worker’s compensation or unemployment
compensation benefits.  This Release also
does not apply to any rights or claims that I might have which arise as a
result of any conduct that occurs after the date this Release is signed by
me.  If I violate the terms of this
Release, I agree to pay the Releasees’ costs and reasonable attorneys’ fees to
the fullest extent permitted by applicable law.

 

10

 

I acknowledge that, among other rights subject to this Release, I am
hereby waiving and releasing any rights I may have under the ADEA, that this
Release is knowing and voluntary, and that the consideration given for this
Release is in addition to anything of value to which I was already entitled as
an employee of Remington.

 

I acknowledge that I  may hereafter
discover claims or facts in addition to or different from those which I now
know or believe to exist with respect to the subject matter of this Release and
which, if known or suspected at the time of executing this Release, may have
materially affected this Release or my decision to execute this Release.  Nevertheless, I hereby waive any right, claim
or cause of action that might arise as a result of such different or additional
claims or facts.

 

I agree that if any court or governmental agency assumes jurisdiction
over any claim, demand, charge, complaint, lawsuit or other legal action that,
in whole or in part, pertains to my employment or the cessation thereof, I
shall not be entitled to any monetary or other benefit that results from such
claim, demand, charge, complaint or lawsuit, except as otherwise expressly
required by applicable law.

 

By signing the Agreement and this Release, I am acknowledging that no
further payments or other compensation or benefits, other than as provided in
the Agreement, are due to me thereunder or hereunder.

 

As provided by law, I have been advised in the Agreement to carefully
consider the matters outlined in the Agreement and this Release and to consult
with such professional advisors as I deem appropriate, including a lawyer of my
own choice.  I acknowledge that I have
had at least twenty-one (21) days from receipt of this Release to consider the
terms and conditions set forth herein, and I understand that I have a period of
seven (7) days following my execution of this Release to revoke my
signature, in which event this Release shall not be effective or binding on the
parties, and I will not receive the payments or benefits described in Sections B
and F of the Agreement.  I
understand fully and acknowledge the terms and consequences of this Release,
and I voluntarily accept them.

 

 

ACKNOWLEDGED AND AGREED TO,

INTENDING TO BE LEGALLY BOUND
HEREBY:

 

 

	
  Dated:

  	
  9/9/2009

  	
   

  	
  /s/ Paul A. Miller

  
	
   

  	
  Paul
  A. Miller

  

 

11Exhibit 10.1

 

ZENITH NATIONAL INSURANCE CORP.

 

FORM

OF

RESTRICTED STOCK AWARD AGREEMENT

FOR EMPLOYEES

(PERFORMANCE-BASED VESTING)

 

THIS RESTRICTED STOCK AWARD AGREEMENT (the “Award Agreement”) is made and entered into as of «Award_Date» (the “Date of
Grant”), by and between Zenith National Insurance Corp., a Delaware
corporation (the “Company”), and «Name» (the “Grantee”).  Capitalized terms not defined herein shall
have the meaning ascribed to them in the Zenith National Insurance Corp. 2004
Restricted Stock Plan, as may be amended and restated from time to time and in
effect at the time of this Award Agreement (the “Plan”).  Where the context permits, references to the
Company or any of its Subsidiaries shall include the successors to the
foregoing.

 

Pursuant to the Plan, the Administrator has
determined that the Grantee is to be granted Restricted Stock, subject to the
terms, conditions and restrictions set forth in the Plan and herein, and hereby
grants such Restricted Stock.

 

1.             Grant of Restricted Stock.  The Company hereby grants to the Grantee «Award1» shares of Restricted Stock (the “Award”) on the terms, conditions and restrictions set forth
in this Award Agreement and as otherwise provided in the Plan.

 

2.             Purchase Price; Method of Payment.  The purchase price per share of Restricted
Stock shall be $1.00.  The purchase price
may be paid (i) in cash or its equivalent, (ii) shares of
unrestricted Stock owned by the Grantee for greater than six (6) months,
the Fair Market Value of which on the purchase date is equal to the purchase
price of the Restricted Stock, (iii) to the extent permitted by law,
cancellation of indebtedness, (iv) services rendered or (v) any
combination of the foregoing.  In the
absence of any other form of payment tendered by the Grantee, the purchase
price shall be paid by services rendered.

 

3.             Restrictions with Respect to Restricted Stock.

 

(a)           Restrictions.  The Restricted Stock granted hereunder and
any interest therein, may not be sold, transferred, pledged, hypothecated,
assigned or otherwise disposed of, except by will or the laws of descent and
distribution, prior to the lapsing of restrictions set forth in the Plan and
this Award Agreement.  Any attempt to
dispose of any Restricted Stock in contravention of any such restrictions shall
be null and void and without effect.

