EMPLOYMENT AGREEMENT
FIRST AMENDMENT TO EMPLOYMENT AGREEMENT 
 
 
 
                                                                    EXHIBIT 10.1
 
                              EMPLOYMENT AGREEMENT
 
      This Agreement, dated as of September 30, 2003, is by and between
SeaBright Insurance Company f/k/a Kemper Employers Insurance Company, an
Illinois domiciled insurance company ("Employer"), and John Pasqualetto
("Executive"). On the date of this Agreement, all of the outstanding shares of
capital stock of Employer are being sold to SeaBright Insurance Holdings, Inc.,
a Delaware corporation ("Holdings").
 
1. PERIOD OF EMPLOYMENT. Employer shall employ Executive to render services to
Employer in the position and with the duties and responsibilities described in
Section 2 for the period (the "Period of Employment") commencing on the date of
this Agreement and ending on the date upon which the Period of Employment is
terminated in accordance with Section 4.
 
2. POSITION AND RESPONSIBILITIES.
 
      (a) Position. Executive accepts employment with Employer as Chief
Executive Officer and shall perform all services appropriate to that position,
as well as such other services as may be assigned by Employer. Executive shall
devote his best efforts and full-time attention to the performance of his
duties. Executive shall be subject to the direction of Employer, which shall
retain full control of the means and methods by which he performs the above
services and of the place(s) at which all services are rendered. Executive shall
be expected to travel if necessary or advisable in order to meet the obligations
of his position.
 
      (b) Other Activity. Except upon the prior written consent of Employer,
Executive (during the Period of Employment) shall not (i) accept any other
employment; or (ii) engage, directly or indirectly, in any other business,
commercial, or professional activity (whether or not pursued for pecuniary
advantage) that is competitive with Employer, creates a conflict of interest
with Employer, or otherwise interferes with the business of Employer or any
Affiliate (and shall immediately cease any such ongoing activity that becomes so
competitive, begins to create such a conflict or begins to interfere with the
business of Employer or any Affiliate). An "Affiliate" shall mean any person or
entity that directly or indirectly controls, is controlled by, or is under
common control with Employer (but, for the avoidance of doubt, the term
"Affiliate" as used herein shall specifically exclude any so-called "portfolio
companies" of Summit Partners, L.P. other than Holdings and its direct and
indirect subsidiaries (including, without limitation, Employer)).
 
3. COMPENSATION AND BENEFITS.
 
      (a) Salary. In consideration of the services to be rendered under this
Agreement, Employer shall pay Executive $313,793 per year ("Base Salary"),
payable in regular installments in accordance with Employer's general payroll
policies for salaried employees, in effect from time to time. All compensation
and comparable payments to be paid to Executive under this Agreement shall be
less all applicable withholdings required by law. Executive's Base Salary will
be reviewed for market and performance adjustments within thirty (30) days of
the beginning of each calendar year during the Period of Employment by
Employer's Board of Directors (the "Board") and may be adjusted after such
review in the Board's sole discretion.
 
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      (b) Bonus. Executive will be eligible to receive an annual bonus in a
target amount equal to 50% of his Base Salary for each calendar year (or portion
thereof) during the Period of Employment based upon achievement by Executive and
achievement by Employer of performance criteria and other goals established by
the Board (after consultation with Employee) on an annual basis prior to the
commencement of each calendar year or as soon as reasonably practicable
thereafter, except that the performance criteria and other goals for the
calendar year ending December 2003 shall be established within 45 days following
the date hereof and the bonus payable in respect of calendar year 2003 shall be
prorated based on the number of days between the Effective Date and December 31,
2003. The bonus payable in respect of any given year (or portion thereof) during
the Period of Employment shall be paid within 30 days following the delivery of
Employer's annual audited statutory financial statements for such year. The
target amount of Executive's bonus as set forth above will be reviewed for
market and performance adjustments within thirty (30) days of the beginning of
each calendar year during the Period of Employment by the Board and may be
adjusted after such review in the Board's sole discretion.
 
      (c) Benefits. Executive shall be entitled to vacation leave in accordance
with Employer's standard policies for salaried employees, in effect from time to
time. As Executive becomes eligible, he shall have the right to participate in
and to receive benefits from all present and future benefit plans specified in
Employer's policies and generally made available to salaried employees of
Employer from time to time. The amount and extent of benefits to which Executive
is entitled shall be governed by the specific benefit plan, as amended.
Executive also shall be entitled to any benefits or compensation tied to
termination as described in Section 4. Employer reserves the ability, in its
sole discretion, to adjust benefits provided to Executive in connection with the
adjustment of benefits to salaried employees. No statement concerning benefits
or compensation to which Executive is entitled shall alter in any way the term
of this Agreement, any renewal thereof, or its termination.
 
