Document:

EXHIBIT
10.2

 

EXECUTION
COPY

 

EMPLOYMENT
AGREEMENT

 

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

 

WHEREAS the Executive is
presently employed as President of Zenith Insurance Company, a California
corporation (“Zenith Insurance”), and a wholly owned subsidiary of the Company,
pursuant to a written Employment Agreement by and between Zenith Insurance and
the Executive dated October 20, 1997, which agreement has been extended
and modified pursuant to an Amendment dated as of March 1, 2000 (as so amended,
the “Existing Employment Agreement”) and also serves as an officer of the
Company without any additional compensation; and

 

WHEREAS the Existing
Employment Agreement expires on October 31, 2004, the Company and the
Executive deem it in their respective best interests to enter into this
Employment Agreement to supercede the Existing Employment Agreement;

 

NOW, THEREFORE, the parties
agree as follows:

 

1.                                       Employment.

 

(a)                                  Subject to earlier termination as provided
herein, the Executive is employed as President of Zenith Insurance from the
Effective Date through the Term of this

 

 

Agreement (as defined below).  The Executive shall also serve, as requested
by the Company, as an officer of the Company and any of its subsidiaries and
affiliates without additional compensation. 
In his capacity as President of Zenith Insurance and as an officer of
the Company, its subsidiaries and affiliates, the Executive shall devote his
full business time and energy to the business, affairs and interests of the
Company, its subsidiaries and affiliates and matters related thereto.  During the Term of the Agreement the
Executive shall have no other employment other than with the Company or a
subsidiary or an affiliate of the Company, except with the prior written
approval of the Board of Directors of the Company (the “Board”).  The Executive shall have such duties and
responsibilities and such executive power and authority as is customary for an
officer in his position and as shall be allocated to him in such capacity and
such other duties and responsibilities as the Board or the Chairman of the
Board and  President of the Company
(the “Chairman”) shall assign from time to time provided such assignments shall
not be inconsistent with the Executive’s position with the Company.  The Company hereby acknowledges and agrees
that the Executive shall have the right to serve in any capacity with civic,
educational, charitable and professional organizations and to make and manage
personal business investments that do not violate the noncompetition provisions
of Section 10 of this Agreement so long as such activities do not
interfere with the discharge of his duties to the Company hereunder.

 

(b)                                 During his employment hereunder, the
Executive shall report to the Chairman.

 

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

 

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2.                                       Term.  This Agreement shall be in
effect for a term commencing on the Effective Date and expiring on
October 31, 2009 (“Expiration Date”), and such period shall be referred to
herein as the “Term” of this Agreement, and such Term shall not be affected by
a termination of employment as elsewhere provided herein.

 

3.                                       Salary.  The Executive shall be paid
the sum of $700,400 per year, subject to such increases as the Board may from
time to time determine (“Base Salary”).

 

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

 

5.                                       Participation in Retirement and Executive
Benefit Plans.  During his employment hereunder, the
Executive shall be eligible to participate in any plan of the Company relating
to stock options, stock purchases, restricted stock, pension, thrift, profit
sharing, life insurance, medical coverage, disability insurance, education, and
other retirement or employee benefits that the Company has adopted or may adopt
for the benefit of its executive employees generally, and the Company shall
provide the Executive with such insurance or other provisions for
indemnification, defense or hold-harmless of officers that are generally in
effect for other senior executive officers of the Company.  Notwithstanding the foregoing, nothing
contained in this Agreement shall prohibit or limit the right of the Company to
discontinue, modify or amend any plan or benefit in its absolute discretion at
any time; provided, however, that any such discontinuance, modification or
amendment shall

 

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

 

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

 

7.                                       Vacation; Memberships. 
During his employment hereunder, the Executive shall be entitled to an
annual paid vacation in accordance with the Company’s standard employment practices;
provided, however, the Executive shall be treated for purposes of vacation as
an employee with more than 120 months of service.  Upon termination of the Executive’s
employment for any reason, the Executive shall be entitled to payment for any
accrued but unused vacation time based upon his then current salary.  The timing of paid vacations shall be
scheduled in a reasonable manner by the Executive.

 

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

 

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8.                                       Termination.

 

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

 

(b)                                 Cause.  Subject to the notice
provisions set forth below, the Company may terminate the Executive’s
employment for “Cause” at any time. 
Termination for “Cause” shall mean termination upon (1) the
Executive’s continued willful failure to substantially perform his duties with
the Company or his other willful breach of this Agreement (other than any such
failure or breach resulting from his incapacity due to physical or mental
illness, injury or similar incapacity) after a written demand for substantial
performance is delivered to him by the Chairman, which demand specifically
identifies the manner in which the Chairman or the Board believes that he has
failed to substantially perform his duties, or has otherwise breached this
Agreement, (2) the Executive’s conviction of a felony, (3) the
Executive’s willful misconduct that is materially and demonstrably injurious to
the Company, or (4) the Executive’s violation of Section 10 hereof;
provided, however, that the Executive shall not be terminated for “Cause”
unless and until the Chairman or the Board has given the Executive reasonable
notice of its intended actions and the alleged events or activities giving rise
thereto and with respect to those events or activities for which a cure is
possible, a reasonable opportunity to cure such breach if such breach is
capable of cure, and there shall have been

 

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delivered to him a written notice from the Chairman
or a copy of a resolution duly adopted by the Board regarding such actions.

