Exhibit 10.1

 

EMPLOYMENT AGREEMENT

 

This EMPLOYMENT AGREEMENT (the “Agreement”) is entered into on January 23, 2006
between ZENITH NATIONAL INSURANCE CORP., a Delaware corporation (the “Company”),
and MICHAEL E. JANSEN (the “Executive”);

 

WHEREAS, the parties desire to enter into this Agreement setting forth the terms
and conditions for the employment relationship of the Executive with Zenith
Insurance Company, a California corporation and a wholly-owned subsidiary of
Company (“Zenith Insurance”).

 

NOW, THEREFORE, it is AGREED as follows:

 

1.                                       Employment.

 

(a)                                  Subject to earlier termination as provided
herein, the Executive is employed as Executive Vice President and General
Counsel of Zenith Insurance from January 23, 2006 (the “Effective Date”) through
the Term of this Agreement (as defined below).  The Executive shall also serve
as Executive Vice President and General Counsel of the Company without
additional compensation.  In addition, if requested by the Company, the
Executive shall serve in such other capacities as an officer of any of the
Company’s subsidiaries and affiliates without additional compensation.  The
Executive shall be the chief legal officer of the Company, its

 

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subsidiaries and affiliates and shall be responsible for the general corporate
legal affairs (excluding claims-related matters) of the Company, its
subsidiaries and affiliates, as well as their compliance with applicable
regulations, including those relating to securities, insurance, and corporate
governance(such as under the Sarbanes-Oxley Act of 2002).  The Executive shall
have such other duties and responsibilities and such executive power and
authority as is customary for an officer in his position and as shall be
allocated to him in such capacity.  He may also be assigned other duties and
responsibilities by the Board of Directors of the Company (the “Board”) or the
chief executive officer of the Company (the “Chief Executive Officer”) from time
to time provided such assignments are not inconsistent with the Executive’s
position with the Company.  In his capacity as Executive Vice President and
General Counsel of Zenith Insurance and the Company, the Executive shall devote
his full business time and energy to the business, affairs and interests of the
Company, its subsidiaries and affiliates and matters related thereto.  During
the Term of the Agreement, the Executive shall have no other employment other
than with the Company or a subsidiary or affiliate of the Company, except with
the prior written approval of the Board.  The Company hereby acknowledges and
agrees that the Executive shall have the right to serve in any capacity with
civic, educational, charitable and professional organizations and to make and
manage personal business investments that do not violate the non-competition
provisions of Section 10 of this Agreement, so long as such activities do not
interfere with the discharge of his duties to the Company hereunder.

 

(b)                                 During his employment hereunder, the
Executive shall report to the Chief Executive Officer or his designee.

 

2.                                       Term.  This Agreement shall be in
effect for a term commencing on the Effective Date and expiring on October 31,
2009 (“Expiration Date”), and such period

 

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shall be referred to herein as the “Term of this Agreement,” and such term shall
not be affected by the termination of the Executive’s employment hereunder.

 

3.                                       Salary.  Commencing as of the Effective
Date, the Executive’s minimum annual base salary shall be $500,000, which shall
be payable in installments in conformity with Zenith Insurance’s policy relating
to salaried employees.  The Executive’s base salary may be subject to annual
adjustment (but not below the then current amount) in the sole discretion of the
Board.

 

4.                                       Discretionary Bonuses.  During the Term
of this Agreement, the Executive shall be eligible for such discretionary
bonuses as may be authorized, declared, and paid by the Board in its sole
discretion and shall also be eligible for such bonuses under the Company’s
Executive Officer Bonus Plan, as may be awarded by the Board pursuant to the
terms of such plan.

 

5.                                       Participation in Retirement and
Executive Benefit Plans.  During his employment hereunder, the Executive shall
be eligible to participate in any plan of the Company relating to stock options,
restricted stock, stock purchases, pension, thrift, profit sharing, life
insurance, medical coverage, disability insurance, education, and other
retirement or employee benefits that the Company has adopted, may adopt, or
caused to be adopted for the benefit of Zenith Insurance’s executive employees
generally.  The Company shall also provide the Executive with such insurance or
other provisions for indemnification, defense or hold-harmless of officers that
are generally in effect for senior executive officers of the Company.
 Notwithstanding the foregoing, nothing contained in this Agreement shall
prohibit or limit the right of the Company to

 

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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 Zenith Insurance generally or to a defined
group of such employees and shall not apply solely to the Executive.

 

In addition, the Company will recommend to the Compensation Committee of the
Board at its next meeting following execution of this Agreement that the
Executive be awarded 10,000 shares of “restricted” common stock pursuant to the
Zenith National Insurance Corp. Amended and Restated 2004 Restricted Stock Plan.