      (d) Expenses. Employer shall reimburse Executive for reasonable travel and
other business expenses incurred by Executive in the performance of his duties,
subject to reasonable documentation thereof and in accordance with Employer's
policies in effect from time to time.
 
      (e) Stock Options. On the Effective Date, Employer will arrange for the
grant to Executive of granted incentive stock options to acquire 10,150 shares
of Common Stock, par value $.01 per share ("Common Stock"), of Holdings, at an
exercise price equal to $100.00 per share, on the terms and conditions set forth
in a Stock Option Grant Agreement, in form and substance as set forth in Exhibit
C attached hereto, and the 2003 SeaBright Insurance Holdings, Inc. Stock Option
Plan.
 
      (f) Withholding. Any and all payments made pursuant to this Agreement
shall be subject to all withholding required in accordance with applicable
federal, state or local law.
 
4. TERMINATION OF EMPLOYMENT.
 
      (a) By Employer Without Cause. At any time, Employer may terminate
Executive without Cause (as defined below), effective as of the date specified
in a written notice from Employer to Executive. Employer may discipline or
demote Executive with or without Cause and with or without prior notice.
Employer may discipline, demote, or dismiss Executive as
 
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provided in this Section 4 notwithstanding anything to the contrary contained in
or arising from any statements, policies, or practices of Employer relating to
the employment, discipline, or termination of its employees. If Executive's
employment with Employer is terminated by Employer without Cause, Executive
shall be entitled to continue to receive his Base Salary and Bonus (pro-rated to
the date of termination) payable in regular installments as special severance
payments from the date of termination for a period of eighteen (18) months
thereafter, or until Executive obtains other employment (but with it being
understood that Executive shall be under no duty to seek alternative employment
during the Severance Period), whichever first occurs (the "Severance Period"),
if and only if Executive has executed and delivered to Employer the General
Release substantially in form and substance as set forth in Exhibit A attached
hereto and only so long as Executive has not revoked or breached the provisions
of the General Release or breached the provisions of this Agreement or any other
Ancillary Agreement (as defined below) and does not apply for unemployment
compensation chargeable to Employer during the Severance Period, and Executive
shall not be entitled to any other salary, compensation or benefits after
termination of the Period of Employment, except as specifically provided for in
Employer's employee benefit plans or as otherwise expressly required by
applicable law (such as COBRA); provided that Employer shall pay Executive's
COBRA health insurance premiums from the date of termination through the date
that is eighteen (18) months after the date of termination. Notwithstanding
anything to the contrary contained in this Section 4(a), in the event Executive
breaches the provisions of this Agreement or any Ancillary Agreement, the
severance amounts payable by Employer under this Section 4(a) shall not
terminate unless and until more than ten (10) days have elapsed from and after
the date written notice of such breach has been delivered to Executive without
such breach having been cured during such 10-day period.
 
      (b) By Employer For Cause. At any time, and without prior notice (except
as otherwise provided in the definition of Cause set forth below), Employer may
terminate Executive for Cause. Employer shall pay Executive all compensation
then due and owing; thereafter, all of Employer's obligations under this
Agreement shall cease. Termination shall be for "Cause" if Executive: (i) is
continuously inattentive to his lawful duties after at least one written notice
has been provided to Executive and Executive has failed to cure the same within
a 30-day period thereafter; (ii) reports to work under the influence of alcohol
or illegal drugs, or uses illegal drugs (whether or not at the workplace) or
engages in other conduct causing the Employer substantial public disgrace or
disrepute or economic harm; (iii) breaches his duty of loyalty to Employer or
engages in any acts of dishonesty or fraud with respect to Employer or any of
its business relations; (iv) is convicted of a felony or any crime involving
dishonesty, breach of trust, or physical or emotional harm to any person (or
enters a plea of guilty or nolo contendere with respect thereto); or (v)
breaches any material term of this Agreement or any other agreement between
Executive and Employer or any of its Affiliates and such breach (if capable of
cure) is not cured within thirty (30) days following written notice thereof from
Employer.
 