 

(b)           Restricted Period; Lapse of Restrictions.  Except as otherwise provided in the Plan or
this Award Agreement, the restrictions set forth in Paragraph 3(a) shall
lapse with respect to the shares of Restricted Stock granted hereunder on the
Determination Date (as

 

 

defined below) provided that both of the following conditions are
met:  (i)  the Grantee continues to
be employed by the Company or any Subsidiary as of such Determination Date and (ii) the
Company Combined Ratio (as defined below) for the [three future] fiscal year
period ended December 31, [     ] is
at least [five] percentage points below the average Industry Combined Ratio for
the [    ], [    ] and [   
] fiscal years.  For the purposes
of this provision, “Company Combined Ratio” for a period shall mean the total
combined ratio for the workers’ compensation operations of the Company for such
period as determined from the consolidated statutory financial statements of
the property and casualty insurance subsidiaries of the Company; “Industry
Combined Ratio” for a fiscal year shall mean the combined ratio for the workers’
compensation insurance industry, as a whole, based on actual and projected
statutory financial statements for such fiscal year as published or announced
by any independent organization; and “Determination Date” shall mean either [February 15,
   ], or such later date that the Compensation
Committee determines to be necessary in order to accurately calculate to a
reasonable degree whether the vesting conditions have been met.

 

4.             Form of Restricted Stock.  The Company may, in its discretion, reflect
ownership of Restricted Stock through the issuance of stock certificates, in
book-entry form or any combination thereof, in accordance with Section 5(e) of
the Plan.

 

5.             Unrestricted Shares.  Promptly after each lapse of restrictions
relating to the Restricted Stock without forfeiture, and provided that the
Grantee shall have complied with his or her obligations under Paragraph 9
hereof, the Company shall, with respect to such Unrestricted Shares:

 

(a)           If such Unrestricted Shares were initially issued in
certificated form, issue to the Grantee or the Grantee’s personal
representative a stock certificate representing a number of shares of Stock,
free of the restrictive legend described in Paragraph 7, equal to the number of
shares of Restricted Stock with respect to which such restrictions have
lapsed.  If certificates representing
such Restricted Stock shall have theretofore been delivered to the Grantee,
such certificates shall be returned to the Company, complete with any necessary
signatures or instruments of transfer prior to the issuance by the Company of
such unlegended shares of Stock; or

 

(b)           If such Unrestricted Shares were initially issued in
book-entry form, transfer such Unrestricted Shares to the Grantee in the form
and registration as indicated by the Grantee.

 

6.             Rights as a Stockholder.  Subject to the restrictions set forth in the
Plan and this Award Agreement, the Grantee shall possess all incidents of
ownership with respect to the Restricted Stock granted hereunder, including the
right to vote such Restricted Stock and the right to receive dividends (whether
ordinary, extraordinary or in kind) with respect to such Restricted Stock;
provided, however, that all dividends accrued on shares of Restricted Stock
while they are still subject to the restrictions set forth in Paragraph 3(a) will
not be paid by the Company to the Grantee until the restrictions with respect
to such shares have lapsed in accordance with Paragraph 3(b).

 

 

If the restrictions set forth in Paragraph 3(a) do
not lapse in accordance with Paragraph 3(b), then, as of the date that it is
determined that the restrictions will not lapse, (a) the Restricted Stock
shall be cancelled, (b) the Grantee shall possess no further incidents of
ownership of such Restricted Stock and (c) the Grantee shall not be
entitled to any of the dividends accrued on the shares of Restricted Stock
while they were subject to the restrictions set forth in Paragraph 3(a).

 

7.             Certificate; Restrictive Legend.  Any certificate issued for Restricted Stock
prior to the lapse of any outstanding restrictions relating thereto shall be
inscribed with the following legend, or such other legend as determined by the
Administrator:

 

THIS CERTIFICATE AND THE SHARES OF STOCK
REPRESENTED HEREBY ARE SUBJECT TO THE TERMS AND CONDITIONS, INCLUDING
FORFEITURE PROVISIONS AND RESTRICTIONS AGAINST TRANSFER (THE “RESTRICTIONS”),
CONTAINED IN THE ZENITH NATIONAL INSURANCE CORP. AMENDED AND RESTATED 2004
RESTRICTED STOCK PLAN AND THE RESTRICTED STOCK AWARD AGREEMENT ENTERED INTO
BETWEEN THE REGISTERED OWNER AND THE COMPANY. 
ANY ATTEMPT TO DISPOSE OF THESE SHARES IN CONTRAVENTION OF THE
RESTRICTIONS, INCLUDING BY WAY OF SALE, ASSIGNMENT, TRANSFER, PLEDGE,
HYPOTHECATION OR OTHERWISE, SHALL BE NULL AND VOID AND WITHOUT EFFECT.