 

6.                                       Fringe Benefits and Automobile.  In
addition to the benefit plans referred to in Section 5 hereof, the Executive
shall be eligible to participate in any other fringe benefits that are now or
may be or become applicable to Zenith Insurance’s executive employees, any other
benefits that are commensurate with the duties and responsibilities to be
performed by the Executive under this Agreement and reimbursement for reasonable
expenses incurred in the course of his duties hereunder in accordance with the
Company’s policy with respect thereto.  In addition, the Company shall provide
Executive with a $1,300 per month automobile allowance.  The benefits provided
under this Section 6 shall cease upon the Executive’s Date of Termination (as
defined below).

 

7.                                       Vacation; Memberships.  During his
employment hereunder, the Executive shall be entitled to an annual paid vacation
in accordance with the Zenith Insurance’s standard employment practices;
provided, however, Executive shall be treated for purposes of vacation as an
employee with more than 120 months of service.

 

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  Upon termination of the Executive’s employment for any reason, the Executive
shall be entitled to payment for any accrued but unused vacation time based upon
his then current salary.  The timing of paid vacations shall be scheduled in a
reasonable manner by the Executive.

 

During his employment hereunder, the Executive shall be entitled to appropriate
professional association and business club memberships, including reimbursement
of payment of dues and assessments pertaining thereto.

 

8.                                       Termination.

 

(a)                                  Disability.  If, as a result of the
Executive’s incapacity due to physical or mental illness, injury or similar
incapacity, he shall have been absent from the full-time performance of his
duties with the Company, its subsidiaries and affiliates for six months within
any eighteen-month period, and have exhausted his Family Medical Leave and its
California equivalent, his employment may be terminated by written notice (as
provided below) from the Company for “Disability.”

 

(b)                                 Cause.  Subject to the notice provisions set
forth below, the Company may terminate the Executive’s employment for “Cause” at
any time.  Termination for “Cause” shall mean termination upon (1) the
Executive’s continued willful failure to substantially perform his duties with
the Company, its subsidiaries or affiliates or his other willful breach of this
Agreement (other than any such failure or breach resulting from his incapacity
due to the physical or mental illness, injury or similar incapacity) after a
written demand for substantial performance is delivered to him by the Board or
the Chief Executive Officer, which demand specifically identifies

 

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the manner in which the Board believes that he has failed to substantially
perform his duties, or has otherwise breached this Agreement, (2) the
Executive’s conviction of a felony, (3) the Executive’s willful misconduct that
is materially and demonstrably injurious to the Company, (4) the Executive’s
violation of Section 10 hereof; or (5)  the Executive’s failure to remain an
active member in good standing of the State Bar of California; provided,
however, that the Executive shall not be terminated for “Cause” unless and until
the Board or the Chief Executive Officer has given the Executive written notice
of the Company’s intended actions and the alleged events or activities upon
which such termination for “Cause” is based and, with respect to those events or
activities for which a cure is possible, a reasonable opportunity to cure such
breach.

 

(c)                                  Constructive Termination.  If at any time
during the Term of this Agreement, any of the following events shall occur, the
Executive shall be entitled to terminate his employment hereunder and be treated
as if his employment had been terminated by the Company other than for Cause:

 

(i)                               The Executive is removed or otherwise
prohibited or restricted in the performance of his duties as set forth in
Section 1 hereof, other than through fault of the Executive;

 

(ii)                            Any payment due under this Agreement shall
remain unpaid for more than 60 days, after notice of non-payment and request for
payment have been given to the Company by the Executive pursuant to Section 12;

 

(iii)                         A Change in Control of the Company (as defined
below) shall occur during the Term of this Agreement, and within 180 days after
the effective

 

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date of any such Change in Control, the Executive delivers to the Company a
written notice of his election to terminate the Agreement effective as of the
date set forth in such notice, which effective date shall not be less than 30
days nor more than 90 days after the date of delivery of any such written
notice.  For purposes of this Section 8(c)(iii), a Change in Control shall mean
either (i) a merger or consolidation of the Company with or into another company
or corporation, other than (a) a merger or consolidation which would result in
the voting securities of the Company 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 the Company or such surviving entity
outstanding immediately after such merger or consolidation or (b) a merger or
consolidation effected to implement a recapitalization of the Company (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 (the
“Exchange Act”)) acquires more than 50% of the combined voting power of the
Company’s then outstanding securities; or (ii) the sale of all or substantially
all of the Company’s assets; or (iii) a change in the identities of a majority
of the members of the Company’s Board of Directors within a one-year period or
less; or (iv) the acquisition, directly or indirectly, by any person or related
group of persons (other than the Company or a person that is controlled by the
Company), of beneficial ownership of securities possessing more than fifty
percent (50%) of the total combined voting power of the Company’s outstanding
securities.