 

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

 

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

 

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

 

(iii)                               A Change in Control of the Company (as
defined below) shall occur during the Term of this Agreement and, within 180
days after the effective date of any such Change in Control, the Executive
delivers to the Company a written notice of his election to terminate the
Agreement effective as of the date set forth in such notice, which effective
date shall not be less than 30 days nor more than 90 days after the date
of delivery of such written notice.  For
purposes of this section, a Change in Control shall mean either (i) a merger or
consolidation of the Company with or into another company or corporation, other
than (a) a merger or consolidation which would result in the voting securities
of the Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into

 

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voting securities of the
surviving entity) at least 75% of the combined voting power of the voting
securities of the Company or such surviving entity outstanding immediately
after such merger or consolidation or (b) a merger or consolidation effected to
implement a recapitalization of the Company (or similar transaction) in which
no “person” (as such term is used in Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended) acquires more than 50% of the combined voting
power of the Company’s then outstanding securities; or (ii) the sale of all or
substantially all of the Company’s assets; or (iii) a change in the identities
of a majority of the members of the Company’s Board of Directors within a
one-year period or less; or (iv) the acquisition, directly or indirectly, by
any person or related group of persons (other than the Company or a person that
is controlled by the Company), of beneficial ownership of securities possessing
more than fifty percent (50%) of the total combined voting power of the
Company’s outstanding securities.

 

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

 

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

 

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Termination; and (4) if the Executive’s
employment is terminated for any other reason, the date specified in the Notice
of Termination.

 

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

 

(a)                                  During any period that the Executive fails to
perform his full-time duties with the Company as a result of incapacity due to
physical or mental illness, injury or similar incapacity, he shall continue to
receive his compensation and other benefits payable to him under this Agreement
at the rate in effect at the commencement of any such period, less any amounts
payable to him under the Company’s disability plan or program or other similar
plan during such period, or under any governmental program, until his
employment is terminated pursuant to Section 8(a) hereof.  If, during any period of disability, the
Executive’s employment shall be terminated by reason of his death, disability
or the expiration of this Agreement, notwithstanding the provisions of this
section, his pay shall cease and his benefits,
if any, shall be determined solely under the Company’s retirement, insurance
and other compensation programs then in effect in accordance with the terms of
such programs, and the Company shall have no further obligations to him under
this Agreement.

 

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

 

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

 

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

 

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

 

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(ii)                                  In addition:

 

(A)  in the event of either (1) a termination by
the Company other than for Cause or Disability or (2) a constructive
termination pursuant to Section 8(c) pursuant to any subsection other
than (iii) (Change in Control), the Company shall pay the Executive, at the
time such payments would have been made had the Executive’s employment not been
terminated hereunder, all salary payments that would have been payable to the
Executive pursuant to this Agreement had the Executive continued to be employed
for the greater of (x) the remaining Term of this Agreement or
(y) six months (the “Severance Period”) (assuming for the purpose of such
continuing payments that the Executive’s salary for such period is to be based
on his rate of salary at the Date of Termination), plus any bonus that would
otherwise have been payable to the Executive with respect to the Severance
Period; provided, however, that to the extent the Executive’s bonus for any
portion of such Severance Period had not been determined, the Executive shall
be deemed to have been entitled to a bonus equal to the bonus paid or payable
to the Executive with respect to the calendar year ended immediately prior to
the Date of Termination OR

 

(B)  in the event of a constructive termination
pursuant to Section 8(c)(iii) (Change in Control) the Company shall pay
the Executive in a lump sum, all salary payments that would have been payable
to the Executive pursuant to this Agreement had the Executive continued to be
employed for the greater of (x) the remaining Term of this Agreement or
(y) two years (the “Severance Period”) (assuming for the purpose of such
continuing payments that the Executive’s salary for such period is to be based
on his rate of salary at the Date of Termination), plus any

 

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bonus that would otherwise
have been payable to the Executive with respect to the Severance Period;
provided, however, that to the extent the Executive’s bonus for any portion of
such Severance Period had not been determined, the Executive shall be deemed to
have been entitled to a bonus equal to the bonus paid or payable to the
Executive with respect to the calendar year ended immediately prior to the Date
of Termination;

 

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

 

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

 

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whichever occurs first.  If upon completion of federal COBRA, the
Executive and his family are then eligible for the corresponding California
COBRA law, AB 1401 (“Cal-COBRA”), which applies to medical coverage only, the
Company shall, at its cost, pay the Executive’s Cal-COBRA premium for his and
his family’s coverage, as applicable, up until the Executive is no longer
eligible for Cal-COBRA, or the end of the Severance Period, whichever occurs
first.  During the Severance Period, the
Company shall, at its cost, arrange to provide the Executive with life
insurance (excluding accidental death and dismemberment).  The amount of life insurance coverage will be
equal to that in effect for the Executive on the Date of Termination under the
Company’s group life insurance program (subject to the age reduction
schedule).  The Company agrees to pay an
additional amount necessary to reimburse the Executive for any taxes imposed
solely by reason of his receipt of such benefits following termination of his
employment as stated herein.

