10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For The Quarterly Period Ended September 30, 2007

or

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period from                      to                     

Commission file number 000-50891

SPECIALTY UNDERWRITERS’ ALLIANCE, INC.

(Exact name of registrant as specified in the charter)

Delaware (State or other jurisdiction of incorporation or organization)	20-0432760 (I.R.S. Employer Identification Number)
222 South Riverside Plaza Chicago, Illinois (Address of principal executive office)	60606 (Zip Code)

(888) 782-4672
(Registrant’s telephone number including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirement for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act (check one):

Large accelerated filer o     Accelerated filer þ     Non-accelerated filer o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12-b-2 of the Exchange Act). Yes o No þ

As of November 1, 2007, there were 14,697,355 shares of common stock, $0.01 par value, outstanding and 813,314 shares of non-voting Class B common stock, $0.01 par value, outstanding.

SPECIALTY UNDERWRITERS’ ALLIANCE, INC.

INDEX

	Page No.
PART I – FINANCIAL INFORMATION		3
Item 1: Financial Statements		3
Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations		10
Item 3: Quantitative and Qualitative Disclosures About Market Risk		17
Item 4: Controls and Procedures		18
PART II – OTHER INFORMATION		19
Item 1: Legal Proceedings		19
Item 1A: Risk Factors		19
Item 2: Unregistered Sales of Equity Securities and Use of Proceeds		19
Item 3: Defaults Upon Senior Securities		19
Item 4: Submission of Matters to a Vote of Security Holders		19
Item 5: Other Information		19
Item 6: Exhibits		20
Signatures		21
Exhibit 3.1
Exhibit 10.1
Exhibit 10.2
Exhibit 10.3
Exhibit 10.4
Exhibit 10.5
Exhibit 10.6
Exhibit 10.7
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 32.2

2

PART I — FINANCIAL INFORMATION

Item 1: Financial Statements

Specialty Underwriters’ Alliance, Inc.
Consolidated Balance Sheets
(dollars in thousands)

	As of
	September 30,			December 31,
	2007			2006
	(unaudited)
Assets
Fixed maturity investments, at fair value (amortized cost: $164,831 and $145,581)	$	164,106		$	144,520
Short-term investments, at amortized cost (which approximates fair value)		50,917			19,538
Total investments		215,023			164,058
Cash		878			2,375
Insurance premiums receivable		63,657			68,310
Reinsurance recoverable on paid and unpaid loss and loss adjustment expenses		76,164			80,976
Prepaid reinsurance premiums		177			3,577
Investment income accrued		1,413			1,566
Equipment and capitalized software at cost (less accumulated depreciation of $7,331 and $3,915)		12,045			8,643
Intangible assets		10,745			10,745
Deferred acquisition costs		17,541			19,876
Other assets		2,186			3,171
Total assets	$	399,829		$	363,297
Liabilities
Loss and loss adjustment expense reserves	$	168,976		$	141,200
Unearned insurance premiums		85,614			89,804
Insured deposit funds		11,495			10,366
Accounts payable and other liabilities		8,595			7,945
Total liabilities		274,680			249,315
Stockholders’ equity
Common stock at $.01 par value per share — authorized 30,000,000 shares; issued and outstanding 14,697,355 shares and 14,682,355 shares		147			147
Class B common stock at $.01 par value per share — authorized 2,000,000 shares; issued and outstanding 742,088 shares and 679,152 shares		7			7
Paid-in capital — common stock		129,320			128,372
Paid-in capital — class B common stock		5,326			4,838
Accumulated deficit		(8,926	)		(18,321	)
Accumulated other comprehensive loss		(725	)		(1,061	)
Total stockholders’ equity		125,149			113,982
Total liabilities and stockholders’ equity	$	399,829		$	363,297

The accompanying notes are an integral part of these financial statements.

3

Specialty Underwriters’ Alliance, Inc.
Consolidated Statements of Operations and Comprehensive Income
(dollars in thousands, except for earnings per share)
(unaudited)

	Three Months						Nine Months
	Ended						Ended
	September 30,						September 30,
	2007			2006			2007			2006
Revenues
Earned insurance premiums	$	40,377		$	31,712		$	112,933		$	80,198
Net investment income		2,517			1,628			6,935			4,204
Net realized gains (losses)		1			273			28			271
Total revenue		42,895			33,613			119,896			84,673
Expenses
Loss and loss adjustment expenses		24,047			18,250			66,077			46,722
Acquisition expenses		9,609			6,701			27,340			17,432
Other operating expenses		5,815			5,019			16,899			14,785
Total expenses		39,471			29,970			110,316			78,939
Pretax income		3,424			3,643			9,580			5,734
Federal income tax expense		(61	)		(61	)		(185	)		(185	)
Net income		3,363			3,582			9,395			5,549
Net change in unrealized gains and losses for investments held, after tax		2,121			2,273			336			637
Comprehensive income	$	5,484		$	5,855		$	9,731		$	6,186
Earnings per share available to common stockholders (in dollars)
Basic	$	0.22		$	0.24		$	0.61		$	0.37
Diluted	$	0.22		$	0.24		$	0.61		$	0.37
Weighted Average Shares Outstanding
Basic		15,431			15,293			15,404			15,162
Diluted		15,431			15,293			15,404			15,162

The accompanying notes are an integral part of these financial statements.

4

Specialty Underwriters’ Alliance, Inc.
Consolidated Statement of Stockholders’ Equity
(dollars in thousands)
(unaudited)

												Accumulated
	Common		Paid-in		Common		Paid-in		Retained			Other			Total
	Stock		Capital		Stock		Capital		Earnings			Comprehensive			Stockholders’
	Class A		Class A		Class B		Class B		(Deficit)			Income (Loss)			Equity
Balance at December 31, 2006	$	147	$	128,372	$	7	$	4,838	$	(18,321	)	$	(1,061	)	$	113,982
Net income										9,395						9,395
Net change in unrealized investment gains and (losses), net of tax													336			336
Stock issuance				123				488								611
Stock based compensation				825												825
Balance at September 30, 2007	$	147	$	129,320	$	7	$	5,326	$	(8,926	)	$	(725	)	$	125,149

The accompanying notes are an integral part of these financial statements.

5

Specialty Underwriters’ Alliance, Inc.
Consolidated Statements of Cash Flows
(dollars in thousands)

	Nine Months
	Ended
	September 30,
	2007			2006
	(unaudited)
Cash flows from operations
Net income	$	9,395		$	5,549
Charges (credits) to reconcile net income to cash flows from operations:
Change in deferred income tax		185			185
Net realized (gains) losses		(28	)		(271	)
Amortization of bond premium (discount)		(6	)		296
Depreciation		3,416			1,768
Net change in:
Reinsurance recoverable on unpaid loss and loss adjustment expense reserves		4,812			6,730
Loss and loss adjustment expense reserves		27,776			29,341
Insurance premiums receivable		4,653			(17,839	)
Unearned insurance premiums		(4,190	)		18,503
Deferred acquisition costs		2,335			(4,869	)
Prepaid reinsurance premiums		3,400			1,126
Insured deposit funds		1,129			3,522
Other, net		2,551			2,124
Total adjustments		46,033			40,616
Net cash flows provided by operations		55,428			46,165
Cash flows from investing activities
Net increase in short-term investments		(31,379	)		(9,882	)
Redemptions, calls and maturities of fixed maturity investments		14,233			13,590
Purchases of fixed maturity investments		(33,449	)		(51,493	)
Purchase of equipment and capitalized software		(6,818	)		(3,805	)
Net cash flows used for investing activities		(57,413	)		(51,590	)
Cash flows from financing activities
Issuance of common stock		488			2,822
Net cash provided by financing activities		488			2,822
Net (decrease) in cash during the period		(1,497	)		(2,603	)
Cash at beginning of the period		2,375			5,329
Cash at the end of the period	$	878		$	2,726

The accompanying notes are an integral part of these financial statements.

6

NOTES TO FINANCIAL STATEMENTS – SPECIALTY UNDERWRITERS’ ALLIANCE, INC.
(dollars in thousands)

Note 1. Basis of Presentation

The Consolidated Financial Statements (unaudited) include the accounts of Specialty Underwriters’ Alliance, Inc., or SUA or the Company, and its consolidated subsidiary, SUA Insurance Company. SUA completed an initial public offering, or IPO, of its common stock on November 23, 2004. Concurrent with the IPO, SUA completed the acquisition of Potomac Insurance Company of Illinois, or Potomac. For accounting purposes Potomac is considered an accounting predecessor. Potomac has subsequently been renamed SUA Insurance Company.

The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, or GAAP. Certain financial information that is normally included in annual financial statements, including certain financial statements footnotes, prepared in accordance with GAAP, is not required for interim reporting purposes and has been condensed or omitted. These statements should be read in conjunction with the consolidated financial statements and notes thereto included in SUA’s Annual Report on Form 10-K for the year ended December 31, 2006 filed with the Securities and Exchange Commission, or SEC.

The interim financial data as of September 30, 2007, and for the three and nine month periods ended September 30, 2007 and September 30, 2006 is unaudited. However, in the opinion of management, the interim data includes all adjustments, consisting of normal recurring accruals, necessary for a fair statement of the Company’s results for the interim periods. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year. Certain reclassifications have been made to prior period financial statement line items to enhance the comparability of the results presented.

On January 1, 2007, the Company adopted the provisions of FIN 48, “Accounting for Uncertainty in Income Taxes.” FIN 48 provides guidance on the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The interpretation also provides guidance on the related derecognition, classification, interest and penalties, accounting for interim periods, disclosure and transition of certain tax positions. The Company has taken no tax position which would require disclosure under the new guidance. Although the IRS is not currently examining any of the Company’s income tax returns, tax years 2003 through 2006 remain open and are subject to examination. 

Note 2. Earnings Per Share

Basic earnings per share are based on the weighted average number of common shares outstanding during the period, while diluted earnings per share includes the weighted average number of common shares and potential dilution from shares issuable pursuant to stock options using the treasury stock method. Outstanding options of 739,133 and 747,466 for the three months ended September 30, 2007 and September 30, 2006 have been excluded from diluted earnings per share, as they were anti-dilutive.

	Three Months Ended		Three Months Ended
	Sept. 30, 2007		Sept. 30, 2006
	(in thousands, except per share data)
Net income	$	3,363	$	3,582
Weighted average common shares outstanding (basic and diluted)		15,431		15,293
Earnings per share (basic and diluted)	$	0.22	$	0.24

Outstanding options of 739,133 and 747,466 for the nine months ended September 30, 2007 and September 30, 2006 have been excluded from diluted earnings per share, as they were anti-dilutive.

	Nine Months Ended		Nine Months Ended
	Sept. 30, 2007		Sept. 30, 2006
	(in thousands, except per share data)
Net income	$	9,395	$	5,549
Weighted average common shares outstanding (basic and diluted)		15,404		15,162
Earnings per share (basic and diluted)	$	0.61	$	0.37

7

NOTES TO FINANCIAL STATEMENTS — SPECIALTY UNDERWRITERS’ ALLIANCE, INC.
(dollars in thousands)

Note 3. Income Taxes

As of September 30, 2007 and December 31, 2006 the Company had tax basis net operating loss carryforwards of $6,786 and $18,564, respectively, which will expire on December 31, 2026 and December 31, 2025, respectively. The Company also accumulated start-up and organization expenditures through December 31, 2004 of $2,364 that are deductible over a 60 month period commencing on November 23, 2004. The unamortized portions of these costs were $991 and $1,344 at September 30, 2007 and December 31, 2006, respectively.

The Company has recorded a tax provision for the quarter equal to the current quarter’s increase in deferred tax liabilities associated with indefinite lived intangible assets. Due to the indefinite nature of these intangible assets for financial reporting purposes, these deferred tax liabilities do not represent a source of income to realize the Company’s deferred tax assets.

Note 4. Unpaid Loss and Loss Adjustment Expense Reserves

Loss and loss adjustment expense (LAE) reserves are estimates of amounts needed to pay claims and related expenses in the future for insured events that have already occurred. The Company establishes estimates of amounts recoverable from its reinsurers in a manner consistent with the claims liability covered by the reinsurance contracts. The Company’s loss and LAE reserves represent management’s best estimate of reserves based on a composite of the results of various actuarial methods, as well as consideration of known facts and trends.

At September 30, 2007, the Company reported gross loss and LAE reserves of $168,976, of which $61,119 represented the gross direct loss and LAE reserves of Potomac, which is fully reinsured by OneBeacon Insurance Company, or OneBeacon. At December 31, 2006, the Company reported gross loss and LAE reserves of $141,200, of which $71,592 represented the gross direct loss and LAE reserves of Potomac, which are fully reinsured by OneBeacon. Included in the reserves for the Company are tabular reserve discounts for workers’ compensation and excess workers’ compensation pension claims of $1,481 as of September 30, 2007 and $1,016 as of December 31, 2006. The reserves are discounted on a tabular basis at four percent using the 2001 United States Actuarial Life Tables for Female and Male population.

Potomac was a participant in the OneBeacon Amended and Restated Reinsurance Agreement. Under that agreement, Potomac ceded all of its insurance assets and liabilities into a pool, or Pool, and assumed a 0.5% share of the Pool’s assets and liabilities. On April 1, 2004, Potomac ceased its participation in the Pool and entered into reinsurance agreements whereby Potomac reinsured all of its business written with OneBeacon effective as of January 1, 2004. As a result, Potomac will not share in any favorable or unfavorable development of prior losses recorded by it or the Pool after January 1, 2004, unless OneBeacon fails to perform on its reinsurance obligation.

Note 5. Recent Accounting Pronouncements

In September 2006, the FASB issued FAS No. 157, “Fair Value Measurements,” or FAS 157. FAS 157 defines fair value, establishes a framework for measuring fair value in accordance with GAAP, and expands disclosures about fair value pronouncements. FAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within the year of adoption. Based on the Company’s current use of fair value measurements, the Company believes that the implementation of FAS 157 will have no material impact on its financial statements.

In February 2007, the FASB issued FAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities,” or FAS 159. FAS 159 permits entities to choose to measure many financial instruments and certain other items at fair value. FAS 159 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within the year of adoption. Based on the Company’s current use of fair value measurements in conjunction with its investment philosophy and mix, the Company believes that the implementation of FAS 159 will have no material impact on its financial statements.

8

NOTES TO FINANCIAL STATEMENTS — SPECIALTY UNDERWRITERS’ ALLIANCE, INC.
(dollars in thousands)

Note 6. Equity Based Compensation

On May 1, 2007, the stockholders of the Company approved the 2007 Stock Incentive Plan, or 2007 Plan. The 2007 Plan replaces the 2004 Stock Option Plan, or 2004 Plan. Options previously granted under the 2004 Plan will continue for the life of such options. The 2007 Plan provides for the issuance of up to 800,000 shares of the Company’s common stock in the form of stock options, stock appreciation rights, restricted stock awards, and deferred stock awards (as well as dividend equivalents in connection with deferred stock awards). In addition, should any of the 742,466 options outstanding under the 2004 Plan as of the date of adoption of the 2007 Plan be terminated, those shares will also be available under the 2007 Plan.

The 2007 Plan provides for an automatic grant of 3,000 unrestricted shares of common stock to independent directors upon the first business day following re-election to the Board of Directors at the Annual Meeting of the Stockholders. On May 2, 2007, 15,000 shares were issued to independent directors who were re-elected to the Board at the 2007 Annual Meeting of the Stockholders held on May 1, 2007. This automatic grant replaced an automatic grant under the 2004 Plan of 10,000 options to independent directors upon re-election to the Board at the annual meetings. The compensation expense associated with the automatic grant of 15,000 shares was $123, based on the fair market value of the shares on the date of grant under FAS 123R. No other awards have been made under the 2007 Plan or the 2004 Plan in 2007.

9

Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the federal securities laws, which are intended to be covered by the safe harbors created thereby. Those statements include, but may not be limited to, the discussions of our operating and growth strategy. Investors are cautioned that all forward-looking statements involve risks and uncertainties including, without limitation, those set forth under the caption “Risk Factors” in the Business section of our Annual Report on Form 10-K for the year ended December 31, 2006. Although we believe that the assumptions underlying the forward-looking statements contained herein are reasonable, any of the assumptions could prove to be inaccurate, and therefore, there can be no assurance that the forward-looking statements included in this Quarterly Report on Form 10-Q will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by us or any other person that our objectives and plans will be achieved. We undertake no obligation to publicly release any revisions to any forward-looking statements contained herein to reflect events and circumstances occurring after the date hereof or to reflect the occurrence of unanticipated events.

Overview

We were formed on April 3, 2003 for the purpose of offering products in the specialty commercial property and casualty insurance market by using an innovative business model. Specialty insurance typically serves niche groups of insureds that require highly specialized knowledge of a business class to achieve underwriting profits. This segment has traditionally been underserved by most standard commercial property and casualty insurers, due to the complex business knowledge and the investment required to achieve attractive underwriting profits. Competition in this segment is based primarily on client service, availability of insurance capacity, specialized policy forms, efficient claims handling and other value-based considerations, rather than just price.

On November 23, 2004 we completed our IPO and concurrent private placements and completed the acquisition of Potomac. After giving effect to the acquisition, we changed the name of Potomac to SUA Insurance Company.

Prior to our IPO, all activities consisted of start-up activities related to our IPO and costs to establish the infrastructure required to commence insurance operations.

On January 1, 2005 we commenced our insurance operations.

10

Three Months Ended September 30, 2007 as compared to the Three Months Ended September 30, 2006

							Percentage Change
	Three Months Ended Sept. 30,						2007 vs.
	2007			2006			2006
	(unaudited)
	(dollars in millions, except percentages and per share data)
Results of operations:
Gross written premiums	$	33.5		$	38.9			(13.9	)%
Net written premiums		30.9			36.4			(15.1	)%
Earned premiums		40.4			31.7			27.4	%
Net investment income		2.5			1.6			56.3	%
Net realized gains (losses)		—			0.3			*
Total revenues	$	42.9		$	33.6			27.7	%
Loss and loss adjustment expense	$	24.1		$	18.3			31.7	%
Acquisition expenses		9.6			6.7			43.3	%
Other operating expenses		5.8			5.0			16.0	%
Total expenses	$	39.5		$	30.0			31.7	%
Pre-tax income	$	3.4		$	3.6			(5.6	)%
Federal income tax (expense)		—			—			*
Net income (loss)	$	3.4		$	3.6			(5.6	)%
Earnings (loss) per share
Basic and diluted	$	0.22		$	0.24			(8.3	)%
Weighted average common shares outstanding (basic and diluted)		15.4			15.3			0.7	%
Key ratios
Net loss and loss adjustment expense ratio		59.6	%		57.6	%		2.0	%
Ratio of acquisition expenses to earned premiums		23.8	%		21.1	%		2.7	%
Ratio of all other expenses to gross written premiums		17.4	%		12.9	%		4.5	%

* Not meaningful

Net income for the quarter ended September 30, 2007 was $3.4 million, compared to net income of $3.6 million for the quarter ended September 30, 2006. Earnings per share for the quarter ended September 30, 2007 was $0.22, versus earnings per share of $0.24 for the quarter ended September 30, 2006.