      (c) By Executive for Good Reason. If Executive shall resign for Good
Reason, Executive shall be entitled to continue to receive his Base Salary and
Bonus (pro-rated to the date of termination) payable in regular installments as
special severance payments from the date of termination for a period of eighteen
(18) months thereafter, or until Executive obtains other employment (but with it
being understood that Executive shall be under no duty to seek alternative
employment during such period), whichever first occurs, if and only if Executive
has
 
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executed and delivered to Employer the General Release substantially in form and
substance as set forth in Exhibit A attached hereto and only so long as
Executive has not revoked or breached the provisions of the General Release or
breached the provisions of this Agreement or any Ancillary Agreement and does
not apply for unemployment compensation chargeable to Employer during such
eighteen month period, and Executive shall not be entitled to any other salary,
compensation or benefits after termination of the Period of Employment, except
as specifically provided for in Employer's employee benefit plans or as
otherwise expressly required by applicable law (such as COBRA). Notwithstanding
anything to the contrary contained in this Section 4(c), in the event Executive
breaches the provisions of this Agreement or any Ancillary Agreement, the
severance amounts payable by Employer under this Section 4(c) shall not
terminate unless and until more than ten (10) days have elapsed from and after
the date written notice of such breach has been delivered to Executive without
such breach having been cured during such 10-day period. For purposes of this
Section 4(c), "Good Reason" will mean Executive's voluntary resignation within
ninety (90) days after the occurrence of any of the following: (i) without the
express written consent of Executive, a reduction in Executive's annualized Base
Salary; (ii) without the express written consent of Executive, a material
diminution in Executive's supervisory responsibilities; (iii) the relocation of
Executive in connection with any relocation of Employer's principal place of
business to a facility or a location more than fifty (50) miles outside of the
greater Seattle, Washington metropolitan area without Executive's written
consent; or (iv) the failure of Employer to obtain the assumption of this
Agreement by any successors for the remainder of its term. In addition, Employer
shall pay Executive's COBRA health insurance premiums from the date of
termination by Executive for Good Reason through the date that is eighteen (18)
months after the date of termination by Executive for Good Reason. In the event
that Executive terminates his employment for Good Reason, the Company shall be
entitled to deliver written notice to Executive within fifteen (15) days
following such termination demanding that the determination of the existence of
Good Reason be determined by arbitration in accordance with the procedures set
forth in Section 9 hereof. If the arbitrator determines that Good Reason did not
exist, the termination shall be treated as a voluntary termination by Executive
and the Company shall have no obligations to pay or provide to Executive the
compensation payments and other benefits to which he would have otherwise been
entitled to pursuant to a termination for Good Reason. If the arbitrator
determines that Good Reason did exist, Executive shall be entitled to the
compensation payments and other benefits set forth in this Section 4(c).
 
      (d) Voluntary Termination By Executive. At any time, Executive may
terminate his employment for any reason, with or without cause, by providing
Employer at least thirty (30) days' advance written notice. Employer shall have
the option, in its complete discretion and upon payment of all compensation then
due and owing through the last day of the notice period, to make Executive's
termination effective at any time prior to the end of such notice period and,
thereafter, all of Employer's obligations under this Agreement shall cease.
 
      (e) Termination Upon Death or Permanent Disability. Executive's employment
with Employer shall also terminate upon Executive's death or permanent mental or
physical disability or other incapacity (as determined by the Board in its good
faith judgment). Upon any such termination, Employer shall pay Executive (or
Executive's estate or legal representative or guardian) all compensation then
due and owing; thereafter, all of Employer's obligations under this Agreement
shall cease.
 
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      (f) Termination of Compensation. Except as otherwise expressly provided
herein, all of Executive's rights to salary, bonuses, employee benefits and
other compensation hereunder which would have accrued or become payable after
the termination or expiration of the Period of Employment shall cease upon such
termination or expiration, other than those expressly required under applicable
law (such as COBRA).
 
      (g) Termination Obligations.
 
            (i) Executive agrees that all property, including, without
      limitation, all equipment, tangible Proprietary Information (as defined
      below), documents, books, records, reports, notes, contracts, lists,
      computer disks (and other computer-generated files and data), and copies
      thereof, created on any medium and furnished to, obtained by, or prepared
      by Executive in the course of or incident to his employment, belongs to
      Employer and shall be returned promptly to Employer upon termination of
      the Period of Employment.
 
            (ii) All employee and other benefits to which Executive is otherwise
      entitled shall cease upon Executive's termination, unless explicitly
      continued either under this Agreement or under any specific written policy
      or benefit plan of Employer.
 
            (iii) Upon termination of the Period of Employment, Executive shall
      be deemed to have resigned from all offices and directorships then held
      with Employer or any Affiliate.
 
            (iv) The representations and warranties contained in this Agreement
      and Executive's obligations under this Section 4(g) shall survive the
      termination of the Period of Employment and the expiration of this
      Agreement.
 
      (h) For sixty (60) days following any termination of the Period of
Employment, Executive shall cooperate in a reasonable manner with Employer in
all matters relating to the winding up of pending work on behalf of Employer and
the orderly transfer of work to other employees of Employer. At all times
following any termination of the Period of Employment, Executive shall also
cooperate in the defense of any action brought by any third party against
Employer that relates in any way to Executive's acts or omissions while employed
by Employer; provided that Employer shall reimburse Executive for his reasonable
out-of-pocket expenses after being provided with reasonable documentation of
such expenses.
 
