EMPLOYMENT AGREEMENT

This Employment Agreement (this “Agreement”) is made effective as December 15,
2007 by and between Unico American Corporation (“Company”) and Cary L. Cheldin
(“Emp1oyee”) with reference to the following facts:
 
 
A.   Company is engaged in the business of insurance and related operations.
Employee will primarily perform the job duties at
       the following location: 23251 Mulholland Drive, Woodland Hills,
California.

 
B.   Company desires to have the services of Employee.

 
C.   Employee is willing to be employed by Company.

Therefore, the parties agree as follows:

1.   EMPLOYMENT.  Company shall employ Employee as an Executive Vice President
of Company.  Employee shall provide to Company the following services: Duties as
needed including day to day management of Company and its subsidiaries; and
serve as President, Vice President or other officer of all Company subsidiaries,
as required by Company.  Employee accepts and agrees to such employment, and
agrees to be subject to the general supervision, advice and direction of Company
by Company’s Board of Directors.  This Employment Agreement supersedes all prior
Employment Agreements between the parties hereto.

2.   BEST EFFORTS OF EMPLOYEE.  Employee agrees to perform faithfully,
industriously, and to the best of Employee’s ability, experience, and talents,
all of the duties that may be required by the terms of this Agreement.  Under no
circumstances shall Employee be obligated without his consent to relocate his
residence in order to render the services or, except for occasional business
trips, to perform his duties outside of the Woodland Hills, California area.

3.   COMPENSATION OF EMPLOYEE.

3.1  Salary.   As compensation for the services provided by Employee under this
Agreement, Company will pay Employee an annual salary of no less than $297,400
payable in accordance with Company’s usual payroll procedures. The annual salary
shall be subject to increase from time to time at the discretion of the Board of
Directors of Company.

3.2  Bonus.   The Company shall pay to the Employee a bonus (the “Mandatory
Bonus”) on or before December 31 of each year, provided that the consolidated
net income of the Company (prior to deductions for income taxes and current
Mandatory Bonuses paid to all executive officers of Company, including Employee
but including deductions for discretionary bonuses paid to all employees) for
the most recent four (4) fiscal quarters ending prior to such payment date is
equal to or greater than $4,000,000 (the “Net Income Goal”). The amount of the
Mandatory Bonus shall be in an amount determined by the Board of Directors, in
its discretion, but shall not be less than $54,000, less any amounts paid to
Employee as a discretionary bonus since the immediately preceding January 1.

 
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Nothing herein shall prevent the Board of Directors from electing, in its
discretion, to grant a discretionary bonus to the Employee, in such amount as
may be determined by the Board of Directors in the event the Net Income Goal is
not met.  Notwithstanding the foregoing, if the Employee’s Agreement is
terminated by the Company other than for Cause or by Employee on account of a
breach of this Agreement by the Company, the Employee will be entitled for the
remainder of the term of this Agreement (without giving effect to the
termination) to the minimum Mandatory Bonus amount of $54,000 regardless of
whether the Net Income Goal is attained.

3.3.   Upon Termination by Company for Cause or By Employee for other than
Breach by Company.   Upon termination of this Agreement by Company for Cause or
by the Employee for other than a breach of this Agreement by Company, payments
under this Section 3 shall cease; provided, however, that Employee shall be
entitled to payments of accrued but unpaid salary and vacation for periods or
partial periods that occurred prior to the date of termination.

3.4.   Upon Termination Without Cause or Breach by Company.   Upon termination
of this Agreement by Company without Cause or by Employee on account of a breach
of this Agreement by Company and the execution of a general release of the
Company by the Employee to the reasonable satisfaction of the Company, except as
provided in Section 3.6 hereof, (a) Employee shall be entitled to immediate
payment in full of his salary for the remainder of the term of this Agreement,
without discount or mitigation, (b) Employee shall be entitled to his Mandatory
Bonus paid as and when provided herein for the remainder of the term of this
Agreement (without giving effect to the termination) and (c) Employee shall be
entitled to his benefits for the remainder of the term of this Agreement
(without giving effect to the termination) as described in Section 5.

3.5.   Accrued Vacation.   Accrued but unpaid vacation will be paid in
accordance with the laws of the State of California and Company’s customary
procedures.

