Document:

EXHIBIT 10.3

 

EXECUTION COPY

 

EMPLOYMENT AGREEMENT

 

THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (“Agreement”)
between ZENITH NATIONAL INSURANCE CORP., a Delaware corporation (hereinafter
referred to as “Zenith”), and Robert E. Meyer (hereinafter referred to as “Employee”)
is hereby amended and restated in its entirety effective on the last date of
execution set forth below (the “Effective Date”).

 

RECITALS

 

WHEREAS, Employee is presently employed as Executive
Vice President and Chief Actuary of Zenith Insurance Company, a subsidiary of
Zenith, pursuant to a written Employment Agreement dated October 12, 2004,
as previously modified, and is also employed as Senior Vice President of Zenith
and is an officer of certain of its other 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 the 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 Senior Vice President 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 and the Chief
Executive Officer of Zenith (“CEO”) or the Board of Directors of Zenith (“Board”)
and the boards of directors of such other corporations.

 

2.2   During the Term of Employment, Employee
shall report to the CEO or his designee. 
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 CEO, his designee or the
Board.  Both Employee and Employer hereby
expressly recognize that the services described herein shall be performed to
the reasonable satisfaction of the CEO, his designee and the Board.

 

 

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, skills 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,
2012 (“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:

 

4.1   Employee shall be paid $497,750 per year, subject to
such increases as the Compensation Committee of the Board (“Compensation
Committee”) may from time to time determine (“Base Compensation”).

 

4.2   In addition to the Base Compensation, Employee shall
be eligible for such bonuses under Zenith’s Executive Officer Bonus Plan as may
be awarded by the Compensation Committee pursuant to the plan, and may also be
awarded discretionary bonuses by the Compensation Committee.

 

4.3   All compensation hereunder shall be paid by Employer,
as may be allocated by Employer from time to time among the different
corporations which comprise Employer, 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, the Company shall provide
Executive with a $1,300 per month automobile allowance.

 

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 

 

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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 vacation in
accordance with standard employment practices, during which time his
compensation shall be paid in full. 
Employee shall be treated for purposes of vacation accrual as an
employee with more than 120 months of service. 
Each vacation shall be taken during a period mutually satisfactory to
both Employer and Employee.

 

6.3   Zenith shall also provide Employee
with such insurance or other provisions for indemnification, defense or hold
harmless of officers that are generally in effect for senior executive officers
of Zenith.

 

7.                                       Death During Employment.  If Employee should die during the Term of
Employment, Employer shall pay (a) to Employee’s spouse, if living or (b) if
his spouse is not then living, to his then living issue by right of
representation or (c) if none of the above are then living, to his estate
a cash lump sum payment equal to:  (1) one
year’s Base Compensation at the rate in effect at his death and (2) one
year’s bonus.  (For these purposes, “bonus”
shall mean the highest annual bonus paid or payable to Employee for the three
calendar years immediately preceding the year of Employee’s death.)  In addition, for a period of two years from
Employee’s death, Employer shall continue to provide Employee’s family with the
same level of medical, dental and vision insurance benefits that they were
receiving through Employer immediately prior to Employee’s death.

 

8.                                       Termination by Employer.

 

8.1   Termination
by Employer due to Disability.  Should
Employer terminate the Term of Employment prior to the Expiration Date due to “Disability”
(as defined below) Employer shall pay to Employee a cash lump sum payment
equal to:  (1) one year’s Base
Compensation at the rate in effect at termination (reduced by any amounts
payable to Employee pursuant to any long-term disability plan in effect at the
time of such termination) and (2) one year’s bonus.  (For these purposes, “bonus” shall mean the
highest annual bonus paid or payable to Employee for the three calendar years
immediately preceding the year of termination.)  In
addition, for a period of two years from Employee’s termination
of employment, Employer shall continue to provide Employee and his family with
the same level of life, medical, dental and vision insurance benefits
that they were receiving through Employer immediately prior to Employee’s
termination of employment.

 

Definition
of Disability. 
For the purposes of this Agreement, “Disability” shall
mean Employee’s absence from employment with Employer which: (i) was
due to his inability to engage in any substantial gainful activity by reason of
any medically determinable physical or mental impairment which can be expected
to result in death or can be expected to last for a continuous period of not
less than twelve (12) months; or (ii) resulted from a medically
determinable physical or mental impairment which can be expected to result in
death or can be expected to last for a continuous period of not less 

 

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than twelve (12) months, and
caused Employee to receive income replacement benefits for a period of not
less than three (3) months under an accident and health plan covering
Employer’s employees or (iii) qualifies as a disability under Employer’s
Long Term Disability Plan.