 

8.             Termination of Employment.  Except as may otherwise be set forth in this
Award Agreement or the Plan [or the written Employment Agreement, if any,
between the Grantee and the Company or its subsidiary], the following
provisions shall apply upon the termination of Grantee’s employment:

 

(a)           Upon the Grantee’s death or termination of employment due to
Disability, the restrictions set forth in Paragraph 3(a) shall lapse.

 

(b)           Upon termination of the Grantee’s employment with the Company
or any Subsidiary thereof for any reason (other than death or Disability) prior
to the lapsing of restrictions with respect to any portion of the Restricted
Stock granted hereunder, the Grantee shall forfeit any rights to the shares of
Restricted Stock with respect to which the restrictions have not lapsed and
shall have no further rights thereto.

 

(c)           Upon forfeiture of any shares of Restricted Stock, to the
extent the Grantee paid the purchase price of such forfeited shares in a manner
other than services rendered, the Company shall repurchase such shares from the
Grantee at a price per share equal to the lesser of (i) the Fair Market
Value of such shares at the time of forfeiture or (ii) the price Grantee
paid for such shares initially.

 

9.             Taxes.  Pursuant to Section 9(d) of the
Plan, the Company (or Subsidiary, as the case may be) may require the Grantee
to remit to the Company (or Subsidiary, as the case may be) in cash an amount
sufficient to satisfy any federal, state and local tax withholding requirements
related to the Award.  With the approval
of the Administrator, the Grantee may satisfy the foregoing requirement by electing
to have the Company withhold from delivery shares of Stock or by delivering
shares of Stock already owned by the Grantee for at least 6 

 

 

months, in each case, having a value equal to the minimum amount of tax
required to be withheld.  Such shares
shall be valued at their Fair Market Value on the date on which the amount of
tax to be withheld is determined, and fractional share amounts shall be settled
in cash.  Such an election may be made
with respect to all or any portion of the shares of Stock to be delivered
pursuant to the Award.

 

The Grantee shall promptly notify the Company
of any election made pursuant to Section 83(b) of the Internal
Revenue Code of 1986, as amended.

 

10.           Adjustments.  The Award and all rights and obligations
under this Award Agreement are subject to Section 3 of the Plan.

 

11.           Notices.  Whenever any notice is required or permitted
hereunder, such notice shall be in writing and shall be given by personal
delivery or first class, certified or registered mail with return receipt
requested.  Any notice required or
permitted to be delivered hereunder shall be deemed to have been duly given on
the date which it is personally delivered or, whether actually received or not,
on the third business day after mailing to the respective parties named below.

 

	
  If to the Company:

  	
  Zenith National Insurance Corp.

  
	
   

  	
  21255 Califa St

  
	
   

  	
  Woodland Hills, CA 91367

  
	
   

  	
  Attn.: Michael E. Jansen, Executive Vice President

  
	
   

  	
  and General Counsel

  
	
   

  	
  Facsimile: 818-713-0177

  
	
   

  	
   

  
	
  If to the Grantee:

  	
  «Name»

  
	
   

  	
  «Address_Line_1»

  
	
   

  	
  «City_State_Zip»

  

 

Either party may change such party’s address
for notices by duly giving notice pursuant hereto.

 

12.           Compliance with Laws.

 

(a)           Shares of Stock shall not be issued pursuant to the Award
granted hereunder unless the issuance or delivery of such shares pursuant thereto
shall comply with all relevant provisions of law, including, without
limitation, the Securities Act of 1933 (the “Securities
Act”) and the Exchange Act, shall be subject to the requirements of
any stock exchange upon which the Stock may then be listed, and shall be
further subject to the approval of counsel for the Company with respect to such
compliance.  The Company shall be under
no obligation to effect the registration pursuant to the Securities Act, of any
interests in the Plan or any shares of Stock to be issued hereunder or to
effect similar compliance under any state laws.

 

(b)           All certificates for shares of Stock delivered under the Plan
shall be subject to such stop-transfer orders and other restrictions as the
Administrator may deem advisable under the rules, regulations, and other
requirements of the Securities and Exchange 

 

 

Commission, any stock exchange upon which the Stock may then
be listed, and any applicable federal or state securities law, and the
Administrator may cause a legend or legends to be placed on any such
certificates to make appropriate reference to such restrictions.  The Administrator may require, as a condition
of the issuance or delivery of certificates evidencing shares of Stock pursuant
to the terms hereof, that the recipient of such shares make such agreements and
representations as the Administrator, in its sole discretion, deems necessary
or desirable.