3.6.   Limitation On Payments.   Notwithstanding the foregoing, in the
event   that it is determined that the aggregate value of payment or
distribution by the Company to Employee pursuant to this Agreement whether paid
or payable (a “Payment”) constitutes an “excess parachute payment” as defined in
Section 280G(b) of the Internal Revenue Code of 1986, as amended (the “Code”)
subject to the excise tax imposed under Section 4999 of the Code (the “Excise
Tax”), the aggregate present value of the Payment shall be reduced to an amount
expressed in a present value without causing any Payment to be subject to the
limitation of deduction under Section 280G of the Code.  In the event any
portion of the amounts payable is reduced pursuant to this Section 3.6, the
Employee and the Company shall mutually agree on the type of payment that will
be reduced.  If the Employee and the Company are unable to reach an agreement as
to the type of payments to be reduced, all payments to the Employee shall be
reduced proportionately to achieve the necessary reduction. All determinations
made pursuant to this Section 3.6 shall be made by the Company’s independent
accounting firm, in their reasonable discretion in consultation with the
Employee’s accountants.

 
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3.7.   Compliance with Section 409A.   Notwithstanding any other provision of
this Agreement, to the extent that (a) any payment pursuant to this Agreement is
treated as nonqualified deferred compensation pursuant to Section 409A of the
Code and (b) Employee is a “specified employee” pursuant to Section 409A (2) (B)
of the Code, then the amount of such payment that is payable to Employee during
the first 6 months following Employee’s termination of employment shall not
exceed the lesser of (i) 2 times Employee’s salary or (ii) 2 times the maximum
amount that may be taken into account under a qualified plan pursuant to Section
401(a)(17) of the Code for the year in which such termination occurred.  Except
for the amounts described in the preceding sentence, any amount otherwise due
and payable to the Employee during the first six months after the Employee’s
termination of employment shall be paid as soon as administratively practicable
following the 6 month anniversary of the Employee’s termination of employment,
but in no event later than the next regularly scheduled payroll period following
such 6 month anniversary, in accordance with the Company’s typical payroll
practices.

 
4.   EXPENSE REIMBURSEMENT.   Company will reimburse Employee for
“out-of-pocket” expenses incurred by Employee in accordance with Company’s
policies in effect from time to time.

5.   BENEFITS.   Employee shall be entitled to employment benefits, including
holidays, personal leave, sick leave, vacation, health insurance, disability
insurance, life insurance, and pension plan as provided by Company’s policies in
effect from time to time. These benefits shall cease upon the effective date of
termination of employment provided that this Agreement is terminated by Company
for Cause or by Employee for other than a breach of this Agreement by
Company.  Upon termination of this Agreement by Company without Cause or by the
Employee on account of a breach of this Agreement by Company, subject to the
limitation described in Section 3.6, these benefits shall continue to be
provided by Company to Employee for the remaining term of this Agreement
(without giving effect to the termination).  Notwithstanding the foregoing,
disability insurance shall be an amount sufficient to provide compensation to
Employee, if disabled, equal to 70% of the compensation that Employee would be
entitled pursuant to Sections 3.1.   Further, during the term of this Agreement,
the benefits hereunder shall not be reduced from those provided to Employee as
of December 15, 2007.

6.   TERM/TERMINATION.   Employee’s employment under this Agreement shall be for
a term beginning on December 15, 2007 and ending December 31, 2012.
Notwithstanding the foregoing, this Agreement may be terminated at any time by
Company for Cause or by Employee for other than breach of this Agreement by the
Company upon thirty days written notice. This Agreement may also be terminated
by Company without Cause upon thirty days written notice or by the Employee at
any time on account of the breach of this Agreement by Company; however, in
either of such events, subject to the limitation described in Section 3.6, the
Company shall pay Employee, as and in the manner provided in Section 3.4, all
salary, bonuses and benefits as provided herein for the remainder of the term of
this Agreement.

 
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7.   CAUSE OR BREACH BY THE COMPANY.   The term “Cause” as used in this
Agreement shall mean (i) chronic alcoholism or drug addiction, (ii) fraud, (iii)
unlawful appropriation of any money or other assets or properties of the Company
or any affiliate of the Company, (iv) a material breach by the Employee of the
terms of this Agreement which is not cured within ten (10) days after Company
has given Employee written notice describing such material breach with
particularity, (v) the conviction of the Employee of any felony involving moral
turpitude or other serious crime involving moral turpitude, (vi) the Employee’s
gross moral turpitude relevant to his office or employment with the Company or
any affiliate of the Company, and (vii) the Employee’s willful engagement in
misconduct which is demonstrably and materially injurious to the Company and its
subsidiaries taken as a whole.  No act, or failure to act, on the part of the
Employee shall be considered “willful” unless done, or omitted to be done, by
the Employee not in good faith and without a reasonable belief that the action
or omission was in the best interests of the Company and its subsidiaries.  The
Company shall be in breach of this Agreement if there is a material breach by
the Company of the terms of this Agreement which is not cured within ten (10)
days after Employee has given Company written notice describing such material
breach with particularity.