 

8.2   Termination
by Employer
For Cause. 
Should Employer terminate the Term of Employment prior to the Expiration
Date “For Cause” (as defined below), Employer shall pay to Employee in complete
satisfaction of Employer’s 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 this Agreement.

 

Definition of For Cause. 
For the purposes of this Agreement, “For Cause” shall mean (1) Employee’s
failure to substantially perform his duties or any other material breach of
this Agreement by Employee (other than a failure or breach resulting from his
incapacity due to physical or mental illness, injury or similar incapacity),
which failure or breach is not cured after the passage of a reasonable period
of time to cure contained in a written demand from the CEO and/or Board that
specifically describes such failure or breach; (2) Employee’s
participation in activities that are competitive with Employer’s business,
which participation is not cured after the passage of a reasonable period of
time to cure contained in a written demand from the CEO and/or Board that
specifically describes such conduct; (3) Employee’s conviction of a
felony; or (4) Employee’s violation of his duty to maintain
confidentiality as required by Paragraph 15.

 

8.3   Termination
by Employer other than due to Disability or For Cause. 
Should Employer terminate the Term of Employment prior to the Expiration
Date for any reason other than due to Disability pursuant to Paragraph 8.1 or
For Cause pursuant to Paragraph 8.2, Employer shall pay to Employee a cash
lump sum payment equal to:  (1) two
years’ Base Compensation at the rate in effect at termination and (2) two
years’ bonus.  (For these purposes, “bonus”
shall mean the highest annual bonus paid or payable to Employee for the three
calendar years immediately preceding the year of termination.)  In addition, for a period of two years from
Employee’s termination of employment, Employer shall continue to provide
Employee and his family with the same level of life, medical, dental and vision
insurance benefits that they were receiving through Employer immediately prior
to Employee’s termination of employment.

 

9.                                      Termination
by Employee.

 

9.1   Termination
by Employee for Good Reason.  Should
Employee terminate the Term of Employment prior to the Expiration Date for “Good
Reason” (as defined below), Employer shall pay to Employee a cash lump sum
payment equal to:  (1) two years’
Base Compensation at the rate in effect at termination and (2) two years’
bonus.  (For these purposes, “bonus”
shall mean the highest annual bonus paid or payable to Employee for the three
calendar years immediately preceding the year of termination.)  In addition, for a period of two years from
Employee’s termination of employment, Employer shall continue to provide
Employee and his family with the same level of life, 

 

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medical,
dental and vision insurance benefits that they were receiving through Employer
immediately prior to Employee’s termination of employment.

 

Definition of Good Reason. 
For the purposes of this Agreement, “Good Reason” shall mean (a) material
diminution in Employee Base Compensation; (b) material diminution in
authority, duties, responsibilities or reporting relationship; (c) material
diminution in the budget over which Employee has authority; (d) material
change in geographic work location; or (e) any other material breach of
this Agreement by Employer.

 

9.2   Other
Termination by Employee.  Should Employee terminate the Term
of Employment prior to the Expiration Date for any reason other than set forth
above, Employee will not be entitled to the additional payments set forth
above.

 

10.                                 Prorated and Prior Year Bonus Payments.

 

10.1   If a termination under Sections 7, 8 or 9, other than
under Section 8.2 (Termination by Employer For Cause) or under Section 9.2
(Other Termination by Employee) occurs in a given year on a date on or after July 1
of such year, Employee shall be entitled to receive a prorated bonus payment
for such year .  The prorated bonus
payment will be an amount that is (1) equal to the highest annual bonus
paid to Employee for the three calendar years immediately preceding the year of
termination and (2) prorated from the beginning of the year of termination
to the date of termination.

 

10.2   If a termination under Sections 7, 8 or 9, other than
under Section 8.2 (Termination by Employer For Cause) or under Section 9.2
(Other Termination by Employee) occurs after the end of a given year but before
the annual bonus for such year has been paid, Employee shall be entitled to
receive such annual bonus.  In the event
the amount of the annual bonus has already been determined in good faith by the
Compensation Committee prior to Employee’s termination, then the annual bonus
paid to Employee shall be equal to the amount so determined.  If, however, the annual bonus for such year
has not yet been so determined, then the amount of annual bonus shall be equal
to the highest annual bonus paid to Employee for the three calendar years
immediately preceding such given year.