Gross written premiums were $33.5 million for the three months ended September 30, 2007 compared to $38.9 million for the three months ended September 30, 2006. The decrease in premium production was primarily the result of greater competition, lower rates, and reduced exposure bases. This was partially offset by the addition of a new partner agent and customer classes in 2007, including the addition of Flying Eagle Insurance Services, Inc. and a small workers’ compensation program with Appalachian Underwriters, Inc.

Earned premiums grew 27.4% to $40.4 million for the quarter ended September 30, 2007 compared to $31.7 million for the quarter ended September 30, 2006. The increase in earned premium was primarily attributable to increased premium writings in 2006, continuing into the first half of 2007. Premiums are earned ratably over the terms of our insurance policies, which are 12 months.

Net investment income was $2.5 million for the quarter ended September 30, 2007 versus $1.6 million for the quarter ended September 30, 2006. The increase in net investment income reflects significant growth in our total investments from $151.4 million at September 30, 2006 to $215.0 million at September 30, 2007 resulting from positive operating cash flows.

11

Other operating expenses were $5.8 million for the quarter ended September 30, 2007, which consisted of salaries and benefit costs of $2.0 million (excluding $1.4 million of salary and benefit costs classified as loss adjustment expenses and acquisition expenses), $0.5 million of professional and consulting fees, $1.3 million of depreciation and amortization, $0.2 million of stock based compensation expense and $1.8 million of other expenses. For the quarter ended September 30, 2006, other operating expenses were $5.0 million, comprised of salaries and benefit costs of $1.4 million (excluding $1.1 million of salary and benefit costs classified as loss adjustment expenses and acquisition expenses), $0.9 million of professional and consulting fees, $0.8 million of depreciation and amortization, $0.3 million of stock based compensation expense and $1.6 million of other expenses.

Acquisition expenses were $9.6 million for the three months ended September 30, 2007, compared to $6.7 million for the three months ended September 30, 2006. This increase was primarily due to a greater level of earned premium as well as partner agent profit sharing.

For the third quarter of 2007, our net loss and loss adjustment expense ratio was 59.6 percent, an increase of 2.0 percent compared to the comparable quarter in 2006 and an increase of 3.1 percent as compared to year-end. These increases were primarily driven by an increase in large losses associated with our commercial automobile business in the current accident year, partially offset by improvements in workers’ compensation and general liability for prior accident years.

Written premium by partner agent was as follows:

	Three Months Ended					Three Months Ended
	Sept. 30, 2007					Sept. 30, 2006
			Percentage of					Percentage of
	Gross Written		Gross Written			Gross Written		Gross Written
	Premium		Premium			Premium		Premium
	(dollars in millions)
AEON Insurance Group, Inc.	$	7.9		23.6	%	$	8.1		20.8	%
American Team Managers		7.1		21.2	%		8.9		22.9	%
Appalachian Underwriters, Inc.		2.7		8.0	%		3.5		9.0	%
Flying Eagle Insurance Services, Inc.		1.2		3.6	%		—		0.0	%
Insential, Inc.		0.5		1.5	%		0.6		1.6	%
Risk Transfer Holdings, Inc.		12.1		36.1	%		15.6		40.1	%
Specialty Risk Solutions, LLC		1.8		5.4	%		2.0		5.1	%
Involuntary risk		0.2		0.6	%		0.2		0.5	%
Total	$	33.5		100.0	%	$	38.9		100.0	%

On October 1, 2007 we signed First Light Program Managers, Inc. as a partner agent, writing commercial general liability, commercial automobile and physical damage for selected customer classes in the trucking industry in the southeastern region.

Our gross written premiums for the three months ended September 30, 2007 and 2006 by state were as follows:

	Three Months Ended					Three Months Ended
	Sept. 30, 2007					Sept. 30, 2006
			Percentage of					Percentage of
	Gross Written		Gross Written			Gross Written		Gross Written
	Premium		Premium			Premium		Premium
	(dollars in millions)
California	$	14.1		42.1	%	$	13.7		35.2	%
Florida		2.8		8.4	%		11.2		28.8	%
Other States		16.6		49.5	%		14.0		36.0	%
Total	$	33.5		100.0	%	$	38.9		100.0	%

The reduction in Florida premium primarily resulted from one large account originally written in the third quarter of 2006 that was cancelled and rewritten in the fourth quarter of 2006.

12

Our gross written premiums by line of business as a percentage of total gross written premiums for the three months ended September 30, 2007 and 2006 were as follows:

	Three Months Ended					Three Months Ended
	Sept. 30, 2007					Sept. 30, 2006
			Percentage of					Percentage of
	Gross Written		Gross Written			Gross Written		Gross Written
	Premium		Premium			Premium		Premium
	(dollars in millions)
Workers’ compensation	$	14.3		42.7	%	$	17.5		45.0	%
General liability		9.5		28.3	%		11.7		30.0	%
Commercial automobile		8.5		25.4	%		8.8		22.6	%
All other		1.2		3.6	%		0.9		2.4	%
Total	$	33.5		100.0	%	$	38.9		100.0	%

For workers’ compensation, Florida approved a rate decrease of 15.7% effective January 1, 2007. California also recently approved a rate decrease of 9.5% for 2007. Despite these rate decreases, we still believe that Florida and California are attractive workers’ compensation markets.

13

Nine Months Ended September 30, 2007 as compared to the Nine Months Ended September 30, 2006

							Percentage Change
	Nine Months Ended Sept. 30,						2007 vs.
	2007			2006			2006
	(unaudited)
	(dollars in millions, except percentages and per share data)
Results of operations:
Gross written premiums	$	117.1		$	107.2			9.2	%
Net written premiums		108.7			98.7			10.1	%
Earned premiums		112.9			80.2			40.8	%
Net investment income		7.0			4.2			66.7	%
Net realized gains (losses)		—			0.3			*
Total revenues	$	119.9		$	84.7			41.6	%
Loss and loss adjustment expense	$	66.1		$	46.7			41.5	%
Acquisition expenses		27.3			17.4			56.9	%
Other operating expenses		16.9			14.8			14.2	%
Total expenses	$	110.3		$	78.9			39.8	%
Pre-tax income	$	9.6		$	5.7			68.4	%
Federal income tax (expense)		(0.2	)		(0.2	)		*
Net income (loss)	$	9.4		$	5.5			70.9	%
Earnings (loss) per share
Basic and diluted	$	0.61		$	0.37			64.9	%
Weighted average common shares outstanding (basic and diluted)		15.4			15.2			1.3	%
Key ratios
Net loss and loss adjustment expense ratio		58.5	%		58.3	%		0.2	%
Ratio of acquisition expenses to earned premiums		24.2	%		21.7	%		2.5	%
Ratio of all other expenses to gross written premiums		14.4	%		13.8	%		0.6	%

* Not meaningful

Net income for the nine months ended September 30, 2007 was $9.4 million, compared to net income of $5.5 for the nine months ended September 30, 2006. Earnings per share for the nine months ended September 30, 2007 was $0.61, versus earnings per share of $0.37 for the nine months ended September 30, 2006.

Gross written premiums increased 9.2% from $107.2 million for the nine months ended September 30, 2006 to $117.1 million for the nine months ended September 30, 2007. The increase in premiums was primarily driven by organic growth within our existing books of business, as well as the addition of Flying Eagle Insurance Services, Inc. as a partner agent and a small workers’ compensation program for Appalachian Underwriters, Inc. in 2007. This increase was partially offset by greater competition, lower rates and reduced exposure bases.

Earned premiums grew 40.8% to $112.9 million for the nine months ended September 30, 2007 compared to $80.2 million for the nine months ended September 30, 2006. The increase in earned premium was primarily attributable to increased premium writings in 2006, continuing into the first half of 2007. Premiums are earned ratably over the terms of our insurance policies, which are 12 months.

Net investment income was $7.0 million for the nine months ended September 30, 2007 versus $4.2 million for the nine months ended September 30, 2006. The increase in net investment income reflects significant growth in our total investments from $151.4 million at September 30, 2006 to $215.0 million at September 30, 2007 resulting from positive operating cash flows.

14

Other operating expenses were $16.9 million for the nine months ended September 30, 2007, which consisted of salaries and benefit costs of $5.3 million (excluding $4.6 million of salary and benefit costs classified as loss adjustment expenses and acquisition expenses), $2.2 million of professional and consulting fees, $3.4 million of depreciation and amortization, $0.9 million of stock based compensation expense and $5.1 million of other expenses. For the nine months ended September 30, 2006, other operating expenses were $14.8 million, comprised of salaries and benefit costs of $4.2 million (excluding $3.2 million of salary and benefit costs classified as loss adjustment expenses and acquisition expenses), $3.1 million of professional and consulting fees, $1.8 million of depreciation and amortization, $0.8 million of stock based compensation expense and $4.9 million of other expenses.

Acquisition expenses were $27.3 million for the nine months ended September 30, 2007, compared to $17.4 million for the nine months ended September 30, 2006. This increase was primarily due to a greater level of earned premium as well as partner agent profit sharing.

For the nine months ended September 30, 2007, our net loss and loss adjustment expense ratio was 58.5 percent, an increase of 0.2 percent compared to the comparable period in 2006 and an increase of 2.0 percent as compared to year-end. These increases were primarily driven by an increase in large losses associated with our commercial automobile business in the current accident year partially offset by improvements in workers’ compensation, and general liability for prior accident years.

Tax expense of $0.2 million for the nine months ended September 30, 2007 and September 30, 2006 resulted from deferred tax liabilities associated with our acquisition of Potomac, which have an indefinite life and therefore cannot be offset with deferred tax assets.

Written premium by partner agent was as follows:

	Nine Months Ended					Nine Months Ended
	Sept. 30, 2007					Sept. 30, 2006
			Percentage of					Percentage of
	Gross Written		Gross Written			Gross Written		Gross Written
	Premium		Premium			Premium		Premium
	(dollars in millions)
AEON Insurance Group, Inc.	$	19.7		16.8	%	$	15.7		14.7	%
American Team Managers		27.3		23.3	%		23.6		22.0	%
Appalachian Underwriters, Inc.		12.9		11.0	%		8.5		7.9	%
Flying Eagle Insurance Services, Inc.		2.3		2.0	%		—		0.0	%
Insential, Inc.		1.3		1.1	%		1.0		0.9	%
Risk Transfer Holdings, Inc.		49.6		42.3	%		56.1		52.3	%
Specialty Risk Solutions, LLC		3.0		2.6	%		2.0		1.9	%
Involuntary risk		1.0		0.9	%		0.3		0.3	%
Total	$	117.1		100.0	%	$	107.2		100.0	%

On October 1, 2007 we signed First Light Program Managers, Inc. as a Partner Agent, writing commercial general liability, commercial automobile and physical damage for selected customer classes in the trucking industry in the southeastern region.

Our gross written premiums for the nine months ended 2007 and 2006 by state were as follows:

	Nine Months Ended					Nine Months Ended
	Sept. 30, 2007					Sept. 30, 2006
			Percentage of					Percentage of
	Gross Written		Gross Written			Gross Written		Gross Written
	Premium		Premium			Premium		Premium
	(dollars in millions)
California	$	42.8		36.6	%	$	35.7		33.3	%
Florida		25.3		21.6	%		39.4		36.8	%
Other States		49.0		41.8	%		32.1		29.9	%
Total	$	117.1		100.0	%	$	107.2		100.0	%

15

The reduction in Florida premium primarily resulted from one large account originally written in the third quarter of 2006 that was cancelled and rewritten in the fourth quarter of 2006.

Our gross written premiums by line of business as a percentage of total gross written premiums for the nine months ended September 30, 2007 and 2006 were as follows:

	Nine Months Ended					Nine Months Ended
	Sept. 30, 2007					Sept. 30, 2006
			Percentage of					Percentage of
	Gross Written		Gross Written			Gross Written		Gross Written
	Premium		Premium			Premium		Premium
	(dollars in millions)
Workers’ compensation	$	60.2		51.4	%	$	62.0		57.8	%
General liability		28.1		24.0	%		25.4		23.7	%
Commercial automobile		25.8		22.0	%		17.9		16.7	%
All other		3.0		2.6	%		1.9		1.8	%
Total	$	117.1		100.0	%	$	107.2		100.0	%

For workers’ compensation, Florida approved a rate decrease of 15.7% effective January 1, 2007. California also recently approved a rate decrease of 9.5% for 2007. Despite these rate decreases, we still believe that Florida and California are attractive workers’ compensation markets.

Liquidity and Capital Resources

Specialty Underwriters’ Alliance, Inc. is organized as a holding company and, as such, has no direct operations of its own. Its assets consist primarily of investments in its subsidiary, through which it conducts substantially all of its insurance operations.

As a holding company, Specialty Underwriters’ Alliance, Inc. has continuing funding needs for general corporate expenses, the payment of principal and interest on future borrowings, if any, taxes and the payment of other obligations. Funds to meet these obligations come primarily from dividends and other statutorily permissible payments from our operating subsidiary. The ability of our operating subsidiary to make payments to us is limited by the applicable laws and regulations of Illinois. There are restrictions on the payment of dividends to us by our insurance subsidiary.

Cash Flows

A summary of our cash flows is as follows:

	Nine Months Ended Sept. 30,
	2007			2006
	(dollars in millions)
Cash provided by (used for)
Operating activities	$	55.4		$	46.2
Investing activities		(57.4	)		(51.6	)
Financing activities		0.5			2.8
Change in cash	$	(1.5	)	$	(2.6	)

For the nine months ended September 30, 2007, net cash from operating activities was $55.4, principally consisting of premium and deposit collections exceeding losses and expenses paid out. This amount compares to net cash from operating activities of $46.2 million for the nine months ended September 30, 2006. The increase in net cash provided by operating activities reflects the overall growth in our business for 2007 compared to 2006.

Cash used for investment activities was $57.4 million for the nine months ended September 30, 2007, principally representing purchases of investments and additions to equipment and capitalized software. For the nine months ended September 30, 2006, cash used in investment activities was $51.6 million, also principally representing increases in investments and additions to equipment and capitalized software.

16

We had cash flows from financing activities of $0.5 million from sales of Class B Common Stock to partner agents for the nine months ended September 30, 2007. For the nine months ended September 30, 2006, cash flows from financing activities from sales of Class B Common Stock to partner agents was $2.8 million.

Fixed Maturity Investments

Our investment portfolio consists of marketable fixed maturity and short-term investments. All fixed maturity investments are classified as available for sale and are reported at their estimated fair value based on quoted market prices. Realized gains and losses are credited or charged to income in the period in which they are realized. Changes in unrealized gains or losses are reported as a separate component of comprehensive income, and accumulated unrealized gains or losses are reported as a separate component of accumulated other comprehensive income in stockholders’ equity.

The aggregate fair market value of our fixed maturity investments at September 30, 2007 was $164.1 million compared to amortized cost of $164.8 million. The aggregate fair market value of our fixed maturity investments at December 31, 2006 was $144.5 million compared to amortized cost of $145.6 million.

We have concluded that none of the available-for-sale securities with unrealized losses at September 30, 2007 has experienced an other-than-temporary impairment. We considered our intent and ability to hold the securities for a sufficient time to allow for a recovery in value in this determination.

At September 30, 2007, we held $4.8 million in fair value, $5.0 million in book value, of investments with sub-prime exposure, all of which were rated “A” or better by established rating agencies.

Item 3: Quantitative and Qualitative Disclosures About Market Risk

Market risk can be described as the risk of change in fair value of a financial instrument due to changes in interest rates, creditworthiness, foreign exchange rates or other factors. We seek to mitigate that risk by a number of actions, as described below.

Interest Rate Risk

Our exposure to market risk for changes in interest rates is concentrated in our investment portfolio. We monitor this exposure through periodic reviews of our consolidated asset and liability positions. We model and periodically review estimates of cash flows, as well as the impact of interest rate fluctuations relating to the investment portfolio and insurance reserves.

The table below summarizes the estimated effects of hypothetical increases and decreases in market interest rates on our investment portfolio:

			Assumed Change	Estimated Fair Value		Increase
	Fair Value at		in Relevant	After Change in		(Decrease) in
	Sept. 30, 2007		Interest Rate	Interest Rate		Carrying Value
			(dollars in thousands)
Total investments	$	215,023	100 bp decrease	$	220,444	$	5,421
			50 bp decrease	$	217,807	$	2,784
			50 bp increase	$	212,121	$	(2,902	)
			100 bp increase	$	209,151	$	(5,872	)

The average duration of our fixed maturity investments at September 30, 2007 was approximately 2.7 years.

Credit Risk

Our portfolio includes primarily fixed income securities and short-term investments, which are subject to credit risk. This risk is defined as default or the potential loss in market value resulting from adverse changes in the borrower’s ability to repay the debt. In our risk management strategy and investment policy, we earn competitive relative returns while investing in a diversified portfolio of securities of high credit quality issuers to limit the amount of credit exposure to any one issuer.

17

The portfolio of fixed maturities consists solely of high quality bonds at September 30, 2007 and December 31, 2006. The following table summarizes bond ratings at market or fair value:

	As of Sept. 30, 2007					As of December 31, 2006
	Market Value		Percent of			Market Value		Percent of
	(dollars in thousands)		Portfolio			(dollars in thousands)		Portfolio
US Govt & AAA Bonds	$	106,529		64.9	%	$	88,843		61.5	%
AA Rated		20,819		12.7	%		15,959		11.0	%
A Rated		34,573		21.1	%		39,718		27.5	%
BBB Rated		2,185		1.3	%		—		—	%
Total	$	164,106		100.0	%	$	144,520		100.0	%

We also have other receivable amounts subject to credit risk, including reinsurance recoverables from OneBeacon Insurance Company. To mitigate the risk of counterparties’ nonpayment of amounts due under these arrangements, we established business and financial standards for reinsurer approval, incorporating ratings by major rating agencies and considering then-current market information.

Item 4: Controls and Procedures

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures. Disclosure controls and procedures are our controls and procedures that are designed to ensure that information required to be disclosed by us in our reports that we file or submit under the Securities Exchange Act of 1934, or the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

As required by SEC Rules 13a-15(b) and 15d-15(b), we have evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this quarterly report. This evaluation was carried out under the supervision and with the participation of our management, including our principal executive officer and principal financial officer. Based on this evaluation, these officers have concluded that the design and operation of our disclosure controls and procedures are effective.

Changes in Internal Control Over Financial Reporting. There were no changes to our internal controls over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, these internal controls.

Inherent Limitations on Effectiveness of Controls. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, if any, within a company have been detected. Accordingly, our disclosure controls and procedures and internal controls over financial reporting are designed to provide reasonable, not absolute, assurance that the objectives of our disclosure control and internal control over financial reporting systems are met.

18

PART II — OTHER INFORMATION

Item 1: Legal Proceedings

None.

Item 1A: Risk Factors

There have been no material changes to the Risk Factors previously disclosed in Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2006.

Item 2: Recent Sales of Unregistered Securities

There were no sales of unregistered securities that have not been previously reported on a Current Report on Form 8-K.

Item 3: Defaults Upon Senior Securities

None.

Item 4: Submission of Matters to a Vote of Security Holders

None.

Item 5: Other Information

On October 29, 2007, our Board of Directors adopted Amended and Restated By-Laws. The following is a description of the main provisions that were adopted or changed in the Amended and Restated By-Laws.

Consent of Stockholders in Lieu of a Meeting

The provisions regarding stockholder action taken by written consent were revised to remove extraneous language relating to a qualified public offering.

