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EXHIBIT 10.1  

        [CITY NATIONAL BANK LOGO] 

 
 

PROMISSORY NOTE    
  

	

	Principal

$20,000,000.00	 	Loan Date

08-09-2002	 	Maturity

08-01-2003	 	Loan No.

11552	 	Call/Call	 	Account

209600	 	Officer

FB	 	Initials

F.B.
	

	References in the shaded area are for Lender's use only and do not limit the applicability of this document to any particular loan or item.

Any item above containing "***" has been omitted due to text length limitations.
	

	Borrower:	ZENITH NATIONAL INSURANCE CORP., A DELAWARE CORPORATION

21255 CALIFA STREET

WOODLAND HILLS, CA 91367	 	Lender:	City National Bank, NA

Westside Commercial Banking Center #674000

400 North Roxbury Drive

Beverly Hills, CA 90210
	

	Principal Amount: $20,000,000.00	 	Initial Rate: 4.750%	 	Date of Note: August 9, 2002

PROMISE TO PAY.    ZENITH NATIONAL INSURANCE CORP., A DELAWARE CORPORATION ["Borrower"] promises to pay to City
National Bank, NA ("Lender"), or order, in lawful money of the United States of America, the principal amount of Twenty Million & 00/100 Dollars ($20,000,000.00) or so much as may be outstanding,
together with interest on the unpaid outstanding principal balance of each advance. Interest shall be calculated from the date of each advance until repayment of each advance. 

PAYMENT.    Borrower will pay this loan in one payment of all outstanding principal plus all accrued unpaid interest on August 1, 2003.
In addition, Borrower will pay regular monthly payments of all accrued unpaid interest due as of each payment date, beginning September 1, 2002, with all subsequent interest payments to be due
on the same day of each month after that. Unless otherwise agreed or required by applicable law, payments will be applied first to accrued unpaid interest, then to principal, and any remaining amount
to any unpaid collection costs and late charges. The annual interest rate for this Note is computed on a 365/360 basis; that is, by applying the ratio of the annual interest rate over a year of 360
days, multiplied by the outstanding principal balance, multiplied by the actual number of days the principal balance is outstanding. Borrower will pay Lender at Lender's address shown above or at such
other place as Lender may designate in writing. 

VARIABLE INTEREST RATE.    The interest rate on this Note is subject to change from time to time based on changes in an index which is the
City National Bank Prime Rate (the "Index"). Prime Rate shall mean the rate most recently announced by Lender at its principal office in Beverly Hills, California, as its "Prime Rate". Any change in
the Prime Rate shall become effective on the same business day on which the Prime Rate shall change, without prior notice to Borrower. Lender will tell
Borrower the current Index rate upon Borrower's request. The interest rate change will not occur more often than each day. Borrower understands that Lender may make loans based on other rates as well.
The Index currently is 4.750%. The interest rate to be applied to the unpaid principal balance of this Note will be at a rate equal to the Index, resulting in an initial rate of 4.750%. NOTICE: Under
no circumstances will the interest rate on this Note be more than the maximum rate allowed by applicable law. 

PREPAYMENT.    Borrower agrees that all loan fees and other prepaid finance charges are earned fully as of the date of the loan and will not
be subject to refund upon early payment (whether voluntary or as a result of default), except as otherwise required by law. Except for the foregoing, Borrower may pay without penalty all or a portion
of the amount owed earlier than it is due. Early payments will not, unless agreed to by Lender in writing, relieve Borrower of Borrower's obligation to continue to make payments of accrued unpaid
interest. Rather, early payments will reduce the principal balance due. Borrower agrees not to send Lender payments marked "paid in full", "without recourse", or similar 

 

language. If Borrower sends such a payment, Lender may accept it without losing any of Lender's rights under this Note, and Borrower will remain obligated to pay any further amount owed to Lender.
All written communications concerning disputed amounts, including any check or other payment instrument that indicates that the payment constitutes "payment in full" of the amount owed or that is
tendered with other conditions or limitations or as full satisfaction of a disputed amount must be mailed or delivered to: City National Bank, NA; Westside Commercial Banking Center #674000; 400 North
Roxbury Drive; Beverly Hills, CA 90210. 