 

(d)                                 Notice of Termination.  Any purported
termination of the Executive’s employment by the Company or by him shall be
communicated by a

 

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written notice (“Notice of Termination”) that shall indicate the specific
termination provision in this Agreement relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executive’s employment under the provision so indicated.

 

(e)                                  Date of Termination, Etc.  “Date of
Termination” shall mean (1) if the Executive’s employment is terminated by his
death, the date of his death; (2) if the Executive’s employment is terminated
for Disability, thirty days after Notice of Termination is given; (3) if the
Executive’s employment is terminated for Cause, the date specified in the Notice
of Termination; and (4) if the Executive’s employment is terminated for any
other reason, the date specified in the Notice of Termination.

 

9.                                       Compensation Upon Termination or During
Disability.  The Executive shall be entitled to the following benefits during a
period of disability, or upon termination of his employment, as the case may be,
if such period or termination occurs during the Term of this Agreement:

 

(a)                                  During any period that the Executive fails
to perform his full-time duties with the Company as a result of incapacity due
to physical or mental illness, injury or similar incapacity, he shall continue
to receive his compensation and other benefits payable to him under this
Agreement at the rate in effect at the commencement of any such period, less
amounts payable to him under the Company’s disability plan or program or other
similar plan during such period, or under any governmental program, until his
employment is terminated pursuant to Section 8(a) hereof.  If, during any period
of disability, the Executive’s employment shall be

 

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terminated by reason of his death, disability or the expiration of this
Agreement, notwithstanding the provisions of this section, his pay shall cease
and his benefits, if any, shall be determined solely under the Company’s
retirement, insurance and other compensation programs then in effect in
accordance with the terms of such programs, and the Company shall have no
further obligations to him under this Agreement.

 

(b)                                 If at any time the Executive’s employment
shall be terminated (i) by reason of his death, (ii) by the Company for Cause or
Disability, or (iii) by him (other than by reason of a constructive termination
pursuant to Section 8(c) hereof), the Company shall pay him (or his appropriate
payee, as determined in accordance with Section 11(c) hereof) his full base
salary through the Date of Termination at the rate in effect at the time Notice
of Termination is given, plus all other amounts to which he is entitled from the
Company through the Date of Termination under any compensation plan in each case
at the time such payments are due, and the Company shall have no further
obligations to him under this Agreement.  In addition, in the event the
Executive’s employment is terminated by reason of the Executive’s death or
Disability, the Executive (or his appropriate payee) shall be entitled to
receive a pro rata portion of any bonus that would otherwise have been payable
to the Executive with respect to the year in which the Executive’s employment is
terminated.  For purposes of this provision, if the Executive’s bonus for such
year has not been determined, the Executive shall be deemed to have been
entitled to a bonus equal to the bonus paid or payable to the Executive with
respect to the immediately preceding year.

 

(c)                                  If the Executive’s employment should be
terminated by the Company other than for Cause or Disability or by the Executive
by reason of a

 

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constructive termination pursuant to Section 8(c) hereof, he shall receive the
payments and benefits provided below (“Severance Payments”); provided, however,
in order to be entitled to any payments or benefits other than those specified
in subparagraph (i) below Executive must execute a release, in a form acceptable
to the Company, of the Company and any subsidiaries and affiliates of the
Company and their respective officers, directors, stockholders, employees and
agents:

 

(i)                               The Company shall pay to the Executive his
full base salary through the Date of Termination, at the rate in effect at the
time Notice of Termination is given, plus all other amounts to which he is
entitled under any compensation plan of the Company, in each case at the time
such payments are due;

 

(ii)                                  In addition:

 

(A)  IN THE EVENT OF EITHER (1) A TERMINATION BY THE COMPANY OTHER THAN FOR
CAUSE OR DISABILITY OR (2) A CONSTRUCTIVE TERMINATION PURSUANT TO SECTION 8(C)
PURSUANT TO ANY SUBSECTION OTHER THAN (III) (CHANGE IN CONTROL), THE COMPANY
SHALL PAY THE EXECUTIVE, AT THE TIME SUCH PAYMENTS WOULD HAVE BEEN MADE HAD THE
EXECUTIVE’S EMPLOYMENT NOT BEEN TERMINATED HEREUNDER, ALL SALARY PAYMENTS THAT
WOULD HAVE BEEN PAYABLE TO THE EXECUTIVE PURSUANT TO THIS AGREEMENT HAD THE
EXECUTIVE CONTINUED TO BE EMPLOYED FOR THE GREATER OF (X) THE REMAINING TERM OF
THIS AGREEMENT OR (Y) SIX MONTHS (THE “SEVERANCE PERIOD”) (ASSUMING FOR THE
PURPOSE OF SUCH CONTINUING PAYMENTS THAT

