EXHIBIT
10.4


 


EXECUTION COPY


 


EMPLOYMENT AGREEMENT


 


This Employment Agreement (“Agreement”) is entered
into effective as of the 1st of November 2004 (“Effective Date”) on this
12th day of October 2004 by and between ZENITH NATIONAL INSURANCE CORP., a
Delaware corporation (the “Company”), and WILLIAM J. OWEN (hereinafter referred
to as the “Executive”).


 


WHEREAS
the Executive is presently employed as Senior Vice President, Chief Financial
Officer and Treasurer of Zenith Insurance Company, a California corporation
(“Zenith Insurance”), a wholly-owned subsidiary of the Company, and also serves
as Senior Vice President, Chief Financial Officer and Treasurer of the Company
without additional compensation; and


 


WHEREAS
the Company and the Executive deem it in their respective best interests to
enter into this Employment Agreement;


 


NOW,
THEREFORE, the parties agree as follows:


 


1.                                       Employment.


 


(a)                                  Subject to earlier termination as provided
herein, the Executive is employed as Senior Vice President, Chief Financial Officer
and Treasurer of Zenith Insurance from the Effective Date through the Term of
this Agreement (as defined below) and shall also serve as Senior Vice President
and Chief Financial Officer of the Company without additional compensation.  In addition, the Executive shall also serve
in such capacities as an officer of


 
















 


the Company and any of its
subsidiaries and affiliates without additional compensation, as requested by
the Company.  In his capacity as Senior
Vice President, Chief Financial Officer and Treasurer 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 an affiliate of the
Company, except with the prior written approval of the Board of Directors of
the Company (the “Board”).  The Executive
shall have such 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 and such other duties and responsibilities as
the Board or the Chairman of the Board and  President
of the Company (the “Chairman”) shall assign from time to time provided such
assignments shall not be inconsistent with the Executive’s position with the
Company.  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 noncompetition
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 Chairman.


 


(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 his duties hereunder.


 


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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
a termination of employment as elsewhere provided herein.


 


3.                                       Salary.  The Executive’s minimum annual
base salary (“Base Salary”) shall be as follows:  $300,000 effective upon the Effective Date;
$315,000 effective November 1, 2005; $330,000 effective November 1,
2006, $345,000 effective November 1, 2007, and $360,000 effective
November 1, 2008.  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 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, stock purchases, restricted stock, pension, thrift, profit
sharing, life insurance, medical coverage, disability insurance, education, and
other retirement or employee benefits that the Company has adopted or may adopt
for the benefit of its executive employees generally, and the Company shall provide
the Executive with such insurance or other provisions for indemnification,
defense or hold-harmless of officers that are generally in effect for other
senior executive officers of the Company. 
Notwithstanding the


 


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


 


6.                                       Fringe Benefits; 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 the Company’s executive employees,
including the payment of reasonable expenses for attending annual and periodic
meetings of trade associations, and 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 the Executive with a monthly car allowance in the amount of
$1,300.  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 Company’s standard employment
practices; provided, however, the 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 his then current salary.  The timing of paid vacations shall be
scheduled in a reasonable manner by the Executive.


 


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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 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 or his other willful breach of this Agreement (other than any such
failure or breach resulting from his incapacity due to physical or mental
illness, injury or similar incapacity) after a written demand for substantial
performance is delivered to him by the Chairman, which demand specifically
identifies the manner in which the Chairman or 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, 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 Chairman or the Board has given the Executive


 


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reasonable notice of its
intended actions and the alleged events or activities giving rise thereto and
with respect to those events or activities for which a cure is possible, a
reasonable opportunity to cure such breach if such breach is capable of cure,
and there shall have been delivered to him a written notice from the Chairman or
a copy of a resolution duly adopted by the Board regarding such actions.


 


(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 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
such written notice.  For purposes of
this section, a Change in Control shall mean either (i) a merger or
consolidation of the Company with or into


 


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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) 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 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


 


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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 prior to
the Executive’s termination:


 


(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 any 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 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


 


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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, if
any, 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 either (1) the Company other than for Cause or Disability or (2)
the Executive by reason of a constructive termination pursuant to
Section 8(c) hereof, he shall be entitled, in exchange for a release of
the Company and any subsidiaries and affiliates of the Company and their
respective officers, directors, stockholders, employees and agents, to the
benefits provided below (“Severance Payments”):


 


(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;


 


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(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 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


 


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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 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,


 


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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, 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 indemnification,
defense or hold-harmless of officers or directors of the Company that are in
effect on the date the Notice of Termination is sent to the Executive or the
Company with respect to all of his acts and omissions while an officer or
director (if applicable) 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


 


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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


 


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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 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


 


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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 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 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 Securities Exchange Act of 1934, as amended (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.  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 his, or any business, individual, partner, firm, corporation
or other entity that is then in competition with the Company, its subsidiaries
and affiliates (“Competitor”).  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 anyone affiliated with him or to any Competitor.


 


(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


 


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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, 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.


 


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(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
designee 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 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


 


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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 or registered mail, return receipt requested,
postage prepaid, addressed (a) if to the Executive, to 25922 N. Santa
Susana Drive, Santa Clarita, California 91321 and (b) if to the Company,
to 21255 Califa Street, Woodland Hills, California 91367, Attention:
Stanley R. Zax, Chairman and President, 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.


 


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


 


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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 grounds 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


 


20
















 


residents
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, 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


 


21
















 


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.


 


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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 Company’s business or constituting the Company’s property,
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 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


 


23
















 


a
waiver of similar or dissimilar provisions or conditions at the same 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/ Stanley R. Zax

  	
   

  
	
   

  	
  STANLEY R. ZAX,

  
	
   

  	
  Chairman and President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  EMPLOYEE:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ William J. Owen

  	
   

  
	
   

  	
  WILLIAM J. OWEN

  
					



 


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