LATE CHARGE.    If a payment is 10 days or more late, Borrower will be charged 5.000% of the unpaid portion of the regularly scheduled payment
or $10.00, whichever is greater. 

INTEREST AFTER DEFAULT.    Upon Borrower's failure to pay all amounts declared due pursuant to this section, including failure to pay upon
final maturity, Lender, at its option, may, if permitted under applicable law, increase the variable interest rate on this Note to 5.000 percentage points over the Index. 

DEFAULT.    Each of the following shall constitute an event of default ("Event of Default") under this Note: 

 Payment Default.    Borrower fails to make any payment when due under this Note. 

 Other Defaults.    Borrower fails to comply with or to perform any other term, obligation, covenant or condition contained in this Note or in any of the related
documents or to comply with or to perform any term, obligation, covenant, or condition contained in any other agreement between Lender and Borrower. 

 Default in Favor of Third Parties.    Borrower or any Grantor defaults under any loan, extension of credit, security agreement, purchase or sales agreement, or any
other agreement, in favor of any other creditor or person that may materially affect Borrower's property or Borrower's ability to repay this Note or perform Borrower's obligations under this Note or
any of the related documents. 

 False Statements.    Any warranty, representation or statement made or furnished to Lender by Borrower or on Borrower's behalf under this Note or the related
documents is false or misleading in any material respect, either now or at the time made or furnished or becomes false or misleading at any time thereafter. 

 Insolvency.    The dissolution or termination of Borrower's existence as a going business, the insolvency of Borrower, the appointment of a receiver for any part of
Borrower's property, any assignment for the benefit of creditors, any type of creditor workout, or the commencement of any proceeding under any bankruptcy or insolvency laws by or against Borrower. 

 Creditor or Forfeiture Proceedings.    Commencement of foreclosure or forfeiture proceedings, whether by judicial proceeding, self-help, repossession or any other
method, by any creditor of Borrower or by any governmental agency against any collateral securing the loan. This includes a garnishment of any of Borrower's accounts, including deposit accounts, with
Lender. However, this Event of Default shall not apply if there is a good faith dispute by Borrower as to the validity or reasonableness of the claim which is the basis of the creditor or forfeiture
proceeding and if Borrower gives Lender written notice of the creditor or forfeiture proceeding and deposits with Lender monies or a surety bond for the creditor or forfeiture proceeding, in an amount
determined by Lender, in its sole discretion, as being an adequate reserve or bond for the dispute. 

 Events Affecting Guarantor.    Any of the preceding events occurs with respect to any guarantor, endorser, surety, or accommodation party of any of the indebtedness
or any guarantor, endorser, 

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surety, or accommodation party dies or becomes incompetent, or revokes or disputes the validity of, or liability under, any guaranty of the indebtedness evidenced by this Note. 

 Change in Ownership.    Any change in ownership of twenty-five percent (25%) or more of the common stock of Borrower, in a single or related series of transactions. 

 Adverse Change.    A material adverse change occurs in Borrower's financial condition, or Lender believes the prospect of payment or performance of this Note is
impaired. 

 Insecurity.    Lender in good faith believes itself insecure. 

LENDER'S RIGHTS.    Upon default, Lender may declare the entire unpaid principal balance on this Note and all accrued unpaid interest
immediately due, and then Borrower will pay that amount. 

ATTORNEYS' FEES; EXPENSES.    Lender may hire or pay someone else to help collect this Note if Borrower does not pay. Borrower will pay Lender
that amount. This includes, subject to any limits under applicable law, Lender's attorneys' fees and Lender's legal expenses, whether or not there is a lawsuit, including attorneys' fees, expenses for
bankruptcy proceedings (including efforts to modify or vacate any automatic stay or injunction), and appeals. Borrower also will pay any court costs, in addition to all other sums provided by law. 