Election of Directors

Provisions regarding the election of our directors were revised to remove extraneous language relating to the rights of a former lender to the Company that were in effect while the Company was private. These rights were automatically terminated in connection with our initial public offering.

Direct Registration Program

The Company is listed on The NASDAQ Stock Market, LLC (“NASDAQ”), which requires that all listed securities be eligible to participate in a “direct registration program” on or after January 1, 2008. Although the existing By-Laws contemplated the issuance of uncertificated shares, Sections 5.01, 5.03 and 5.04 of our Amended and Restated By-Laws were amended to allow the Company to issue, record and transfer shares without the issuance of a physical certificate, making the Company eligible to participate in a direct registration program.

Electronic Transmission

Provisions were added to clarify that an “electronic transmission” means any form of communication, not directly involving the physical transmission of paper, that creates a record that may be retained, retrieved, and reviewed by a recipient thereof, and that may be directly reproduced in paper form by such recipient through an automated process.

19

Emergency By-Laws Provisions

Pursuant Section 110 of the Delaware General Corporation Law, provisions were added with respect to the conduct of the business of the Company during an emergency resulting from a catastrophe, disaster, calamity or other similar event.

The foregoing is a description of the amendments to the Company’s Amended and Restated By-Laws and is qualified in its entirety by reference to the full text of the Amended and Restated By-Laws. This description should be read in conjunction with the Amended and Restated By-Laws, a copy of which is filed as Exhibit 3.1 to this Quarterly Report on Form 10-Q and which is incorporated by reference herein.

Item 6: Exhibits

Exhibits:

Exhibit
Number	Description
3.1	Amended and Restated Bylaws of the Registrant dated as of October 29, 2007
10.1	Amendment No. 4 to the Partner Agent Program Agreement between the Registrant and American Team Managers
10.2	SUA Insurance Company Partner Agent Program Agreement between the Registrant and First Light Program Managers, Inc.
10.3	Securities Purchase Agreement between the Registrant and First Lights Program Managers, Inc.
10.4	Form of Restricted Stock Agreement for Directors under the 2007 Stock Incentive Plan of the Registrant
10.5	Form of Restricted Stock Agreement for Employees under the 2007 Stock Incentive Plan of the Registrant
10.6	Form of Nonqualified Stock Option Agreement under the 2007 Stock Incentive Plan of the Registrant
10.7	Form of Incentive Stock Option Agreement under the 2007 Stock Incentive Plan of the Registrant
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

20

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	SPECIALTY UNDERWRITERS’ ALLIANCE, INC.
	(Registrant)
Dated: November 2, 2007	By:	/s/ Courtney C. Smith
	Name: Courtney C. Smith
	Title: President and Chief Executive Officer (Principal Executive Officer)
Dated: November 2, 2007	By:	/s/ Peter E. Jokiel
	Name: Peter E. Jokiel
	Title: Executive Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer)

21

Exhibits Index

Exhibit
Number	Description
3.1	Amended and Restated Bylaws of the Registrant dated as of October 29, 2007
10.1	Amendment No. 4 to the Partner Agent Program Agreement between the Registrant and American Team Managers
10.2	SUA Insurance Company Partner Agent Program Agreement between the Registrant and First Light Program Managers, Inc.
10.3	Securities Purchase Agreement between the Registrant and First Lights Program Managers, Inc.
10.4	Form of Restricted Stock Agreement for Directors under the 2007 Stock Incentive Plan of the Registrant
10.5	Form of Restricted Stock Agreement for Employees under the 2007 Stock Incentive Plan of the Registrant
10.6	Form of Nonqualified Stock Option Agreement under the 2007 Stock Incentive Plan of the Registrant
10.7	Form of Incentive Stock Option Agreement under the 2007 Stock Incentive Plan of the Registrant
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

22

EX-3.1

Exhibit 3.1

AMENDED AND RESTATED BY-LAWS

OF

SPECIALTY UNDERWRITERS’ ALLIANCE, INC.

Dated as of October 29, 2007

Table of Contents

Section	Page
ARTICLE I
STOCKHOLDERS		1
Section 1.01 Annual Meetings		1
Section 1.02 Special Meetings		1
Section 1.03 Notice of Meetings; Waiver		1
Section 1.04 Quorum		2
Section 1.05 Voting		2
Section 1.06 Voting by Ballot		2
Section 1.07 Adjournment		3
Section 1.08 Proxies		3
Section 1.09 Organization; Procedure		3
Section 1.10 Consent of Stockholders in Lieu of Meeting		4
ARTICLE II
BOARD OF DIRECTORS		4
Section 2.01 General Powers		4
Section 2.02 Number and Term of Office		4
Section 2.03 Election of Directors		4
Section 2.04 Annual and Regular Meetings		5
Section 2.05 Special Meetings; Notice		5
Section 2.06 Quorum; Voting		5
Section 2.07 Adjournment		5
Section 2.08 Action Without a Meeting		5
Section 2.09 Regulations; Manner of Acting		5
Section 2.10 Action by Telephonic Communications		6
Section 2.11 Resignations		6
Section 2.12 Removal of Directors		6
Section 2.13 Vacancies and Newly Created Directorships		6
Section 2.14 Compensation		6
Section 2.15 Reliance on Accounts and Reports, etc.		6
ARTICLE III
EXECUTIVE COMMITTEE AND OTHER COMMITTEES		7
Section 3.01 How Constituted		7
Section 3.02 Powers		7
Section 3.03 Proceedings		8
Section 3.04 Quorum and Manner of Acting		8
Section 3.05 Action by Telephonic Communications		8

i

Table of Contents
(continued)

Section	Page
Section 3.06 Absent or Disqualified Members		8
Section 3.07 Resignations		8
Section 3.08 Removal		8
Section 3.09 Vacancies		9
ARTICLE IV
OFFICERS		9
Section 4.01 Number		9
Section 4.02 Election		9
Section 4.03 Salaries		9
Section 4.04 Removal and Resignation; Vacancies		9
Section 4.05 Authority and Duties of Officers		9
Section 4.06 The President		10
Section 4.07 The Vice President		10
Section 4.08 The Secretary		10
Section 4.09 The Treasurer		11
Section 4.10 Additional Officers		12
Section 4.11 Security		12
ARTICLE V
CAPITAL STOCK		12
Section 5.01 Certificates of Stock, Uncertificated Shares		12
Section 5.02 Signatures; Facsimile		12
Section 5.03 Lost, Stolen or Destroyed Certificates		12
Section 5.04 Transfer of Stock		13
Section 5.05 Record Date		13
Section 5.06 Registered Stockholders		14
Section 5.07 Transfer Agent and Registrar		14
ARTICLE VI
INDEMNIFICATION		14
Section 6.01 Nature of Indemnity		14
Section 6.02 Successful Defense		15
Section 6.03 Determination That Indemnification Is Proper		15
Section 6.04 Advance Payment of Expenses		15
Section 6.05 Procedure for Indemnification of Directors and Officers		16
Section 6.06 Survival; Preservation of Other Rights		16
Section 6.07 Insurance		16

ii

Table of Contents
(continued)

Section	Page
Section 6.08 Severability		17
ARTICLE VII
OFFICES		17
Section 7.01 Registered Office		17
Section 7.02 Other Offices		17
ARTICLE VIII
GENERAL PROVISIONS		17
Section 8.01 Dividends		17
Section 8.02 Reserves		17
Section 8.03 Execution of Instruments		18
Section 8.04 Corporate Indebtedness		18
Section 8.05 Deposits		18
Section 8.06 Checks		18
Section 8.07 Sale Transfer, etc. of Securities		18
Section 8.08 Voting as Stockholder		18
Section 8.09 Fiscal Year		19
Section 8.10 Seal		19
Section 8.11 Books and Records; Inspection		19
Section 8.12 Emergency Bylaws		19
Section 8.13 Electronic Transmission		20
ARTICLE IX
AMENDMENT OF BY-LAWS		20
Section 9.01 Amendment		20
ARTICLE X
CONSTRUCTION		20
Section 10.01 Construction		20

iii

SPECIALTY UNDERWRITERS’ ALLIANCE, INC.

AMENDED AND RESTATED BY-LAWS

Dated as of October 29, 2007
ARTICLE I

STOCKHOLDERS

Section 1.01 Annual Meetings. Subject to Section 1.10 of these By-Laws, the annual meeting of the stockholders of the Corporation for the election of directors and for the transaction of such other business as properly may come before such meeting shall be held at such place, either within or without the State of Delaware, or, within the sole discretion of the Board of Directors, by remote electronic communication technologies, and at such date and hour, as may be fixed from time to time by resolution of the Board of Directors and set forth in the notice or waiver of notice of the meeting.

Section 1.02 Special Meetings. Special meetings of the stockholders may be called at any time by the President (or, in the event of his or her absence or disability, by any Vice President), or by the Board of Directors. A special meeting shall be called by the President (or, in the event of his or her absence or disability, by any Vice President), or by the Secretary, immediately upon receipt of a written request therefor by stockholders holding in the aggregate not less than a majority of the outstanding shares of the Corporation at the time entitled to vote at any meeting of the stockholders. If such officers or the Board of Directors shall fail to call such meeting within twenty days after receipt of such request, any stockholder executing such request may call such meeting. Such special meetings of the stockholders shall be held at such places, within or without the State of Delaware, or, within the sole discretion of the Board of Directors, by remote electronic communication technologies, as shall be specified in the respective notices or waivers of notice thereof.

Section 1.03 Notice of Meetings; Waiver. The Secretary or any Assistant Secretary shall cause written notice of the place, if any, date and hour of each meeting of the stockholders, and the means of remote communications, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such meeting, and, in the case of a special meeting, the purpose or purposes for which such meeting is called, to be given personally or by mail, not less than ten nor more than sixty days prior to the meeting, to each stockholder of record entitled to vote at such meeting. If a stockholder meeting is to be held via electronic communications and stockholders will take action at such meeting, the notice of such meeting must: (i) specify the means of remote communications, if any, by which stockholders and proxy holders may be deemed to be present and vote at such meeting; and (ii) provide the information required to access the stockholder list.

For notice given by electronic transmission to a stockholder to be effective, such stockholder must consent to the Corporation’s giving notice by that particular form of electronic transmission. A stockholder may revoke consent to receive notice by electronic transmission by written notice to the Corporation. A stockholder’s consent to notice by electronic transmission is automatically revoked if the Corporation is unable to deliver two consecutive electronic transmission notices and such inability becomes known to the Secretary, Assistant Secretary, the transfer agent or other person responsible for giving notice.

Notices are deemed given (i) if by mail, when deposited in the United States mail, postage prepaid, directed to the stockholder at his or her address as it appears on the record of stockholders of the Corporation, or, if he or she shall have filed with the Secretary of the Corporation a written request that notices to him or her be mailed to some other address, then directed to him or her at such other address; (ii) if by facsimile, when faxed to a number where the stockholder has consented to receive notice; (iii) if by electronic mail, when mailed electronically to an electronic mail address at which the stockholder consented to receive such notice; (iv) if by posting on an electronic network (such as a website or chatroom) together with a separate notice to the stockholder of such specific posting, upon the later to occur of (A) such posting or (B) the giving of the separate notice of such posting; or (v) if by any other form of electronic communication, when directed to the stockholder in the manner consented to by the stockholder. Such further notice shall be given as may be required by law.

A written waiver of any notice of any annual or special meeting signed by the person entitled thereto, or a waiver by electronic transmission by the person entitled to notice, shall be deemed equivalent to notice, whether provided before or after the meeting. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders need be specified in a waiver of notice. The attendance of any stockholder at a meeting of stockholders shall constitute a waiver of notice of such meeting, except when the stockholder attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business on the ground that the meeting is not lawfully called or convened.

Section 1.04 Quorum. Except as otherwise required by law or by the Certificate of Incorporation, the presence in person or by proxy of the holders of record of a majority of the shares entitled to vote at a meeting of stockholders shall constitute a quorum for the transaction. of business at such meeting.

Section 1.05 Voting. If, pursuant to Section 5.05 of these By-Laws, a record date has been fixed, every holder of record of shares entitled to vote at a meeting of stockholders shall be entitled to one vote for each share outstanding in his or her name on the books of the Corporation at the close of business on such record date. If no record date has been fixed, then every holder of record of shares entitled to vote at a meeting of stockholders shall be entitled to one vote for each share of stock standing in his or her name on the books of the Corporation at the close of business on the day next preceding the day on which notice of the meeting is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. Except as otherwise required by law or by the Certificate of Incorporation or by these By-Laws, the vote of a majority of the shares represented in person or by proxy at any meeting at which a quorum is present shall be sufficient for the transaction of any business at such meeting.

Section 1.06 Voting by Ballot. No vote of the stockholders need be taken by written ballot, or by a ballot submitted by electronic transmission, unless otherwise required by law. Any vote which need not be taken by written ballot, or by a ballot submitted by electronic transmission, may be conducted in any manner approved by the meeting.

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Section 1.07 Adjournment. If a quorum is not present at any meeting of the stockholders, the stockholders present in person or by proxy shall have the power to adjourn any such meeting from time to time until a quorum is present. Notice of any adjourned meeting of the stockholders of the Corporation need not be given if the place, if any, date and hour thereof, and the means of remote communications, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such meeting, are announced at the meeting at which the adjournment is taken, provided, however, that if the adjournment is for more than thirty days, or if after the adjournment a new record date for the adjourned meeting is fixed pursuant to Section 5.05 of these By-Laws, a notice of the adjourned meeting, conforming to the requirements of Section 1.03 of these By-Laws, shall be given to each stockholder of record entitled to vote at such meeting. At any adjourned meeting at which a quorum is present, any business may be transacted that might have been transacted on the original date of the meeting.

Section 1.08 Proxies. Any stockholder entitled to vote at any meeting of the stockholders or to express consent to or dissent from corporate action in writing without a meeting may authorize another person or persons to vote at any such meeting and express such consent or dissent for him or her by proxy. A stockholder may authorize a valid proxy by executing a written instrument signed by such stockholder, or by causing his or her signature to be affixed to such writing by any reasonable means including, but not limited to, by facsimile signature, or by transmitting or authorizing the transmission of a telegram, cablegram or other means of electronic transmission to the person designated as the holder of the proxy, a proxy solicitation firm or a like authorized agent. No such proxy shall be voted or acted upon after the expiration of three years from the date of such proxy, unless such proxy provides for a longer period. Every proxy shall be revocable at the pleasure of the stockholder executing it, except in those cases where applicable law provides that a proxy shall be irrevocable. A stockholder may revoke any proxy which is not irrevocable by attending the meeting and voting in person or by filing an instrument in writing revoking the proxy or by filing another duly executed proxy bearing a later date with the Secretary. Proxies by telegram, cablegram, or other electronic transmission must either set forth or be submitted with information from which it can be determined that the telegram, cablegram or other electronic transmission was authorized by the stockholder. Any copy, facsimile telecommunication or other reliable reproduction of a writing or transmission created pursuant to this section may be substituted or used in lieu of the original writing or transmission for any and all purposes for which the original writing or transmission could be used, provided that such copy, facsimile telecommunication or other reproduction shall be a complete reproduction of the entire original writing or transmission.

Section 1.09 Organization; Procedure. At every meeting of stockholders the presiding officer shall be the President or, in the event of his or her absence or disability, a presiding officer chosen by a majority of the stockholders present in person or by proxy. The Secretary, or in the event of his or her absence or disability, the Assistant Secretary, if any, or if there be no Assistant Secretary, in the absence of the Secretary, an appointee of the presiding officer, shall act as Secretary of the meeting. The order of business and all other matters of procedure at every meeting of stockholders may be determined by such presiding officer.

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Section 1.10 Consent of Stockholders in Lieu of Meeting. To the fullest extent permitted by law, whenever the vote of stockholders at a meeting thereof is required or permitted to be taken for or in connection with any corporate action, such action may be taken without a meeting, without prior notice and without a vote of stockholders, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted (but not less than the minimum number of votes otherwise prescribed by law) and shall be delivered to the Corporation by delivery to its registered office in the State of Delaware, its principal place of business, or an officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to the Corporation’s registered office shall be by hand or by certified or registered mail, return receipt requested.

Every written consent shall bear the date of signature of each stockholder who signs the consent and no written consent shall be effective to take the corporate action referred to therein unless, within sixty days of the earliest dated consent delivered in the manner required by law to the Corporation, written consents signed by a sufficient number of holders to take action are delivered to the Corporation by delivery to its registered office in the State of Delaware, its principal place of business, or an officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to the Corporation’s registered office shall be by hand or by certified or registered mail, return receipt requested.

ARTICLE II

BOARD OF DIRECTORS

Section 2.01 General Powers. Except as may otherwise be provided by law, by the Certificate of Incorporation or by these By-Laws, the property, affairs and business of the Corporation shall be managed by or under the direction of the Board of Directors and the Board of Directors may exercise all the powers of the Corporation.

Section 2.02 Number and Term of Office. The number of Directors constituting the entire Board of Directors shall be seven, which number may be modified from time to time by resolution of the Board of Directors, but in no event shall the number of Directors be less than one. Each Director (whenever elected) shall hold office until his or her successor has been duly elected and qualified, or until his or her earlier death, resignation or removal.

Section 2.03 Election of Directors. Except as otherwise provided in Sections 2.12 and 2.13 of these By-Laws, the Directors shall be elected at each annual meeting of the stockholders. If the annual meeting for the election of Directors is not held on the date designated therefor, the Directors shall cause the meeting to be held as soon thereafter as convenient. At each meeting of the stockholders for the election of Directors, provided a quorum is present, the Directors shall be elected by a plurality of the votes validly cast in such election.

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Section 2.04 Annual and Regular Meetings. The annual meeting of the Board of Directors for the purpose of electing officers and for the transaction of such other business as may come before the meeting shall be held as soon as possible following adjournment of the annual meeting of the stockholders at the place of such annual meeting of the stockholders. Notice of such annual meeting of the Board of Directors need not be given. The Board of Directors from time to time may by resolution provide for the holding of regular meetings and fix the place (which may be within or without the State of Delaware) and the date and hour of such meetings. Notice of regular meetings need not be given, provided, however, that if the Board of Directors shall fix or change the time or place of any regular meeting, notice of such action shall be mailed promptly, or sent by telegram, radio or cable, to each Director who shall not have been present at the meeting at which such action was taken, addressed to him or her at his or her usual place of business, or shall be delivered to him or her personally. Notice of such action need not be given to any Director who attends the first regular meeting after such action is taken without protesting the lack of notice to him or her, prior to or at the commencement of such meeting, or to any Director who submits a signed waiver of notice, whether before or after such meeting.

Section 2.05 Special Meetings; Notice. Special meetings of the Board of Directors shall be held whenever called by the President or, in the event of his or her absence or disability, by any Vice President, at such place (within or without the State of Delaware), date and hour as may be specified in the respective notices or waivers of notice of such meetings. Special meetings of the Board of Directors may be called on twenty-four hours’ notice, if notice is given to each Director personally or by telephone or telegram, or on five days’ notice, if notice is mailed to each Director, addressed to him or her at his or her usual place of business. Notice of any special meeting need not be given to any Director who attends such meeting without protesting the lack of notice to him or her, prior to or at the commencement of such meeting, or to any Director who submits a signed waiver of notice, whether before or after such meeting, and any business may be transacted thereat.