5. NONCOMPETITION. Executive acknowledges and agrees with Employer that
Executive's services to Employer are unique in nature and that Employer would be
irreparably damaged if Executive were to provide similar services to any person
or entity competing with Employer or engaged in a similar business. Executive
accordingly covenants and agrees with Employer that during the period commencing
with the Effective Date and ending on the eighteen (18) month following the date
of the termination of Executive's employment with Employer (the "Noncompetition
Period"), Executive shall not, directly or indirectly, either for himself or for
any other individual, corporation, partnership, joint venture or other entity,
participate in any business (including, without limitation, any division, group
or franchise of a larger organization) anywhere in the world which engages or
which proposes to engage in the promotion, service,
 
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underwriting, issuance or sale of insurance policies providing United States
Longshoremen and Harbor Workers coverage or other coverage under the Jones Act
or related workers compensation or similar insurance or reinsurance or any
alternative dispute resolution insurance or of any other business hereafter
conducted by Employer or its Affiliates prior to Executive's termination
(collectively, the "USL&H Business"). For purposes of this Agreement, the term
"participate in" shall include, without limitation, having any direct or
indirect interest in any corporation, partnership, joint venture or other
entity, whether as a sole proprietor, owner, stockholder, partner, joint
venturer, creditor or otherwise, or rendering any direct or indirect service or
assistance to any individual, corporation, partnership, joint venture and other
business entity (whether as a director, officer, manager, supervisor, employee,
agent, consultant or otherwise). Without limiting the generality of the
foregoing, Executive agrees that during the Noncompetition Period he will not,
directly or indirectly, either for himself or for any other individual,
corporation, partnership, joint venture or other entity, form or acquire any
insurance company licensed to write or service USL&H Business. If, at the time
of enforcement of this Section 5, a court shall hold that the duration, scope or
area restrictions stated herein are unreasonable under circumstances then
existing, the parties hereto agree that the maximum period, scope or geographic
area reasonable under such circumstances shall be substituted for the stated
period, scope or area and that the court shall be allowed and directed to revise
the restrictions contained herein to cover the maximum period, scope and area
permitted by law. In the event of an alleged breach or violation by Executive of
this Section 5, the Non-Competition Period shall be tolled until such breach or
violation has been duly cured. Executive agrees that the restrictions contained
in this Section 5 are reasonable and that Executive has received adequate and
valuable consideration in exchange therefor.
 
6. NONSOLICITATION. Executive acknowledges that he is familiar with the trade
secrets of Employer and its Affiliates and with other proprietary information
concerning Employer and its Affiliates, including, without limitation, all (a)
inventions, technology and research and development of Employer and its
Affiliates, (b) customers and suppliers and customer and supplier lists of
Employer and its Affiliates, (c) products and services of Employer and its
Affiliates (including, without limitation, those under development) and related
costs and pricing structures, (d) accounting and business methods and practices
of Employer and its Affiliates and (e) similar and related proprietary
information of Employer and its Affiliates. Executive further acknowledges that
his services have been and shall be of special, unique and extraordinary value
to Employer, that Executive has been substantially responsible for the growth
and development of Employer and the creation and preservation of Employer's
goodwill. During the period commencing with the Effective Date and ending
eighteen (18) months after the date of termination of Executive's employment
with Employer (the "Restriction Period"), Executive shall not (i) induce or
attempt to induce any employee of Employer or any of its Affiliates to leave the
employ of Employer or such Affiliate, or in any way interfere with the
relationship between Employer or any of its Affiliates and any employee thereof,
(ii) hire directly or through another entity any person who was an employee of
Employer or any of its Affiliates at any time during the Restriction Period, or
(iii) call on, solicit or service any customer, supplier, licensee, licensor or
other business relation of Employer or any of its Affiliates in order to induce
or attempt to induce such person or entity to cease doing business with Employer
or any such Affiliate or in any way materially interfere with the relationship
between any such customer, supplier, licensee, licensor or business relation and
Employer or any of its Affiliates (including, without limitation, making any
negative statements or communications concerning Employer or
 
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any of its Affiliates), or enter into any transaction, contract or arrangement
with any such customer, supplier, licensee, licensor or business relation
relating, directly or indirectly, to the USL&H Business.
 
7. NONDISCLOSURE AND NONUSE OF PROPRIETARY INFORMATION.
 
      (a) Executive shall not disclose or use at any time, either during his
employment with Employer or thereafter, any Proprietary Information (as defined
below) of which Executive is or becomes aware, whether or not such information
is developed by him, except to the extent that such disclosure or use is
directly related to and required by Executive's performance of duties assigned
to Executive by Employer. Executive shall take all appropriate steps to
safeguard Proprietary Information and to protect it against disclosure, misuse,
espionage, loss and theft. The foregoing shall not, however, prohibit disclosure
by Executive of Proprietary Information that has been published in a form
generally available to the public prior to the date Executive proposes to
disclose such information. Information shall not be deemed to have been
published merely because individual portions of the information have been
separately published, but only if all material features comprising such
information have been published in combination.
 