 

10.3   It is agreed that the bonus amounts referred to in Section 10.1
and 10.2 above shall be in addition to the other bonus payments that may become
payable pursuant to other sections of this Agreement.

 

11.                               Release
by Employee.  In order to be
entitled to any payment or benefit payable or receivable that are provided for
in this Agreement upon termination of employment, Employee must execute a
release in a form acceptable to Employer, of Employer and its respective
officers, directors, stockholders, employees and agents.

 

12.                                 Change in Control.  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, restricted stock and any and all other
similar rights theretofore granted to Employee shall vest and, if applicable,
become exercisable in full.

 

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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 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 19.2 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 within a one-year
period or less; or (v) any other transaction involving a material change of
ownership in Zenith which would require any party or affiliated group of
parties to 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).

 

13.                                 Excise Tax.  Notwithstanding anything to the contrary in
this Agreement, in the event that Employee becomes entitled to 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 herein, 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 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 

 

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determining the
amount of the Gross-Up Payment, Employee 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
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 Employee 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), Zenith shall make an additional Gross-Up Payment in respect of such
excess (plus any interest, penalties or additions payable by Employee with respect to such excess)
at the time that the amount of such excess is finally determined.

 

The
Gross-Up Payment 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 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).

 

14.                               Acknowledgment
of Peculiar Value of Services.

 

14.1   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.

 

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14.2   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.  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.

 

15.                               Confidential
Information and Non-Competition

 

15.1   During the Term of Employment and thereafter, Employee
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 Employer.  “Confidential
Information” shall mean information about Employer and its clients and customers that is not available
to the general public and that was learned by Employee in the
course of his employment by Employer, 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. 
Employee acknowledges that such Confidential Information is specialized,
unique in nature and of great value to Employer, and that such information gives Employer a competitive advantage.  Upon the termination of his employment for
any reason whatsoever, Employee shall promptly deliver to Employer all documents (and all copies hereof) containing any
Confidential Information.

 

15.2  
During
the term of this Agreement and for two years following termination of
employment, Employee shall not, directly or indirectly, without the prior
written consent of Employer, 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 Employer (a “Competitor of Employer”); provided, however, that the “beneficial ownership”
by Employee, 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, 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 Employer will or would suffer irreparable
injury if Employee were to compete with Employer or any affiliate of Employer in violation of this Agreement.  Employer hereby acknowledges
and agrees that Employee 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 provisions of this
Paragraph 15, so long as such activities do not interfere with the discharge of
Employee’ duties to Employer hereunder.

 

15.3   During the Term of Employment and for one year
following termination of employment, Employee shall not, directly or
indirectly, influence or attempt to influence customers or suppliers of Employer to divert their business to any Competitor of Employer.

 

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15.4  
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. 
Employee recognizes that the information he will possess about these
other employees is not generally known, is of substantial value to Employer 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 Term of Employment and for one year following termination of
employment, Employee 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 a Competitor of Employer. 
Employee further agrees that he will not convey any such confidential
information or trade secrets about other employees of Employer to any Competitor of Employer or to anyone affiliated
with him or with any Competitor of Employer.

 

15.5  
Employee further acknowledges that the remedy at law
for any breach by him of the covenants contained in this Paragraph 15 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 the customers of Employer and/or
trade secrets or other confidential information of Employer, 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 Employee to
return to Employer any and all memoranda, specifications, documents and all
other material relating to the business of Employer 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 15 shall survive the expiration or
termination, for any reason, of this Agreement and of Employee’s employment.

 

16.                                 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.

 

17.                                 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 to be fully performed
thereunder.

 

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18.                                 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 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:

  	
   

  	
  Robert E. Meyer

  
	
   

  	
   

  	
  41 Lockerbie Drive

  
	
   

  	
   

  	
  Valparaiso, Indiana 46385

  

 

19.                               Assignment.

 

19.1   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.

 

19.2   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 otherwise all or substantially all
of Zenith’s consolidated assets, but such assignment shall not release Employer
from its obligations under this Agreement.