 

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THE EXECUTIVE’S SALARY FOR SUCH PERIOD IS TO BE BASED ON HIS RATE OF SALARY AT
THE DATE OF TERMINATION), PLUS ANY BONUS THAT WOULD OTHERWISE HAVE BEEN PAYABLE
TO THE EXECUTIVE WITH RESPECT TO THE SEVERANCE PERIOD; PROVIDED, HOWEVER, THAT
TO THE EXTENT THE EXECUTIVE’S BONUS FOR ANY PORTION OF SUCH SEVERANCE PERIOD HAD
NOT BEEN DETERMINED, THE EXECUTIVE SHALL BE DEEMED TO HAVE BEEN ENTITLED TO A
BONUS EQUAL TO THE BONUS PAID OR PAYABLE TO THE EXECUTIVE WITH RESPECT TO THE
CALENDAR YEAR ENDED IMMEDIATELY PRIOR TO THE DATE OF TERMINATION OR

 

(B)  IN THE EVENT OF A CONSTRUCTIVE TERMINATION PURSUANT TO SECTION 8(C)(III)
(CHANGE IN CONTROL), THE COMPANY SHALL PAY THE EXECUTIVE IN A LUMP SUM, ALL
SALARY PAYMENTS THAT WOULD HAVE BEEN PAYABLE TO THE EXECUTIVE PURSUANT TO THIS
AGREEMENT HAD THE EXECUTIVE CONTINUED TO BE EMPLOYED FOR THE GREATER OF (X) THE
REMAINING TERM OF THIS AGREEMENT OR (Y) TWO YEARS (THE “SEVERANCE PERIOD”)
(ASSUMING FOR THE PURPOSE OF SUCH CONTINUING PAYMENTS THAT THE EXECUTIVE’S
SALARY FOR SUCH PERIOD IS TO BE BASED ON HIS RATE OF SALARY AT THE DATE OF
TERMINATION), PLUS ANY BONUS THAT WOULD OTHERWISE HAVE BEEN PAYABLE TO THE
EXECUTIVE WITH RESPECT TO THE SEVERANCE PERIOD; PROVIDED, HOWEVER, THAT TO THE
EXTENT THE EXECUTIVE’S BONUS FOR ANY PORTION OF SUCH SEVERANCE PERIOD HAD NOT
BEEN DETERMINED, THE

 

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EXECUTIVE SHALL BE DEEMED TO HAVE BEEN ENTITLED TO A BONUS EQUAL TO THE BONUS
PAID OR PAYABLE TO THE EXECUTIVE WITH RESPECT TO THE CALENDAR YEAR ENDED
IMMEDIATELY PRIOR TO THE DATE OF TERMINATION;

 

(iii)                         Notwithstanding any provisions in the applicable
plans governing them, all stock option rights, stock appreciation rights and any
and all other similar rights theretofore granted to the Executive, including,
but not limited to, the Executive’s right to receive cash in lieu of exercising
stock options, as may be provided in his stock option agreements, shall vest and
shall then be exercisable in full, and the Executive shall have 90 days
following his termination within which to exercise any and all such rights and
the restrictions on any and all shares of restricted stock granted to the
Executive that are outstanding on the Date of Termination shall lapse as of the
Date of Termination;

 

(iv)                        The Company’s group health plans allow for benefits
to extend beyond employment, under certain circumstances and for a specified
length of time, as defined by the federal law called the Consolidated Omnibus
Budget Reconciliation Act of 1985 (commonly known as “COBRA”).  During the
Severance Period, if the Executive and his family are eligible for COBRA
coverage, the Company shall, at its cost, pay the Executive’s COBRA premium for
his and his family’s coverage, as applicable, under the medical, dental, vision
and the employee assistance plan, up until the Executive is no longer eligible
for COBRA, or the end of the Severance Period, whichever occurs first.  If upon
completion of federal COBRA, the Executive and his family are then eligible for
the corresponding California COBRA law, AB 1401 (“Cal-COBRA”), which applies to
medical coverage only, the Company shall, at its cost,

 

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pay the Executive’s Cal-COBRA premium for his and his family’s coverage, as
applicable, up until the Executive is no longer eligible for Cal-COBRA, or the
end of the Severance Period, whichever occurs first.  During the Severance
Period, the Company shall, at its cost, arrange to provide the Executive with
life insurance (excluding accidental death and dismemberment).  The amount of
life insurance coverage will be equal to that in effect for the Executive on the
Date of Termination under the Company’s group life insurance program (subject to
the age reduction schedule).  The Company agrees to pay an additional amount
necessary to reimburse the Executive for any taxes imposed solely by reason of
his receipt of such benefits following termination of his employment as stated
herein.