Section 2.06 Quorum; Voting. At all meetings of the Board of Directors, the presence of a majority of the total authorized number of Directors shall constitute a quorum for the transaction of business. Except as otherwise required by law, the vote of a majority of the Directors present at any meeting at which a quorum is present shall be the act of the Board of Directors.

Section 2.07 Adjournment. A majority of the Directors present, whether or not a quorum is present, may adjourn any meeting of the Board of Directors to another time or place. No notice need be given of any adjourned meeting unless the time and place of the adjourned meeting are not announced at the time of adjournment, in which case notice conforming to the requirements of Section 2.05 of these By-Laws shall be given to each Director.

Section 2.08 Action Without a Meeting. Any action required or permitted to be taken at any meeting of the Board of Directors may be taken without a meeting if all members of the Board of Directors consent thereto in writing or by electronic transmission, and such writing or writings or electronic transmissions are filed with the minutes of proceedings of the Board of Directors. Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form.

Section 2.09 Regulations; Manner of Acting. To the extent consistent with applicable law, the Certificate of Incorporation and these By-Laws, the Board of Directors may adopt such rules and regulations for the conduct of meetings of the Board of Directors and for the management of the property, affairs and business of the Corporation as the Board of Directors may deem appropriate. The Directors shall act only as a Board, and the individual Directors shall have no power as such.

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Section 2.10 Action by Telephonic Communications. Members of the Board of Directors may participate in a meeting of the Board of Directors by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this provision shall constitute presence in person at such meeting.

Section 2.11 Resignations. Any Director may resign at any time by submitting an electronic transmission or by delivering a written notice of resignation, signed by such Director, to the President or the Secretary. Unless otherwise specified therein, such resignation shall take effect upon delivery.

Section 2.12 Removal of Directors. Any Director may be removed at any time, either for or without cause, upon the affirmative vote of the holders of a majority of the outstanding shares of stock of the Corporation entitled to vote for the election of such Director. Any vacancy in the Board of Directors caused by any such removal may be filled at such meeting by the stockholders entitled to vote for the election of the Director so removed. If such stockholders do not fill such vacancy at such meeting (or in the written instrument effecting such removal, if such removal was effected by consent without a meeting), such vacancy may be filled in the manner provided in Section 2.13 of these By-Laws.

Section 2.13 Vacancies and Newly Created Directorships. If any vacancies shall occur in the Board of Directors, by reason of death, resignation, removal or otherwise, or if the authorized number of Directors shall be increased, the Directors then in office shall continue to act, and such vacancies and newly created directorships may be filled by a majority of the Directors then in office, although less than a quorum. A Director elected to fill a vacancy or a newly created directorship shall hold office until his or her successor has been elected and qualified or until his or her earlier death, resignation or removal. Any such vacancy or newly created directorship may also be filled at any time by vote of the stockholders.

Section 2.14 Compensation. The amount, if any, which each Director shall be entitled to receive as compensation for his or her services as such shall be fixed from time to time by resolution of the Board of Directors.

Section 2.15 Reliance on Accounts and Reports, etc. A Director, or a member of any Committee designated by the Board of Directors shall, in the performance of his or her duties, be fully protected in relying in good faith upon the records of the Corporation and upon information, opinions, reports or statements presented to the Corporation by any of the Corporation’s officers or employees, or Committees designated by the Board of Directors, or by any other person as to the matters the member reasonably believes are within such other person’s professional or expert competence and who has been selected with reasonable care by or on behalf of the Corporation.

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ARTICLE III

EXECUTIVE COMMITTEE AND OTHER COMMITTEES

Section 3.01 How Constituted. The Board of Directors may designate one or more Committees, including an Executive Committee, each such Committee to consist of such number of Directors as from time to time may be fixed by the Board of Directors. The Board of Directors may designate one or more Directors as alternate members of any such Committee, who may replace any absent or disqualified member or members at any meeting of such Committee. Thereafter, members (and alternate members, if any) of each such Committee may be designated at the annual meeting of the Board of Directors. Any such Committee may be abolished or re-designated from time to time by the Board of Directors. Each member (and each alternate member) of any such Committee (whether designated at an annual meeting of the Board of Directors or to fill a vacancy or otherwise) shall hold office until his or her successor shall have been designated or until he or she shall cease to be a Director, or until his or her earlier death, resignation or removal.

Section 3.02 Powers. During the intervals between the meetings of the Board of Directors, the Executive Committee, except as otherwise provided in this section, shall have and may exercise all the powers and authority of the Board of Directors in the management of the property, affairs and business of the Corporation; provided, however, that the Executive Committee shall not have the power and authority to declare dividends or to authorize the issuance of stock of the Corporation. Each such other Committee, except as otherwise provided in this section, shall have and may exercise such powers of the Board of Directors as may be provided by resolution or resolutions of the Board of Directors. Neither the Executive Committee nor any such other Committee shall have the power or authority:

(a) to amend the Certificate of Incorporation;

(b) to adopt an agreement of merger or consolidation;

(c) to recommend to the stockholders the sale, lease or exchange of all or substantially all of the Corporation’s property and assets;

(d) to recommend to the stockholders a dissolution of the Corporation or a revocation of a dissolution;

(e) to amend the By-Laws of the Corporation;

(f) to remove any President, Vice President, Assistant Secretary or Assistant Treasurer of the Corporation;

(g) to authorize the borrowing of funds, other than under existing facilities, that is material to the capital structure of the Corporation;

(h) to authorize any new compensation or benefit program;

(i) to appoint or discharge the Corporation’s independent public accountants;

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(j) to authorize the annual operating plan, annual capital expenditure plan and strategic plan; or

(k) to abolish or usurp the authority of the Board of Directors.

The Executive Committee shall have, and any such other Committee may be granted by the Board of Directors, power to authorize the seal of the Corporation to be affixed to any or all papers which may require it.

Section 3.03 Proceedings. Each such Committee may fix its own rules of procedure and may meet at such place (within or without the State of Delaware), at such time and upon such notice, if any, as it shall determine from time to time. Each such Committee shall keep minutes of its proceedings and shall report such proceedings to the Board of Directors at the meeting of the Board of Directors next following any such proceedings.

Section 3.04 Quorum and Manner of Acting. Except as may be otherwise provided in the resolution creating such Committee, at all meetings of any Committee the presence of members (or alternate members) constituting a majority of the total authorized membership of such Committee shall constitute a quorum for the transaction of business. The act of the majority of the members present at any meeting at which a quorum is present shall be the act of such Committee. Any action required or permitted to be taken at any meeting of any such Committee may be taken without a meeting, if all members of such Committee shall consent to such action in writing or by electronic transmission, and such writing or writings or electronic transmission or transmissions are filed with the minutes of the proceedings of the Committee. Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form. The members of any such Committee shall act only as a Committee, and the individual members of such Committee shall have no power as such.

Section 3.05 Action by Telephonic Communications. Members of any Committee designated by the Board of Directors may participate in a meeting of such Committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this provision shall constitute presence in person at such meeting.

Section 3.06 Absent or Disqualified Members. In the absence or disqualification of a member of any Committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he, she or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member.

Section 3.07 Resignations. Any member (and any alternate member) of any Committee may resign at any time by delivering a written notice of resignation, signed by such member, to the Chairman or the President. Unless otherwise specified therein, such resignation shall take effect upon delivery.

Section 3.08 Removal. Any member (and any alternate member) of any Committee may be removed from his or her position as a member (or alternate member, as the case may be) of such Committee at any time, either for or without cause, by resolution adopted by a majority of the whole Board of Directors.

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Section 3.09 Vacancies. If any vacancy shall occur in any Committee, by reason of disqualification, death, resignation, removal or otherwise, the remaining members (and any alternate members) shall continue to act, and any such vacancy may be filled by the Board of Directors.

ARTICLE IV

OFFICERS

Section 4.01 Number. The officers of the Corporation shall be chosen by the Board of Directors and shall be a President, one or more Vice Presidents, a Secretary and a Treasurer. The Board of Directors also may elect one or more Assistant Secretaries and Assistant Treasurers in such numbers as the Board of Directors may determine. Any number of offices may be held by the same person. No officer need be a Director of the Corporation.

Section 4.02 Election. Unless otherwise determined by the Board of Directors, the officers of the Corporation shall be elected by the Board of Directors at the annual meeting of the Board of Directors, and shall be elected to hold office until the next succeeding annual meeting of the Board of Directors. In the event of the failure to elect officers at such annual meeting, officers may be elected at any regular or special meeting of the Board of Directors. Each officer shall hold office until his or her successor has been elected and qualified, or until his or her earlier death, resignation or removal.

Section 4.03 Salaries. The salaries of all officers and agents of the Corporation shall be fixed by the Board of Directors.

Section 4.04 Removal and Resignation; Vacancies. Any officer may be removed for or without cause at any time by the Board of Directors. Any officer may resign at any time by delivering notice of resignation, either in writing signed by such officer or by electronic transmission, to the Board of Directors or the President. Unless otherwise specified therein, such resignation shall take effect upon delivery. Any vacancy occurring in any office of the Corporation by death, resignation, removal or otherwise, shall be filled by the Board of Directors.

Section 4.05 Authority and Duties of Officers. The officers of the Corporation shall have such authority and shall exercise such powers and perform such duties as may be specified in these By-Laws, except that in any event each officer shall exercise such powers and perform such duties as may be required by law.

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Section 4.06 The President. The President shall preside at all meetings of the stockholders and directors at which he or she is present, shall be the chief executive officer and the chief operating officer of the Corporation, shall have general control and supervision of the policies and operations of the Corporation and shall see that all orders and resolutions of the Board of Directors are carried into effect. He or she shall manage and administer the Corporation’s business and affairs and shall also perform all duties and exercise all powers usually pertaining to the office of a chief executive officer and a chief operating officer of a corporation. He or she shall have the authority to sign, in the name and on behalf of the Corporation, checks, orders, contracts, leases, notes, drafts and other documents and instruments in connection with the business of the Corporation, and together with the Secretary or an Assistant Secretary, conveyances of real estate and other documents and instruments to which the seal of the Corporation is affixed. He or she shall have the authority to cause the employment or appointment of such employees and agents of the Corporation as the conduct of the business of the Corporation may require, to fix their compensation, and to remove or suspend any employee or agent elected or appointed by the President or the Board of Directors. The President shall perform such other duties and have such other powers as the Board of Directors or the Chairman may from time to time prescribe.

Section 4.07 The Vice President. Each Vice President shall perform such duties and exercise such powers as may be assigned to him or her from time to time by the President. In the absence of the President, the duties of the President shall be performed and his or her powers may be exercised by such Vice President as shall be designated by the President, or failing such designation, such duties shall be performed and such powers may be exercised by each Vice President in the order of their earliest election to that office; subject in any case to review and superseding action by the President.

Section 4.08 The Secretary. The Secretary shall have the following powers and duties:

(a) He or she shall keep or cause to be kept a record of all the proceedings of the meetings of the stockholders and of the Board of Directors in books provided for that purpose.

(b) He or she shall cause all notices to be duly given in accordance with the provisions of these By-Laws and as required by law.

(c) Whenever any Committee shall be appointed pursuant to a resolution of the Board of Directors, he or she shall furnish a copy of such resolution to the members of such Committee.

(d) He or she shall be the custodian of the records and of the seal of the Corporation and cause such seal (or a facsimile thereof) to be affixed to all certificates representing shares of the Corporation prior to the issuance thereof and to all instruments the execution of which on behalf of the Corporation under its seal shall have been duly authorized in accordance with these By-Laws, and when so affixed he or she may attest the same.

(e) He or she shall properly maintain and file all books, reports, statements, certificates and all other documents and records required by law, the Certificate of Incorporation or these By-Laws.

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(f) He or she shall have charge of the stock books and ledgers of the Corporation and shall cause the stock and transfer books to be kept in such manner as to show at any time the number of shares of stock of the Corporation of each class issued and outstanding, the names (alphabetically arranged) and the addresses of the holders of record of such shares, the number of shares held by each holder and the date as of which each became such holder of record.

(g) He or she shall sign (unless the Treasurer, an Assistant Treasurer or an Assistant Secretary shall have signed) certificates representing shares of the Corporation the issuance of which shall have been authorized by the Board of Directors.

(h) He or she shall perform, in general, all duties incident to the office of secretary and such other duties as may be specified in these By-Laws or as may be assigned to him or her from time to time by the Board of Directors, or the President.

Section 4.09 The Treasurer. The Treasurer shall be the chief financial officer of the Corporation and shall have the following powers and duties:

(a) He or she shall have charge and supervision over and be responsible for the moneys, securities, receipts and disbursements of the Corporation, and shall keep or cause to be kept full and accurate records of all receipts of the Corporation.

(b) He or she shall cause the moneys and other valuable effects of the Corporation to be deposited in the name and to the credit of the Corporation in such banks or trust companies or with such bankers or other depositaries as shall be selected in accordance with Section 8.05 of these By-Laws.

(c) He or she shall cause the moneys of the Corporation to be disbursed by checks or drafts (signed as provided in Section 8.06 of these By-Laws) upon the authorized depositaries of the Corporation and cause to be taken and preserved proper vouchers for all moneys disbursed.

(d) He or she shall render to the Board of Directors or the President, whenever requested, a statement of the financial condition of the Corporation and of all his or her transactions as Treasurer, and render a full financial report at the annual meeting of the stockholders, if called upon to do so.

(e) He or she shall be empowered from time to time to require from all officers or agents of the Corporation reports or statements giving such information as he or she may desire with respect to any and all financial transactions of the Corporation.

(f) He or she may sign (unless an Assistant Treasurer or the Secretary or an Assistant Secretary shall have signed) certificates representing stock of the Corporation the issuance of which shall have been authorized by the Board of Directors.

(g) He or she shall perform, in general, all duties incident to the office of treasurer and such other duties as may be specified in these By-Laws or as may be assigned to him or her from time to time by the Board of Directors, or the President.

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Section 4.10 Additional Officers. The Board of Directors may appoint such other officers and agents as it may deem appropriate, and such other officers and agents shall hold their offices for such terms and shall exercise such powers and perform such duties as may be determined from time to time by the Board of Directors. The Board of Directors from time to time may delegate to any officer or agent the power to appoint subordinate officers or agents and to prescribe their respective rights, terms of office, authorities and duties. Any such officer or agent may remove any such subordinate officer or agent appointed by him or her, for or without cause.

Section 4.11 Security. The Board of Directors may require any officer, agent or employee of the Corporation to provide security for the faithful performance of his or her duties, in such amount and of such character as may be determined from time to time by the Board of Directors.

ARTICLE V

CAPITAL STOCK

Section 5.01 Certificates of Stock, Uncertificated Shares. The shares of the Corporation shall be represented by certificates, provided that the Board of Directors may provide by resolution or resolutions that some or all of any or all classes or series of the stock of the Corporation shall be uncertificated shares. Any such resolution shall not apply to shares represented by a certificate until each certificate is surrendered to the Corporation. Notwithstanding the adoption of such a resolution by the Board of Directors, every holder of stock in the Corporation represented by certificates and upon request every holder of uncertificated shares shall be entitled to have a certificate signed by, or in the name of the Corporation, by the President or a Vice President, and by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary, representing the number of shares registered in certificate form. Such certificate shall be in such form as the Board of Directors may determine, to the extent consistent with applicable law, the Certificate of Incorporation and these By-Laws.

Section 5.02 Signatures; Facsimile. All signatures on the certificate referred to in Section 5.01 of these By-Laws may be in facsimile, engraved or printed form, to the extent permitted by law. In case any officer, transfer agent or registrar who has signed, or whose facsimile, engraved or printed signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he or she were such officer, transfer agent or registrar at the date of issue.

Section 5.03 Lost, Stolen or Destroyed Certificates. The Board of Directors may direct that a new certificate be issued in place of any certificate theretofore issued by the Corporation alleged to have been lost, stolen or destroyed, upon delivery to the Board of Directors of an affidavit of the owner or owners of such certificate, setting forth such allegation. The Board of Directors may require the owner of such lost, stolen or destroyed certificate, or his or her legal representative, to give the Corporation a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of any such new certificate.

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Section 5.04 Transfer of Stock. Upon surrender to the Corporation or the transfer agent of the Corporation of a certificate for shares, duly endorsed or accompanied by appropriate evidence of succession, assignment or authority to transfer, the Corporation shall issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books. Within a reasonable time after the transfer of uncertificated stock, the Corporation shall send to the registered owner thereof a written notice containing the information required to be set forth or stated on certificates pursuant to Sections 151, 156, 202(a) or 218(a) of the General Corporation Law of the State of Delaware. Subject to the provisions of the Certificate of Incorporation and these By-Laws, the Board of Directors may prescribe such additional rules and regulations as it may deem appropriate relating to the issue, transfer and registration of shares of the Corporation.

Section 5.05 Record Date. In order to determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, the Board of Directors may fix, in advance, a record date, which record date shall not precede the date on which the resolution fixing the record date is adopted, by the Board of Directors, and which shall not be more than sixty nor less than ten days before the date of such meeting. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting, provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.

In order that the Corporation may determine the stockholders entitled to consent to corporate action in writing without a meeting, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which date shall not be more than ten days after the date upon which the resolution fixing the record date is adopted by the Board of Directors. If no record date has been fixed by the Board of Directors, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting, when no prior action by the board of directors is required by law, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the Corporation by delivery to its registered office in the State of Delaware, its principal place of business, or an officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to the Corporation’s registered office shall be by hand or by certified or registered mail, return receipt requested. If no record date has been fixed by the Board of Directors and prior action by the Board of Directors is required by law, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting shall be at the close of business on the day on which the Board of Directors adopts the resolution taking such prior action.

In order that the Corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights of the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall be not more than sixty days prior to such action. If no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto.

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Section 5.06 Registered Stockholders. Prior to due surrender of a certificate for registration of transfer, the Corporation may treat the registered owner as the person exclusively entitled to receive dividends and other distributions, to vote, to receive notice and otherwise to exercise all the rights and powers of the owner of the shares represented by such certificate, and the Corporation shall not be bound to recognize any equitable or legal claim to or interest in such shares on the part of any other person, whether or not the Corporation shall have notice of such claim or interests. Whenever any transfer of shares shall be made for collateral security, and not absolutely, it shall be so expressed in the entry of the transfer if, when the certificates are presented to the Corporation for transfer or uncertificated shares are requested to be transferred, both the transferor and transferee request the Corporation to do so.

Section 5.07 Transfer Agent and Registrar. The Board of Directors may appoint one or more transfer agents and one or more registrars, and may require all certificates representing shares to bear the signature of any such transfer agents or registrars.

ARTICLE VI

INDEMNIFICATION

Section 6.01 Nature of Indemnity. The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he or she is or was or has agreed to become a director or officer of the Corporation, or is or was serving or has agreed to serve at the request of the Corporation as a director or officer, of another corporation, partnership, joint venture, trust or other enterprise, or by reason of any action alleged to have been taken or omitted in such capacity, and may indemnify any person who was or is a party or is threatened to be made a party to such an action, suit or proceeding by reason of the fact that he or she is or was or has agreed to become an employee or agent of the Corporation, or is or was serving or has agreed to serve at the request of the Corporation as an employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him or her or on his or her behalf in connection with such action, suit or proceeding and any appeal therefrom, if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding had no reasonable cause to believe his or her conduct was unlawful; except that in the case of an action or suit by or in the right of the Corporation to procure a judgment in its favor (1) such indemnification shall be limited to expenses (including attorneys’ fees) actually and reasonably incurred by such person in the defense or settlement of such action or suit, and (2) no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation unless and only to the extent that the Delaware Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Delaware Court of Chancery or such other court shall deem proper.

