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                                                                  EXECUTION COPY

                                EMPLOYMENT AGREEMENT

     This Employment Agreement ("Agreement") is entered into effective as of the
11th day of December, 1997 ("Effective Date"), on this 8th day of January, 1998
between ZENITH  NATIONAL INSURANCE CORP., a Delaware corporation (hereinafter
referred to as "Zenith"), and STANLEY R. ZAX (hereinafter referred to as
"Employee").   

     WHEREAS, Employee is presently employed as Chairman of the Board
and President of Zenith Insurance Company, a subsidiary of Zenith, pursuant to a
written Employment Agreement originally dated as of December 9, 1981, for a term
of five years ending December 8, 1986, which agreement was extended and modified
pursuant to a written Employment Agreement dated as of December 5, 1985 for a
term of five years ending December 31, 1990, which agreement was extended and
modified pursuant to a written Employment Agreement dated as of February 28,
1990 for a term of five years ending December 31, 1995 and further extended and
modified pursuant to a written Employment Agreement dated December 6, 1994 for a
term of four year expiring on December 31, 1998, and is also employed as
Chairman of the Board and President of Zenith and certain of its other


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subsidiaries (Zenith and all of its subsidiaries collectively referred to
hereinafter as "Employer"); and

     WHEREAS, Zenith and Employee deem it in their respective best interests to
extend the term of said Employment Agreement at the present time and modify
certain other provisions thereof;

     NOW, THEREFORE, it is agreed as follows:

     1.   AMENDED AND RESTATED EMPLOYMENT AGREEMENT.

     The Agreement is hereby amended and restated in its entirety and the term
thereof is hereby extended as hereinafter provided.

     2.   ENGAGEMENT AND DUTIES.

     During the Term of Employment as defined in Paragraph 3 of this Agreement:

     2.1  Employer hereby employs Employee and Employee does hereby agree to be
employed by Employer as Chairman of the Board, President, and Chief Executive
Officer of Zenith and in such other capacities at Zenith and at each of the
corporations which comprise Employer as shall hereafter be agreed upon by
Employee, the Board of Directors of Zenith and the boards of directors of such
other corporations.

     2.2  Employee shall perform the normal duties of such offices and such
other executive duties as may from time to time be assigned to him by and in
accordance with instructions and directions of the Board of Directors of 

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Zenith. Both Employee and Employer hereby expressly recognize that the 
services described herein shall be performed to the reasonable satisfaction 
of the Board of Directors of Zenith.

     2.3  Employee shall perform the duties contemplated hereunder at his
principal office located in Los Angeles County, California; provided, however,
Employee shall travel outside Los Angeles County to the extent he reasonably
deems it necessary or appropriate in the performance of his duties hereunder.

     2.4  Employee, during the Term of Employment, shall devote his time,
attention, energies, skill and best efforts to the performance of his duties for
and on behalf of Employer.

     3.   TERM OF EMPLOYMENT.

     The term of employment hereunder shall be a period commencing on the
Effective Date and terminating December 31, 2002 ("Expiration Date"), unless
sooner terminated as elsewhere provided herein ("Term of Employment").

     4.   COMPENSATION.

     As full and complete consideration for the performance of his duties and
the rendition of any and all services under this Agreement, Employee shall be
compensated as follows:

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     4.1  Effective as of the Effective Date, Employee shall be paid the sum One
Million Dollars ($1,000,000) per year, subject to such other increases as the
Board of Directors of Zenith may from time to time determine ("Base
Compensation").

     4.2  In addition to the Base Compensation, Employee shall be a participant
in the Executive Officer Bonus Plan of Zenith.

     4.3  All compensation hereunder shall be paid by Employer, as allocated
from time to time among the different corporations which comprise Employer by
the Audit Committee of Zenith, and shall comply with all relevant governmental
directives, rules and regulations which may be in effect from time to time.  All
Base Compensation shall be payable ratably twice each month, or more or less
often in accordance with the normal payroll practices of Employer.

     5.   BUSINESS EXPENSES.

     Employee shall be reimbursed for reasonable and necessary expenses duly
incurred in connection with the duties to be performed and the services to be
rendered by Employee to Employer under and pursuant to this Agreement, upon
submission of itemized expense statements in the manner and at times specified
by Employer for officers of Employer.  In addition, Employee shall be entitiled
to the 

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exclusive full time use of one deluxe automobile of his choice, to be 
replaced from time to time at Employee's discretion.

