Exhibit
10.1


 


EMPLOYMENT AGREEMENT


 


This EMPLOYMENT AGREEMENT (the “Agreement”) is entered into on
May 24, 2006 between ZENITH NATIONAL INSURANCE
CORP., a Delaware corporation (the “Company”), and KARI L. VAN GUNDY (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 a
Senior Vice President of Zenith Insurance from July 5, 2006 (the “Effective
Date”) through the Term of this Agreement (as defined below). The Executive
shall also be a Senior Vice President of the Company. The Executive shall serve
as Senior Vice President – Finance of Zenith Insurance and of the Company from
the Effective Date to the date on which the retirement of William J. Owen is
effective (expected to be August 1, 2006), on which date, Executive shall
assume the duties of, and become, the Chief Financial Officer and Treasurer of
Zenith Insurance and of the Company. 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 have such other duties and responsibilities and such executive power and
authority as is customary for an officer in her position and as shall be
allocated to her in such capacity. She may also be assigned other duties and
responsibilities by the Board of Directors of the Company (the “Board”), the
Chief Executive Officer of the Company or the President of Zenith Insurance
from time to time provided such assignments are not inconsistent with the
Executive’s position with the Company. In her capacity as Senior Vice President
– Finance or Senior Vice President, Chief Financial Officer and Treasurer of
Zenith Insurance and the Company, the Executive shall devote her 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 an 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 her duties to the Company hereunder.


 


(b)           During
her employment hereunder, the Executive shall report to the Chief Executive
Officer of the Company, as to matter pertaining to the Company, and to the
President of Zenith Insurance, as to matters pertaining to Zenith Insurance.


 

















 


(c)           The
Executive shall not be required to relocate outside of Southern California in
order to perform the services hereunder, without the Executive’s consent,
except for travel reasonably required in the performance of her duties
hereunder.


 


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 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 $400,000, 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 her 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 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
that the Executive be awarded 10,000 shares of “restricted” common stock
pursuant to the Zenith National Insurance Corp. 2004 Restricted Stock Plan.


 


6.             Fringe
Benefits, Automobile and Relocation Assistance.
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 her 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).


 

















 


The
Company shall also offer Executive relocation assistance as set forth in the
Company’s relocation policy attached hereto as Attachment A. Executive
understands and agrees that in the event of her termination within twelve
months of receiving relocation expenses and for reasons within her control, she
will be obligated to repay the Company for all relocation expenses paid under Attachment
A.


 


7.             Vacation;
Memberships. During her
employment hereunder, the Executive shall be entitled to an annual paid
vacation in accordance with 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. 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 her then current salary. The timing
of paid vacations shall be scheduled in a reasonable manner by the Executive.


 


During
her 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, she shall have been absent from the
full-time performance of her duties with the Company, its subsidiaries and
affiliates for six months within any eighteen-month period, and have exhausted
her Family


 

















 


Medical Leave and its California
equivalent, her 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 her duties with the Company, its subsidiaries or
affiliates or her other willful breach of this Agreement (other than any such
failure or breach resulting from her incapacity due to the physical or mental
illness, injury or similar incapacity) after a written demand for substantial
performance is delivered to her by the Board, the Chief Executive Officer of
the Company or the President of Zenith Insurance, which demand specifically
identifies the manner in which the Board believes that she has failed to
substantially perform her 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, or (4) the Executive’s violation of Section 10 hereof; provided,
however, that the Executive shall not be terminated for “Cause” unless and
until the Board, the Chief Executive Officer of the Company or the President of
Zenith Insurance 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 her employment hereunder and be
treated as if her 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 her 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 date of any such
Change in Control, the Executive delivers to the Company a written notice of
her 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 her shall be
communicated by a 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
her death, the date of her 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 her 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 her full-time duties with the
Company as a result of incapacity due to physical or mental illness, injury or
similar incapacity, she shall continue to receive her compensation and other
benefits payable to her under this Agreement at the rate in effect at the
commencement of any such period, less amounts payable to her under the Company’s
disability plan or program or other similar plan during such period, or under
any governmental program, until her employment is terminated pursuant to
Section 8(a) hereof. If, during any period of disability, the Executive’s
employment shall be terminated by reason of her death, disability or the
expiration of this Agreement, notwithstanding the provisions of this section, her pay shall cease and her 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 her under this
Agreement.


 


(b)           If
at any time the Executive’s employment shall be terminated (i) by reason
of her death, (ii) by the Company for Cause or Disability, or
(iii) by her (other than by reason of a constructive termination pursuant
to Section 8(c) hereof), the Company shall pay her (or her appropriate
payee, as determined in accordance with Section 11(c) hereof) her 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 she 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 her
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
her 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 constructive termination
pursuant to Section 8(c) hereof, she 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 her 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 she 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 the Executive’s salary for such period is to be based
on her 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 her 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;


 


(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 her
stock option agreements, shall vest and shall then be exercisable in full, and
the Executive shall have 90 days following her 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 her family are eligible for COBRA coverage, the Company shall, at its cost,
pay the Executive’s COBRA premium for her and her 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 her 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, pay the Executive’s
Cal-COBRA premium for her and her 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 her receipt
of such benefits following termination of her 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 her 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 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 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 her 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 customers that is not available to the general
public and that was learned by the Executive in the course of her 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
her 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.


 


(c)           During
the Term of this Agreement or for the period ending on the last day of the
one-year period following termination of her 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 she 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 she 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 her because of her
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 her
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 her, or any business, individual, partner, firm, corporation
or other entity that is then a Competitor of the Company. The Executive further
agrees that she 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 her or
with any Competitor of the Company.


 


(e)           The
Executive further acknowledges that the remedy at law for any breach by her 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 her 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 she may have under her possession or control. Nothing
herein shall be construed as prohibiting the Executive from pursuing
professional employment or investments utilizing her 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, 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
her 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 her hereunder had she continued to live,
all such amounts, unless otherwise provided herein, shall be paid in accordance
with the terms of this Agreement to her devisee, legatee or other designees,
or, if there is no such designee, to her 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 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 her securing other employment or her 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
Kari L. Van Gundy, 540 Valim Way, Sacramento, CA 95831 and (b) if to the
Company, to Zenith National Insurance Corp., 21255 Califa Street, Woodland
Hills, CA 91367, Attention:  Jack D.
Miller, Executive Vice President, with copies to Stanley R. Zax, Chief
Executive Officer of the Company, and Michael E. Jansen, General Counsel of the
Company, at 21255 Califa St., Woodland Hills, CA 91367 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.


 


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 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 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 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
she leaves the employment of the Company, its subsidiaries or affiliates, she
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.


 


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 its 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.


 


(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/ Jack D. Miller

  	
   

  
	
   

  	
   

  	
  JACK D. MILLER

  
	
   

  	
   

  	
  Executive Vice President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  EXECUTIVE

  
	
   

  	
   

  
	
   

  	
   

  	
   

  	
  /s/ Kari L. Van Gundy

  	
   

  
	
   

  	
   

  	
   KARI L. VAN GUNDY

  



 

















 


Attachment A


 


Company’s standard “memorandum, subject:  Relocation Assistance”


 


(Omitted)