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The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he or she reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his or her conduct was unlawful.

Section 6.02 Successful Defense. To the extent that a present or former director, officer, employee or agent of the Corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in Section 6.01 of these By-Laws or in defense of any claim, issue or matter therein, he or she shall be indemnified against expenses (including attorneys’ fees) actually and reasonably incurred by him or her in connection therewith.

Section 6.03 Determination That Indemnification Is Proper. Any indemnification of a present or former director or officer of the Corporation under Section 6.01 of these By-Laws (unless ordered by a court) shall be made by the Corporation only upon a determination that indemnification of such person is proper in the circumstances because such person has met the applicable standard of conduct set forth in Section 6.01 of these By-Laws. Any indemnification of a present or former employee or agent of the Corporation under Section 6.01 of these By-Laws (unless ordered by a court) may be made by the Corporation upon a determination that indemnification of the employee or agent is proper in the circumstances because he or she has met the applicable standard of conduct set forth in Section 6.01 of these By-Laws. Any such determination shall be made, with respect to a person who is a director or officer at the time of such determination (1) by a majority vote of the Directors who are not parties to such action, suit or proceeding, even though less than a quorum, or (2) by a committee of such directors designated by majority vote of such directors, even though less than a quorum, or (3) if there are no such directors, or if such directors so direct, by independent legal counsel in a written opinion, or (4) by the stockholders.

Section 6.04 Advance Payment of Expenses. Expenses (including attorneys’ fees) incurred by a present director or officer in defending any civil, criminal, administrative or investigative action, suit or proceeding shall be paid by the Corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of the director or officer to repay such amount if it shall ultimately be determined that he or she is not entitled to be indemnified by the Corporation as authorized in this Article. Such expenses (including attorneys’ fees) incurred by former directors and officers or other employees and agents may be so paid upon such terms and conditions, if any, as the Corporation deems appropriate. The Corporation, or in respect of a present director or officer the Board of Directors, may authorize the Corporation’s counsel to represent such present or former director, officer, employee or agent in any action, suit or proceeding, whether or not the Corporation is a party to such action, suit or proceeding.

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Section 6.05 Procedure for Indemnification of Directors and Officers. Any indemnification of a director, officer, employee or agent of the Corporation under Sections 6.01 and 6.02 of these By-Laws, or advance of costs, charges and expenses to such person under Section 6.04 of these By-Laws, shall be made promptly, and in any event within thirty days, upon the written request of such person. If a determination by the Corporation that such person is entitled to indemnification pursuant to this Article is required, and the Corporation fails to respond within sixty days to a written request for indemnity, the Corporation shall be deemed to have approved such request. If the Corporation denies a written request for indemnity or advancement of expenses, in whole or in part, or if payment in full pursuant to such request is not made within thirty days, the right to indemnification or advances as granted by this Article shall be enforceable by such person in any court of competent jurisdiction. Such person’s costs and expenses incurred in connection with successfully establishing his or her right to indemnification, in whole or in part, in any such action shall also be indemnified by the Corporation. It shall be a defense to any such action (other than an action brought to enforce a claim for the advance of costs, charges and expenses under Section 6.04 of these By-Laws where the required undertaking, if any, has been received by or tendered to the Corporation) that the claimant has not met the standard of conduct set forth in Section 6.01 of these By-Laws, but the burden of proving such defense shall be on the Corporation. Neither the failure of the Corporation (including its Board of Directors or any committee thereof, its independent legal counsel, and its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in Section 6.01 of these By-Laws, nor the fact that there has been an actual determination by the Corporation (including its Board of Directors or any committee thereof, its independent legal counsel, and its stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct.

Section 6.06 Survival; Preservation of Other Rights. The foregoing indemnification provisions shall be deemed to be a contract between the Corporation and each director, officer, employee and agent who serves in any such capacity at any time while these provisions as well as the relevant provisions of the Delaware Corporation Law are in effect and any repeal or modification thereof shall not affect any right or obligation then existing with respect to any state of facts then or previously existing or any action, suit or proceeding previously or thereafter brought or threatened based in whole or in part upon any such state of facts. Such a “contract right” may not be modified retroactively without the consent of such director, officer, employee or agent.

The indemnification provided by this Article VI shall not be deemed exclusive of any other rights to which those indemnified may be entitled under any by-law, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his or her official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person.

Section 6.07 Insurance. The Corporation may purchase and maintain insurance on behalf of any person who is or was or has agreed to become a director or officer of the Corporation, or is or was serving at the request of the Corporation as a director or officer of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him or her and incurred by him or her or on his or her behalf in any such capacity, or arising out of his or her status as such, whether or not the Corporation would have the power to indemnify him or her against such liability under the provisions of this Article, provided that such insurance is available on acceptable terms, which determination shall be made by a vote of a majority of the entire Board of Directors.

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Section 6.08 Severability. If this Article or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the Corporation shall nevertheless indemnify each director or officer and may indemnify each employee or agent of the Corporation as to costs, charges and expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement with respect to any action, suit or proceeding, whether civil, criminal, administrative or investigative, including an action by or in the right of the Corporation, to the fullest extent permitted by any applicable portion of this Article that shall not have been invalidated and to the fullest extent permitted by applicable law.

ARTICLE VII

OFFICES

Section 7.01 Registered Office. The registered office of the Corporation in the State of Delaware shall be located at 9 East Loockerman Street in the City of Dover, County of Kent. The name of the registered agent is National Registered Agents, Inc.

Section 7.02 Other Offices. The Corporation may maintain offices or places of business at such other locations within or without the State of Delaware as the Board of Directors may from time to time determine or as the business of the Corporation may require.

ARTICLE VIII

GENERAL PROVISIONS

Section 8.01 Dividends. Subject to any applicable provisions of law and the Certificate of Incorporation, dividends upon the shares of the Corporation may be declared by the Board of Directors at any regular or special meeting of the Board of Directors and any such dividend may be paid in cash, property, or shares of the Corporation’s Capital Stock.

A member of the Board of Directors, or a member of any Committee designated by the Board of Directors shall be fully protected in relying in good faith upon the records of the Corporation and upon such information, opinions, reports or statements presented to the Corporation by any of its officers or employees, or Committees of the Board of Directors, or by any other person as to matters the Director reasonably believes are within such other person’s professional or expert competence and who has been selected with reasonable care by or on behalf of the Corporation, as to the value and amount of the assets, liabilities and/or net profits of the Corporation, or any other facts pertinent to the existence and amount of surplus or other funds from which dividends might properly be declared and paid

Section 8.02 Reserves. There may be set aside out of any funds of the Corporation available for dividends such sum or sums as the Board of Directors from time to time, in its absolute discretion, thinks proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation or for such other purpose as the Board of Directors shall think conducive to the interest of the Corporation, and the Board of Directors may similarly modify or abolish any such reserve.

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Section 8.03 Execution of Instruments. The President, any Vice President, the Secretary or the Treasurer may enter into any contract or execute and deliver any instrument in the name and on behalf of the Corporation. The Board of Directors or the President may authorize any other officer or agent to enter into any contract or execute and deliver any instrument in the name and on behalf of the Corporation. Any such authorization must be in writing or by electronic transmission and may be general or limited to specific contracts or instruments.

Section 8.04 Corporate Indebtedness. No loan shall be contracted on behalf of the Corporation, and no evidence of indebtedness shall be issued in its name, unless authorized by the Board of Directors or the President. Such authorization may be general or confined to specific instances. Loans so authorized may be effected at any time for the Corporation from any bank, trust company or other institution, or from any firm, corporation or individual. All bonds, debentures, notes and other obligations or evidences of indebtedness of the Corporation issued for such loans shall be made, executed and delivered as the Board of Directors or the President shall authorize. When so authorized by the Board of Directors or the President, any part of or all the properties, including contract rights, assets, business or good will of the Corporation, whether then owned or thereafter acquired, may be mortgaged, pledged, hypothecated or conveyed or assigned in trust as security for the payment of such bonds, debentures, notes and other obligations or evidences of indebtedness of the Corporation, and of the interest thereon, by instruments executed and delivered in the name of the Corporation.

Section 8.05 Deposits. Any funds of the Corporation may be deposited from time to time in such banks, trust companies or other depositaries as may be determined by the Board of Directors or the President, or by such officers or agents as may be authorized by the Board of Directors or the President to make such determination.

Section 8.06 Checks. All checks or demands for money and notes of the Corporation shall be signed by such officer or officers or such agent or agents of the Corporation, and in such manner, as the Board of Directors or the President from time to time may determine.

Section 8.07 Sale Transfer, etc. of Securities. To the extent authorized by the Board of Directors or by the President, any Vice President, the Secretary or the Treasurer or any other officers designated by the Board of Directors or the President may sell, transfer, endorse, and assign any shares of stock, bonds or other securities owned by or held in the name of the Corporation, and may make, execute and deliver in the name of the Corporation, under its corporate seal, any instruments that may be appropriate to effect any such sale, transfer, endorsement or assignment.

Section 8.08 Voting as Stockholder. Unless otherwise determined by resolution of the Board of Directors, the President or any Vice President shall have full power and authority on behalf of the Corporation to attend any meeting of stockholders of any corporation in which the Corporation may hold stock, and to act, vote (or execute proxies to vote) and exercise in person or by proxy all other rights, powers and privileges incident to the ownership of such stock. Such officers acting on behalf of the Corporation shall have full power and authority to execute any instrument expressing consent to or dissent from any action of any such corporation without a meeting. The Board of Directors may by resolution from time to time confer such power and authority upon any other person or persons.

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Section 8.09 Fiscal Year. The fiscal year of the Corporation shall commence on the first day of January of each year (except for the Corporation’s first fiscal year which shall commence on the date of incorporation) and shall terminate in each case on December 31.

Section 8.10 Seal. The seal of the Corporation shall be circular in form and shall contain the name of the Corporation, the year of its incorporation and the words “Corporate Seal” and “Delaware”. The form of such seal shall be subject to alteration by the Board of Directors. The seal may be used by causing it or a facsimile thereof to be impressed, affixed or reproduced, or may be used in any other lawful manner.

Section 8.11 Books and Records; Inspection. Except to the extent otherwise required by law, the books and records of the Corporation shall be kept at such place or places within or without the State of Delaware as may be determined from time to time by the Board of Directors.

Section 8.12 Emergency By-Laws. The provisions in this Section 8.12 shall be operative during any emergency in the conduct of the business of the Corporation resulting from a catastrophe, disaster, calamity or other similar event, notwithstanding any different provision in the preceding Articles of these By-Laws or in the Corporation’s Certificate of Incorporation. To the extent not inconsistent with the provisions of this Section 8.12, the provisions in the preceding Articles of these By-Laws shall remain in effect during such emergency, and upon its termination the provisions in this Section 8.12 shall cease to be operative. During any such emergency:

(a) An emergency meeting or meetings of the Board of Directors or of the surviving members thereof shall be called by the Chairman of the Board, if available, or, if he is not available, by any other director or directors of the Corporation; any such meeting shall be held at such time and place and upon such notice, if any, as the person or persons calling the meeting shall deem proper under the circumstances. The Board may take any action at any such meeting that it deems necessary and appropriate to meet the emergency.

(b) Vacancies on the Board of Directors shall be filled as soon as practicable in the manner specified in Section 2.13 of Article II of these By-Laws. In filling vacancies, consideration shall be given to senior officers of the Corporation.

(c) The presence of three (3) directors shall be sufficient for the transaction of business at emergency meetings of the Board of Directors, except that if there are less than three (3) surviving directors, the surviving director or directors, although less than a quorum, may fill vacancies on the Board.

(d) These By-Laws may be amended by the Board of Directors without notice of the proposed amendment being given in the notice of the meeting.

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(e) Without limiting the generality of the foregoing, the Board of Directors is authorized to make all necessary determinations of fact regarding the extent and severity of the emergency and the availability of members of the Board; to designate and replace officers, agents and employees of the Corporation and otherwise provide for continuity of management; and to elect a chairman, adopt rules of procedures and fill vacancies.

(f) The emergency powers provided in this Section 8.12 shall be in addition to any powers provided by law.

No officer, director or employee acting in accordance with the provisions of this Section 8.12 shall be liable except for willful misconduct.

Section 8.13 Electronic Transmission. For purposes of these By-Laws, “electronic transmission” means any form of communication, not directly involving the physical transmission of paper, that creates a record that may be retained, retrieved, and reviewed by a recipient thereof, and that may be directly reproduced in paper form by such a recipient through an automated process.

ARTICLE IX

AMENDMENT OF BY-LAWS

Section 9.01 Amendment. Subject to the provisions of the Certificate of Incorporation, these By-Laws may be amended, altered or repealed

(a) by resolution adopted by a majority of the Board of Directors at any special or regular meeting of the Board if, in the case of such special meeting only, notice of such amendment, alteration or repeal is contained in the notice or waiver of notice of such meeting; or

(b) at any regular or special meeting of the stockholders if, in the case of such special meeting only, notice of such amendment, alteration or repeal is contained in the notice or waiver of notice of such meeting.

ARTICLE X

CONSTRUCTION

Section 10.01 Construction. In the event of any conflict between the provisions of these By-Laws as in effect from time to time and the provisions of the Certificate of Incorporation of the Corporation as in effect from time to time, the provisions of such Certificate of Incorporation shall be controlling.

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EX-10.1

Exhibit 10.1

AMENDMENT NO. 4
TO THE
SPECIALTY UNDERWRITERS’ ALLIANCE, INC.
PARTNER AGENT PROGRAM AGREEMENT

This amendment (“Amendment”) is made and entered into as of August 30, 2007 by and between American Team Managers (“ATM”) and Specialty Underwriters’ Alliance, Inc., and amends the Partner Agent Program Agreement (“Agreement”) entered into by the parties on May 1, 2004, as amended. Any terms defined in the Agreement and used herein shall have the same meaning in this Amendment as in the Agreement. In the event that any provision of this Amendment and any provision of the Agreement are inconsistent or conflicting, the inconsistent or conflicting provision of this Amendment shall be and constitute an amendment of the Agreement and shall control, but only to the extent that such provision is inconsistent or conflicting with the Agreement. Any capitalized terms not defined herein shall be defined as in the Agreement.

Now, therefore, in accordance with Section IX, D of the Agreement and in consideration of the mutual agreements and covenants hereinafter set forth, the parties wish to amend the Agreement as follows:

1.

SUA Insurance Company, a wholly owned subsidiary of Specialty Underwriters’ Alliance, Inc., shall be added as a party to this Agreement.

2.

Exhibit B-2 attached hereto shall be added to the Agreement and shall be used for all profit sharing calculations for Profit Sharing Periods beginning after January 1, 2007 (“Effective Date”). Under Exhibit B-2, Profit Sharing Years 2005 and 2006 shall be treated as one year for purposes of calculating the Annual Profit Share for Profit Sharing Year 2007 and thereafter. All profit sharing calculations for Profit Sharing Years prior to 2007 shall continue to be calculated in accordance with Exhibit B to the original Agreement.

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed on their behalf by their duly authorized officers as of the day, month and year above written.

SPECIALTY UNDERWRITERS’ ALLIANCE, INC.
SUA INSURANCE COMPANY

By: Name:	/s/ William S. Loder William S. Loder
Title:	Senior Vice President and
	Chief Underwriting Officer

AMERICAN TEAM MANAGERS

By:	/s/ Chris Michaels
Name:	Chris Michaels
Title:	CEO

EXHIBIT B-2
PROFIT SHARING SCHEDULE

The Profit Sharing Due to Partner Agent will be calculated using the following Tables:

Table I

Annual Profit Share
Profit Sharing Year [   ]

Premium
1. Eligible Earned Premium before write off for Profit Sharing Year	$
2. Premium Written Off	$
3. Eligible Earned Premium (Line 1 minus Line 2)	$
Expenses
4. Losses and ALAE Incurred for Profit Sharing Year	$
5. TPA Claims Fee for Profit Sharing Year	$
6. Claims Charge for Profit Sharing Year	$
7. IBNR Charge for Profit Sharing Year	$
8. Commissions Incurred for Profit Sharing Year	$
9. Taxes, Licenses and Fees for Profit Sharing Year	$
10. Operating Charge	$
11. Dividends Incurred for Profit Sharing Year	$
12. Expense Total (Sum of Lines 4, 5, 6, 7, 8, 9, 10 and 11)	$
Profit Sharing Year Result
13. Profit Sharing Year Result (Line 3 minus line 12) (Can be negative)	$
14. Profit Sharing Factor		*
15. Profit to be Shared before Accelerated Quarterly Profit Share (Line 13 times Line 14) (Can be negative)	$
16. Accelerated Quarterly Profit Share (cumulative)	$
17. Profit to be Shared (Line 15 minus Line 16)	$
18. Payout Factor		%
19. Result (Line 17 times Line 18)
(Can be Negative)	$

2

Based on this Table, the Partner Agent’s Combined Ratio is                     % (line 12 divided by line 3). The maximum Profit Sharing due the Partner Agent will be limited to 5% of Eligible Earned Premium per Profit Sharing Year.

*Profit Sharing Factor shall be equal to 5/7 multiplied by 50% for Combined Ratios below 100% and 50% for Combined Ratios greater than or equal to 100%.

A minimum total Eligible Written Premium of twenty million dollars ($20,000,000) and minimum Eligible Written Premium of five million dollars ($5,000,000) for each program must be achieved during the Profit Sharing Year to be paid out under the profit sharing calculation. The profit sharing calculation will be completed regardless of whether Partner Agent meets its minimum requirements.

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Table II

Quarterly Profit Share
Profit Sharing Quarter [ ]

Premium
1. Eligible Earned Premium before write off	$
2. Premium Written Off	$
3. Eligible Earned Premium (Line 1 minus Line 2)	$
Expenses
4. Losses and ALAE Incurred	$
5. TPA Claims Fee	$
6. Claims Charge	$
7. IBNR Charge	$
8. Commissions Incurred	$
9. Taxes, Licenses and Fees	$
10. Operating Charge	$
11. Dividends Incurred	$
12. Expense Total (Sum of Lines 4, 5, 6, 7, 8, 9, 10 and 11)	$
Profit Sharing Year Result
13. Profit Sharing Result (Line 3 minus line 12) (Can be negative)	$
14. Profit Sharing Factor		_	*
15. Profit to be Shared (Line 13 times Line 14)	$
(Can be negative)

Profit to be Shared shall be calculated on a cumulative year to date basis.

Based on this Table, the Partner Agent’s Combined Ratio is                     % (line 13 divided by line 3). The maximum Profit Sharing due the Partner Agent will be limited to 2% of Eligible Earned Premium per Profit Sharing Quarter.

*Profit Sharing Factor shall be equal to 2/7 multiplied by 50%.