 

(d)                                 The Company shall continue in effect for the
benefit of the Executive all insurance or other provisions for the
indemnification, defense or hold-harmless of officers or directors of the
Company that are in effect on the date the Notice of Termination is given by the
Executive or by the Company with respect to all of his acts and omissions while
an officer as fully and completely as if such termination had not occurred, and
until the final expiration or running of all periods of limitation against
actions that may be applicable to such acts or omissions.

 

(e)                                  Notwithstanding anything to the contrary in
this Agreement, in the event that the Executive becomes entitled to the
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”), the Company shall pay to the Executive an additional
amount (the “Gross-Up Payment”) such that the net amount retained by the
Executive, after payment of any Excise Tax on the Total Payments (as hereinafter
defined) and any federal, state and local income and other tax

 

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and Excise Tax upon the Gross-Up Payment provided for by this Section 9(e),
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 amount of such
Excise Tax, (i) any other payments or benefits received or to be received by the
Executive in connection with a Change in Control or the Executive’s termination
of employment (whether pursuant to the terms of this Agreement or any other
plan, arrangement or agreement with the Company, any person whose actions result
in a Change in Control or any person affiliated with the Company or such person
(which, together with Severance Payments, shall constitute “Total Payments”)),
shall be treated as “parachute payments” within the meaning of
section 280G(b)(2) of the Code, and all “excess parachute payments” within the
meaning of section 280G(b)(1) shall be treated as subject to the Excise Tax,
unless in the opinion of tax counsel selected by the Company and acceptable to
the Executive, such other payments or benefits (in whole or in part) do not
constitute parachute payments, or such excess parachute payments (in whole or in
part) represent reasonable compensation for services actually rendered within
the meaning of section 280G(b)(4) of the Code, within the meaning of
section 280G(b)(3) of the Code, or are otherwise not subject to the Excise Tax,
(ii) the amount of the Total Payments which shall be treated as subject to the
Excise Tax shall be equal to the lesser of (A) the total amount of the Total
Payments or (B) the amount of excess parachute payments within the meaning of
section 280G(b)(1) (after applying clause (i), above), and (iii) the value of
any non-cash benefits or any deferred payment or benefit shall be determined by
the Company’s independent auditors in accordance with the principles of
sections 280G(d)(3) and (4) of the Code.  For purposes of determining the amount
of the Gross-Up Payment, the Executive shall be

 

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deemed to pay federal income taxes at the highest marginal rate of federal
income taxation in the calendar year in which the Gross-Up Payment is to be made
and state and local income taxes at the highest marginal rate of taxation in the
state and locality of the Executive’s residence on the date of termination of
employment, net of the maximum reduction in federal income taxes which could be
obtained from deduction of such state and local taxes.  In the event that the
Excise Tax is subsequently determined to be less than the amount taken into
account hereunder at the time of termination of the Executive’s employment, the
Executive shall repay to the Company, at the time that the amount of such
reduction in Excise Tax is finally determined, the portion of the Gross-Up
Payment attributable to such reduction plus interest on the amount of such
repayment at the rate provided in section 1274(b)(2)(B) of the Code.  In the
event that the Excise Tax is determined to exceed the amount taken into account
hereunder at the time of the termination of the Executive’s employment
(including by reason of any payment the existence or amount of which cannot be
determined at the time of the Gross-Up Payment), the Company shall make an
additional Gross-Up Payment in respect of such excess (plus any interest,
penalties or additions payable by the Executive with respect to such excess) at
the time that the amount of such excess is finally determined.

 

10.                                 Confidential Information and
Non-Competition.

 

(a)                      During the Term of this Agreement and thereafter, the
Executive shall not, except as may be required to perform his duties hereunder
or as required by applicable law, disclose to others or use, whether directly or
indirectly, any Confidential Information regarding the Company.  “Confidential
Information” shall mean information about the Company, its subsidiaries and
affiliates, and their respective clients and

 

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customers that is not available to the general public and that was learned by
the Executive in the course of his employment by the Company, including (without
limitation) any data, formulae, information, proprietary knowledge, trade
secrets and client and customer lists and all papers, resumes, records and the
documents containing such Confidential Information.  The Executive acknowledges
that such Confidential Information is specialized, unique in nature and of great
value to the Company, and that such information gives the Company a competitive
advantage.  Upon the termination of his employment for any reason whatsoever,
the Executive shall promptly deliver to the Company all documents (and all
copies hereof) containing any Confidential Information.