     6.   EMPLOYEE BENEFITS.

     6.1  Employee shall be entitled to participate in all employee insurance,
retirement and other benefit plans for which he qualifies and which may be in
effect from time to time.  Notwithstanding the foregoing, nothing contained in
this Agreement shall prohibit or limit the right of Employer 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 Employer generally, or to a defined group of such
employees, and shall not apply solely to Employee.

     6.2  Employee shall be entitled each year to a vacation in accordance with
standard employment practices, during which time his compensation shall be paid
in full.  Each vacation shall be taken during a period mutually satisfactory to
both Employer and Employee.

     7.   DEATH DURING EMPLOYMENT.

     If Employee shall die during the Term of Employment, Employer shall pay the
compensation which could otherwise be payable to Employee pursuant to Paragraphs
4.1 and 4.2 of this Agreement, up to the end of the twelfth 

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month following the month in which his death occurred (a) to Employee's 
spouse, if living, (b) if his spouse is not then living, to his then living 
issue by right of representation, and (c) if none of the above are then 
living, to his estate.

     8.   ACKNOWLEDGMENT OF PECULIAR VALUE OF SERVICES.

     8.1  Employee acknowledges that the services which he has agreed to render
during the Term of Employment under this Agreement are special, unique, unusual,
extraordinary, and of an intellectual character, and therefore are of peculiar
value to Employer.

     8.2  Employee further acknowledges that because of the character of said
services the remedy at law for any breach by him of this Agreement may be
enforced by an injunction in a suit in equity, without the necessity of proving
actual damage, and that a temporary injunction may be granted immediately upon
the commencement of any such suit, and without notice.  Nothing herein contained
shall be construed as prohibiting Employer from pursuing any other remedies
available to Employer from such breach or threatened breach, including the
recovery of damages from Employee.

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     9.   DISCLOSURE OF INFORMATION.

     9.1  Employee acknowledges that the list of Employer's customers, as they
may exist from time to time, and Employer's trade secrets and other confidential
information are valuable, special and unique assets of Employer's business. 
Employee will not, during or after the Term of Employment, disclose to any
person, firm, corporation, association, or any other entity or use for his own
benefit, any list of Employer's customers, or any part thereof, or any of
Employer's trade secrets or other confidential information, for any reason or
purpose whatsoever.

     9.2  Employee agrees that upon leaving the employ of Employer he will
deliver to Employer and not keep or deliver to anyone else, any and all
memoranda, specifications, documents and in general any and all material
relating to Employer's business that he may have under his possession or
control.

     9.3  Employee recognizes that he will possess confidential information
about other employees of Employer relating to their education, experience,
skills, abilities, compensation and benefits, and interpersonal relationships
with customers of Employer.  The Employee recognizes that the information he
will possess about these other employees is not generally known, is of
substantial value to Employer 


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in developing its products and in securing and retaining customers, and will 
be acquired by him because of his business position with Employer.  Employee 
agrees that, during the period ending on the last day of the one-year period 
following his termination of employment, he will not, directly or indirectly, 
solicit or recruit any employee of Employer for the purpose of being employed 
by him, or any business, individual, partner, firm, corporation or other 
entity that is then in competition with Employer ("Competitor") on whose 
behalf he is acting as an agent, representative or employee.  The Employee 
further agrees that he will not convey any such confidential information or 
trade secrets about other employees of Employer to anyone affiliated with him 
or to any Competitor.

     9.4  Employee further acknowledges that the remedy at law for any breach by
him of the covenants contained in Paragraphs 9.1 and 9.2 will be inadequate and
that in the event of a breach, or threatened breach, by Employee of the
covenants contained therein, Employer shall be entitled to an injunction
restraining Employee from using, for his own benefit, and/or from disclosing, in
whole or in part, the list of Employer's customers, and/or Employer's trade
secrets or other confidential information, and/or from rendering any services to
any person, firm, corporation, 

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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 Employee to return to Employer any and all memoranda, 
specifications, documents and all other material relating to Employer's 
business that he may have under his possession or control.  Nothing herein 
shall be construed as prohibiting Employer from pursuing any other remedies 
available to Employer from such breach or threatened breach, including the 
recovery of damages from Employee.  The provisions of this Paragraph 9 shall 
survive the expiration or termination, for any reason, of this Agreement and 
of Employee's employment.