8.   TERMINATION FOR DISABILITY OR DEATH.   Company shall have the option to
terminate this Agreement, if Employee becomes permanently disabled and is no
longer able to perform the essential functions of his position with reasonable
accommodation, provided that Company has provided the disability insurance
benefit described in Section 5.   Company shall exercise this option by giving
sixty days prior written notice of such termination to Employee.  This Agreement
shall terminate on the death of Employee.  A termination of this Agreement
pursuant to this Section 8 shall not be deemed a termination by Company of this
Agreement without Cause.

9.   INDEMNIFICATION.  To the fullest extent permitted under the law, the
Company shall indemnify the Employee, if the Employee is made a party, or
threatened to be made a party, to any threatened, pending, or contemplated
action, suit, or proceeding, whether civil, criminal, administrative, or
investigative, by reason of the fact that the Employee is or was an employee,
officer or director of the Company or any affiliate of the Company, in which
capacity the Employee is or was serving the Company, against any and all
liabilities, costs, expenses (including reasonable attorneys’ fees), judgments,
fines, and amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit, or proceeding.  In the case of any claim
being made, Company shall advance reasonable costs of defense (including
reasonable attorneys’ fees) provided that Employee agrees to repay such advances
if it is finally determined that Employee was not entitled to indemnification
with respect to such claim. This Section shall not limit in any way the
Employee’s rights under any agreement relating specifically to
indemnification.  This section shall survive the termination or expiration of
this Agreement.

 
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10.   CONFIDENTIALITY.  Employee recognizes that he has and will have
information regarding matters such as trade secrets, customer lists, product
design, and other vital information (collectively, “Information”) which are
valuable, special, and unique assets of Company.  Employee agrees that he will
not at any time or in any manner, either directly or indirectly, divulge,
disclose, or communicate in any manner any Information to any third party
without the prior written consent of Company (which consent may not be signed by
Employee on Company’s behalf.  Employee will protect the Information and treat
it as strictly confidential.  A violation by Employee of this paragraph shall be
a material breach of this Agreement and will justify legal and/or equitable
relief.  This section shall survive the termination or expiration of this
Agreement.

11.   RETURN OF PROPERTY.   Upon termination of his employment, Employee shall
deliver to Company all property which is Company’s property or related to
Company’s business (including keys, records, notes, data, memoranda, models, and
equipment) that is in Employee’s possession or under Employee’s control.  Such
obligation shall be governed by any separate confidentiality or proprietary
rights agreement signed by Employee.  This section shall survive the termination
or expiration of this Agreement.

12. NOTICES.  All notices required or permitted under this Agreement shall be in
writing and shall be deemed delivered when delivered in person or on the third
day after being deposited in the United States mail, postage paid, addressed as
follows:

Company:

Unico American Corporation
Erwin Cheldin, President
23251 Mulholland Drive
Woodland Hills, California 91364

Employee:

Cary L. Cheldin
23251 Mulholland Drive
Woodland Hills, California 91364

Such addresses may be changed from time to time by either party by providing
written notice in the manner set forth above.

13.   ENTIRE AGREEMENT.   This Agreement contains the entire agreement of the
parties and there are no other promises or conditions in any other agreement
whether oral or written. This Agreement supersedes any prior written or oral
agreements between the parties.

14.   AMENDMENT.   This Agreement may be modified or amended, if the amendment
is made in writing and is signed by both parties.

 
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15.   SEVERABILITY.   If any provisions of this Agreement shall be held to be
invalid or unenforceable for any reason, the remaining provisions shall continue
to be valid and enforceable.  If a court finds that any provision of this
Agreement is invalid or unenforceable, but that by limiting such provision it
would become valid or enforceable, then such provision shall be deemed to be
written, construed, and enforced as so limited.

16.   WAIVER OF CONTRACTUAL RIGHT.   The failure of either party to enforce any
provision of this Agreement shall not be construed as a waiver or limitation of
that party’s right to subsequently enforce and compel strict compliance with
every provision of this Agreement.

17.  COUNTERPARTS.  This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.

18.   HEADINGS.   The headings in the Agreement are for reference purposes only
and shall not in any way affect the meaning or interpretation of this Agreement.

19.   APPLICABLE LAW.   This Agreement shall be governed by the laws of the
State of California.

COMPANY:
Unico American Corporation

By /s/  Erwin Cheldin                Date: March 17, 2008
Erwin Cheldin, President

 
EMPLOYEE:

/s/  Cary Cheldin                      Date: March 17, 2008
Cary L. Cheldin
 
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