 

(b)                     During the term of this Agreement and any period the
Executive is entitled to benefits hereunder, the Executive shall not, directly
or indirectly, without the prior written consent of the Company, provide
consultative service (with or without pay) to, own, manage, operate, join,
control, participate in, or be connected (as a stockholder, partner, or
otherwise) with, any business, individual, partner, firm, corporation, or other
entity that is then in competition with the Company or any of its subsidiaries
or affiliates (a “Competitor of the Company”); provided, however, that the
“beneficial ownership” by the Executive, either individually or as a member of a
“group,” as such terms are used in Rule 13d of the General Rules and Regulations
under the Exchange Act, of not more than one percent (1%) of the voting stock of
any publicly held corporation shall not be a violation of this Agreement.  It is
further expressly agreed that the Company will or would suffer irreparable
injury if the Executive were to compete with the Company or any subsidiary or
affiliate of the Company in violation of this Agreement.

 

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(c)                      During the Term of this Agreement or for the period
ending on the last day of the one-year period following termination of his
employment, the Executive shall not, directly or indirectly, influence or
attempt to influence customers or suppliers of the Company or any of its
subsidiaries or affiliates, to divert their business to any Competitor of the
Company.

 

(d)                     The Executive recognizes that he will possess
confidential information about other employees of the Company, its subsidiaries
and affiliates relating to their education, experience, skills, abilities,
compensation and benefits, and interpersonal relationships with customers of the
Company, its subsidiaries and affiliates.  The Executive recognizes that the
information he will possess about these other employees is not generally known,
is of substantial value to the Company, its subsidiaries and affiliates in
developing their products and in securing and retaining customers, and will be
acquired by him because of his business position with the Company, its
subsidiaries or affiliates.  The Executive agrees that, during the Term of this
Agreement and for the period ending on the last day of the one-year period
following termination of his employment, the Executive will not, directly or
indirectly, solicit or recruit any employee of the Company, its subsidiaries and
affiliates for the purpose of being employed by him, or any business,
individual, partner, firm, corporation or other entity that is then a Competitor
of the Company.  The Executive further agrees that he will not convey any such
confidential information or trade secrets about other employees of the Company,
its subsidiaries and affiliates to any Competitor of the Company or to anyone
affiliated with him or with any Competitor of the Company.

 

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(e)                      The Executive further acknowledges that the remedy at
law for any breach by him of the covenants contained in this Section 10 will be
inadequate and that in the event of a breach, or threatened breach, by the
Executive of the covenants contained therein, the Company shall be entitled to
provisional relief or an injunction restraining the Executive from using, for
his own benefit, and/or from disclosing, in whole or in part, the list of the
customers of the Company, its subsidiaries and affiliates and/or trade secrets
or other confidential information of the Company, its subsidiaries and
affiliates, and/or from rendering any services to any person, firm, corporation,
association or other entity to whom such a list, and/or such trade secrets or
other confidential information, in whole or in part, have been disclosed, or are
threatened to be disclosed and such other declaratory relief as is proper to
cause the Executive to return to the Company any and all memoranda,
specifications, documents and all other material relating to the business of the
Company, its subsidiaries and affiliates that he may have under his possession
or control.  Nothing herein shall be construed as prohibiting the Executive from
pursuing professional employment or investments utilizing his own skills and
knowledge or the Company from pursuing any other remedies available to the
Company from such breach or threatened breach, including the recovery of damages
from the Executive.  The provisions of this Section 10 shall survive the
expiration or termination, for any reason, of this Agreement and of the
Executive’s employment.

 

11.                                 Assignments/Mitigation.

 

(a)                                  This Agreement and the rights, interest and
benefits hereunder are personal to the Executive and shall not be assigned,
transferred, pledged, or hypothecated in any way by the Executive, and shall not
be subject to execution,

 

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 attachment or similar process.  Any attempted assignment, transfer, pledge, or
hypothecation, or the levy of any execution, attachment or similar process
thereon, shall be null and void and without effect.

 

(b)                                 The Company shall have the right to assign
this Agreement and to delegate all of its rights, duties and obligations
hereunder, whether in whole or in part, to any parent, affiliate, successor or
subsidiary organization of the Company or corporation with which the Company may
merge or consolidate or which acquires by purchase or otherwise all or
substantially all of the Company’s consolidated assets, but such assignment
shall not release the Company from its obligations under this Agreement.

 

(c)                                  This Agreement shall inure to the benefit
of and be enforceable by the Executive and his personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees.  If the Executive should die while any amount would still
be payable to him hereunder had he continued to live, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the terms of this
Agreement to his devisee, legatee or other designees, or, if there is no such
designee, to his estate.