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Defined Terms Used in Table I and Table II

A. “Accelerated Quarterly Profit Share” shall mean Profit to be Shared based on calculation in Table II.

B. “Claims Charge” shall be a designated amount determined by Company based on unallocated loss adjustment expense for the current Profit Sharing Year.

C. “Combined Ratio” shall mean the ratio of Expense Total to Eligible Earned Premium.

D. “Commissions Incurred” shall include the direct commissions and policy fees (if included in Eligible Earned Premium) incurred by Company for the Profit Sharing Year, relating to Eligible Earned Premium. Additionally, Company shall add to such total any amounts or expenses of Partner Agent which Company agrees to reimburse, assume, or share.

E. “Dividends Incurred” shall include all dividends incurred (paid plus an estimate of accrued but not paid) for the Profit Sharing Year by Company.

F. “Eligible Earned Premium” shall mean direct premium earned for Profit Sharing Year less earned premium ceded (less ceding commission earned) for reinsurance.

G. “Eligible Written Premium” shall mean direct premium written for Profit Sharing Year.

H. “Expense Total” shall mean the sum of the following: Losses and ALAE Incurred for Profit Sharing Year; TPA Claims Fee for Profit Sharing Year; Claims Charge for Profit Sharing Year; IBNR Charge for Profit Sharing Year; Commissions Incurred for Profit Sharing Year; Taxes, Licenses and Fees for Profit Sharing Year; Operating Charge; and Dividends Incurred for Profit Sharing Year.

I. “Final Profit Sharing Quarter” shall mean the Profit Sharing Quarter in which this Agreement is terminated.

J. “Final Profit Sharing Year” shall mean the Profit Sharing Year in which this Agreement is terminated.

K. “IBNR Charge” shall be determined solely by Company and shall include a provision for the reserve for Losses and ALAE Incurred but not reported during the Profit Sharing Year, which reserve shall include development on losses and ALAE already reported to Company less losses for IBNR ceded.

L. “Losses and ALAE Incurred” shall be direct losses and expenses incurred (paid plus case reserves) less Losses and ALAE Incurred ceded for reinsurance by Company on claims reported for the Profit Sharing Year relating to Eligible Earned Premium, excluding unallocated loss adjustment expense, plus any extra contractual or bad faith payments or reserves.

M. “Operating Charge” shall be a designated amount for the current Profit Sharing Year. Operating Charge shall be determined solely at Company’s discretion and shall be based on the operating expenses of Company not included in any of the line items described herein.

N. “Payout Factor” shall be calculated according to the following chart for Table I:

PROFIT SHARING AGREEMENT

PAYOUT FACTORS

	5 Years
1st Valuation		20	%
2nd Valuation		40	%
3rd Valuation		60	%
4th Valuation		80	%
5th Valuation		100	%

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O. “Premium Written Off” shall include any premium due Company which Company has charged off as uncollectible for the Profit Sharing Year.

P. “Profit Sharing Quarter” shall mean a calendar quarter, with the Initial Profit Sharing Quarter beginning on January 1, 2007.

Q. “Profit Sharing Year” shall mean January 1 to December 31, except for the initial Profit Sharing Year which shall be from the Effective Date to December 31.

R. “Taxes, Licenses and Fees” shall include any loss based or premium based assessments and any expenses relating thereto, and premium taxes, boards, bureaus, and any miscellaneous taxes including insurance department licenses and fees, relating to Eligible Earned Premium.

S. “TPA Claims Fee” shall be third party claims fees incurred by Company on behalf of the Partner Agent for the current Profit Sharing Year.

T. “Valuation Date” shall mean June 30 of each year for each Profit Sharing Year and sixty (60) days following each Profit Sharing Quarter. Except as otherwise set forth below, Company shall continue providing calculations for each Profit Sharing Year through the June 30 of each successive year following termination of this Agreement, the Final Profit Sharing Year, or until the parties mutually agree in writing to close the calculations for a particular Profit Sharing Year or Profit Sharing Years.

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Timing of Calculation of Profit Sharing Due

A. If Partner Agent meets the Minimum Eligible Written Premium requirements for profit sharing, Company shall calculate Profit Sharing Due to Partner Agent for the applicable profit sharing period based on Company’s records. Such calculation shall be provided to Partner Agent sixty (60) days after each the Valuation Date for each Profit Sharing Year.

B. Each Annual Profit Sharing calculation will include a separate re-calculation of each prior Profit Sharing Year. Re-calculations for each prior Profit Sharing Year will be as of the current Valuation Date, and will be made utilizing the formula set forth in Table I. Each Profit Sharing Quarter calculation will be cumulatively adjusted for Profit to be Shared calculated on Table II for prior Profit Sharing Quarters.

C. Provided that all premium or other amounts due Company shall have been received by Company, within sixty (60) days after completion of the calculation of Profit Sharing Due, Company shall pay the amount of Profit Sharing Due to Partner Agent for the applicable profit sharing period.

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Term and Termination

These profit sharing schedules will terminate upon the effective date of termination of this Agreement. The Final Profit Sharing Year and Final Profit Sharing Quarter under this Agreement will be the Profit Sharing Periods ending as of the effective date of termination.

In the event this Agreement is terminated prior to the fifth anniversary of the Effective Date by the Partner Agent, Company shall provide no further Profit Sharing calculations. In the event that this Agreement is terminated prior to the fifth anniversary of the Effective Date by Company in accordance with Section VIII (D), Company shall provide no further Profit Sharing calculations.

General

No charge, offset, credit, or deduction for any Profit Sharing which is or may be due Partner Agent shall be made or claimed by Partner Agent in accounts submitted to Company under this Agreement or any other agreement. Profit Sharing Due shall be payable only by Company’s check. Company may combine or offset any amount owed to Partner Agent by Company hereunder against any amount owed to Company by Partner Agent under any other agreement between the parties.

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EX-10.2

Exhibit 10.2

SUA INSURANCE COMPANY

PARTNER AGENT PROGRAM AGREEMENT

This Partner Agent Program Agreement (“Agreement”) is entered into as of the 1st day of October, 2007 (the “Effective Date”) by and between SUA Insurance Company and its property and casualty insurance subsidiaries and affiliates (collectively the “Company”) and First Light Program Managers, Inc. (the “Partner Agent”).

The parties hereto intend to develop and administer an insurance program (“Program”) as described in Exhibit A attached hereto. This Agreement pertains only to the Program, with Company and Partner Agent agreeing as follows:

I. DEFINITIONS

A.	“Commission” shall mean the commission as described in Exhibit A.
B.	“Company Confidential Information” shall mean Company rates, rating manuals, forms, Company Guidelines, program analysis, underwriting records, management reports, and any information as may have been or shall be provided by Company to Partner Agent.
C.	“Company Guidelines” shall mean the terms of this Agreement, the Program description, underwriting guidelines, system templates, service standards, form and rate and other filings, and authority limits provided by Company to Partner Agent.
D.	“Company System” shall mean Company’s centralized technology system.
E.	“Compensation” shall mean both Commission and Profit Sharing.
F.	“Partner Agent Advisory Committee” shall mean Company’s Partner Agent committee.
G.	“Partner Agent Stock” shall mean the Class B exchangeable common stock, as more fully described in Article III, Paragraph O. of this Agreement and specifically described in the Securities Purchase Agreement.
H.	“Premium Trust Fund” shall mean an account separate and segregated from Partner Agent’s own funds or funds held by Partner Agent on behalf of any other company or person as more fully described in Article VII, Paragraph C.
I.	“Profit Sharing” shall mean a share of profits in accordance with Exhibit B attached hereto.
J.	“Securities Purchase Agreement” shall mean the Securities Purchase Agreement by and between Company and Partner Agent, which is incorporated by reference as an integral part of this Agreement.
K.	“Statement” shall mean a monthly itemized statement to Partner Agent from Company of money due Company as more fully described in Article VII, Paragraph B.
L.	“Term” shall be from the Effective Date until the termination of this Agreement.
M.	“Third Party Confidential Information” shall mean any and all information either Company or Partner Agent may receive with regard to applicants, policyholders, beneficiaries of policies, and claimants.
N.	“Vendor Selection and Claims Procedures” shall mean the selection of vendors and claims handling procedures as more fully described in Article V, Paragraph D.

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II. AUTHORITY

A. Partner Agent’s authority is subject to the Company Guidelines. Company appoints Partner Agent as its exclusive Partner Agent for five (5) years for the Program from the Effective Date within the territory specified in the Company Guidelines solely for the following purposes:

1.	To solicit, receive, and bind proposals for commercial lines insurance in accordance with the Company Guidelines.
2.	To pre-screen applications and estimate rates and/or premiums in accordance with the Company Guidelines.
3.	To endorse in-force policies in accordance with the Company Guidelines.
4.	To collect, receive, account for, and pay to Company, premiums on policies written by Company, and to refund to the policyholder or insured, as appropriate (or to Company if requested by Company), return premiums as provided in the applicable policy.
5.	To issue, countersign (where necessary), and deliver policies executed by authorized officers of Company.
6.	To effect conditional renewals, cancellation and non-renewal of policies in accordance with the Company Guidelines and applicable law.

B.	Partner Agent may delegate its authority in writing to designated employees.
C.	Partner Agent’s authority is subject to compliance with (and Partner Agent shall not alter, modify, or change and shall not waive any provision in) the applicable forms, rules, or rates of Company, according to their exact terms and to all applicable laws and regulations.
D.	Company shall have the right to reject any application or business submitted by Partner Agent or to modify, cancel, or refuse to renew any policies written by Company hereunder by giving Partner Agent written notice of effective date of changes that would affect such business.
E.	Partner Agent shall, within twenty (20) calendar days of the inception of coverage, provide to Company all data and statistical information relating to the underwriting of accounts. Partner Agent is authorized to issue binders, certificates or other evidence of insurance.
F.	The Company Guidelines may be amended or new Company Guidelines may be adopted at Company’s discretion without the need to amend this Agreement. Such amendments or new Company Guidelines will be provided to Partner Agent in writing and must be implemented by Partner Agent in accordance with Company’s instructions. Company will give Partner Agent reasonable notice in which to enact such changes.
G.	Company retains the right to modify, cancel, conditionally renew or non-renew any and all policies solely in Company’s discretion.
H.	Partner Agent has no authority to solicit, negotiate or place any reinsurance on behalf of Company.

III. OBLIGATIONS OF PARTNER AGENT

A. Partner Agent represents and warrants that (i) Partner Agent has any and all ownership or other rights in the business contemplated herein necessary to place such business with Company under this Agreement; (ii) Partner Agent placing business under this Agreement is not in violation of any duty or obligation owed to any other entity or person; and (iii) Partner Agent is, and will continue to be, authorized and licensed to perform all acts set out in this Agreement while providing services under this Agreement.

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B.	The Program, as more specifically described in the Company Guidelines and in Exhibit A, will be mutually exclusive, unless otherwise stated in this Agreement. Partner Agent will be allowed to complete existing obligations under insurance policies with other insurance carriers for the Program. Unless otherwise specifically stated in this Agreement, Company will not accept business encompassed within the Program from any entity other than Partner Agent during the Term of this Agreement. Partner Agent shall exclusively represent Company and shall not represent any other insurance company or similar entity in relation to the Program. In the event that a conflict exists as to whether Partner Agent is authorized to represent an existing or prospective policyholder, Company may honor the policyholder’s written producer of record designation signed by the policyholder. Notwithstanding the foregoing, Company shall be under no obligation to honor a written producer of record designation from a policyholder before accepting business from a designated Partner Agent, and Company’s determination of which agent of Company represents Company with regard to a particular policyholder shall be final and binding.
C.	Partner Agent shall be responsible for compliance with all applicable state and federal laws, regulations, rules, and requirements relating to the performance of Partner Agent’s obligations and the general standards, rules, and regulations of the insurance industry and all Company Guidelines as provided by Company in writing.
D.	Partner Agent shall keep true, separate, accurate, and complete records of all transactions related to the policies and all correspondence related thereto.
E.	All records and documents applicable to the business relationship between Company and Partner Agent shall be maintained by Partner Agent in a form and manner that is (i) requested by Company, and (ii) secure and in accordance with Company’s record retention guidelines and insurance regulatory practices. Such records and documents shall continue to be maintained in a secure manner during the Term and for a period of no less than five (5) years (or such longer period as Company may request or is needed in order to preserve such records and documents under state statutes of limitations) after termination of this Agreement. At the end of such five (5) year period or at any time Company requests, Partner Agent shall provide Company with originals or copies of such records and documents. No records or documents shall be destroyed at any time prior to five (5) years or according to state regulation without Company’s prior written consent.
F.	All records and documents of Partner Agent may be audited, examined, and/or copied by representatives of Company at any time during normal business hours and shall be made available for examination to reinsurers, or to any state insurance department or regulatory authority which so requires. Additionally, Partner Agent shall permit authorized employees and representatives of Company to review the operations of Partner Agent, both at its place of business and at other locations during normal business hours upon ten (10) days written notice by Company.
G.	Partner Agent shall notify Company immediately of notice or receipt of any complaint filed with any state insurance department or other regulatory authority relating to the policies, whether against Company or Partner Agent. The parties will work together to promptly and adequately respond to any such complaint. If requested by Company, Partner Agent shall prepare a response to any such complaint or, at Company’s discretion, provide a complete written account to Company such that Company can respond; however, no response shall be sent by Partner Agent prior to consulting with Company regarding such response. Company retains the final authority on all responses relating to complaints against Company. Company may establish formal complaint handling procedures for Partner Agent to follow which are consistent with the requirements set forth herein.
H.	Partner Agent shall not contact any state insurance department or other regulatory authority, directly or indirectly, with regard to Company’s business without the prior written consent of Company. Partner Agent shall notify Company immediately in the event that Partner Agent receives any contact from any such department or authority with regard to Company’s business.
I.	Partner Agent shall utilize automated business processing through the Company System. Partner Agent shall be responsible for any integration required for the Company System to operate with other third party systems of Partner Agent.
J.	If Company provides access to Company information or networks through computer access, Partner Agent shall be responsible for maintaining the security and integrity of such information and of the Company System. Partner Agent shall not introduce into the Company System any virus or other harmful agent. Partner Agent shall be responsible for assuring the quality of policy, premium, accounting and statistical data submitted to Company consistent with Company standards. Partner Agent agrees to adhere to the terms and conditions governing Partner Agent’s use of any existing Company website or any website

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	Company may own, make available, operate, acquire, use from time to time, create or sponsor in the future, and related services available under any such website. These terms and conditions regarding use of any website or the content of any website may change without notice to Partner Agent. Partner Agent’s use of these websites constitutes agreement to the terms and conditions that exist at each point in time Partner Agent uses any such website. Partner Agent may not use the name, logo, or service mark of Company in any advertising, promotional material, internet site, or in any material disseminated by Partner Agent without the prior written consent of Company. Partner Agent shall maintain copies and provide an original to Company of any advertisement or other materials approved by Company along with full details concerning where, when, and how it was used. Use of any authorized item shall be limited to the scope of the current request and approval, unless specifically authorized for broader use by Company. Partner Agent must obtain re-authorization of all items at least annually.
K.	All expenses associated with Partner Agent’s performance hereunder shall be the responsibility of Partner Agent, including but not limited to general office expenses, automation expenses, systems integration expenses, marketing expenses, broker, producer, or countersigning commissions, fees, and taxes.
L.	Partner Agent agrees that the Company Confidential Information, which is confidential and proprietary to Company, shall be considered trade secrets of Company, and shall not be disclosed to any third parties. Partner Agent agrees to maintain the confidentiality of the Company Confidential Information. Partner Agent shall ensure that Partner Agent’s employees, agents, and representatives are aware of and sensitive to the proprietary nature of the Company Confidential Information, of the importance of confidentiality, and of the need to comply with the confidentiality requirements in this Agreement. All Company Confidential Information shall be returned by Partner Agent to Company immediately upon request.
M.	Partner Agent agrees that Partner Agent and its employees, agents, and representatives are (i) aware of the sensitive and proprietary nature of Third Party Confidential Information; and (ii) aware of and will comply with: (a) any and all applicable laws, regulations, rules, and requirements relating to Third Party Confidential Information; (b) the general standards, rules, and regulations of the insurance industry relating to Third Party Confidential Information; and (c) all written instructions provided to Partner Agent from time to time by Company relating to Third Party Confidential Information. Partner Agent shall comply with Company’s privacy policies and shall hold all Third Party Confidential Information in trust and confidence in compliance with Company’s privacy policy, and shall use Third Party Confidential Information only for the purpose contemplated in this Agreement. Partner Agent agrees that it shall immediately refer any question concerning any aspect of Company’s privacy policy to Company for resolution.
N.	If requested by Company, Partner Agent agrees to become a member of the Partner Agent Advisory Committee. Partner Agent or appropriate designee shall attend all meetings of the Partner Agent Advisory Committee, provide input at such meetings, and cooperate fully with the Partner Agent Advisory Committee in all aspects.
O.	Partner Agent agrees to purchase a certain amount of Partner Agent Stock as more specifically described in the Securities Purchase Agreement dated as of the date hereof by and between Company and Partner Agent which is hereby incorporated by reference as an integral part of this Agreement.
P.	Partner Agent agrees that it and its employees, agents and representatives will not pledge any premiums due to Company as collateral or enter into similar arrangements such that the Company would no longer have a continuing first priority security interest in the premiums.

IV. OBLIGATIONS OF COMPANY

A. Company shall act in accordance with the terms of this Agreement and will pay Partner Agent Compensation in accordance with Exhibit A and Exhibit B to this Agreement. Partner Agent shall be responsible for paying any compensation due to its sub-producers.

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B.	Company shall provide for the payment of all excise taxes, premium taxes, except surplus lines taxes, and assessments.
C.	Company shall appoint Partner Agent as required by various state laws and regulations.
D.	Company will develop and maintain the Company System.

V. CLAIMS AND COVERAGE

A.	Partner Agent shall immediately notify and cooperate with Company if Partner Agent receives notice of any claim or potential claim which could involve Company or the business written hereunder.
B.	Partner Agent has no authority to adjust or settle any claims arising out of or in connection with policies, shall not make any statements regarding the application of coverage to specific situations, whether actual or hypothetical, and shall not commit Company to any liability in connection with any actual or potential claim or loss.
C.	Partner Agent shall immediately report all claims, or potential claims, suits, or losses relating to the policies to Company or to an assigned adjuster or claim representative who has been designated by Company. Partner Agent shall cooperate fully with Company or the assigned adjuster or claim representative in the investigation, adjustment, settlement, and payment of claims and coverage matters. All records, files, correspondence, or other materials pertaining to claims shall be the sole property of Company.
D.	Company will consult with Partner Agent on the Vendor Selection and Claims Procedures. Company retains sole discretion for Vendor Selection and Claims Procedures.