 

20.                                 Entire Agreement.  This Agreement constitutes the entire
understanding of the parties hereto related to the subject matter hereof 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 Employee and one of Zenith’s duly
authorized officers (other than Employee), with the approval of the
Compensation Committee.

 

21.                                 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.

 

22.                               Arbitration.

 

22.1   In the event there is any dispute between Employee
and Employer
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 Employee’s employment
or the termination of Employee’s employment, 

 

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both
Employee and Employer 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.

 

22.2   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.

 

22.3   This agreement to resolve any disputes by binding
arbitration shall extend to claims against any shareholder or partner of Employer,
any brother-sister company, parent, or affiliate of Employer, any
officer, director, employee, or agent of Employer, 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 Paragraph, 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.

 

22.4   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 Employer.  Employer shall be
responsible for the costs and fees of the arbitrator, unless 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 

 

11

 

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.

 

22.5   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 Paragraph
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 Paragraph shall be reformed to the extent necessary to
insure that the resolution of all conflicts between Employee and Employer
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.

 

22.6   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.

 

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

 

23.                               Miscellaneous.

 

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

 

23.2   The unenforceability or invalidity of any paragraph or
subparagraph of this Agreement shall not affect the enforceability and validity
of the balance of this Agreement.

 

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

 

23.4   Employer shall also pay any additional amount
necessary to reimburse Employee and/or his family for any taxes imposed solely
by reason of receipt of life, medical, dental or vision insurance benefits
following Employee’s termination of employment or death, as applicable.

 

Notwithstanding
the foregoing, Employer shall not provide any medical, dental or vision benefit
otherwise receivable by Employee and/or his family pursuant to Paragraphs 7, 8.1,
8.3 and 9 if an equivalent benefit is actually received by Employee and/or his
family 

 

12

 

at
any time during the period of coverage, and any such benefit actually received
shall be reported to Zenith by Employee and/or his family.

 

23.5  
It is the understanding and intent of the parties
hereto, and Employer represents and warrants, that no payment or distribution
that could be made pursuant to the provisions of this Agreement constitutes an
item of deferred compensation under Section 409A of the Code (“Deferred
Compensation”).  Nevertheless, the
following provision is included in this Agreement for technical compliance with
409A of the Code:

 

Notwithstanding any provision to the contrary in this
Agreement, no payment or distribution under this Agreement which constitutes “409A
Deferred Compensation” and becomes payable by reason of Employee’s termination
of employment with Employer will be made to Employee unless Employee’s
termination of employment constitutes a “separation from service” (as such term
is defined in Treasury Regulations issued under Section 409A of the
Code).  In addition, no such payment or
distribution of 409A Deferred Compensation will be made to Employee prior to
the earlier of (i) the expiration of the six (6)-month period measured
from the date of Employee’s “separation from service” (as such term is defined
in Treasury Regulations issued under Section 409A of the Code) or (ii) the
date of Employee’s death, if Employee is deemed at the time of such separation
from service to be a “key employee” within the meaning of that term under Section 416(i) of
the Code and such delayed commencement is otherwise required in order to avoid
a prohibited distribution under Section 409A(a)(2) of the Code.  Upon the expiration of the applicable Code Section 409A(a)(2) deferral
period, all payments and benefits deferred pursuant to this Paragraph 23.5
(whether they would have otherwise been payable in a single sum or in
installments in the absence of such deferral) shall be paid or reimbursed to
Employee in a lump sum, and any remaining payments due under this Agreement
will be paid in accordance with the normal payment dates specified for them
herein.  It is intended that this
Agreement shall comply with the provisions of Section 409A of the Code and
the Treasury Regulations relating thereto so as not to subject Employee to the
payment of additional taxes and interest under Section 409A of the
Code.  In furtherance of this intent,
this Agreement shall be interpreted, operated and administered in a manner
consistent with these intentions.

 

13

 

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

 

 

	
   

  	
  ZENITH NATIONAL INSURANCE CORP.

  
	
   

  	
  (“Zenith”)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/Stanley R. Zax

  
	
   

  	
   

  	
  Stanley R. Zax

  
	
   

  	
   

  	
  Chairman and President

  
	
   

  	
   

  
	
   

  	
  Date:

  	
    June 3, 2009

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Robert E. Meyer (“Employee”)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  /s/ Robert E. Meyer

  
	
   

  	
   

  
	
   

  	
  Date:

  	
    June 3, 2009

  

 

14EXHIBIT 10.4

 

EXECUTION COPY

 

EMPLOYMENT AGREEMENT

 

THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (“Agreement”)
between ZENITH NATIONAL INSURANCE CORP., a Delaware corporation (hereinafter
referred to as “Zenith”), and Davidson M. Pattiz (hereinafter referred to as “Employee”)
is hereby amended and restated in its entirety effective on the last date of
execution set forth below (the “Effective Date”).