 

(d)                                 The Executive shall have no duty to mitigate
the Company’s obligations hereunder by seeking other employment or by becoming
self-employed; provided, however, that compensation, including life, disability,
dental, accident, group health insurance and other health and welfare benefits
as well as salary, wage or other compensation, received by the Executive during
or with respect to the Severance

 

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Period and attributable to services rendered during such period by the Executive
to persons or entities other than the Company shall be applied to reduce the
Company’s obligation to provide compensation and benefits under this Agreement. 
The Executive shall promptly notify the Company of his securing other employment
or his becoming self-employed and shall account to the Company as to the amount
of such compensation and benefits; if the Company has paid amounts in excess of
those to which the Executive was entitled (after giving effect to the offsets
provided above), the Executive shall reimburse the Company promptly thereafter
for such excess.

 

12.                                 Notice.  Notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered or five business days after being
mailed by United States certified mail, return receipt requested, postage
prepaid, addressed (a) if to the Executive, to Michael E. Jansen, 29463 Malibu
View Court, Agoura Hills, CA 91301 and (b) if to the Company, to 21255 Califa
Street, Woodland Hills, CA 91367, Attention:  Stanley R. Zax, Chief Executive
Officer, with a copy to the Secretary of the Company; or to such other address
as either party may have furnished to the other in writing in accordance
herewith, except that notice of change of address shall be effective only upon
receipt thereof.

 

13.                                 Section Headings.  The Section headings used
in this Agreement are included solely for convenience and shall not affect, or
be used in connection with. the interpretation of this Agreement.

 

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14.                                 Severability.  Any provision of this
Agreement which is deemed invalid, illegal or unenforceable in any jurisdiction
shall, as to that jurisdiction and subject to this section be ineffective to the
extent of such invalidity, illegality or unenforceability, without affecting in
any way the remaining provisions hereof in such jurisdiction or rendering that
or any other provisions of this Agreement invalid, illegal, or unenforceable in
any other jurisdiction.  Moreover, if any provision should be deemed invalid,
illegal or unenforceable because its scope is considered excessive, such
provision shall be modified so that the scope of the provision is reduced only
to the minimum extent necessary to render the modified provision valid, legal
and enforceable.

 

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

 

16.                                 Arbitration.  In the event there is any
dispute between the Executive and the Company which the parties are unable to
resolve themselves, including any dispute with regard to the application,
interpretation or validity of this Agreement or any dispute with regard to any
aspect of the Executive’s employment or the termination of the Executive’s
employment, both the Executive and the Company agree by entering into this
Agreement that the exclusive remedy for determining any such dispute, regardless
of its nature, will be by arbitration in accordance with the then most
applicable rules of the American Arbitration Association.  Arbitration shall be
the exclusive remedy for determining any such dispute, regardless of its
nature.  Notwithstanding the foregoing, either party may in an appropriate
matter apply to a court pursuant to California Code of Civil Procedure Section
1281.8, or any

 

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comparable provision, for provisional relief, including a temporary restraining
order or a preliminary injunction, on the ground that the award to which the
applicant may be entitled in arbitration may be rendered ineffectual without
provisional relief.

 

In the event the parties are unable to agree upon an arbitrator, the parties
shall select a single arbitrator from a list designated by the Los Angeles
office of the American Arbitration Association of seven arbitrators all of whom
shall be retired judges who have had experience in the employment law, who are
actively involved in hearing private cases and who are resident in the greater
Los Angeles area.  If the parties are unable to select an arbitrator from the
list provided by the American Arbitration Association, then the parties shall
each strike names alternatively from the list, with the first to strike being
determined by lot.  After each party has used three strikes, the remaining name
on the list shall be the arbitrator.  Any arbitration shall be administered by
the American Arbitration Association only if both parties so agree.

 

This agreement to resolve any disputes by binding arbitration shall extend to
claims against any shareholder or partner of the Company, any brother-sister
company, parent, subsidiary or affiliate of the Company, any officer, director,
employee, or agent of the Company, or of any of the above, and shall apply as
well to claims arising out of state and federal statutes and local ordinances as
well as to claims arising under the common law.  In the event of a dispute
subject to this Section, the parties shall be entitled to reasonable discovery,
including deposition discovery, subject to the discretion of the arbitrator. 
The arbitrator shall apply the same substantive law as would be applied by a
court having jurisdiction over the parties and their dispute and the remedial
authority of the arbitrator shall be the same as, but no greater than, would

 

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be the remedial power of a court having jurisdiction over the parties and their
dispute.  The arbitrator shall, upon an appropriate motion, dismiss any claim
brought in arbitration if the arbitrator determines that the claim does not
state a claim or a cause of action which could have been properly pursued
through court litigation.  In the event of a conflict between the then
most-applicable rules of the American Arbitration Association and these
procedures, the provisions of these procedures shall govern.