      (b) As used in this Agreement, the term "Proprietary Information" means
all information of a confidential or proprietary nature (whether or not
specifically labeled or identified as "confidential"), in any form or medium,
that relates to or results from the business, historical or projected financial
results, products, services or research or development of Employer or its
Affiliates or their respective suppliers, distributors, customers, independent
contractors or other business relations. Proprietary Information includes, but
is not limited to, the following: (i) internal business information (including,
without limitation, historical and projected financial information and budgets
and information relating to strategic and staffing plans and practices,
business, training, marketing, promotional and sales plans and practices, cost,
rate and pricing structures and accounting and business methods); (ii)
identities of, individual requirements of, specific contractual arrangements
with, and information about, Employer's and its Affiliates' suppliers,
distributors, customers, independent contractors or other business relations and
their confidential information; (iii) trade secrets, technology, know-how,
compilations of data and analyses, techniques, systems, formulae, research,
records, reports, manuals, flow charts, documentation, models, data and data
bases relating thereto; (iv) computer software, including, without limitation,
operating systems, applications and program listings; (v) inventions,
innovations, ideas, devices, improvements, developments, methods, processes,
designs, analyses, drawings, photographs, reports and all similar or related
information (whether or not patentable and whether or not reduced to practice);
(vi) copyrightable works; (vii) intellectual property of every kind and
description; and (viii) all similar and related information in whatever form.
 
8. EMPLOYER'S OWNERSHIP OF INTELLECTUAL PROPERTY.
 
      (a) In the event that Executive during the term of his employment by
Employer generates, authors, conceives, develops, acquires, makes, reduces to
practice or contributes to any idea, discovery, trade secret, invention,
innovation, improvement, development, method of doing business, process,
program, design, analysis, drawing, report, data, software, firmware, logo,
device, method, product or any similar or related information (whether or not
patentable or
 
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reduced to practice or comprising Proprietary Information), any copyrightable
work (whether or not comprising Proprietary Information) or any other form of
Proprietary Information (collectively, "Intellectual Property"), Executive
acknowledges that such Intellectual Property is and shall be the exclusive
property of Employer. Any copyrightable work prepared in whole or in part by
Executive shall to be deemed "a work made for hire" to the maximum extent
permitted under Section 201(b) of the 1976 Copyright Act as amended, and
Employer shall own all of the rights comprised in the copyright therein. Without
limiting the generality of the foregoing, Executive hereby assigns his entire
right, title and interest in and to all Intellectual Property to Employer.
Executive shall promptly and fully disclose all Intellectual Property to
Employer and shall cooperate with Employer to protect Employer's interests in
and rights to such Intellectual Property (including, without limitation,
providing reasonable assistance in securing patent protection and copyright
registrations and executing all documents as reasonably requested by Employer,
whether such requests occur prior to or after termination of Executive's
employment with Employer).
 
      (b) Notwithstanding the foregoing, however, Employer shall not own and
Executive shall have no obligation to assign to Employer any invention otherwise
falling within the definition of Intellectual Property for which no equipment,
supplies, facility, or trade secret information of Employer was used and that
was developed entirely on Executive's own time, unless: (i) such Intellectual
Property relates (A) to Employer's business or (B) to their actual or
demonstrably anticipated research or development, or (ii) the Intellectual
Property results from any work performed by him for them under this Agreement.
Executive has identified and described in detail on an attachment hereto
initialed by each of the undersigned party's or their authorized
representatives, all Intellectual Property that is or was owned by him or was
written, discovered, made, conceived or first reduced to practice by him alone
or jointly with another person prior to his employment under this Agreement. If
no such Intellectual Property is listed, Executive represents to Employer that
he does not now nor has he ever owned, nor has he made, any such Intellectual
Property.
 