     10.   TERMINATION OF AGREEMENT BY EMPLOYER.

     Should any of the following events occur, Employer may terminate this
Agreement by giving written notice thereof to Employee, which notice shall be
effective immediately:

          (a)  Employee is physically or mentally incapacitated for a period of
one hundred eighty (180) consecutive days.  Employee shall be deemed to be
physically or mentally incapacitated if he is unable for any reason whatsoever
to devote his full time and efforts to the business of Employer.

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          (b)  Employee breaches any of his material obligations under this
Agreement.

     10.1 Should Employer terminate the Term of Employment prior to the
Expiration Date pursuant to Paragraph 10(a) hereof, Employer shall thereupon pay
to Employee, in complete satisfaction of its obligations under this Agreement,
the compensation which would otherwise be payable to him pursuant to Paragraphs
4.1 and 4.2 of this Agreement up to the end of the sixth month following the
month in which such termination occurred.  Should Employer terminate the Term of
Employment prior to the Expiration Date pursuant to Paragraph 10(b) hereof,
Employer shall pay to Employee in complete satisfaction of its obligations under
this Agreement and without waiving any rights which it or its subsidiaries may
have against Employee, the compensation which would otherwise be payable to him
pursuant to Paragraph 4.1 of this Agreement up to the end of the month in which
such termination occurs and Employer shall not be obligated to make any payments
to Employee pursuant to Paragraph 4.2 of the Agreement.

     10.2 Subject to the provisions of Paragraph 11.2 hereof, should Employer
terminate the Term of Employment prior to the Expiration Date for any reason
other than as set forth in Paragraphs 10(a) and 10(b) hereof, Employer shall
thereupon pay to Employee, in complete satisfaction 

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of its obligations under this Agreement, the compensation which would 
otherwise be payable to him pursuant to Paragraphs 4.1 and 4.2 of this 
Agreement had Employee continued to be employed through the Expiration Date, 
assuming, for purposes of this Paragraph 10.2, that the annual bonus payable 
to Employee pursuant to Paragraph 4.2 of this Agreement for each year of the 
remaining term is equal to the highest annual bonus paid or payable to 
Employee during the three consecutive years immediately preceding his 
termination of employment.

     11.  CHANGE IN CONTROL; TERMINATION OF AGREE-MENT BY EMPLOYEE OR EMPLOYER.

     In the event of a Change in Control (as defined below) at any time during
the Term of Employment, all stock option rights, stock appreciation rights, and
any and all other similar rights theretofore granted to Employee, including, but
not limited to, Employee's right to receive cash in lieu of exercising stock
options, as provided in Section 9 of his Stock Option Agreements entered into
with Zenith as of December 6, 1985 and December 9, 1987, shall vest and shall
then be exercisable in full.

     11.1 Employee may, within 180 days after the effective date of any such
Change in Control, deliver to Zenith a written notice of his election to
terminate the 

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Term of Employment, effective as of a date set forth in said notice, which 
effective date shall be not less than 30 days nor more than 90 days after the 
date of delivery of such written notice.

     11.2 Notwithstanding anything in this Agreement to the contrary, in the
event of a Change in Control, should Employee terminate the Term of Employment
prior to the Expiration Date pursuant to Paragraph 11.1 hereof, or should
Employer terminate the Term of Employment prior to the Expiration Date for any
reason other than as set forth in Paragraphs 10(a) and 10(b) hereof, then,
effective as of the date set forth in Employee's or Employer's notice to
terminate the Term of Employment, Employee shall be entitled to the benefits
provided below (hereinafter referred to as "Severance Payments"):

                    (i)  Zenith shall pay to Employee his Base Compensation
     through the effective date of the notice to terminate the Term of
     Employment, at the rate in effect at the time such notice of
     termination is given, plus all other amounts to which he is entitled
     under any compensation plan of Employer, in each case at the time such
     payments are due;

                    (ii) Zenith shall pay to Employee a cash lump sum
     payment, no later than the 