 

13.           Protections Against Violations of Agreement.  No purported sale, assignment, mortgage,
hypothecation, transfer, pledge, encumbrance, gift, transfer in trust (voting
or other) or other disposition of, or creation of a security interest in or
lien on, any of the shares of Stock underlying the Award by any holder thereof
in violation of the provisions of this Award Agreement, the Plan or the
certificate of incorporation or the bylaws of the Company, will be valid, and
the Company will not transfer any such shares on its books nor will any such
shares be entitled to vote, nor will any dividends be paid thereon, unless and
until there has been full compliance with such provisions to the satisfaction
of the Company.  The foregoing
restrictions are in addition to and not in lieu of any other remedies, legal or
equitable, available to enforce said provisions.

 

14.           Failure to Enforce Not a Waiver.  The failure of the Company to enforce at any
time any provision of the Award Agreement shall in no way be construed to be a
waiver of such provision or of any other provision hereof.

 

15.           Governing Law.  The Award Agreement shall be governed by and
construed according to the laws of the State of Delaware without regard to its
principles of conflict of laws.

 

16.           Incorporation of the Plan.   The Plan, as it exists on the date of the
Award Agreement and as amended from time to time, is hereby incorporated by
reference and made a part hereof, and the Award and this Award Agreement shall
be subject to all terms and conditions of the Plan.  In the event of any conflict between the
provisions of the Award Agreement and the provisions of the Plan, the terms of
the Plan shall control, except as expressly stated otherwise.  The term “Section” generally refers to
provisions within the Plan (except where denoted otherwise); provided, however,
the term “Paragraph” shall refer to a provision of this Award Agreement.

 

17.           Amendments.  This Award Agreement may be amended or
modified at any time, but only by an instrument in writing signed by each of
the parties hereto.

 

18.           Counterparts.        This Award Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

 

19.           Invalid Provision.   The invalidity or unenforceability of any
particular provision hereof shall not affect the other provisions hereof, and
this Award Agreement shall be construed in all respects as if such invalid or
unenforceable provision had been omitted.

 

20.           Entire Agreement.    This Award Agreement and the Plan, as it
exists on the date of this Award Agreement and as amended from time to time, [and
the written Employment Agreement, if any, between the Grantee and the Company
or its subsidiary] contain the entire 

 

 

agreement and understanding of the parties hereto with respect to the
subject matter contained herein and therein and supersede all prior
communications, representations and negotiations in respect thereto.

 

21.           Captions and Headings.   The captions and headings of the paragraphs
and subparagraphs of this Award Agreement are provided for convenience only and
are not to serve as a basis for interpreting or construing this Award
Agreement.

 

22.           Agreement Not a Contract of Employment.  Neither the Plan, the granting of the Award,
the Award Agreement nor any other action taken pursuant to the Plan shall
constitute or be evidence of any agreement or understanding, express or
implied, that the Grantee has a right to continue to be employed by, or to
provide services as a director, consultant or advisor to, the Company, any
Subsidiary or affiliate thereof for any period of time or at any specific rate
of compensation.

 

23.           Authority of the Administrator.  The Administrator shall have full authority
to interpret and construe the terms of the Plan and the Award Agreement.  The determination of the Administrator as to
any such matter of interpretation or construction shall be final, binding and
conclusive.

 

24.           Binding Effect.  The Award Agreement shall apply to and bind
the Grantee and the Company and their respective permitted assignees or
transferees, heirs, legatees, executors, administrators and legal successors.

 

25.           Tax Representation.  The Grantee has reviewed with his or her own
tax advisors the federal, state, local and foreign tax consequences of the
transactions contemplated by this Award Agreement.  The Grantee is relying solely on such
advisors and not on any statement or representations of the Company or any of
its agents.  The Grantee understands that
he or she (and not the Company) shall be responsible for any tax liability that
may arise as a result of the transactions contemplated by the Award Agreement.

 

26.           Acceptance.  The Grantee hereby acknowledges receipt of a
copy of the Plan, the prospectus and this Award Agreement.  Grantee has read and understands the terms
and provisions thereof, and accepts the Award subject to all the terms and
conditions of the Plan and the Award Agreement.

 

IN WITNESS WHEREOF, the parties hereto have
executed and delivered the Award Agreement as of the day and year first above
written.

 

 

	
   

  	
  ZENITH NATIONAL INSURANCE
  CORP.

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
  [                                 ]

  
	
   

  	
  Title: 

  	
  [                                 ]

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  GRANTEE

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Signature:

  	
   

  
	
   

  	
  Name:

  	
  «Name»

  
	
   

  	
  Address:

  	
  «Address_Line_1»

  
	
   

  	
   

  	
  «City_State_Zip»

  
	
   

  	
  Social Security No.: «SSN»

  
	
   

  	
   

  	
   

  
	
   

  	
  Date:

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