GOVERNING LAW.    This Note will be governed by, construed and enforced in accordance with federal law and the laws of the State of
California. This Note has been accepted by Lender in the State of California. 

CHOICE OF VENUE.    If there is a lawsuit, Borrower agrees upon Lender's request to submit to the jurisdiction of the courts of LOS ANGELES
County, State of California. 

LINE OF CREDIT.    This Note evidences a revolving line of credit. Advances under this Note may be requested orally by Borrower or as provided
in this paragraph. All oral requests shall be confirmed in writing on the day of the request. All communications, instructions, or directions by telephone or otherwise to Lender are to be directed to
Lender's office shown above. The following persons currently are authorized to request advances and authorize payments under the line of credit until Lender receives from Borrower, at Lender's address
shown above, written notice of revocation of their authority: STANLEY R. ZAX; WILLIAM J. OWEN; and HYMAN J. LEE, JR. Borrower agrees to be
liable for all sums either: (A) advanced in accordance with the instructions of an authorized person or (B) credited to any of Borrower's accounts with Lender. The unpaid principal
balance owing on this Note at any time may be evidenced by endorsements on this Note or by Lender's internal records, including daily computer print-outs. Lender will have no obligation to advance
funds under this Note if: (A) Borrower or any guarantor is in default under the terms of this Note or any agreement that Borrower or any guarantor has with Lender, including any agreement made
in connection with the signing of this Note; (B) Borrower or any guarantor ceases doing business or is insolvent; (C) any guarantor seeks, claims or otherwise attempts to limit, modify
or revoke such guarantor's guarantee of this Note or any other loan with Lender; (D) Borrower has applied funds provided pursuant to this Note for purposes other than those authorized by
Lender; or (E) Lender in good faith believes itself insecure. 

SUCCESSOR INTERESTS.    The terms of this Note shall be binding upon Borrower, and upon Borrower's heirs, personal representatives, successors
and assigns, and shall inure to the benefit of Lender and its successors and assigns. 

NOTIFY US OF INACCURATE INFORMATION WE REPORT TO CONSUMER REPORTING AGENCIES.    Please notify us if we report any inaccurate information
about your account(s) to a 

3

 

consumer reporting agency. Your written notice describing the specific inaccuracy(ies) should be sent to us at the following address: City National Bank, 831 South Douglas Street,
El Segundo, CA 90245 

GENERAL PROVISIONS.    Lender may delay or forgo enforcing any of its rights or remedies under this Note without losing them. Borrower and any
other person who signs, guarantees or endorses this Note, to the extent allowed by law, waive any applicable statute of limitations, presentment, demand for payment, and notice of dishonor. Upon any
change in the terms of this Note, and unless otherwise expressly stated in writing, no party who signs this Note, whether as maker, guarantor, accommodation maker or endorser, shall be released from
liability. All such parties agree that Lender may renew or extend (repeatedly and for any length of time) this loan or release any party or guarantor or collateral; or impair, fail to realize upon or
perfect Lender's security interest in the collateral; and take any other action deemed necessary by Lender without the consent of or notice to anyone. All such parties also agree that Lender may
modify this loan without the consent of or notice to anyone other than the party with whom the modification is made. The obligations under this Note are joint and several. 

PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO THE TERMS OF THE
NOTE.  

BORROWER ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THIS PROMISSORY NOTE.  

	BORROWER:	 	 
	

ZENITH NATIONAL INSURANCE CORP., A DELAWARE CORPORATION
	

By:	

/s/  STANLEY R. ZAX      
 STANLEY R. ZAX, Board Chairman/President of ZENITH NATIONAL INSURANCE CORP., A DELAWARE
CORPORATION	
 	

 

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[CITY NATIONAL BANK LOGO] 

 
 

DISBURSEMENT REQUEST AND AUTHORIZATION    
  

	

	Principal

$20,000,000.00	 	Loan Date

08-09-2002	 	Maturity

08-01-2003	 	Loan No.