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     fifteenth day following the effective date of the notice to terminate the 
     Term of Employment, equal to the greater of (a) two times the sum of (x) 
     his Base Compensation at the rate in effect as of the effective date of 
     the notice to terminate the Term of Employment and (y) the highest annual 
     bonus paid or payable to Employee during the three consecutive years 
     immediately preceding his termination of employment, or (b) the "actuarial 
     equivalent" of all Base Compensation and bonus payments that would have 
     been payable to Employee pursuant to Paragraphs 4.1 and 4.2 of this 
     Agreement had Employee continued to be employed through the Expiration 
     Date, assuming, for purposes of this Paragraph, that the annual bonus
     payable to Employee pursuant to Paragraph 4.2 of this Agreement for
     each year of such remaining term is equal to the highest annual bonus
     paid or payable to Employee during the three consecutive years
     immediately preceding his termination of employment.  For purposes of
     this subparagraph 11.2(ii), "actuarial equivalent" shall be determined
     by an actuary selected by Zenith, subject to approval by Employee, and
     calculated in accordance with 

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     the actuarial assumptions used by the Pension Benefit Guaranty Corporation 
     to value liabilities for pension plans terminating as of the effective date
     of Employee's or Employer's notice to terminate the Term of Employment;

                    (iii)     During the period beginning as of the
     effective date of Employee's or Employer's notice to terminate the
     Term of Employment until the Expiration Date, Zenith shall, at its
     cost, arrange to provide Employee with life, disability, dental,
     accident and group health insurance benefits substantially similar to
     those that he was receiving immediately prior to the effective date of
     the notice to terminate the Term of Employment plus an additional
     amount necessary to reimburse Employee for any taxes imposed solely by
     reason of his receipt of such benefits following his termination of
     employment.  Notwithstanding the foregoing, Zenith shall not provide
     any benefit otherwise receivable by Employee pursuant to this
     subparagraph 11.2(iii) if an equivalent benefit actually received by
     him at any time during the period of coverage, and any such 

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     benefit actually received by him shall be reported to Zenith.

     11.3 For purposes of this Agreement, a Change in Control shall mean either
(i) a merger or consolidation of Zenith with or into another company or
corporation, other than (a) a merger or consolidation which would result in the
voting securities of Zenith 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 Zenith or such surviving entity outstanding immediately
after such merger or consolidation or (b) a merger or consolidation effected to
implement a recapitalization of Zenith (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 Zenith more than 50% of the combined
voting power of Zenith's then outstanding securities; or (ii) an assignment of
this Agreement by Zenith under the provisions of Paragraph 15.2 hereof; or (iii)
the sale of all or substantially all of Zenith's assets; or (iv) a change in the
identities of a majority of the members of the Board of Directors of Zenith
within a one-year period or less; or (v) any other transaction which would
require any party or affiliated group of parties to 

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obtain approval from, or require such transactions to be presented for 
approval by, the California Insurance Commissioner (assuming there is no 
preemption of California insurance laws by Federal Law).

     11.4 Notwithstanding anything to the contrary in this Agreement, in the
event that Employee 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"),
Zenith shall pay to Employee an additional amount (the "Gross-Up Payment") such
that the net amount retained by Employee, after deduction 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 payment provided for by this
Paragraph 11.4, 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 Employee in connection with a Change in Control or
Employee's termination of employment (whether pursuant to the terms of this
Agreement or any other plan, arrangement or agreement with Employer, any person
whose actions result in a change in control or any person affiliated with
Employer or such person (which, together 


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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 Zenith's independent auditors and acceptable to Employee, 
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 in excess of the base amount, 
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 Zenith'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, Employee shall be deemed 
to pay federal income taxes at the highest 

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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 Employee'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 Employee's employment, Employee shall repay to Zenith, 
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 that portion of the Gross-Up Payment attributable to the 
Excise Tax and federal, state and local income tax imposed on the Gross-Up 
Payment being repaid by the Executive to the extent that such repayment 
results in a reduction in Excise Tax and/or a federal, state or local income 
tax deduction) 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 Employee'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), 

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Zenith 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.

