Document:

Exhibit 10.1

 

EMPLOYMENT AGREEMENT

 

This
EMPLOYMENT AGREEMENT (the “Agreement”)
is entered into on September 12, 2005 between ZENITH
NATIONAL INSURANCE CORP., a Delaware corporation (the “Company”),
and Davidson Pattiz (the “Executive”);

 

WHEREAS,
the parties desire to enter into this Agreement setting forth the terms and
conditions for the employment relationship of the Executive with Zenith
Insurance Company, a California corporation and a wholly-owned subsidiary of
Company (“Zenith Insurance”).

 

NOW,
THEREFORE, it is AGREED as follows:

 

1.             Employment.

 

(a)           Subject
to earlier termination as provided herein, the Executive is employed as an
Executive Vice President of Zenith Insurance from September 12, 2005 (the “Effective
Date”) through the Term of this Agreement (as defined below) with
responsibilities for Claims, Claims Legal and Medical Management.  The Executive shall also serve, if requested
by the Company, as an officer of the Company and any of its subsidiaries and
affiliates without additional compensation. 
In his capacity as an Executive Vice President of Zenith Insurance (and,
if so requested to serve, 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 Chief Executive
Officer or President of the Company or of Zenith Insurance shall assign from
time to time provided such assignments shall not be inconsistent with the
Executive’s position with Zenith Insurance. 
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 Chief Executive
Officer or President of the Company or of Zenith Insurance.

 

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

 

3.             Salary.  Commencing as of the Effective Date, the
Company shall pay the employee an annual base salary at the minimum rate of
$500,000, which shall be payable in installments in conformity with the Company’s
policy relating to salaried 

 

 

employees.  The Executive’s base salary may be subject to
annual adjustment (but not below the then current amount) in the sole
discretion of the Board.

 

4.             Discretionary
Bonuses.  During the Term of this Agreement, the
Executive shall be eligible for such discretionary bonuses as may be
authorized, declared, and paid by the Board in its sole discretion.

 

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, restricted stock, stock purchases, pension, thrift, profit
sharing, life insurance, medical coverage, disability insurance, education, and
other retirement or employee benefits that the Company has adopted or may adopt
for the benefit of Zenith Insurance’s 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 senior executive officers of Zenith Insurance.  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.

 

In
addition, the Company will recommend to the Compensation Committee of the Board
of Directors at its next meeting following execution of this Agreement that 

 

 

the
Executive be awarded 10,000 shares of “restricted” common stock pursuant to the
Zenith National Insurance Corp. Amended and Restated 2004 Restricted Stock
Plan.

 

6.             Fringe
Benefits: Relocation Assistance and 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, 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 Executive with a $1,300 per month automobile allowance.  The benefits provided under this Section 6
shall cease upon the Executive’s Date of Termination (as defined below).

 

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

 

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, 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,.

 

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 the physical or mental illness, injury or similar incapacity)
after a written demand for substantial performance is delivered to him by the
Board or the Chief Executive Officer or President of the Company or of Zenith
Insurance, which demand specifically identifies the manner in which 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
Board or the Chief Executive Officer or President of the Company or of Zenith
Insurance 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 and there shall have been delivered to him a copy of a
resolution duly adopted by the Board regarding such action or written notice
from the Chief Executive Officer or President of the Company or of Zenith
Insurance.

 

(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 any such written notice.  For purposes of this Section 8(c)(iii), a
Change in Control shall mean either (i) a merger or consolidation of the
Company with or into another company or corporation, other than (a) a merger or
consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) at least 75% of the combined voting power of the voting
securities of the Company or such surviving entity outstanding immediately
after such merger or consolidation or (b) a merger or consolidation effected to
implement a recapitalization of the Company (or similar transaction) in which
no “person” (as such term is used in Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended) 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 of 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
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 during the
Term of this Agreement:

 

(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 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
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
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 the Company other than for
Cause or Disability or by the Executive by reason of a constructive termination
pursuant to Section 8(c) hereof, he shall receive the payments and benefits provided
below (“Severance Payments”); provided, however, in order to be entitled
to any payments or benefits other than those specified in subparagraph (i)
below Executive must execute a release, in a form acceptable to the Company, of
the Company and any subsidiaries and affiliates of the Company and their
respective officers, directors, stockholders, employees and agents:

 

(i)          The
Company shall pay to the Executive 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;

 

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

 

(e)           Notwithstanding
anything to the contrary in this Agreement, in the event that the Executive
becomes entitled to the Severance Payments, if any of the Severance Payments
will be subject to the tax (the “Excise Tax”) imposed by section 4999 of the
Internal Revenue Code of 1986, as amended (the “Code”), the Company shall pay
to the Executive an additional amount (the “Gross-Up Payment”) such that the
net amount retained by the Executive, after payment of any Excise Tax on the
Total Payments (as hereinafter defined) and any federal, state and local income
and other tax and Excise Tax upon the Gross-Up Payment provided for by this
Section 9(e), shall be equal to the Total Payments.  For purposes of determining whether any of
the Total 

 

 

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

 

 

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

 

10.           Confidential
Information and Non-Competition.

 

(a)           During
the Term of this Agreement and thereafter, the Executive shall not, except as
may be required to perform 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 the prior
written consent of the Company, provide consultative service (with or without
pay) to, own, manage, operate, join, control, participate in, or be connected
(as a stockholder, partner, or otherwise) with, any business, individual, partner,
firm, corporation, or other entity that is then in competition with the Company
or any of its subsidiaries or affiliates (a “Competitor of the Company”);
provided, however, that the “beneficial ownership” by the Executive, either
individually or as a member of a “group,” as such terms are used in
Rule 13d of the General Rules and Regulations under the 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.