11552	 	Call/Call	 	Account

209600	 	Officer

FB	 	Initials

F.B.
	

	References in the shaded area are for Lender's use only and do not limit the applicability of this document to any particular loan or item.

Any item above containing "***" has been omitted due to text length limitations.
	

	Borrower:	ZENITH NATIONAL INSURANCE CORP., A DELAWARE CORPORATION

21255 CALIFA STREET

WOODLAND HILLS, CA 91367	 	Lender:	City National Bank, NA

Westside Commercial Banking Center #674000

400 North Roxbury Drive

Beverly Hills, CA 90210
	

LOAN TYPE.    This is a Variable Rate Nondisclosable Revolving Line of Credit Loan to a Corporation for $20,000,000.00 due on August 1,
2003. The reference rate (CITY NATIONAL BANK PRIME, currently 4.750%), resulting in an initial rate of 4.750. 

PRIMARY PURPOSE OF LOAN.    The primary purpose of this loan is for: 

o  Personal, Family, or Household Purposes or Personal Investment.

ý  Business (including Real Estate Investment).  

 SPECIFIC PURPOSE.    The specific purpose of this loan is: WORKING CAPITAL. 

*DISBURSEMENT INSTRUCTIONS.    Borrower understands that no loan proceeds will be disbursed until all of Lender's conditions for making the
loan have been satisfied. Please disburse the loan proceeds of $20,000,000.00 as follows: 

	Amount paid on Borrower's account:	 	$	20,000,000.00	 
	 	$20,000,000.00 Payment on Loan # 209600/11552 (RENEWAL)	 	 	 	 
	 	 	
	 
	Note Principal:	 	$	20,000,000.00	*

	*
	NO disbursement is being requested by this form. This form signifies simply that an existing $20 million Note, on which the
principal balance is 0, is being renewed by a new note. 

CHARGES PAID IN CASH.    Borrower has paid or will pay in cash as agreed the following charges: 

	Prepaid Finance Charges Paid in Cash:	 	$	100,000.00
	 	$100,000.00 Loan Fee	 	 	 
	 	 	

	Total Charges Paid in Cash:	 	$	100,000.00

LOAN PROCEEDS.    Loan proceeds are to be credited to Account Number 001-670786 at City National Bank. 

FINANCIAL CONDITION.    BY SIGNING THIS AUTHORIZATION, BORROWER REPRESENTS AND WARRANTS TO LENDER THAT THE INFORMATION
PROVIDED ABOVE IS TRUE AND CORRECT AND THAT THERE HAS BEEN NO MATERIAL ADVERSE CHANGE IN BORROWER'S  

 

 FINANCIAL CONDITION AS DISCLOSED IN BORROWER'S MOST RECENT FINANCIAL STATEMENT TO LENDER. THIS AUTHORIZATION IS DATED AUGUST 9, 2002.  

	BORROWER:	 	 
	

ZENITH NATIONAL INSURANCE CORP., A DELAWARE CORPORATION
	

By:	

/s/  STANLEY R. ZAX      
 STANLEY R. ZAX, Board Chairman/President of ZENITH NATIONAL INSURANCE CORP., A DELAWARE
CORPORATION	
 	

 

2

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EXHIBIT 10.2  

 
 