 

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

 

(e)                                  Notwithstanding anything to the contrary in
this Agreement, in the event that the Executive becomes entitled to the
Severance Payments, if any of the Severance Payments will be subject to the tax
(the “Excise Tax”) imposed by section 4999 of the Internal

 

12

 

Revenue Code of 1986, as amended (the “Code”), the
Company shall pay to the Executive an additional amount (the “Gross-Up
Payment”) such that the net amount retained by the Executive, after payment of
any Excise Tax on the Total Payments (as hereinafter defined) and any federal,
state and local income and other tax and Excise Tax upon the Gross-Up Payment
provided for by this Section 9(e), shall be equal to the Total
Payments.  For purposes of determining
whether any of the Total Payments will be subject to the Excise Tax and the
amount of such Excise Tax, (i) any other payments or benefits received or
to be received by the Executive in connection with a Change in Control or the
Executive’s termination of employment (whether pursuant to the terms of this
Agreement or any other plan, arrangement or agreement with the Company, any
person whose actions result in a Change in Control or any person affiliated
with the Company or such person (which, together with Severance Payments, shall
constitute “Total Payments”)), shall be treated as “parachute payments” within
the meaning of section 280G(b)(2) of the Code, and all “excess parachute payments”
within the meaning of section 280G(b)(1) shall be treated as subject to
the Excise Tax, unless in the opinion of tax counsel selected by the Company
and acceptable to the Executive, such other payments or benefits (in whole or
in part) do not constitute parachute payments, or such excess parachute
payments (in whole or in part) represent reasonable compensation for services
actually rendered within the meaning of section 280G(b)(4) of the Code,
within the meaning of section 280G(b)(3) of the Code, or are otherwise not
subject to the Excise Tax, (ii) the amount of the Total Payments which
shall be treated as subject to the Excise Tax shall be equal to the lesser of
(A) the total amount of the Total Payments or (B) the amount of
excess parachute payments within the meaning of section 280G(b)(1) (after
applying clause (i), above), and (iii) the value of any non-cash benefits or
any deferred payment or benefit shall be determined by the Company’s
independent auditors in accordance with the principles

 

13

 

of sections 280G(d)(3) and (4) of the
Code.  For purposes of determining the
amount of the Gross-Up Payment, the Executive shall be deemed to pay federal
income taxes at the highest marginal rate of federal income taxation in the
calendar year in which the Gross-Up Payment is to be made and state and local
income taxes at the highest marginal rate of taxation in the state and locality
of the Executive’s residence on the date of termination of employment, net of the
maximum reduction in federal income taxes which could be obtained from
deduction of such state and local taxes. 
In the event that the Excise Tax is subsequently determined to be less
than the amount taken into account hereunder at the time of termination of the
Executive’s employment, the Executive shall repay to the Company, at the time
that the amount of such reduction in Excise Tax is finally determined, the
portion of the Gross-Up Payment attributable to such reduction plus interest on
the amount of such repayment at the rate provided in section 1274(b)(2)(B)
of the Code.  In the event that the
Excise Tax is determined to exceed the amount taken into account hereunder at
the time of the termination of the Executive’s employment (including by reason
of any payment the existence or amount of which cannot be determined at the
time of the Gross-Up Payment), the Company shall make an additional Gross-Up
Payment in respect of such excess (plus any interest, penalties or additions
payable by the Executive with respect to such excess) at the time that the
amount of such excess is finally determined.

 

10.                                 Confidential Information and Non-Competition.

 

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

 

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

 

(b)                                 During the term of this Agreement and any
period the Executive is entitled to benefits hereunder, the Executive shall
not, directly or indirectly, without prior written consent of the Company,
provide consultative service (with or without pay) to, own, manage, operate,
join, control, participate in, or be connected (as a stockholder, partner, or
otherwise) with, any business, individual, partner, firm, corporation, or other
entity that is then in competition with the Company or any of its subsidiaries
or affiliates (a “Competitor of the Company”); provided, however, that the
“beneficial ownership” by the Executive, either individually or as a member of
a “group,” as such terms are used in Rule 13d of the General Rules and
Regulations under the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), of not more than one percent (1%) of the voting stock of any
publicly held corporation shall not be a violation of this Agreement.  It is further expressly agreed that the
Company will or would suffer irreparable injury if the Executive were to
compete with the Company or any subsidiary or affiliate of the Company in
violation of this Agreement.

 

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

 

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

 

(e)                                  The Executive further acknowledges that the
remedy at law for any breach by him of the covenants contained in this
Section 10 will be inadequate and that in the

 

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

 

11.                                 Assignments/Mitigation.

 

(a)                                  This Agreement and the rights, interest and
benefits hereunder are personal to the Executive and shall not be assigned,
transferred, pledged, or hypothecated in any way by the Executive, and shall
not be subject to execution, attachment or similar process.  Any attempted assignment, transfer, pledge,
or hypothecation, or the levy of any execution, attachment or similar process
thereon, shall be null and void and without effect.

 

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

 

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

 

(d)                                 The Executive shall have no duty to mitigate
the Company’s obligations hereunder by seeking other employment or by becoming
self-employed; provided, however, that compensation including life, disability,
dental, accident, group health insurance and other health and welfare benefits
as well as salary, wage or other compensation received by the Executive during
or with respect to the Severance Period and attributable to services rendered
during such period by the Executive to persons or entities other than the
Company shall be applied to reduce the Company’s obligation to provide compensation
and benefits under this Agreement.  The
Executive shall promptly notify the Company of his securing other employment or
his becoming self-employed and shall account to the Company as to the amount of
such compensation and benefits; if the Company has paid amounts in excess of

 

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those to which the Executive was entitled (after
giving effect to the offsets provided above), the Executive shall reimburse the
Company promptly thereafter for such excess.