 

RECITALS

 

WHEREAS, Employee is presently employed as Executive
Vice President, Claims Operations of Zenith Insurance Company, a subsidiary of
Zenith, pursuant to a written Employment Agreement dated September 12,
2005, as previously modified, and is also employed as Executive Vice President
of Zenith and is an officer of certain of its other 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 the 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 Executive Vice President 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 and the Chief
Executive Officer of Zenith (“CEO”) or the Board of Directors of Zenith (“Board”)
and the boards of directors of such other corporations.

 

2.2   During the Term of Employment, Employee
shall report to the CEO or his designee. 
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 CEO, his designee or the
Board.  Both Employee and Employer hereby
expressly recognize that the services described herein shall be performed to
the reasonable satisfaction of the CEO, his designee and the Board.

 

 

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, skills 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, 2012 (“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:

 

4.1   Employee shall be paid $500,000 per year, subject to
such increases as the Compensation Committee of the Board (“Compensation
Committee”) may from time to time determine (“Base Compensation”).

 

4.2   In addition to the Base Compensation, Employee shall
be eligible for such bonuses under Zenith’s Executive Officer Bonus Plan as may
be awarded by the Compensation Committee pursuant to the plan, and may also be
awarded discretionary bonuses by the Compensation Committee.

 

4.3   All compensation hereunder shall be paid by Employer,
as may be allocated by Employer from time to time among the different
corporations which comprise Employer, 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, the Company shall provide
Executive with a $1,300 per month automobile allowance.

 

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 

 

2

 

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 vacation in
accordance with standard employment practices, during which time his
compensation shall be paid in full. 
Employee shall be treated for purposes of vacation accrual as an
employee with more than 120 months of service. 
Each vacation shall be taken during a period mutually satisfactory to
both Employer and Employee.

 

6.3   Zenith shall also provide Employee
with such insurance or other provisions for indemnification, defense or hold
harmless of officers that are generally in effect for senior executive officers
of Zenith.

 

7.                                      Death
During Employment.  If Employee
should die during the Term of Employment, Employer shall pay (a) to
Employee’s spouse, if living or (b) if his spouse is not then living, to
his then living issue by right of representation or (c) if none of the
above are then living, to his estate a cash lump sum payment equal to:  (1) one year’s Base Compensation at the
rate in effect at his death and (2) one year’s bonus.  (For these purposes, “bonus” shall mean the
highest annual bonus paid or payable to Employee for the three calendar years
immediately preceding the year of Employee’s death.)  In addition, for a period of two years from
Employee’s death, Employer shall continue to provide Employee’s family with the
same level of medical, dental and vision insurance benefits that they were
receiving through Employer immediately prior to Employee’s death.

 

8.                                      Termination
by Employer.

 

8.1   Termination
by Employer due to Disability.  Should
Employer terminate the Term of Employment prior to the Expiration Date due to “Disability”
(as defined below) Employer shall pay to Employee a cash lump sum payment
equal to:  (1) one year’s Base
Compensation at the rate in effect at termination (reduced by any amounts
payable to Employee pursuant to any long-term disability plan in effect at the
time of such termination) and (2) one year’s bonus.  (For these purposes, “bonus” shall mean the
highest annual bonus paid or payable to Employee for the three calendar years
immediately preceding the year of termination.)  In
addition, for a period of two years from Employee’s termination
of employment, Employer shall continue to provide Employee and his family with
the same level of life, medical, dental and vision insurance benefits
that they were receiving through Employer immediately prior to Employee’s
termination of employment.

 

Definition
of Disability. 
For the purposes of this Agreement, “Disability” shall
mean Employee’s absence from employment with Employer which: (i) was
due to his inability to engage in any substantial gainful activity by reason of
any medically determinable physical or mental impairment which can be expected
to result in death or can be expected to last for a continuous period of not
less than twelve (12) months; or (ii) resulted from a medically
determinable physical or mental impairment which can be expected to result in
death or can be expected to last for a continuous period of not less 

 

3

 

than twelve (12) months, and
caused Employee to receive income replacement benefits for a period of not
less than three (3) months under an accident and health plan covering
Employer’s employees or (iii) qualifies as a disability under Employer’s
Long Term Disability Plan.