 

(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, its subsidiaries or affiliates. 
The Executive agrees that, during the Term of this Agreement and for the
period ending on the last day of the one-year period following termination of
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 him, or any business, individual, partner, firm,
corporation or other entity that is then a Competitor of the Company.  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 of the Company.

 

(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.

 

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 designees, 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 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 18 Evergreen Drive, Orinda, CA
94563, and (b) if to the Company, to 21255 Califa Street, Woodland Hills,
CA 91367, Attention:  Stanley R. Zax,
Chief Executive Officer, 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 provision is reduced only to the minimum extent necessary to render the
modified provision valid, legal and enforceable.

 

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

 

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

 

 

In
the event the parties are unable to agree upon an arbitrator, the parties shall
select a single arbitrator from a list designated by the Los Angeles office of
the American Arbitration Association of seven arbitrators all of whom shall be
retired judges who have had experience in the employment law, who are actively
involved in hearing private cases and who are resident in the greater Los
Angeles area.  If the parties are unable
to select an arbitrator from the list provided by the American Arbitration
Association, then the parties shall each strike names alternatively from the
list, with the first to strike being determined by lot.  After each party has used three strikes, the
remaining name on the list shall be the arbitrator.  Any arbitration shall be administered by the
American Arbitration Association only if both parties so agree.

 

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

 

 

action
which could have been properly pursued through court litigation.  In the event of a conflict between the then
most-applicable rules of the American Arbitration Association and these
procedures, the provisions of these procedures shall govern.

 

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

 

The
arbitrator shall render an award and opinion in the form typical of that
rendered in labor arbitrations and the award of the arbitrator shall be final
and binding upon the parties.  If any of
the provisions of this Section are determined to be unlawful or otherwise
unenforceable, in whole or in part, such determination shall not affect the
validity of the remainder of these provisions and this Section shall be
reformed to the extent necessary to insure that the resolution of all conflicts
between the Executive and the Company including those arising out of statutory
claims, shall be resolved by 

 

 

neutral,
binding arbitration.  In the event a
court finds that the arbitration procedure set forth herein is not absolutely
binding, then it is the intent of the parties that any arbitration decision
should be fully admissible in evidence, given great weight by any finder of
fact and treated as determinative to the maximum extent permitted by law.

 

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

 

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

 

17.           Company
Property.  The Executive agrees that at the time 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
a waiver of similar or dissimilar provisions or conditions at the time or at
any prior or subsequent time.

 

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

 

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

 

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

 

 

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

 

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

 

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

 

 

	
   

  	
  ZENITH NATIONAL INSURANCE

  CORP.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Stanley R. Zax

  	
   

  
	
   

  	
   

  	
  STANLEY R. ZAX

  
	
   

  	
   

  	
  Chairman of the Board and 

  President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  EXECUTIVE

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  /s/Davidson Pattiz

  	
   

  
	
   

  	
   

  	
  Davidson Pattiz

  	
   

  
						

 

 

Attachment A

 

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

 

(Omitted)Exhibit 10.2

 

AMENDMENT
NO. 1

TO

EMPLOYMENT
AGREEMENT

BETWEEN

ZENITH
NATIONAL INSURANCE CORP.

AND

DAVIDSON
PATTIZ

 

1.  Zenith National Insurance
Corp. (“Zenith”) and Davidson Pattiz (“Executive”) are parties to that certain
Employment Agreement dated September 12, 2005 (the “Employment
Agreement”).  Capitalized terms used
herein have the meaning ascribed to them in the Employment Agreement, unless
otherwise defined herein.

 

2.  This Amendment dated February
9, 2006 is hereby made a part of, and expressly incorporated into, the
Employment Agreement as an amendment thereto. 
In the event any provision of this Amendment and any provision of the
Employment Agreement are inconsistent or conflicting, the inconsistent or conflicting
provision of this Amendment shall control.

 

3.  The parties agree to amend the Employment Agreement by
deleting Section 4 in its entirety and substituting the following in its place:

 

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

 

Except as specifically modified herein, the parties expressly reaffirm
the terms and conditions of the Employment Agreement.

 

	
   

  	
  Zenith National Insurance Corp.

  
	
   

  	
   

  	
   

  
	
   

  	
  by:

  	
   /s/Stanley R.
  Zax

  	
   

  
	
   

  	
   

  	
      Stanley R. Zax

  
	
   

  	
   

  	
      Chairman and President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   /s/Davidson
  Pattiz

  	
   

  
	
   

  	
   

  	
      Davidson Pattiz

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