 

Each party may be represented by counsel or other representative of the party’s
choice and each party shall initially be responsible for the costs and fees of
its counsel or other representative.  Any filing or administrative fees shall be
borne initially by the party requesting arbitration; provided, however, if such
fees should exceed those applicable in Superior Court (or other state court of
general jurisdiction if in a state other than California) the excess shall be
borne by the employer party to this agreement. The employer party to this
agreement shall be responsible for the costs and fees of the arbitrator, unless
the employee wishes to contribute (up to 50%) of the costs and fees of the
arbitrator.  The prevailing party in such arbitration proceeding, as determined
by the arbitrator, and in any enforcement or other court proceedings, shall be
entitled to the extent permitted by law, to reimbursement from the other party
for all of the prevailing party’s costs (including but not limited to the
arbitrator’s compensation), expenses and attorneys’ fees.

 

The arbitrator shall render an award and opinion in the form typical of that
rendered in labor arbitrations and the award of the arbitrator shall be final
and binding upon the parties.  If any of the provisions of this Section are
determined to be unlawful or otherwise unenforceable, in whole or in part, such
determination shall not affect the

 

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validity of the remainder of these provisions and this Section shall be reformed
to the extent necessary to insure that the resolution of all conflicts between
the Executive and the Company including those arising out of statutory claims,
shall be resolved by neutral, binding arbitration.  In the event a court finds
that the arbitration procedure set forth herein is not absolutely binding, then
it is the intent of the parties that any arbitration decision should be fully
admissible in evidence, given great weight by any finder of fact and treated as
determinative to the maximum extent permitted by law.

 

Unless mutually agreed by the parties otherwise, any arbitration shall take
place in Los Angeles.  In the event the parties are unable to agree upon a
location for the arbitration, the location within Los Angeles shall be
determined by the arbitrator.

 

In the event of a good faith dispute regarding the payment of salary or benefits
under this Agreement, the Company shall make the disputed payments to the
Executive as if such dispute did not exist during the pendency of such good
faith dispute, and, following the resolution of such dispute, the Executive
shall reimburse the Company for any overpayments.

 

17.                                 Company Property.  The Executive agrees that
at the time he leaves the employment of the Company he will deliver to the
Company, and will not keep or deliver to anyone else, all notebooks, memoranda,
documents, computer discs, and any and all other material relating to the
business of the Company, its subsidiaries and affiliate or constituting the
property of the Company, its subsidiaries and affiliates, whether or not the
Executive was the author or recipient of such material.

 

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18.                                 Miscellaneous.

 

(a)                                  Certain actions set out herein to be taken
by the Board of the Company may, as appropriate or required, be taken by its
duly appointed committees.  Further, the Company, at its option, may cause it
subsidiaries and/or affiliates to perform and discharge certain of the actions
or obligations undertaken by the Company.

 

(b)                                 No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing and signed by the Executive and such officer as may be
specifically designated by the Board.  No waiver by either party hereto at any
time of any breach by the other party hereto of or compliance with, any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the time or at any prior or subsequent time.

 

(c)                                  This instrument contains the entire
agreement of the parties hereto relating to the subject matter hereof and it
replaces and supersedes all prior agreements and understandings, oral and
written, between the parties hereto.  No agreements or representations, oral or
otherwise, express or implied, with respect to the subject matter hereof have
been made by either party which are not expressly set forth in this Agreement.

 

(d)                                 The validity, interpretation, construction
and performance of this Agreement shall be governed by the laws of the State of
California, without regard to its conflicts of law principles.

 

(e)                                  All references to Sections of the Exchange
Act or the Code shall be deemed also to refer to any successor provisions to
such Sections.

 

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(f)                                    Any payments provided for hereunder shall
be paid net of any applicable withholding required under federal, state or local
law.

 

(g)                                 The obligations created under the provisions
of Sections 9, 10, 11, 16 and 17 shall survive the expiration, suspension or
termination, for any reason, of this Agreement or the Executive’s employment
hereunder until such obligations created thereunder are fully satisfied.  This
provision is not intended to create additional rights or obligations or to
expand or otherwise alter rights and obligations created by this Agreement.

 

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

 

 

ZENITH NATIONAL INSURANCE
CORP.

 

 

 

 

 

 

By:

/s/ Stanley R. Zax

 

 

 

STANLEY R. ZAX

 

 

Chairman of the Board and President

 

 

 

 

 

EXECUTIVE

 

 

 

 

 

 

 

/s/ Michael E. Jansen

 

 

 

MICHAEL E. JANSEN

 

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