 

8.2   Termination
by Employer
For Cause. 
Should Employer terminate the Term of Employment prior to the Expiration
Date “For Cause” (as defined below), Employer shall pay to Employee in complete
satisfaction of Employer’s 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 this Agreement.

 

Definition of For Cause. 
For the purposes of this Agreement, “For Cause” shall mean (1) Employee’s
failure to substantially perform his duties or any other material breach of
this Agreement by Employee (other than a failure or breach resulting from his
incapacity due to physical or mental illness, injury or similar incapacity),
which failure or breach is not cured after the passage of a reasonable period
of time to cure contained in a written demand from the CEO and/or Board that
specifically describes such failure or breach; (2) Employee’s
participation in activities that are competitive with Employer’s business,
which participation is not cured after the passage of a reasonable period of
time to cure contained in a written demand from the CEO and/or Board that
specifically describes such conduct; (3) Employee’s conviction of a
felony; or (4) Employee’s violation of his duty to maintain
confidentiality as required by Paragraph 15.

 

8.3   Termination
by Employer other than due to Disability or For Cause. 
Should Employer terminate the Term of Employment prior to the Expiration
Date for any reason other than due to Disability pursuant to Paragraph 8.1 or
For Cause pursuant to Paragraph 8.2, Employer shall pay to Employee a cash
lump sum payment equal to:  (1) two
years’ Base Compensation at the rate in effect at termination and (2) two
years’ bonus.  (For these purposes, “bonus”
shall mean the highest annual bonus paid or payable to Employee for the three
calendar years immediately preceding the year of termination.)  In addition, for a period of two years from
Employee’s termination of employment, Employer shall continue to provide
Employee and his family with the same level of life, medical, dental and vision
insurance benefits that they were receiving through Employer immediately prior
to Employee’s termination of employment.

 

9.                                      Termination
by Employee.

 

9.1   Termination
by Employee for Good Reason.  Should
Employee terminate the Term of Employment prior to the Expiration Date for “Good
Reason” (as defined below), Employer shall pay to Employee a cash lump sum
payment equal to:  (1) two years’
Base Compensation at the rate in effect at termination and (2) two years’
bonus.  (For these purposes, “bonus”
shall mean the highest annual bonus paid or payable to Employee for the three
calendar years immediately preceding the year of termination.)  In addition, for a period of two years from
Employee’s termination of employment, Employer shall continue to provide
Employee and his family with the same level of life, 

 

4

 

medical,
dental and vision insurance benefits that they were receiving through Employer
immediately prior to Employee’s termination of employment.

 

Definition of Good Reason. 
For the purposes of this Agreement, “Good Reason” shall mean (a) material
diminution in Employee Base Compensation; (b) material diminution in
authority, duties, responsibilities or reporting relationship; (c) material
diminution in the budget over which Employee has authority; (d) material
change in geographic work location; or (e) any other material breach of
this Agreement by Employer.

 

9.2   Other
Termination by Employee.  Should Employee terminate the Term
of Employment prior to the Expiration Date for any reason other than set forth
above, Employee will not be entitled to the additional payments set forth
above.

 

10.                               Prorated
and Prior Year Bonus Payments.

 

10.1   If a termination under Sections 7, 8 or 9, other than
under Section 8.2 (Termination by Employer For Cause) or under Section 9.2
(Other Termination by Employee) occurs in a given year on a date on or after July 1
of such year, Employee shall be entitled to receive a prorated bonus payment
for such year .  The prorated bonus
payment will be an amount that is (1) equal to the highest annual bonus
paid to Employee for the three calendar years immediately preceding the year of
termination and (2) prorated from the beginning of the year of termination
to the date of termination.

 

10.2   If a termination under Sections 7, 8 or 9, other than
under Section 8.2 (Termination by Employer For Cause) or under Section 9.2
(Other Termination by Employee) occurs after the end of a given year but before
the annual bonus for such year has been paid, Employee shall be entitled to
receive such annual bonus.  In the event
the amount of the annual bonus has already been determined in good faith by the
Compensation Committee prior to Employee’s termination, then the annual bonus
paid to Employee shall be equal to the amount so determined.  If, however, the annual bonus for such year
has not yet been so determined, then the amount of annual bonus shall be equal
to the highest annual bonus paid to Employee for the three calendar years
immediately preceding such given year.