     11.5 The payments provided for in Paragraphs 11.2 (other than subparagraph
11.2(iii)) and 11.4 hereof shall be made not later than the fifth day following
the date of termination of employment, provided, however, that if the amounts of
such payments cannot be finally determined on or before such day, Zenith shall
pay to Employee on such day an estimate, as determined in good faith by Zenith,
of the minimum amount of such payments to which Employee is clearly entitled and
shall pay the remainder of such payments (together with interest at the rate
provided in section 1274(b)(2)(B) of the Code) as soon as the amount thereof can
be determined but in no event later than the thirtieth (30th) day after the date
of termination of employment.  In the event that the amount of the estimated
payments exceeds the amount subsequently determined to have been due, such
excess shall constitute a loan by Zenith to Employee, payable on the fifth (5th)
business day after demand by Zenith (together with interest at the rate provided
in section 1274(b)(2)(B) of the Code).  At the time that payments are made under
this Paragraph, Zenith 

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shall provide Employee with a written statement setting forth the manner in 
which such payments were calculated and the basis for such calculations 
including, without limitation, any opinions or other advice Zenith has 
received from outside counsel, auditors or consultants (and any such opinions 
or advice which are in writing shall be attached to the statement).

     12.  ATTORNEY'S FEES.

     In the event that any action at law or in equity, for injunctive or
declaratory relief, is brought to enforce or interpret the provisions of this
Agreement, if Employee is the prevailing party, he shall be entitled to
reasonable attorney's fees in addition to any other relief to which he may be
entitled.


     13.  APPLICABLE LAW.

     This Agreement and the rights and obligations of the parties hereunder
shall be construed, interpreted and enforced in accordance with, and governed
by, the laws of the State of California applicable to agreements executed and
fully to be performed thereunder.

     14.  NOTICES.

     Any notice required to be given hereunder shall be in writing sent by
registered or certified mail, return receipt requested, to either Zenith or
Employee at the 

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addresses listed below, or at such other addresses as either Zenith or 
Employee may hereafter designate in writing to the other:

          To Zenith:

                    Zenith National Insurance Corp.
                    21255 Califa Street
                    Woodland Hills, California 91367
                    Attention:     Corporate Secretary

          To Employee:

                    813 North Bedford Drive
                    Beverly Hills, California 90210

     15.  ASSIGNMENT.

     15.1 This Agreement and the rights, interests, and benefits hereunder are
personal to Employee and shall not be assigned, transferred, pledged, or
hypothecated in any way by Employee, 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.

     15.2 Zenith shall have the right to assign this Agreement and to delegate
all of its rights, duties and obligation hereunder, whether in whole or in part,
to any parent, affiliate, successor, or subsidiary organization or company of
Zenith or corporation with which Zenith may merge or consolidate or which
acquires by purchase or 

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otherwise all or substantially all of Zenith's consolidated assets, but such 
assignment shall not release Employer from its obligations under this 
Agreement, and in the event of any such assignment by Zenith, Employee may, 
at his sole option, exercise his termination rights under the provisions of 
Paragraph 11 of this Agreement.

     16.  ENTIRE AGREEMENT.

     This Agreement constitutes the entire understanding of the parties hereto
and supersedes any and all prior agreements and understanding whether oral or
written between the parties.  This Agreement may only be modified by an
agreement in writing executed by one of Zenith's duly authorized officers (other
than Employee), with the approval of Zenith's Board of Directors, and by
Employee.


     17.  WAIVER OF BREACH.

     The waiver by Employee of a breach of any provision of this Agreement by
Employee shall not operate or be construed as a waiver of any subsequent breach
by Employee.

     18.  MISCELLANEOUS.

     18.1 The titles of the paragraphs of this Agreement are for convenience of
reference only, and are not to be considered in construing this Agreement.

     18.2 The unenforceability or invalidity of any paragraph or subparagraph of
this Agreement shall not 

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affect the enforceability and validity of the balance of this Agreement.

     18.3 Each party hereto shall make, execute and deliver such other
instruments or documents as may be reasonable required in order to effectuate
the purpose of this Agreement.

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement in
Woodland Hills, California, on the date indicated below.

               ZENITH NATIONAL INSURANCE CORP.
                    ("Zenith")


Date:          By  /s/ Fredricka Taubitz
               As agent for and on behalf of Zenith
               and each and all of its Subsidiaries
               ("Employer")


Date:          By  /s/ Stanley R. Zax
               STANLEY R. ZAX ("Employee")