 

12.                                 Notice.  Notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered or five business days after being
mailed by United States certified or registered mail, return receipt requested,
postage prepaid, addressed (a) if to the Executive, to 6 Merrill Drive,
Moraga, California 94556 and (b) if to the Company, to 21255 Califa
Street, Woodland Hills, California 91367, Attention: Stanley R. Zax,
Chairman and President, with a copy to the Secretary of the Company; or to such
other address as either party may have furnished to the other in writing in
accordance herewith, except that notice of change of address shall be effective
only upon receipt thereof.

 

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

 

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

 

19

 

provision is reduced only to the minimum extent
necessary to render the modified provision valid, legal and enforceable.

 

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

 

16.                                 Arbitration.  In the event there is any
dispute between the Executive and the Company which the parties are unable to
resolve themselves, including any dispute with regard to the application,
interpretation or validity of this Agreement or any dispute with regard to any
aspect of the Executive’s employment or the termination of the Executive’s
employment, both the Executive and the Company agree by entering into this
Agreement that the exclusive remedy for determining any such dispute,
regardless of its nature, will be by arbitration in accordance with the then
most applicable rules of the American Arbitration Association.  Arbitration shall be the exclusive remedy for
determining any such dispute, regardless of its nature.  Notwithstanding the foregoing, either party
may in an appropriate matter apply to a court pursuant to California Code of
Civil Procedure Section 1281.8, or any comparable provision, for
provisional relief, including a temporary restraining order or a preliminary
injunction, on the grounds that the award to which the applicant may be
entitled in arbitration may be rendered ineffectual without provisional relief.

 

In the event the parties are
unable to agree upon an arbitrator, the parties shall select a single
arbitrator from a list designated by the Los Angeles office of the American
Arbitration Association of seven arbitrators all of whom shall be retired
judges who have had experience in the employment law, who are actively involved
in hearing private cases and who are

 

20

 

residents
in the greater Los Angeles area.  If the
parties are unable to select an arbitrator from the list provided by the
American Arbitration Association, then the parties shall each strike names
alternatively from the list, with the first to strike being determined by lot.  After each party has used three strikes, the
remaining name on the list shall be the arbitrator.  Any arbitration shall be administered by the
American Arbitration Association only if both parties so agree.

 

This agreement to resolve
any disputes by binding arbitration shall extend to claims against any
shareholder or partner of the Company, any brother-sister company, parent,
subsidiary or affiliate of the Company, any officer, director, employee, or
agent of the Company, or of any of the above, and shall apply as well to claims
arising out of state and federal statutes and local ordinances as well as to
claims arising under the common law.  In
the event of a dispute subject to this section the parties shall be
entitled to reasonable discovery, including deposition discovery, subject to
the discretion of the arbitrator.  The
arbitrator shall apply the same substantive law as would be applied by a court
having jurisdiction over the parties and their dispute and the remedial
authority of the arbitrator shall be the same as, but no greater than, the
remedial power of a court having jurisdiction over the parties and their
dispute.  The arbitrator shall, upon an
appropriate motion, dismiss any claim brought in arbitration if the arbitrator
determines that the claim does not state a claim or a cause of action which
could have been properly pursued through court litigation.  In the event of a conflict between the then
most-applicable rules of the American Arbitration Association and these
procedures, the provisions of these procedures shall govern.

 

Each party may be
represented by counsel or other representative of the party’s choice and each
party shall initially be responsible for the costs and fees of its counsel or
other

 

21

 

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

 

The arbitrator shall render
an award and opinion in the form typical of that rendered in labor arbitrations
and the award of the arbitrator shall be final and binding upon the
parties.  If any of the provisions of
this section are determined to be unlawful or otherwise unenforceable, in
whole or in part, such determination shall not affect the validity of the
remainder of these provisions and this section shall be reformed to the
extent necessary to insure that the resolution of all conflicts between the
Executive and the Company including those arising out of statutory claims,
shall be resolved by neutral, binding arbitration.  In the event a court finds that the
arbitration procedure set forth herein is not absolutely binding, then it is
the intent of the parties that any arbitration decision should be fully
admissible in evidence, given great weight by any finder of fact and treated as
determinative to the maximum extent permitted by law.

 

22

 

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

 

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

 

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

 

18.                                 Miscellaneous.

 

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

 

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

 

23

 

a waiver of similar or dissimilar provisions
or conditions at the same or at any prior or subsequent time.

 

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

 

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

 

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

 

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

 

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

 

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

 

	
   

  	
  ZENITH NATIONAL INSURANCE
  CORP.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Stanley R. Zax

  	
   

  
	
   

  	
  STANLEY R. ZAX,

  
	
   

  	
  Chairman and
  President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  EMPLOYEE:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Jack D. Miller

  	
   

  
	
   

  	
  JACK D. MILLER

  

 

24EXHIBIT
10.3

 

EXECUTION COPY

 

EMPLOYMENT AGREEMENT

 

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

 

WHEREAS
the Executive is presently employed as Senior Vice President and Chief Actuary
of the workers’ compensation business of Zenith Insurance Company, a California
corporation (“Zenith Insurance”), and a wholly owned subsidiary of the Company,
pursuant to a written Employment Agreement by and between Zenith Insurance and
the Executive dated October 20, 1997, which agreement has been extended
and modified pursuant to an Amendment dated as of March 1, 2000 (as so
amended, the “Existing Employment Agreement”) and also serves as an officer of
the Company without any additional compensation; and