VI. COMPENSATION OF PARTNER AGENT

A.	Company shall pay Partner Agent the Commission and Profit Sharing as respectively described in Exhibit A and Exhibit B.
B.	With one hundred eighty (180) days advance written notice, for reasons related to regulatory constraints or industry issues including, but not limited, to Program coverage resulting in an insurance industry or market downturn, Company reserves the right to adjust Partner Agent’s Commission as described in Exhibit A.
C.	Effective at any time after a minimum of one hundred eighty (180) days advance written notice to Partner Agent, Company may adjust the current payout period of Profit Sharing as described in Exhibit B.
D.	It is understood and agreed that Compensation paid hereunder shall be full compensation for all services rendered by Partner Agent pursuant to this Agreement.
E.	Partner Agent shall refund Commission, or other fees or amounts retained by Partner Agent, to the policyholder or insured, as appropriate, or to Company if requested by Company, from Partner Agent’s own funds on a pro-rata basis on return premiums at the same rate as paid to Partner Agent.
F.	The Commission applicable to multiple year policies (if Company has bound such policies through Partner Agent) shall be the Commission that is in effect for such policy during the year in which the policy is initially written, and such Commission shall apply throughout the term of any such policy.
G.	Partner Agent shall have no authority to, and shall not collect any fee(s) on, the policies unless specifically authorized by Company and permitted by law.
H.	Partner Agent shall calculate Commission based on premiums collected by Partner Agent for policies reported to Company.

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VII. PREMIUMS AND ACCOUNTING

A.	Partner Agent shall be responsible for collecting premiums, whether advance, deposit, developed, installment, audit, renewal, additional, or otherwise, on all policies other than direct-bill policies. Despite the foregoing, however, Company reserves the right, in its sole discretion, to communicate with, to directly collect premium from, and/or to cancel or non-renew policies of, its insureds. Except as otherwise provided in this Agreement, Partner Agent shall be liable for and pay all earned premium to Company, even if Partner Agent does not collect such premium from the policyholder. Uncollected premiums shall be remitted from Partner Agent’s own funds and not the Premium Trust Fund. Partner Agent may deduct Commission from the Premium Trust Fund.
B.	Within fifteen (15) days from the last day of each month, Company shall provide Partner Agent with a Statement. Amounts due to Company pursuant to the Statement shall be remitted to Company on or before the tenth day of the following month the Statement was rendered. In the event of differences between Partner Agent’s and Company’s records, Partner Agent shall provide all necessary information to permit proper adjustment. Any dispute respecting such Statement shall be resolved based on Company’s records.
C.	All premiums collected by Partner Agent are the property of Company, shall not be commingled with any other funds, shall be held in trust on behalf of Company in a fiduciary capacity, and shall be deposited and maintained in a Premium Trust Fund account separate and segregated from Partner Agent’s own funds or funds held by Partner Agent on behalf of any other company or person. The Premium Trust Fund shall be placed in an interest bearing account in a bank and account approved by Company in advance. Unless Partner Agent has breached this Agreement, Partner Agent shall be authorized to retain the interest on the Premium Trust Fund. Company may request at any time, and Partner Agent shall provide, a reconciliation of the funds deposited in, and balance due to Company from, the Premium Trust Fund.
D.	The omission of any item(s) by Company from the Statement does not affect Partner Agent’s responsibility to properly account for policies and pay all amounts due, nor does it prejudice the rights of Company to collect such amounts.
E.	Partner Agent shall be liable for premiums on policies written through submissions to Partner Agent by other brokers or producers, whether or not collected by Partner Agent or such brokers or producers.
F.	No premium advances may be made by Partner Agent from the Premium Trust Fund, and premium advanced on behalf of any insured by the Partner Agent shall not be reversed. Partner Agent accepts full responsibility for such premiums.
G.	After making a diligent effort to collect such premiums and submitting documentation of that diligent effort to Company which Company reasonably determines to be sufficient, Partner Agent may request in writing that premiums due as a result of audit of a particular insured be collected directly by Company. Company agrees to assume responsibility for collecting such additional premiums. Company will have no obligation to collect amounts hereunder unless Partner Agent’s written request is made within forty-five (45) days of the billing date shown on the audit statement. Partner Agent shall not be entitled to Compensation on premiums Partner Agent requests Company to collect or Company undertakes to collect, regardless of the amounts collected by Company.
H.	Should Partner Agent default in any payment of premiums on any policy, Company shall have the right to require that all premiums on all policies are due and payable immediately.
I.	Partner Agent agrees to be responsible for the payment of any applicable surplus lines taxes and the filing of all affidavits as required by the applicable entities, and shall provide Company with written evidence of such payment and compliance on a quarterly basis.
J.	Partner Agent shall not be entitled to any Compensation on any premium which Company determines (i) to collect (whether or not collected), (ii) in its sole discretion to write-off, or (iii) is overdue and is collected by Company, regardless of the amounts collected. Nothing contained herein shall alter Partner Agent’s obligation to remit all premium to Company, whether or not collected.

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VIII. INSURANCE AND INDEMNITY

B.	Partner Agent shall maintain the following insurance amounts with an insurer having a rating with A.M. Best of at least “A-”: (i) errors and omissions insurance covering Partner Agent and its employees in the minimum amount of $3,000,000 per claim, $5,000,000 aggregate, with a deductible not exceeding an amount agreed by Company; (ii) fidelity insurance covering Partner Agent and its employees in the minimum amount of $1,000,000; and (iii) general liability insurance covering Partner Agent and its employees in the minimum amount of $1,000,000. Partner Agent agrees to immediately notify Company when it receives notice of lapse, increased deductibles, decreased coverage, non-renewal, or termination of any such coverage. Partner Agent agrees to notify Company of any claim brought under any errors and omissions or fidelity insurance which arises out of or is connected with a policy or policies. At the inception of this Agreement and on or before January 31 of each year thereafter, Partner Agent shall furnish Company proof of this insurance.
C.	Company agrees to fully indemnify, defend, and hold harmless Partner Agent from any and all liability, claims, demands, suits, fines and penalties, expenses, costs and attorney fees, made or assessed against or incurred by Partner Agent or the officers, directors, or affiliates of Partner Agent, that may arise by reason of any act, error, or omission of or any misrepresentation by Company or its officers or employees.
D.	Partner Agent agrees to fully indemnify, defend, and hold harmless Company from any and all liability, claims, demands, suits, fines and penalties, expenses, costs and attorney fees, made or assessed against or incurred by Company or the officers, directors, or affiliates of Company, that may arise by reason of any act, error, or omission of or any misrepresentation by Partner Agent, its officers or employees, or brokers or producers submitting business to Partner Agent pursuant to this Agreement.
E.	The indemnifying party shall have the right to direct the investigation, settlement, and defense of any such claim, complaint or action. If the indemnifying party assumes the defense of any such action, such party shall not be liable to the indemnified party for any expenses incurred by such indemnified party in connection with such action.

IX. TERM AND TERMINATION

A.	At any time during the Term, Partner Agent may terminate this Agreement without cause on one hundred eighty (180) days written notice of termination to Company. Partner Agent’s authority to place new business with Company shall cease immediately upon receipt of such notice of termination. Partner Agent’s authority to renew business with Company shall cease as of the effective date of termination.
B.	At any time during the Term, Company may terminate this Agreement on one hundred eighty (180) days (or such longer period as mandated by regulation) written notice of termination to Partner Agent if Partner Agent has not met the Company Guidelines pertaining to profitability and/or production. Partner Agent’s authority to submit new business with Company will cease on ninety (90) days after receipt of such notice of termination. Partner Agent’s authority to submit renewals with Company shall cease as of the effective date of termination. Any disputes regarding Company Guidelines shall be determined by Company in its sole discretion.
C.	Upon written notice, Company may immediately terminate this Agreement in whole or in part for cause, which shall include, but not be limited to, the following:

1.

Partner Agent, or its parent or any affiliated corporation becomes insolvent, institutes or acquiesces in the institution of any bankruptcy, financial reorganization, or liquidation proceeding or any such proceeding is instituted against Partner Agent or its parent corporation (Partner Agent shall immediately notify Company of same); or

2.

Partner Agent, or the owner of a controlling interest in Partner Agent, sells, exchanges, transfers, assigns, consolidates, pledges or causes to be sold, exchanged, transferred, assigned, consolidated, or pledged: (i) all or substantially all of the assets of Partner Agent, or any entity controlling Partner Agent, to a third party, or (ii) a controlling interest in Partner Agent, or any entity controlling Partner Agent, to a third party (Partner Agent shall immediately notify Company of same); or

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3.	Partner Agent fails to correct material deficiencies as noted in any agency audit or program review within the time frame set out in the audit; or
4.	Partner Agent fails to render timely and proper reports or premium accounting as required, or remit premiums when due; or
5.	Partner Agent fails to maintain premium funds in trust as required by this Agreement; or
6.	Partner Agent engages in acts or omissions constituting abandonment, fraud, insolvency, misappropriation of funds, material misrepresentation, or gross and willful misconduct; or
7.	Partner Agent’s license or certificate of authority is cancelled, suspended, or is declined renewal by any regulatory body within the territory where Partner Agent transacts or services policies pursuant to this Agreement (Partner Agent shall immediately notify Company of same); for fraud or if for more than thirty (30) days for any other reason; or
8.	Partner Agent otherwise materially breaches this Agreement.

D.	In the event this Agreement is terminated or any authority of Partner Agent is suspended, limited, or terminated (whether by Company, Partner Agent, or agreement of the parties), Partner Agent shall, subject to all terms, conditions, and restrictions contained in this Agreement, service all business until all such business has been completely cancelled, non-renewed, or otherwise terminated and all claims hereunder have been closed. Company may, in its sole discretion, immediately suspend or terminate Partner Agent’s continuing service obligation as outlined in the Company Guidelines. Notwithstanding the foregoing, Partner Agent shall not, without the prior written approval of Company, increase or extend Company’s liability under, extend the term(s) or condition(s) of, or cancel and re-write, any policies.
	If Partner Agent fails to fulfill any service obligation under this Agreement or comply with this Agreement, then Partner Agent shall reimburse Company any expense incurred by Company as a result of non-compliance, or in servicing or arranging for the servicing of business, or such amounts may be offset by Company.
E.	Any notice of termination shall be in writing and sent by certified mail or personally delivered. Such notice shall be deemed received three (3) days from the date of mailing or, if personally delivered, the date delivered. Unless changed by giving written notice to the other party, the addresses of the respective parties are:

Partner Agent:

First Light Program Managers, Inc.
2800 W. State Road 84, Suite 118
Dania, FL 33312
Facsimile: 1-954-942-9081
Attention: Anthony L. Johnson

Company:

SUA Insurance Company
222 South Riverside Plaza, Suite 1600
Chicago, IL 60606
Facsimile: 1-312-277-1800
Attention: Scott Goodreau, General Counsel

X. GENERAL PROVISIONS

A. If Partner Agent breaches this Agreement for any reason whatsoever, Company may, in lieu of terminating the Agreement, suspend some or all of the authority of Partner Agent under this Agreement. Additionally, Company may suspend the authority of Partner Agent during the pendency of any dispute regarding termination or suspension.

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B.	During the Term and following termination of the Agreement, if Partner Agent has made full payments of all amounts due Company and continues to do so in a timely manner, then the expirations and renewals shall be the property of Partner Agent; provided, however, that Company shall have the absolute right to write or renew such business as may be required by law, and to take any and all actions with regard to the business as may be required in order to service the business or as may be required by law or pursuant to the policy’s terms.
	If, during the Term and following termination of this Agreement, Partner Agent has not made full payment to Company, the expirations and renewals shall not be the property of Partner Agent, and Company shall be entitled to the expirations and renewals, and the use and control of the expirations and renewals shall be vested in Company for sale, use, or disposal as Company deems fit.
C.	Partner Agent will advise Company promptly if it, an employee of Partner Agent, or any of Partner Agent’s brokers or producers have been or are in the future convicted of a felony.
D.	This Agreement and the Securities Purchase Agreement constitute the entire agreement between Company and Partner Agent and supersedes any and all other agreements, either oral or written, between Company and Partner Agent with respect to the business. No waiver by either party to enforce any provisions of this Agreement will be effective unless made in writing and signed by an authorized officer of Company and Partner Agent and shall be effective as to the specifically stated waiver date. No amendment to this Agreement will be effective unless made in writing and signed by the parties hereto, and specifying the effective date of such amendment.
E.	Company may combine or offset any balances or funds owed by Partner Agent to Company against any balances or funds owed to Partner Agent by Company under this Agreement or any other agreement between the parties. Partner Agent may not offset any balance due from Company to Partner Agent under this Agreement or under any other agreement with Company or any other party against the Premium Trust Fund.
F.	This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to its rules regarding conflict of laws. Notwithstanding the foregoing, matters relating to agency termination and Partner Agent’s right or Company’s obligations on termination shall be governed solely by the applicable insurance laws, if any, of the state in which Partner Agent is domiciled. The parties hereto consent to the jurisdiction of the courts of the State of Illinois in any matters pertaining to this Agreement which are not otherwise resolved in accordance with subsection G. below.
G.	Except as provided herein, all unresolved differences of opinion or disputes between Company and Partner Agent arising out of or in connection with this Agreement or any transaction hereunder shall first be attempted to be settled by a good faith meeting of a member of senior management of each of Company and Partner Agent and/or by mediation. If any unresolved differences of opinion or disputes still exist after such meeting, then such matters shall be submitted to arbitration in accordance with the rules relating to commercial arbitration of the American Arbitration Association. Arbitration initiated by one party will allow the other party to select the situs of the arbitration proceedings. Notwithstanding the foregoing, Company shall be entitled to the issuance of an injunction or other legal or equitable action to obtain premiums or monies due, to prohibit Partner Agent’s use of funds, to prohibit Partner Agent’s writing business in violation of this Agreement, or to require Partner Agent’s deposit of such funds in accordance with this Agreement. If Company prevails in any such action, the cost and expense thereof, including attorney fees, shall be borne by Partner Agent.
H.	Partner Agent may not assign this Agreement, delegate its duties, or assign its rights under this Agreement, unless otherwise agreed upon and authorized in writing in advance by Company.
I.	This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but which together shall constitute one and the same instrument.
J.	The parties hereby agree that all provisions of this Agreement shall survive termination, except that Article II and Article IV hereof shall not survive.

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K.

Unless otherwise agreed to in writing by both parties, each party agrees that during this Agreement and for a period of one (1) year after the termination or expiration of this Agreement, it shall not directly or indirectly recruit, solicit or hire any employee of the other party, or induce or attempt to induce any employee of the other party to discontinue his or her employment relationship with the other party.

L.

Partner Agent shall submit to the Company, for Company’s approval, a copy of its business continuity and disaster recovery plan on an annual basis, on or before the anniversary date of this Agreement.

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed effective as of the Effective Date first above written.

SUA Insurance Company
By:	/s/ William S. Loder
Name Printed:	William S. Loder
Title:	Senior Vice President and Chief Underwriting Officer
First Light Program Managers, Inc.
By:	/s/ Anthony L. Johnson
Name Printed:	Anthony L. Johnson
Title:	President

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EXHIBIT A

COMMISSION SCHEDULE

A. Except as otherwise provided in this commission schedule, Partner Agent’s Commission shall be as follows:

Program Description	Line of Business	Maximum Rate of Commission
Transportation operations in the territories defined in the Underwriting Guidelines	Commercial general liability, commercial automobile liability and physical damage		15	%

B. The Commission provided in this commission schedule does not relate to the following types of business:

1.	business which Company determines is specially rated, specially classified, or specially reinsured;
2.	business written subject to a participating plan;
3.	business written subject to a retrospective plan, SIR, or large deductible; or
4.	business placed through assigned risks, fair plans, pools, or other risk-sharing associations.
	Commission for all such business shall be negotiated on an individual policy basis and agreed to in writing by Company.

C. Commission different than provided herein may be agreed to in writing between Partner Agent and Company, and such agreement shall supersede this commission schedule.

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EXHIBIT B

PROFIT SHARING SCHEDULE

The Profit Sharing Due to Partner Agent will be calculated using the following Table:

Table

Profit Sharing Year [ ]

Premium
1.	Eligible Earned Premium before write off for Profit Sharing Year	$
2.	Premium Written Off	$
3.	Eligible Earned Premium	$
	(Line 1 minus Line 2)
Expenses
4.	Losses and ALAE Incurred for Profit Sharing Year	$
5.	TPA Claims Fee for Profit Sharing Year	$
6.	Claims Charge for Profit Sharing Year	$
7.	IBNR Charge for Profit Sharing Year	$
8.	Commissions Incurred for Profit Sharing Year	$
9.	Taxes, Licenses and Fees for Profit Sharing Year	$
10.	Operating Charge	$
11.	Dividends Incurred for Profit Sharing Year	$
12.	Expense Total (Sum of Lines 4, 5, 6, 7, 8, 9, 10 and 11)	$
Profit Sharing Year Result
13.	Profit Sharing Year Result	$
	(Line 3 minus line 12) (Can be negative)
14.	Profit Sharing Factor	50%
15.	Profit to be Shared (Line 13 times Line 14)	$
	(Can be negative)
16.	Payout Factor	%
17.	Result (Line 15 times Line 16) (Can be Negative)	$

Based on this Table, the Partner Agent’s Combined Ratio is                     % (line 12 divided by line 3). The maximum Profit Sharing due Partner Agent will be limited to 7% of Eligible Earned Premium per Profit Sharing Year.

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A minimum total Eligible Written Premium of twenty million dollars ($20,000,000) and minimum Eligible Written Premium of five million dollars ($5,000,000) for each program must be achieved during the Profit Sharing Year to be paid out under the profit sharing calculation. The profit sharing calculation will be completed regardless of whether Partner Agent meets its minimum requirements.

Defined Terms Used in this Exhibit B

A.	“Claims Charge” shall be a designated amount determined by Company based on unallocated loss adjustment expense for the current Profit Sharing Year.
B.	“Combined Ratio” shall mean the ratio of Expense Total to Eligible Earned Premium.
C.	“Commissions Incurred” shall include the direct commissions and policy fees (if included in Eligible Earned Premium) incurred by Company for the Profit Sharing Year, relating to Eligible Earned Premium. Additionally, Company shall add to such total any amounts or expenses of Partner Agent which Company agrees to reimburse, assume, or share.
D.	“Dividends Incurred” shall include all dividends incurred (paid plus an estimate of accrued but not paid) for the Profit Sharing Year by Company.
E.	“Eligible Earned Premium” shall mean direct premium earned for Profit Sharing Year less earned premium ceded (less ceding commission earned) for reinsurance.
F.	“Eligible Written Premium” shall mean direct premium written for Profit Sharing Year.
G.	“Expense Total” shall mean the sum of the following: Losses and ALAE Incurred for Profit Sharing Year; TPA Claims Fee for Profit Sharing Year; Claims Charge for Profit Sharing Year; IBNR Charge for Profit Sharing Year; Commissions Incurred for Profit Sharing Year; Taxes, Licenses and Fees for Profit Sharing Year; Operating Charge; and Dividends Incurred for Profit Sharing Year.
H.	“Final Profit Sharing Year” shall mean the Profit Sharing Year in which this Agreement is terminated.
I.	“IBNR Charge” shall be determined solely by Company and shall include a provision for the reserve for Losses and ALAE Incurred but not reported during the Profit Sharing Year, which reserve shall include development on losses and ALAE already reported to Company less losses for IBNR ceded.
J.	“Losses and ALAE Incurred” shall be direct losses and expenses incurred (paid plus case reserves) less Losses and ALAE Incurred ceded for reinsurance by Company on claims reported for the Profit Sharing Year relating to Eligible Earned Premium, excluding unallocated loss adjustment expense, plus any extra contractual or bad faith payments or reserves.
K.	“Operating Charge” shall be a designated amount for the current Profit Sharing Year. Operating Charge shall be determined solely at Company’s discretion and shall be based on the operating expenses of Company not included in any of the line items described herein.
L.	“Payout Factor” shall be calculated according to the following chart:

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PROFIT SHARING AGREEMENT

PAYOUT FACTORS

	5 Years
1st Valuation		20	%
2nd Valuation		40	%
3rd Valuation		60	%
4th Valuation		80	%
5th Valuation		100	%

M.	“Premium Written Off” shall include any premium due Company which Company has charged off as uncollectible for the Profit Sharing Year.
N.	“Profit Sharing Year” shall mean January 1 to December 31, except for the initial Profit Sharing Year which shall be from the Effective Date until December 31.
O.	“Taxes, Licenses and Fees” shall include any loss based or premium based assessments and any expenses relating thereto, and premium taxes, boards, bureaus, and any miscellaneous taxes including insurance department licenses and fees, relating to Eligible Earned Premium.
P.	“TPA Claims Fee” shall be third party claims fees incurred by Company on behalf of the Partner Agent for the current Profit Sharing Year.
Q.	“Valuation Date” shall mean June 30 of each year. Except as otherwise set forth below, Company shall continue providing calculations for each Profit Sharing Year through the June 30 of each successive year following termination of this Agreement, the Final Profit Sharing Year, or until the parties mutually agree in writing to close the calculations for a particular Profit Sharing Year or Profit Sharing Years.