SETTLEMENT AGREEMENT    
  

        This Settlement Agreement (the "Agreement") is made and entered into this            day of August, 2002, by and between
RISCORP, INC., a Florida
corporation, RISCORP Management Services, Inc., a Florida corporation, 1390 Main Street Services, a Florida Corporation, RISCORP of Illinois, Inc., an Illinois corporation, Independent
Association Administrators Incorporated, an Alabama corporation, RISCORP Insurance Services, Inc., a Florida corporation, RISCORP Managed Care Services, Inc., a Florida corporation,
CompSource, Inc., a North Carolina corporation, RISCORP Real Estate Holdings, Inc., a Florida corporation, RISCORP Acquisition, Inc., a Florida corporation, RISCORP
West, Inc., an Oklahoma corporation, RISCORP of Florida, Inc., a Florida corporation, RISCORP Insurance Company, a Florida corporation, RISCORP Property & Casualty Insurance
Company, a Florida corporation, RISCORP National Insurance Company, a Missouri corporation, RISCORP Services, Inc., a Florida corporation, RISCORP Staffing Solutions Holding Company, a Florida
corporation, RISCORP Staffing Solutions, Inc. I, a Florida corporation and RISCORP Staffing Solutions, Inc. II, a Florida corporation (collectively referred to as "RISCORP") and Zenith
Insurance Company, a California corporation ("Zenith") (collectively, RISCORP and Zenith are referred to herein as the "Parties"), as follows: 

        WHEREAS:

        A.    There
is presently pending a civil action styled RISCORP Insurance Company, etc., et. al v. Department of Labor and Employment Security, et. al, In the Circuit Court,
Second Judicial Circuit, In and For Leon County, Florida; Consolidated Case Nos: 99-5027, 00-602 (the "DLES Action"); 

        B.    Zenith
and RISCORP are parties to a Settlement Agreement dated July 7, 1999 and attached as Exhibit "A" hereto (the "July 7 Agreement"), pursuant to
which Zenith has an interest in a certain portion of any recovery by RISCORP in the DLES Action less a pro rata portion of fees and expenses incurred in the prosecution of the DLES Action; 

        C.    There
is presently pending a civil action styled RISCORP Inc., etc., et. al v. Zenith Insurance Company, etc., In the Superior Court of Fulton County, State of
Georgia; Civil Action File No: 2000CV17847 (the "Zenith/AA Action"); 

        D.    The
parties are desirous of resolving their disputes and avoiding the expense and time involved in litigation of the Zenith/AA Action and to resolve Zenith's interest in
the DLES Action; 

        NOW,
THEREFORE, for and in consideration of the mutual covenants, promises, representations, recitals and agreements contained herein, and other such good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Parties intend to make this Agreement a legally binding contract on the Parties and do agree as follows: 

        1.    The DLES Action.    

        Zenith
hereby waives and releases any and all claims, rights, title or interest it may have in any recovery by RISCORP in the DLES Action, including but not limited to any and all
claims, rights, title or interest that may arise pursuant to paragraph 3 of the July 7 Agreement. The parties agree that any and all recovery obtained in the DLES Action shall belong
completely and fully to RISCORP. 

        2.    The Zenith/AA Action.    

        Upon
execution of this Agreement, RISCORP and Zenith shall enter into a stipulation for entry of an order dismissing with prejudice their respective claims, defenses and counterclaims,
including any and all claims to attorneys' fees and/or court costs and appeals in the Zenith/AA Action. 

 

        3.    Attorneys' Fees and Costs.    

        Each
party shall bear their own attorneys' fees and costs incurred in connection with the DLES Action and the Zenith/AA Action. In any action brought to enforce or interpret the terms of
this Agreement, however, the prevailing party(ies) shall be entitled to recover from the other party(ies) the prevailing party's attorneys' fees and costs. 

        4.    Cooperation in the DLES Action.    

        Zenith
agrees to continue to provide RISCORP with full cooperation in RISCORP's prosecution of the DLES Action, including but not limited to (i) making available for copying and
inspection any and all financial and other business records that may be deemed necessary by RISCORP to prosecute the DLES Action, and (ii) Zenith also agrees not to interfere with or in any way
object to RISCORP's claims or recovery in the DLES Action. 

        5.    Mutual Release.    

        RISCORP,
on the one hand, and Zenith, on the other hand, except as to those obligations expressly set forth in this Agreement, do hereby, forever release, aquit and discharge each other
from every claim and demand that either RISCORP or Zenith has, had or could have presented against the other in the Zenith/AA Action or in way relating to or arising out of the DLES Action, including
any and all claims, causes of action, suits, debts, sums of money, accounts, controversies, agreements, promises, damages, judgments, executions and demands of any kind whatsoever, in law or in equity
known or unknown, which existed in the past, presently exist, or shall accrue, upon or by reason of any matter, cause or thing whatsoever, regarding any and all issues that arise from, relate to or
concern, directly or indirectly, the Zenith/AA Action or Zenith's right to any recovery in the DLES Action, from the beginning of the of the world to the date of this Agreement. 