 

10.3   It is agreed that the bonus amounts referred to in Section 10.1
and 10.2 above shall be in addition to the other bonus payments that may become
payable pursuant to other sections of this Agreement.

 

11.                               Release
by Employee.  In order to be
entitled to any payment or benefit payable or receivable that are provided for
in this Agreement upon termination of employment, Employee must execute a
release in a form acceptable to Employer, of Employer and its respective
officers, directors, stockholders, employees and agents.

 

12.                               Change
in Control.  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, restricted stock and any
and all other similar rights theretofore granted to Employee shall vest and, if
applicable, become exercisable in full.

 

5

 

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 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 19.2 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 within a one-year
period or less; or (v) any other transaction involving a material change of
ownership in Zenith which would require any party or affiliated group of
parties to 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).

 

13.                               Excise
Tax.  Notwithstanding anything to
the contrary in this Agreement, in the event that Employee becomes entitled to
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 herein, 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 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 

 

6

 

determining the
amount of the Gross-Up Payment, Employee 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
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 Employee 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), Zenith shall make an additional Gross-Up Payment in respect of such
excess (plus any interest, penalties or additions payable by Employee with respect to such excess)
at the time that the amount of such excess is finally determined.

 

The
Gross-Up Payment 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 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).

 

14.                               Acknowledgment
of Peculiar Value of Services.

 

14.1   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.

 

7

 

14.2   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.  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.

 

15.                               Confidential
Information and Non-Competition

 

15.1   During the Term of Employment and thereafter, Employee
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 Employer.  “Confidential
Information” shall mean information about Employer and its clients and customers that is not available
to the general public and that was learned by Employee in the
course of his employment by Employer, 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. 
Employee acknowledges that such Confidential Information is specialized,
unique in nature and of great value to Employer, and that such information gives Employer a competitive advantage.  Upon the termination of his employment for
any reason whatsoever, Employee shall promptly deliver to Employer all documents (and all copies hereof) containing any
Confidential Information.

 

15.2  
During
the term of this Agreement and for two years following termination of
employment, Employee shall not, directly or indirectly, without the prior
written consent of Employer, 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 Employer (a “Competitor of Employer”); provided, however, that the “beneficial ownership”
by Employee, 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, 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 Employer will or would suffer irreparable
injury if Employee were to compete with Employer or any affiliate of Employer in violation of this Agreement.  Employer hereby acknowledges
and agrees that Employee 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 provisions of this
Paragraph 15, so long as such activities do not interfere with the discharge of
Employee’ duties to Employer hereunder.

 

15.3   During the Term of Employment and for one year
following termination of employment, Employee shall not, directly or
indirectly, influence or attempt to influence customers or suppliers of Employer to divert their business to any Competitor of Employer.

 

8

 

15.4  
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. 
Employee recognizes that the information he will possess about these
other employees is not generally known, is of substantial value to Employer 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 Term of Employment and for one year following termination of
employment, Employee 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 a Competitor of Employer. 
Employee further agrees that he will not convey any such confidential
information or trade secrets about other employees of Employer to any Competitor of Employer or to anyone affiliated
with him or with any Competitor of Employer.

 

15.5  
Employee further acknowledges that the remedy at law
for any breach by him of the covenants contained in this Paragraph 15 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 the customers of Employer and/or
trade secrets or other confidential information of Employer, 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 Employee to
return to Employer any and all memoranda, specifications, documents and all
other material relating to the business of Employer 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 15 shall survive the expiration or
termination, for any reason, of this Agreement and of Employee’s employment.

 

16.                               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.

 

17.                               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 to be fully performed
thereunder.

 

9

 

18.                               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 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:

  	
   

  	
  Davidson M. Pattiz

  
	
   

  	
   

  	
  29136 Crags Drive

  
	
   

  	
   

  	
  Agoura Hills, California 91301

  

 

19.                               Assignment.

 

19.1   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.

 

19.2   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 otherwise all or substantially all
of Zenith’s consolidated assets, but such assignment shall not release Employer
from its obligations under this Agreement.