9. ARBITRATION.
 
      (a) Arbitrable Claims. To the fullest extent permitted by law, all
disputes between Executive (and his attorneys, successors, and assigns) and
Employer (and its Affiliates, shareholders, directors, officers, employees,
agents, successors, attorneys, and assigns) of any kind whatsoever, including,
without limitation, all disputes relating in any manner to the employment or
termination of Executive, and all disputes arising under this Agreement
("Arbitrable Claims") shall be resolved by arbitration. All persons and entities
specified in the preceding sentence (other than Employer and Executive) shall be
considered third-party beneficiaries of the rights and obligations created by
this Section on Arbitration. Arbitrable Claims shall include, but are not
limited to, contract (express or implied) and tort claims of all kinds, as well
as all claims based on any federal, state, or local law, statute, or regulation,
excepting only claims under applicable workers' compensation law and
unemployment insurance claims. By way of example and not in limitation of the
foregoing, Arbitrable Claims shall include (to the fullest extent permitted by
law) any claims arising under Title VII of the Civil Rights Act of 1964, the Age
Discrimination in Employment Act, the Americans with Disabilities Act, and the
Rev. Code of Washington Sections 49.45.010 et. seq. and 49.60.010 et.seq., as
well as any claims asserting wrongful termination, harassment, breach of
contract, breach of the
 
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covenant of good faith and fair dealing, negligent or intentional infliction of
emotional distress, negligent or intentional misrepresentation, negligent or
intentional interference with contract or prospective economic advantage,
defamation, invasion of privacy, and claims related to disability.
 
      (b) Procedure. Arbitration of Arbitrable Claims shall be in accordance
with the National Rules for the Resolution of Employment Disputes of the
American Arbitration Association, as amended ("AAA Employment Rules"), as
augmented in this Agreement. Arbitration shall be initiated as provided by the
AAA Employment Rules, although the written notice to the other party initiating
arbitration shall also include a statement of the claim(s) asserted and the
facts upon which the claim(s) are based. Arbitration shall be final and binding
upon the parties and shall be the exclusive remedy for all Arbitrable Claims.
Either party may bring an action in court to compel arbitration under this
Agreement and to enforce an arbitration award. Otherwise, neither party shall
initiate or prosecute any lawsuit or administrative action in any way related to
any Arbitrable Claim. Notwithstanding the foregoing, either party may, at its
option, seek injunctive relief pursuant to chapter 7.40 of the Revised Code of
Washington. All arbitration hearings under this Agreement shall be conducted in
Los Angeles County. The decision of the arbitrator shall be in writing and shall
include a statement of the essential conclusions and findings upon which the
decision is based. THE PARTIES HEREBY WAIVE ANY RIGHTS THEY MAY HAVE TO TRIAL BY
JURY IN REGARD TO ARBITRABLE CLAIMS, INCLUDING WITHOUT LIMITATION ANY RIGHT TO
TRIAL BY JURY AS TO THE MAKING, EXISTENCE, VALIDITY, OR ENFORCEABILITY OF THE
AGREEMENT TO ARBITRATE.
 
      (c) Arbitrator Selection and Authority. All disputes involving Arbitrable
Claims shall be decided by a single arbitrator. The arbitrator shall be selected
by mutual agreement of the parties within thirty (30) days of the effective date
of the notice initiating the arbitration. If the parties cannot agree on an
arbitrator, then the complaining party shall notify the AAA and request
selection of an arbitrator in accordance with the AAA Employment Rules. The
arbitrator shall have only such authority to award equitable relief, damages,
costs, and fees as a court would have for the particular claim(s) asserted. The
fees of the arbitrator shall be paid by the non-prevailing party. If the
allocation of responsibility for payment of the arbitrator's fees would render
the obligation to arbitrate unenforceable, the parties authorize the arbitrator
to modify the allocation as necessary to preserve enforceability. The arbitrator
shall have exclusive authority to resolve all Arbitrable Claims, including, but
not limited to, whether any particular claim is arbitrable and whether all or
any part of this Agreement is void or unenforceable.
 
      (d) Confidentiality. All proceedings and all documents prepared in
connection with any Arbitrable Claim shall be confidential and, unless otherwise
required by law, the subject matter thereof shall not be disclosed to any person
other than the parties to the proceedings, their counsel, witnesses and experts,
the arbitrator, and, if involved, the court and court staff. All documents filed
with the arbitrator or with a court shall be filed under seal. The parties shall
stipulate to all arbitration and court orders necessary to effectuate fully the
provisions of this subsection concerning confidentiality.
 
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      (e) Continuing Obligations. The rights and obligations of Executive and
Employer set forth in this Section 9 shall survive the termination of
Executive's employment and the expiration of this Agreement.
 
10. EXECUTIVE'S REPRESENTATIONS. Executive hereby represents and warrants to
Employer that (i) the execution, delivery and performance of this Agreement by
Executive does not and shall not conflict with, breach, violate or cause a
default under any contract, agreement, instrument, order, judgment or decree to
which Executive is a party or by which he is bound, (ii) Executive is not a
party to or bound by any employment agreement, noncompete agreement or
confidentiality agreement with any other person or entity and (iii) upon the
execution and delivery of this Agreement by Employer, this Agreement shall be
the valid and binding obligation of Executive, enforceable in accordance with
its terms.
 