 

WHEREAS
the Existing Employment Agreement expires on October 31, 2004, the Company
and the Executive deem it in their respective best interests to enter into this
Employment Agreement to supercede the Existing Employment Agreement;

 

NOW,
THEREFORE, the parties agree as follows:

 

 

1.                                       Employment.

 

(a)                                  Subject to earlier termination as provided
herein, the Executive is employed as Senior Vice President and Chief Actuary of
the workers’ compensation business of Zenith Insurance from the Effective Date
through the Term of this Agreement (as defined below).  The Executive shall also serve, as requested
by the Company, as an officer of the Company and any of its subsidiaries and
affiliates without additional compensation. 
In his capacity as Senior Vice President and Chief Actuary of the
workers’ compensation business of Zenith Insurance and as an officer of the
Company, its subsidiaries and affiliates, the Executive shall devote his full
business time and energy to the business, affairs and interests of the Company,
its subsidiaries and affiliates and matters related thereto.  During the Term of the Agreement the Executive
shall have no other employment other than with the Company or a subsidiary or
an affiliate of the Company, except with the prior written approval of the
Board of Directors of the Company (the “Board”).  The Executive shall have such duties and
responsibilities and such executive power and authority as is customary for an
officer in his position and as shall be allocated to him in such capacity and
such other duties and responsibilities as the Board or the Chairman of the
Board and  President of the Company
(the “Chairman”) shall assign from time to time provided such assignments shall
not be inconsistent with the Executive’s position with the Company.  The Company hereby acknowledges and agrees
that the Executive shall have the right to serve in any capacity with civic,
educational, charitable and professional organizations and to make and manage
personal business investments that do not violate the noncompetition provisions
of Section 10 of this Agreement so long as such activities do not
interfere with the discharge of his duties to the Company hereunder.

 

2

 

(b)                                 During his employment hereunder, the
Executive shall report to the Chairman.

 

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

 

2.                                       Term.  This Agreement shall be in
effect for a term commencing on the Effective Date and expiring on
October 31, 2009 (“Expiration Date”), and such period shall be referred to
herein as the “Term” of this Agreement, and such Term shall not be affected by
a termination of employment as elsewhere provided herein.

 

3.                                       Salary.  The Executive shall be paid
the sum of $467,750 per year, subject to such increases as the Board may from
time to time determine (“Base Salary”).

 

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

 

5.                                       Participation in Retirement and Executive
Benefit Plans.  During his employment hereunder, the
Executive shall be eligible to participate in any plan of the Company relating
to stock options, stock purchases, restricted stock, pension, thrift, profit
sharing, life insurance, medical coverage, disability insurance, education, and
other retirement or employee benefits that the Company has adopted or may adopt
for the benefit of its executive employees generally, and the Company shall
provide the Executive with such

 

3

 

insurance or other
provisions for indemnification, defense or hold-harmless of officers that are
generally in effect for other senior executive officers of the Company.  Notwithstanding the foregoing, nothing
contained in this Agreement shall prohibit or limit the right of the Company to
discontinue, modify or amend any plan or benefit in its absolute discretion at
any time; provided, however, that any such discontinuance, modification or
amendment shall apply to employees of the Company generally, or to a defined
group of such employees and shall not apply solely to the Executive.

 

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

 

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

 

4

 

accrued but unused vacation
time based upon his then current salary. 
The timing of paid vacations shall be scheduled in a reasonable manner
by the Executive.

 

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

 

8.                                       Termination.

 

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

 

(b)                                 Cause.  Subject to the notice
provisions set forth below, the Company may terminate the Executive’s
employment for “Cause” at any time. 
Termination for “Cause” shall mean termination upon (1) the
Executive’s continued willful failure to substantially perform his duties with
the Company or his other willful breach of this Agreement (other than any such
failure or breach resulting from his incapacity due to physical or mental illness,
injury or similar incapacity) after a written demand for substantial
performance is delivered to him by the Chairman, which demand specifically
identifies the manner in which the Chairman or the Board believes that he has
failed to substantially perform his duties, or has otherwise breached this
Agreement, (2) the Executive’s conviction of a felony, (3) the
Executive’s willful misconduct that is materially and demonstrably injurious to
the Company, or (4) the

 

5

 

Executive’s violation of
Section 10 hereof; provided, however, that the Executive shall not be
terminated for “Cause” unless and until the Chairman or the Board has given the
Executive reasonable notice of its intended actions and the alleged events or
activities giving rise thereto and with respect to those events or activities
for which a cure is possible, a reasonable opportunity to cure such breach if
such breach is capable of cure, and there shall have been delivered to him a
written notice from the Chairman or a copy of a resolution duly adopted by the
Board regarding such actions.