 

20.                               Entire
Agreement.  This Agreement
constitutes the entire understanding of the parties hereto related to the
subject matter hereof 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 Employee
and one of Zenith’s duly authorized officers (other than Employee), with the
approval of the Compensation Committee.

 

21.                               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.

 

22.                               Arbitration.

 

22.1   In the event there is any dispute between Employee
and Employer
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 Employee’s employment
or the termination of Employee’s employment,

 

10

 

both
Employee and Employer 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.

 

22.2   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.

 

22.3   This agreement to resolve any disputes by binding
arbitration shall extend to claims against any shareholder or partner of Employer,
any brother-sister company, parent, or affiliate of Employer, any
officer, director, employee, or agent of Employer, 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 Paragraph, 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.

 

22.4   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 Employer.  Employer shall be
responsible for the costs and fees of the arbitrator, unless 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

 

11

 

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.

 

22.5   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 Paragraph
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 Paragraph shall be reformed to the extent necessary to
insure that the resolution of all conflicts between Employee and Employer
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.

 

22.6   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.

 

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

 

23.                               Miscellaneous.

 

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

 

23.2   The unenforceability or invalidity of any paragraph or
subparagraph of this Agreement shall not affect the enforceability and validity
of the balance of this Agreement.

 

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

 

23.4   Employer shall also pay any additional amount
necessary to reimburse Employee and/or his family for any taxes imposed solely
by reason of receipt of life, medical, dental or vision insurance benefits
following Employee’s termination of employment or death, as applicable.

 

Notwithstanding
the foregoing, Employer shall not provide any medical, dental or vision benefit
otherwise receivable by Employee and/or his family pursuant to Paragraphs 7,
8.1, 8.3 and 9 if an equivalent benefit is actually received by Employee and/or
his family

 

12

 

at
any time during the period of coverage, and any such benefit actually received
shall be reported to Zenith by Employee and/or his family.

 

23.5  
It is the understanding and intent of the parties
hereto, and Employer represents and warrants, that no payment or distribution
that could be made pursuant to the provisions of this Agreement constitutes an
item of deferred compensation under Section 409A of the Code (“Deferred
Compensation”).  Nevertheless, the
following provision is included in this Agreement for technical compliance with
409A of the Code:

 

Notwithstanding any provision to the contrary in this
Agreement, no payment or distribution under this Agreement which constitutes “409A
Deferred Compensation” and becomes payable by reason of Employee’s termination
of employment with Employer will be made to Employee unless Employee’s
termination of employment constitutes a “separation from service” (as such term
is defined in Treasury Regulations issued under Section 409A of the
Code).  In addition, no such payment or
distribution of 409A Deferred Compensation will be made to Employee prior to
the earlier of (i) the expiration of the six (6)-month period measured
from the date of Employee’s “separation from service” (as such term is defined
in Treasury Regulations issued under Section 409A of the Code) or (ii) the
date of Employee’s death, if Employee is deemed at the time of such separation
from service to be a “key employee” within the meaning of that term under Section 416(i) of
the Code and such delayed commencement is otherwise required in order to avoid
a prohibited distribution under Section 409A(a)(2) of the Code.  Upon the expiration of the applicable Code Section 409A(a)(2) deferral
period, all payments and benefits deferred pursuant to this Paragraph 23.5
(whether they would have otherwise been payable in a single sum or in
installments in the absence of such deferral) shall be paid or reimbursed to
Employee in a lump sum, and any remaining payments due under this Agreement
will be paid in accordance with the normal payment dates specified for them
herein.  It is intended that this
Agreement shall comply with the provisions of Section 409A of the Code and
the Treasury Regulations relating thereto so as not to subject Employee to the
payment of additional taxes and interest under Section 409A of the
Code.  In furtherance of this intent,
this Agreement shall be interpreted, operated and administered in a manner
consistent with these intentions.

 

13

 

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

 

 

	
   

  	
  ZENITH NATIONAL INSURANCE CORP.

  
	
   

  	
  (“Zenith”)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Stanley R. Zax

  
	
   

  	
   

  	
  Stanley R. Zax

  
	
   

  	
   

  	
  Chairman and President

  
	
   

  	
   

  
	
   

  	
  Date:

  	
    June 3, 2009

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Davidson M. Pattiz (“Employee”)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  /s/ Davidson M. Pattiz

  
	
   

  	
   

  
	
   

  	
  Date:

  	
    June 3, 2009

  

 

14

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