11. WAIVER AND RELEASE; OTHER AGREEMENTS. On the date of this Agreement,
Executive shall, in further consideration of the covenants and agreements of
Employer hereunder, execute and deliver to Employer (i) a Waiver and Release in
form and substance substantially the same as the waiver and release contemplated
by Section 8.8 of the Purchase Agreement, (ii) a counterpart to the Stockholders
Agreement, in form and substance as set forth in Exhibit B attached hereto, to
be entered into by and among Holdings and all of its stockholders, (iii) a
counterpart to the Stock Option Grant Agreement, in form and substance as set
forth in Exhibit C attached hereto, to be entered into by and among Holdings and
all of its stockholders, and (iv) an Executive Stock Agreement, in form and
substance as set forth in Exhibit D attached hereto. The Waiver and Release, the
Stockholders Agreement, the Stock Option Grant Agreement and the Executive Stock
Agreement referred to in the foregoing sentence shall be referred to herein
collectively as the "Ancillary Agreements" and individually as an "Ancillary
Agreement".
 
12. NOTICES. Any notice or other communication under this Agreement must be in
writing and shall be effective upon delivery by hand, or three (3) business days
after deposit in the United States mail, postage prepaid, certified or
registered, and addressed to Employer or to Executive at the corresponding
address below. Executive shall be obligated to notify Employer in writing of any
change in his address. Notice of change of address shall be effective only when
done in accordance with this Section.
 
Employer's Notice Address:
 
SeaBright Insurance Company f/k/a
Kemper Employers Insurance Company
2101 4th Avenue, Suite 1600
Seattle, WA  98121
Attn:    President
Telecopy: (206) 448-4442
 
                                       10
<PAGE>
 
with a copy to:
 
Summit Partners, L.P.
499 Hamilton Avenue
Palo Alto, California 94301
Attn:   Peter Y. Chung
        J. Scott Carter
Telecopy: (650) 321-1188
 
Kirkland & Ellis LLP
200 East Randolph
Chicago, IL 60601
Attn:   Ted H. Zook, P.C.
        Stephen D. Oetgen
Telecopy: (312) 861-2200
 
Executive's Notice Address:
 
Mr. John Pasqualetto
24012 102nd Place West
Edmonds, WA. 98020
 
13. ACTION BY EMPLOYER. All actions required or permitted to be taken under this
Agreement by Employer, including, without limitation, exercise of discretion,
consents, waivers, and amendments to this Agreement, shall be made and
authorized only by a designee of Summit Partners, L.P. or by its representative
specifically authorized in writing to fulfill these obligations under this
Agreement.
 
14. INTEGRATION. This Agreement is intended to be the final, complete, and
exclusive statement of the terms of Executive's employment by Employer. This
Agreement supersedes all other prior and contemporaneous agreements and
statements, whether written or oral, express or implied, pertaining in any
manner to the employment of Executive (including, without limitation, the
Termination Protection Agreement by and between Executive and Lumbermens Mutual
Casualty Company, dated as of November 1, 2002, which shall be terminated in its
entirety and of no further force or effect as of the date of the execution and
delivery of this Agreement), and it may not be contradicted by evidence of any
prior or contemporaneous statements or agreements. To the extent that the
practices, policies, or procedures of Employer, now or in the future, apply to
Executive and are inconsistent with the terms of this Agreement, the provisions
of this Agreement shall control.
 
15. AMENDMENTS; WAIVERS. This Agreement may not be amended except by an
instrument in writing, signed by each of the parties. No failure to exercise and
no delay in exercising any right, remedy, or power under this Agreement shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right, remedy, or power under this Agreement preclude any other or further
exercise thereof, or the exercise of any other right, remedy, or power provided
herein or by law or in equity.
 
                                       11
<PAGE>
 
16. ASSIGNMENT; SUCCESSORS AND ASSIGNS. Executive agrees that he will not
assign, sell, transfer, delegate, or otherwise dispose of, whether voluntarily
or involuntarily, or by operation of law, any rights or obligations under this
Agreement. Any such purported assignment, transfer, or delegation shall be null
and void. Nothing in this Agreement shall prevent the consolidation of Employer
with, or its merger into, any other entity, or the sale by Employer of all or
substantially all of its assets, or the assignment by Employer of any rights or
obligations under this Agreement. Subject to the foregoing, this Agreement shall
be binding upon and shall inure to the benefit of the parties and their
respective heirs, legal representatives, successors, and permitted assigns, and
shall not benefit any person or entity other than those specifically enumerated
in this Agreement
 
17. SEVERABILITY. If any provision of this Agreement, or its application to any
person, place, or circumstance, is held by an arbitrator or a court of competent
jurisdiction to be invalid, unenforceable, or void, such provision shall be
enforced to the greatest extent permitted by law, and the remainder of this
Agreement and such provision as applied to other persons, places, and
circumstances shall remain in full force and effect.
 