 

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

 

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

 

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

 

(iii)                               A Change in Control of the Company (as
defined below) shall occur during the Term of this Agreement and, within 180
days after the effective date of any such Change in Control, the Executive
delivers to the Company a written notice of his election to terminate the
Agreement effective as of the date set forth in such notice, which effective
date shall not be less than 30 days nor more than 90 days after

 

6

 

the
date of delivery of such written notice. 
For purposes of this section, a Change in Control shall mean either (i)
a merger or consolidation of the Company with or into another company or
corporation, other than (a) a merger or consolidation which would result in the
voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) at least 75% of the combined
voting power of the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation or (b) a merger or
consolidation effected to implement a recapitalization of the Company (or
similar transaction) in which no “person” (as such term is used in Sections
13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) acquires
more than 50% of the combined voting power of the Company’s then outstanding
securities; or (ii) the sale of all or substantially all of the Company’s
assets; or (iii) a change in the identities of a majority of the members of the
Company’s Board of Directors within a one-year period or less; or (iv) the
acquisition, directly or indirectly, by any person or related group of persons
(other than the Company or a person that is controlled by the Company), of
beneficial ownership of securities possessing more than fifty percent (50%) of
the total combined voting power of the Company’s outstanding securities.

 

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

 

7

 

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

 

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

 

(a)                                  During any period that the Executive fails to
perform his full-time duties with the Company as a result of incapacity due to
physical or mental illness, injury or similar incapacity, he shall continue to
receive his compensation and other benefits payable to him under this Agreement
at the rate in effect at the commencement of any such period, less any amounts
payable to him under the Company’s disability plan or program or other similar
plan during such period, or under any governmental program, until his
employment is terminated pursuant to Section 8(a) hereof.  If, during any period of disability, the Executive’s
employment shall be terminated by reason of his death, disability or the
expiration of this Agreement, notwithstanding the provisions of this section, his pay shall cease and his benefits, if any, shall be
determined solely under the Company’s retirement, insurance and other
compensation programs then in effect in accordance with the terms of such
programs, and the Company shall have no further obligations to him under this
Agreement.

 

8

 

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

 

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

 

(i)                                     The Company shall pay to the Executive his
full base salary through the Date of Termination, at the rate in effect at the
time Notice of Termination

 

9

 

is
given, plus all other amounts to which he is entitled under any compensation
plan of the Company, in each case at the time such payments are due;

 

(ii)                                  In addition:

 

(A)  in the event of either (1) a termination by
the Company other than for Cause or Disability or (2) a constructive
termination pursuant to Section 8(c) pursuant to any subsection other
than (iii) (Change in Control), the Company shall pay the Executive, at the
time such payments would have been made had the Executive’s employment not been
terminated hereunder, all salary payments that would have been payable to the
Executive pursuant to this Agreement had the Executive continued to be employed
for the greater of (x) the remaining Term of this Agreement or
(y) six months (the “Severance Period”) (assuming for the purpose of such
continuing payments that the Executive’s salary for such period is to be based
on his rate of salary at the Date of Termination), plus any bonus that would
otherwise have been payable to the Executive with respect to the Severance
Period; provided, however, that to the extent the Executive’s bonus for any
portion of such Severance Period had not been determined, the Executive shall
be deemed to have been entitled to a bonus equal to the bonus paid or payable
to the Executive with respect to the calendar year ended immediately prior to
the Date of Termination OR

 

(B)  in the event of a constructive termination
pursuant to Section 8(c)(iii) (Change in Control) the Company shall pay
the Executive in a lump sum, all salary payments that would have been payable
to the Executive pursuant to this Agreement had the Executive continued to be
employed for the greater of (x) the

 

10

 

remaining
Term of this Agreement or (y) two years (the “Severance Period”) (assuming
for the purpose of such continuing payments that the Executive’s salary for
such period is to be based on his rate of salary at the Date of Termination),
plus any bonus that would otherwise have been payable to the Executive with
respect to the Severance Period; provided, however, that to the extent the
Executive’s bonus for any portion of such Severance Period had not been
determined, the Executive shall be deemed to have been entitled to a bonus
equal to the bonus paid or payable to the Executive with respect to the calendar
year ended immediately prior to the Date of Termination;

 

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

 

(iv)                              The Company’s group health plans allow for
benefits to extend beyond employment, under certain circumstances and for a
specified length of time, as defined by the federal law called the Consolidated
Omnibus Budget Reconciliation Act of 1985 (commonly known as “COBRA”).  During the Severance Period, if the Executive
and his family are eligible for COBRA coverage, the Company shall, at its

 

11

 

cost,
pay the Executive’s COBRA premium for his and his family’s coverage, as
applicable, under the medical, dental, vision and the employee assistance plan,
up until the Executive is no longer eligible for COBRA, or the end of the
Severance Period, whichever occurs first. 
If upon completion of federal COBRA, the Executive and his family are
then eligible for the corresponding California COBRA law, AB 1401
(“Cal-COBRA”), which applies to medical coverage only, the Company shall, at
its cost, pay the Executive’s Cal-COBRA premium for his and his family’s
coverage, as applicable, up until the Executive is no longer eligible for
Cal-COBRA, or the end of the Severance Period, whichever occurs first.  During the Severance Period, the Company
shall, at its cost, arrange to provide the Executive with life insurance
(excluding accidental death and dismemberment). 
The amount of life insurance coverage will be equal to that in effect
for the Executive on the Date of Termination under the Company’s group life
insurance program (subject to the age reduction schedule).  The Company agrees to pay an additional
amount necessary to reimburse the Executive for any taxes imposed solely by
reason of his receipt of such benefits following termination of his employment
as stated herein.