        6.    Entire Agreement.    

        This
Agreement contains the entire agreement of the Parties with respect to the subject matter hereof and no promise, inducement, or agreements other than those expressed in this
Agreement have been made. The terms fully set forth in this Agreement are contractual and not mere recitals, and shall be binding upon, and inure to the benefit of all Parties, their successors,
heirs, assigns and all of their present and former officers, directors, agents, employees, representatives, predecessors, subsidiaries, parent corporations, and affiliates. 

        7.    Survivability.    

        If
any provision, covenant, condition or term of this Agreement shall later be determined to be invalid or unenforceable, the remainder of this Agreement shall not be affected thereby,
and each provision, covenant, condition and term of this Agreement shall be valid and enforceable to the fullest extent permitted by law. 

        8.    Choice of Law.    

        This
Agreement shall be governed by, construed and interpreted in accordance with the laws of the State of Florida. 

        9.    Authority of Undersigned.    

        Each
of the undersigned Parties represents, warrants and states that all legal actions necessary for the effectuation and execution of this Agreement have been taken and that the
individuals whose signatures appear below on behalf of the Parties are duly authorized to execute this Agreement on behalf of their respective Parties. 

Page 2 of 4

 

        10.    Further Assurances.    

        Upon
and after execution of this Agreement, the Parties agree that they will take all action reasonably necessary, including but not limited to executing any additional documents of any
kind, which may be necessary to carry out any provision of this Agreement. 

        11.    Amendments and Waivers.    

        This
Agreement may not be amended, superseded, cancelled or otherwise altered except by a writing signed by all Parties. No term within this Agreement may be waived except by a writing
signed by the party waiving compliance. No delay by any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any waiver by any party of any right,
power or privilege preclude any further exercise thereof or the exercise of any other right, power or privilege. 

        13.    Multiple Counterparts.    

        This
Agreement may be executed in multiple counterparts each of which shall be deemed to be an original as against any party whose signature appears thereon and all of which shall
together constitute one and the same instrument. 

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

	RISCORP, INC,	 	ZENITH INSURANCE COMPANY
	RISCORP MANAGEMENT SERVICES, INC.

1390 MAIN STREET SERVICES, INC.	 	 	 
	RISCORP OF ILLINOIS, INC.	 	By:	/s/  STANLEY R. ZAX      
	INDEPENDENT ASSOCIATION ADMINISTRATORS INC.	 	 	

	RISCORP MANAGED CARE SERVICES, INC.	 	Its:	President
	COMPSOURCE, INC.	 	 	

	RISCORP REAL ESTATE HOLDINGS, INC.	 	Dated:	August 8, 2002
	RISCORP ACQUISION, INC.	 	 	

	RISCORP WEST, INC.,	 	 	 
	RISCORP OF FLORIDA, INC.	 	 	 
	RISCORP INSURANCE COMPANY	 	 	 
	RISCORP PROPERTY AND CASUALTY INSURANCE COMPANY
	RISCORP NATIONAL INSURANCE COMPANY	 	 	 
	RISCORP SERVICES, INC	 	 	 
	RISCORP STAFFING SOLUTIONS HOLDING COMPANY
	RISCORP STAFFING SOLUTIONS, INC., I	 	 	 
	RISCORP STAFFING SOLUTIONS, INC., II	 	 	 

	 	 
	 	 
	By:	/s/  RANDY SOL      

	Its:	VP

	Dated:	8-13-02

Page 3 of 4

 
EXHIBIT A  

EXHIBIT
A NOT INCLUDED 

Page 4 of 4

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SETTLEMENT AGREEMENT

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