18. ATTORNEYS' FEES. In any legal action, arbitration, or other proceeding
brought to enforce or interpret the terms of this Agreement, the prevailing
party shall be entitled to recover reasonable attorneys' fees and costs.
 
19. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the law of the State of Washington.
 
20. INTERPRETATION. This Agreement shall be construed as a whole, according to
its fair meaning, and not in favor of or against any party. By way of example
and not in limitation, this Agreement shall not be construed in favor of the
party receiving a benefit nor against the party responsible for any particular
language in this Agreement. Captions are used for reference purposes only and
should be ignored in the interpretation of the Agreement.
 
21. EMPLOYEE ACKNOWLEDGMENT. Executive acknowledges that he has had the
opportunity to consult legal counsel in regard to this Agreement, that he has
read and understands this Agreement, that he is fully aware of its legal effect,
and that he has entered into it freely and voluntarily and based on his own
judgment and not on any representations or promises other than those contained
in this Agreement.
 
                                       12
<PAGE>
 
The parties have duly executed this Agreement as of the date first written
above.
 
                                        /s/ John Pasqualetto
                                        ---------------------------------------
                                        JOHN PASQUALETTO
 
                                        SEABRIGHT INSURANCE COMPANY f/k/a
                                        KEMPER EMPLOYERS INSURANCE COMPANY
 
                                        /s/ Richard Gergasko
                                        ---------------------------------------
                                        By:  Richard Gergasko
                                        Its: EVP
 
 

 

 
 
 
 
EXHIBIT 10.20
 
                        AMENDMENT TO EMPLOYMENT AGREEMENT
 
         THIS AMENDMENT TO EMPLOYMENT AGREEMENT (this "Amendment"), dated as of
November 8, 2004, is made by and among SeaBright Insurance Company f/k/a Kemper
Employers Insurance Company, an Illinois domiciled insurance company
("Employer"), and John G. Pasqualetto ("Executive").
 
                                    RECITALS
 
         WHEREAS, the parties entered into that certain Employment Agreement
between Employer and Executive, dated as of September 30, 2003 (the
"Agreement");
 
         WHEREAS, the Board of Directors of the Employer has approved an
increase in the annual bonus target amount set forth in Section 3(b) of the
Agreement; and
 
         WHEREAS, the parties desire to amend the Agreement to reflect the
increased annual bonus target amount;
 
         NOW, THEREFORE, in consideration of the foregoing recitals, which shall
constitute a part of this Amendment, and the mutual promises contained in this
Amendment, and intending to be legally bound thereby, the parties agree as
follows:
 
         1. Effective as of January 1, 2004, the Agreement is hereby amended by
deleting Section 3(b) in its entirety and replacing such section with the
following:
 
         "Executive will be eligible to receive an annual bonus in a target
         amount equal to 65% of his Base Salary for each calendar year (or
         portion thereof) during the Period of Employment based upon achievement
         by Executive and achievement by Employer of performance criteria and
         other goals established by the Board (after consultation with
         Executive) on an annual basis prior to commencement of each calendar
         year or as soon as reasonably practicable thereafter. The bonus payable
         in respect of any given year (or portion thereof) during the Period of
         Employment shall be paid within 30 days following the delivery of
         Employer's annual audited statutory financial statements for such year.
         The target amount of Executive's bonus as set forth above will be
         reviewed for market and performance adjustments within thirty (30) days
         of the beginning of each calendar year during the Period of Employment
         by the Board and may be adjusted after such review in the Board's sole
         discretion."
 
         2. All other sections, paragraphs, provisions, and clauses in the
Agreement not so modified remain in full force and effect as originally written.
 
         3. Certain capitalized terms not defined herein shall have the meanings
given to such terms in the Agreement.
 
<PAGE>
 
 
 
         4. This Amendment may be executed in one or more counterparts, each of
which is an original, but all of which together constitute one and the same
instrument.
 
         5. This Amendment shall be governed by and construed in accordance with
the law of the State of Washington.
 
 
                                    * * * * *
 
<PAGE>
 
 
 
         The parties have duly executed this Amendment as of the date first
written above.
 
                                              SEABRIGHT INSURANCE COMPANY
                                              f/k/a/ KEMPER EMPLOYERS
                                              INSURANCE COMPANY
 
 
                                              By:  /s/  Richard Gergasko
                                                 -----------------------------
                                              Name:  Richard Gergasko
                                              Its:  Executive Vice President
 
 
 
                                                   /s/  John G. Pasqualetto
                                              --------------------------------
                                              JOHN G. PASQUALETTO