 

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

 

12

 

(e)                                  Notwithstanding anything to the contrary in
this Agreement, in the event that the Executive becomes entitled to the
Severance Payments, if any of the Severance Payments will be subject to the tax
(the “Excise Tax”) imposed by section 4999 of the Internal Revenue Code of
1986, as amended (the “Code”), the Company shall pay to the Executive an
additional amount (the “Gross-Up Payment”) such that the net amount retained by
the Executive, after payment of any Excise Tax on the Total Payments (as
hereinafter defined) and any federal, state and local income and other tax and
Excise Tax upon the Gross-Up Payment provided for by this Section 9(e),
shall be equal to the Total Payments. 
For purposes of determining whether any of the Total Payments will be
subject to the Excise Tax and the amount of such Excise Tax, (i) any other
payments or benefits received or to be received by the Executive in connection
with a Change in Control or the Executive’s termination of employment (whether
pursuant to the terms of this Agreement or any other plan, arrangement or
agreement with the Company, any person whose actions result in a Change in
Control or any person affiliated with the Company or such person (which,
together with Severance Payments, shall constitute “Total Payments”)), shall be
treated as “parachute payments” within the meaning of section 280G(b)(2)
of the Code, and all “excess parachute payments” within the meaning of
section 280G(b)(1) shall be treated as subject to the Excise Tax, unless
in the opinion of tax counsel selected by the Company and acceptable to the
Executive, such other payments or benefits (in whole or in part) do not
constitute parachute payments, or such excess parachute payments (in whole or
in part) represent reasonable compensation for services actually rendered
within the meaning of section 280G(b)(4) of the Code, within the meaning
of section 280G(b)(3) of the Code, or are otherwise not subject to the
Excise Tax, (ii) the amount of the Total Payments which shall be treated
as subject to the Excise Tax shall be equal to the lesser of (A) the total
amount of the Total Payments or (B) the amount of

 

13

 

excess parachute payments within
the meaning of section 280G(b)(1) (after applying clause (i), above), and
(iii) the value of any non-cash benefits or any deferred payment or benefit
shall be determined by the Company’s independent auditors in accordance with
the principles of sections 280G(d)(3) and (4) of the Code.  For purposes of determining the amount of the
Gross-Up Payment, the Executive shall be deemed to pay federal income taxes at
the highest marginal rate of federal income taxation in the calendar year in
which the Gross-Up Payment is to be made and state and local income taxes at
the highest marginal rate of taxation in the state and locality of the
Executive’s residence on the date of termination of employment, net of the
maximum reduction in federal income taxes which could be obtained from
deduction of such state and local taxes. 
In the event that the Excise Tax is subsequently determined to be less
than the amount taken into account hereunder at the time of termination of the
Executive’s employment, the Executive shall repay to the Company, at the time
that the amount of such reduction in Excise Tax is finally determined, the
portion of the Gross-Up Payment attributable to such reduction plus interest on
the amount of such repayment at the rate provided in section 1274(b)(2)(B)
of the Code.  In the event that the
Excise Tax is determined to exceed the amount taken into account hereunder at
the time of the termination of the Executive’s employment (including by reason
of any payment the existence or amount of which cannot be determined at the
time of the Gross-Up Payment), the Company shall make an additional Gross-Up
Payment in respect of such excess (plus any interest, penalties or additions
payable by the Executive with respect to such excess) at the time that the amount
of such excess is finally determined.

 

14

 

10.                                 Confidential Information and Non-Competition.

 

(a)                                  During the Term of this Agreement and
thereafter, the Executive shall not, except as may be required to perform his
duties hereunder or as required by applicable law, disclose to others or use,
whether directly or indirectly, any Confidential Information regarding the
Company.  “Confidential Information”
shall mean information about the Company, its subsidiaries and affiliates, and
their respective clients and customers that is not available to the general
public and that was learned by the Executive in the course of his employment by
the Company, including (without limitation) any data, formulae, information, proprietary
knowledge, trade secrets and client and customer lists and all papers, resumes,
records and the documents containing such Confidential Information.  The Executive acknowledges that such
Confidential Information is specialized, unique in nature and of great value to
the Company, and that such information gives the Company a competitive
advantage.  Upon the termination of his
employment for any reason whatsoever, the Executive shall promptly deliver to
the Company all documents (and all copies hereof) containing any Confidential
Information.

 

(b)                                 During the term of this Agreement and any
period the Executive is entitled to benefits hereunder, the Executive shall
not, directly or indirectly, without prior written consent of the Company,
provide consultative service (with or without pay) to, own, manage, operate,
join, control, participate in, or be connected (as a stockholder, partner, or
otherwise) with, any business, individual, partner, firm, corporation, or other
entity that is then in competition with the Company or any of its subsidiaries
or affiliates (a “Competitor of the Company”); provided, however, that the
“beneficial ownership” by the Executive, either individually or as a member of
a “group,” as such terms are used in Rule 13d of the General Rules and
Regulations under the Securities Exchange Act of 1934, as amended (the

 

15

 

“Exchange Act”), of not more
than one percent (1%) of the voting stock of any publicly held corporation
shall not be a violation of this Agreement. 
It is further expressly agreed that the Company will or would suffer
irreparable injury if the Executive were to compete with the Company or any
subsidiary or affiliate of the Company in violation of this Agreement.

 

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

 

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

 

16

 

secrets about other
employees of the Company, its subsidiaries and affiliates to anyone affiliated
with him or to any Competitor.

 

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

 

17

 

11.                                 Assignments/Mitigation.

 

(a)                                  This Agreement and the rights, interest and
benefits hereunder are personal to the Executive and shall not be assigned,
transferred, pledged, or hypothecated in any way by the Executive, and shall
not be subject to execution, attachment or similar process.  Any attempted assignment, transfer, pledge,
or hypothecation, or the levy of any execution, attachment or similar process
thereon, shall be null and void and without effect.

 

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

 

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

 

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

 

18

 

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

 

12.                                 Notice.  Notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered or five business days after being
mailed by United States certified or registered mail, return receipt requested,
postage prepaid, addressed (a) if to the Executive, to 24024 Hillhurst
Drive, West Hills, California 91307 and (b) if to the Company, to 21255
Califa Street, Woodland Hills, California 91367, Attention: Stanley R.
Zax, Chairman and President, with a copy to the Secretary of the Company; or to
such other address as either party may have furnished to the other in writing
in accordance herewith, except that notice of change of address shall be
effective only upon receipt thereof.

 

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

 

14.                                 Severability.  Any
provision of this Agreement which is deemed invalid, illegal or unenforceable
in any jurisdiction shall, as to that jurisdiction and subject to this
section be ineffective to the extent of such invalidity, illegality or
unenforceability, without affecting in

 

19

 

any way the remaining
provisions hereof in such jurisdiction or rendering that or any other
provisions of this Agreement invalid, illegal, or unenforceable in any other
jurisdiction.  Moreover, if any provision
should be deemed invalid, illegal or unenforceable because its scope is
considered excessive, such provision shall be modified so that the scope of the
provision is reduced only to the minimum extent necessary to render the
modified provision valid, legal and enforceable.

 

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

 

16.                                 Arbitration.  In the event there is any
dispute between the Executive and the Company which the parties are unable to
resolve themselves, including any dispute with regard to the application,
interpretation or validity of this Agreement or any dispute with regard to any
aspect of the Executive’s employment or the termination of the Executive’s
employment, both the Executive and the Company agree by entering into this
Agreement that the exclusive remedy for determining any such dispute,
regardless of its nature, will be by arbitration in accordance with the then
most applicable rules of the American Arbitration Association.  Arbitration shall be the exclusive remedy for
determining any such dispute, regardless of its nature.  Notwithstanding the foregoing, either party
may in an appropriate matter apply to a court pursuant to California Code of
Civil Procedure Section 1281.8, or any comparable provision, for
provisional relief, including a temporary restraining order or a preliminary
injunction, on the grounds that the award to which the applicant may be
entitled in arbitration may be rendered ineffectual without provisional relief.

 

20

 

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 residents in the greater Los
Angeles area.  If the parties are unable
to select an arbitrator from the list provided by the American Arbitration
Association, then the parties shall each strike names alternatively from the
list, with the first to strike being determined by lot.  After each party has used three strikes, the
remaining name on the list shall be the arbitrator.  Any arbitration shall be administered by the
American Arbitration Association only if both parties so agree.

 

This
agreement to resolve any disputes by binding arbitration shall extend to claims
against any shareholder or partner of the Company, any brother-sister company,
parent, subsidiary or affiliate of the Company, any officer, director,
employee, or agent of the Company, or of any of the above, and shall apply as
well to claims arising out of state and federal statutes and local ordinances
as well as to claims arising under the common law.  In the event of a dispute subject to this
section the parties shall be entitled to reasonable discovery, including
deposition discovery, subject to the discretion of the arbitrator.  The arbitrator shall apply the same
substantive law as would be applied by a court having jurisdiction over the
parties and their dispute and the remedial authority of the arbitrator shall be
the same as, but no greater than, the remedial power of a court having
jurisdiction over the parties and their dispute.  The arbitrator shall, upon an appropriate
motion, dismiss any claim brought in arbitration if the arbitrator determines
that the claim does not state a claim or a cause of action which could have
been properly pursued through court litigation. 
In the event

 

21

 

of
a conflict between the then most-applicable rules of the American Arbitration
Association and these procedures, the provisions of these procedures shall
govern.

 

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

 

The
arbitrator shall render an award and opinion in the form typical of that
rendered in labor arbitrations and the award of the arbitrator shall be final
and binding upon the parties.  If any of
the provisions of this section are determined to be unlawful or otherwise
unenforceable, in whole or in part, such determination shall not affect the
validity of the remainder of these provisions and this section shall be
reformed to the extent necessary to insure that the resolution of all conflicts
between the Executive and the Company including those arising out of statutory
claims, shall be resolved by neutral, binding arbitration.  In the event a court finds that the
arbitration procedure set forth herein is not absolutely binding, then it is
the intent of the parties that any arbitration decision should be fully
admissible in

 

22

 

evidence,
given great weight by any finder of fact and treated as determinative to the
maximum extent permitted by law.

 

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

 

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

 

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

 

18.                                 Miscellaneous.

 

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

 

(b)                                 No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing and signed by the Executive and such officer as may be
specifically designated by the Board.  No
waiver by either party

 

23

 

hereto
at any time of any breach by the other party hereto of, or compliance with, any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time.

 

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

 

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

 

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

 

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

 

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

 

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

 

	
   

  	
  ZENITH
  NATIONAL INSURANCE CORP.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Stanley R. Zax

  	
   

  
	
   

  	
  STANLEY R. ZAX,

  
	
   

  	
  Chairman and President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  EMPLOYEE:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Robert E. Meyer

  	
   

  
	
   

  	
  ROBERT E. MEYER

  
					

 

24

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