Timing of Calculation of Profit Sharing Due

A.	If Partner Agent meets the Minimum Eligible Written Premium requirements for profit sharing, Company shall calculate Profit Sharing Due to Partner Agent for the Profit Sharing Year based on Company’s records. Such calculation shall be provided to Partner Agent sixty (60) days after each Valuation Date for each Profit Sharing Year.
B.	Each Profit Sharing Year’s calculation will include a separate re-calculation of each prior Profit Sharing Year. Re-calculations for each prior Profit Sharing Year will be as of the current Valuation Date, and will be made utilizing the formula set forth in the Table.
C.	Provided that all premium or other amounts due Company shall have been received by Company, within sixty (60) days after completion of the calculation of Profit to be Shared, Company shall pay the amount of Profit Sharing Due to Partner Agent for the Profit Sharing Year.

Term and Termination

In the event this Agreement is terminated prior to the fifth anniversary of the Effective Date by the Partner Agent, Company shall provide no further profit sharing calculations. In the event that this Agreement is terminated prior to the fifth anniversary of the Effective Date by Company in accordance with Section IX, Company shall provide no further profit sharing calculations.

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General

No charge, offset, credit, or deduction for any Profit Due to Partner Agent which is or may be due Partner Agent shall be made or claimed by Partner Agent in accounts submitted to Company under this Agreement or any other agreement. Profit Due to Partner Agent shall be payable only by Company’s check. Company may combine or offset any amount owed to Partner Agent by Company hereunder against any amount owed to Company by Partner Agent under any other agreement between the parties.

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EX-10.3

Exhibit 10.3

SECURITIES PURCHASE AGREEMENT

This Securities Purchase Agreement (this “Agreement”) is made as of October 1, 2007, by and among the purchaser listed on Schedule A attached hereto (the “Purchaser”) and Specialty Underwriters’ Alliance, Inc., a Delaware corporation (the “Company”).

WHEREAS, the Company desires to sell to Purchaser shares of the Company’s Class B Common Stock, par value $.01 per share (the “Shares”),

NOW THEREFORE, in consideration of the foregoing recitals and the mutual covenants, agreements and other consideration set forth herein, the parties hereto, intending to be legally bound hereby, agree as follows:

PART III — 1. Sale and Purchase of Securities; Closing.

Item 1: (a) Authorization. The Company has authorized the issuance and sale of the Shares, having the rights, preferences, privileges and restrictions set forth in the Company’s Amended and Restated Certificate of Incorporation, a copy of which is attached hereto as Schedule B (the “Certificate of Incorporation”).

Item 2: (b) Sale and Purchase. Subject to the terms, conditions, representations, warranties, covenants and agreements contained in this Agreement, the Purchaser agrees to purchase from the Company, and the Company agrees to sell, assign, transfer and deliver to the Purchaser, from time to time, as set forth herein, the applicable number of Shares for the consideration specified in Section 1(c).

(c) Purchase Price. The Purchaser agrees to pay to the Company an aggregate purchase price of $1,000,000 (the “Purchase Price”) to purchase Shares in installments, as provided for on Schedule C attached hereto (the “Installment Schedule,” and each date individually, an “Installment Date”). The number of Shares that Purchaser will receive in consideration for such payments will be determined by dividing (i) the applicable portion of the purchase price due on each Installment Date (each individually, a “Payment”) by (ii) the Closing Price of the Company’s Common Stock on the date of actual payment (with fractional Shares rounded up to the next whole Share). If Purchaser fails to make full payment on any Installment Date, the number of Shares that Purchaser shall be entitled to receive, with respect to such Installment Date, will be equal to the Payment divided by the Closing Price of the Common Stock on the date of actual payment, or if such day is not a Trading Day, the Trading Day first preceding the date of actual payment. Each Payment shall be made by wire transfer in immediately available funds to an account designated by the Company. Notwithstanding the foregoing, with respect to any Installment Date, the Company shall not issue, and the Purchaser shall not be required to make Payment for, any Shares if the issuance of such Shares would result in (i) the aggregate number of all Shares issued pursuant to this Agreement being greater than 19.9% of the number of shares of the Company’s Common Stock issued and outstanding on the date hereof (exclusive of any shares held by affiliates of the Company) or (ii) the Company being in violation of any listing requirements, corporate governance rules or any other rules and regulations of the NASD or the Nasdaq National Market or any other market or exchange on which the Company’s Common Stock is then listed or quoted; in which case the Company and the Purchaser will, if legally permissible, adjust the amount of the Payment due, and the number of Shares to be issued, so that the conditions specified in sub-clauses (i) and (ii) would be satisfied.

(d) Delivery. With respect to each installment, the Company shall deliver, or cause to be delivered, the applicable number of Shares to the Purchaser as promptly as practical after full payment was made.

2. Representations and Warranties of the Purchaser.

The Purchaser hereby represents and warrants to the Company as follows:

(a) The Purchaser is purchasing the Shares for its own account, for investment purposes only, and not with a view to, or in connection with, any resale or other distribution of the Shares.

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(b) The Purchaser has such knowledge and experience in financial and business matters that the Purchaser is capable of evaluating the merits and risks of its investment in the Company and of protecting its own interests in connection therewith. The Purchaser is an “accredited investor” within the meaning of Rule 501(a) promulgated under the Securities Act.

(c) The Purchaser has had the opportunity to review all documents and information that the Purchaser has requested concerning its investment in the Company. The Purchaser has had the opportunity to ask questions of the Company’s management, which questions were answered to its satisfaction.

(d) The Purchaser acknowledges that an investment in the Company involves substantial risks. The Purchaser is able to bear the economic risk of its investment for an indefinite period of time.

(e) The Purchaser has not paid or given any commission or other remuneration in connection with the purchase of the Shares. The Purchaser has not received any public media advertisements and has not been solicited by any form of mass mailing solicitation.

(f) This Agreement has been duly executed and delivered by the Purchaser and has been duly authorized by the Purchaser by all necessary action. This Agreement is a valid and binding obligation of the Purchaser, enforceable in accordance with its terms, except as such enforcement may be limited by bankruptcy, insolvency, moratorium or other similar laws affecting creditors’ rights generally or by the principles governing the availability of equitable remedies.

(g) Neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will violate or result in any violation of, or be in conflict with or constitute a default under, or require the consent of any person under any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to the Purchaser, except such that are obtained or waived. No consent, approval, order or authorization of, or registration, declaration or filing with, any governmental authority is required on the part of the Purchaser in connection with the execution and delivery of this Agreement or the performance by the Purchaser of its obligations hereunder.

3. Representations and Warranties of the Company.

The Company hereby represents and warrants to the Purchaser as follows:

(a) The Company is a corporation duly organized, validly existing and in good standing under the laws of the state of Delaware.

(b) The Company has full corporate power and authority to execute and deliver this Agreement and to sell, transfer, assign and deliver the Shares to the Purchaser.

(c) This Agreement has been duly executed and delivered by the Company and constitutes a valid and binding obligation of the Company, enforceable in accordance with its terms, except as such enforcement may be limited by bankruptcy, insolvency, moratorium or other similar laws affecting creditors’ rights generally or by the principles governing the availability of equitable remedies.

(d) All of the Shares, when delivered in accordance with the terms of this Agreement, will be validly issued and outstanding, fully paid and nonassessable.

(e) Neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will violate or result in any violation of, or be in conflict with or constitute a default under, or require the consent of any person under any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to the Company, except such that are obtained or waived. No consent, approval, order or authorization of, or registration, declaration or filing with, any governmental authority is required on the part of the Company in connection with the execution and delivery of this Agreement or the performance by the Company of its obligations hereunder.

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(f) The Company has delivered to the Purchaser true, correct and complete copies of the Company’s Certificate of Incorporation and By-laws of the Company, reflecting all amendments thereto. Such Certificate of Incorporation and By-laws have not been amended, modified or waived since the date thereof.

4. Terms of the Class B Common Stock.

(a) Voting Rights; Redemption Rights. Holders of Class B Stock are not entitled to any voting rights in the Company. Holders of Class B Stock have no redemption or preemptive rights, except as provided herein.

(b) Dividends; Liquidation and Distribution. Subject to the terms of any outstanding series of preferred stock of the Company, holders of Class B Stock are entitled to dividends in amounts and at times as may be declared by the board of directors of the Company out of funds legally available, in the same proportion as holders of the Company’s common stock, par value $.01 per share (the “Common Stock”). Upon liquidation or distribution, holders of Class B Stock will be entitled to share ratably, pari passu with the holders of the Common Stock, in all net assets available for distribution to stockholders, after payment of any liquidation preferences to holders of preferred stock of the Company.

(c) Exchange Right. (i) At any time and from time to time after the fifth anniversary of the date of that certain Partner Agent Program Agreement between the Company and the Purchaser (the “Partner Agent Agreement”), provided that the Partner Agent Agreement is still in effect and has not been terminated by either party thereto, the Purchaser shall have the right, but not the obligation, to exchange its shares of Class B Stock for an equal number of shares of Common Stock (subject to equitable adjustment in the event of any stock dividend, stock split, combination, reorganization, recapitalization, reclassification or other similar event involving a change in such security); provided, further, that after the fifth anniversary of the date of the Partner Agent Agreement and for so long as the Partner Agent Agreement is in effect, including any day or days on which the Purchaser exercises such exchange right, the Purchaser must retain legal and beneficial ownership for its own benefit of such number of shares of Class B Stock as could be exchanged for the same number of shares of Common Stock with a value on such date of $500,000, as determined pursuant to Section 4(g).

(ii) Upon the Purchaser’s exercise of the exchange right, the Purchaser shall surrender the certificate or certificates for the shares of Class B Stock to be so exchanged, accompanied by written notice of exchange duly executed, to the Company at any time during regular business hours at the office of the Company. If so required by the Company, the shares of Class B Stock so exchanged shall be accompanied by a written instrument or instruments of transfer in form satisfactory to the Company, duly executed by the Purchaser.

(d) Issuance of Shares on Exchange. (i) As promptly as practicable after the surrender, as provided herein, of any shares of Class B Stock for exchange, the Company shall deliver to the Purchaser certificates representing the number of fully paid and nonassessable shares of Common Stock into which such shares of Class B Stock have been exchanged in accordance with the provisions of Section 4(c)(i). Such exchange shall be deemed to have been made as of the close of business on the date that such shares of Class B Stock shall have been surrendered for exchange by delivery thereof with a written notice of exchange duly executed, so that the rights of the Purchaser as a holder of the shares of Class B Stock so exchanged shall cease at such time and, subject to the following provisions of this section, the Purchaser shall be treated for all purposes as having become the record holder of such shares of Common Stock at such time; provided, however, that no such surrender on any date when the stock transfer books of the Company shall be closed shall be effective to constitute the Purchaser as the record holder of such shares of Common Stock on such date, but such surrender shall be effective to constitute the Purchaser as the record holder thereof for all purposes at the close of business on the next succeeding day on which such stock transfer books are open. The Company shall issue and deliver to the Purchaser, at the expense of the Company, a new certificate covering the number of shares of Class B Stock representing the unexchanged portion of the certificate so surrendered, which new certificate shall entitle in all respects the Purchaser to the rights of the Class B Stock represented thereby to the same extent as if the certificate theretofore covering such unexchanged shares had not been surrendered for exchange.

(ii) All shares of Class B Stock that shall have been surrendered for exchange as provided herein shall no longer be deemed to be outstanding and all rights with respect to such shares shall immediately cease and terminate on the surrender date, except only the right of the Purchaser to receive shares of Common Stock in exchange therefor, and such shares shall not thereafter be transferred on the books of the Company or be deemed to be outstanding for any purpose whatsoever.

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(e) Repurchase Right. (i) (A) At any time prior to the fifth anniversary of the execution of the Partner Agent Agreement, if the Partner Agent Agreement is terminated by either the Company or the Purchaser, for any reason, the Company shall have the right, but not the obligation, to repurchase the Shares currently held by the Purchaser for a price per Share equal to the lesser of (1) the weighted average purchase price per Share as provided herein or (2) the Current Market Price (as defined herein) of the Common Stock; and (B) at any time on or after the fifth anniversary of the execution of the Partner Agent Agreement, if the Partner Agent Agreement is terminated by either the Company or the Purchaser, for any reason, the Company shall have the right, but not the obligation, to repurchase the Shares currently held by the Purchaser for a price per Share equal to the Current Market Price of the Common Stock. Such right of the Company may be exercised by providing a notice of repurchase (the “Repurchase Notice”) to the Purchaser not less than five business days prior to the date repurchase is to be made pursuant to this Section 4(e), specifying the date of such repurchase (the “Repurchase Date”) and the number of shares of Class B Stock to be repurchased. The Repurchase Notice having been so given by the Company, the aggregate repurchase price for the shares of Class B Stock to be so repurchased shall become due and payable on the Repurchase Date.

(ii) For purposes of this Agreement:

(A) “Current Market Price” per share of a security at any date herein shall mean the average daily Closing Price (as defined herein) of such security for the 20 consecutive Trading Days (as defined herein) preceding such date (subject to equitable adjustment in the event of any stock dividend, stock split, combination, reorganization, recapitalization, reclassification or other similar event involving a change in such security); provided, however, that in the case of the Common Stock, where no public market exists for the Common Stock at the time of exchange, the Current Market Price per share of the Common Stock shall be as determined by an independent investment banking firm experienced in the valuation of securities of property and casualty insurance companies and selected by the Company (at the Company’s expense); provided that, after receipt of the determination by such firm, the Purchaser shall have the right to select (at the expense of the Purchaser) a second such investment banking firm to make such determination, in which case the Current Market Price shall be the average of the two determinations; and provided further that such determination need not be made more frequently than once every six months and any determination shall be superceded by a good faith determination by the Company’s board of directors that shall be required if a material event reasonably likely to affect the value of the Common Stock (such as a placement of equity securities) should occur after the next preceding determination, whether by an investment banking firm or firms, or by the Company’s board of directors.

(B) “Closing Price” shall mean, with respect to any Trading Day: (1) if the Common Stock is listed or admitted to trading on a national securities exchange, the last reported sale price of the Common Stock, regular way, or in case no sale takes place on such day, the average of the reported closing bid and asked prices of the Common Stock, regular way, in either case as reported on such exchange; or (2) if the Common Stock is not listed or admitted to trading on any national securities exchange, but is listed on the Nasdaq National Market, the closing sale price of the Common Stock on such day, or in case no sale is publicly reported for such day, the average of the representative closing bid and asked quotations for the Common Stock, as reported on Nasdaq; or (3) if the Common Stock is not listed or admitted to trading on the Nasdaq National Market, the average of the bid and asked prices for the Common Stock as furnished for such day by Nasdaq, or, if not furnished by Nasdaq, by any New York Stock Exchange, Inc. member firm regularly making a market in the Common Stock and selected for such purpose by the Company’s board of directors.

(C) “Trading Day” shall mean, in the case of any security, any day on which trading takes place (1) if such security is then listed or admitted to trading on a national securities exchange, on the principal national securities exchange on which such security is then listed or admitted to trading, (2) if such security is then listed or admitted to trading on the Nasdaq National Market, on the Nasdaq National Market, or (3) otherwise, in the over-the-counter market.

(iii) On or prior to the Repurchase Date, the Purchaser shall surrender such shares of Class B Stock to the Company in the manner and at the place designated by the Company. From and after the Repurchase Date, unless there shall have been a default in the payment of the repurchase price, all rights of the Purchaser with respect to the Shares shall cease, and such Shares shall not thereafter be transferred on the books of the Company or be deemed to be outstanding for any purpose whatsoever.

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(f) Provisions in Case of a Change of Control. In case of any “Change of Control”; that is: (i) any sale, lease, exchange or other transfer of all or substantially all of the property and assets of the Company to a non-affiliated third party; (ii) any merger or consolidation with a non-affiliated third party to which the Company is a party and as a result of which the holders of the voting securities of the Company immediately prior thereto own less than a majority of the outstanding voting securities of the surviving entity immediately following such transaction; or (iii) any Person or group of Persons (as such term is used in Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) shall beneficially own (as defined in Rule 13d-3 under the Exchange Act) securities of the Company representing 50% or more of the combined voting power of the voting securities of the Company then outstanding, then the Purchaser shall thereafter have the right to convert its shares of the Class B Stock into the kind and amount of securities, cash and other property receivable upon such reorganization, reclassification, consolidation, merger or disposition by the Purchaser of the number of shares of Common Stock that the Purchaser would have received had it converted its shares of Class B Stock immediately prior to such reorganization, reclassification, consolidation, merger or disposition pursuant to Section 4(c)(i). For purposes of this section, “voting securities” shall mean securities, the holders of which are ordinarily, in the absence of contingencies, entitled to elect the corporate directors (or Persons performing similar functions). The foregoing provisions of this section shall similarly apply to successive reorganizations, reclassifications, consolidations, mergers or dispositions.

(g) Purchase obligation. Following the five-year anniversary of the date of this Agreement, on each six-month anniversary thereafter, the Company shall determine the aggregate value of the shares of Class B Stock held by the Purchaser. The value of each share of Class B Stock shall equal the fair market value of one share of the Common Stock on such date, to be calculated as follows: (i) if the Common Stock is listed or admitted to trading on a national securities exchange, the last reported sale price of the Common Stock, regular way, on such day or in case no sale takes place on such day, the average of the reported closing bid and asked prices of the Common Stock, regular way, on such day, in either case as reported on such exchange; or (ii) if the Common Stock is not listed or admitted to trading on any national securities exchange, but is listed on the Nasdaq National Market, the closing sale price of the Common Stock on such day, or in case no sale is publicly reported for such day, the average of the representative closing bid and asked quotations for the Common Stock, as reported on Nasdaq; or (iii) if the Common Stock is not listed or admitted to trading on the Nasdaq National Market, the average of the bid and asked prices for the Common Stock as furnished for such day by Nasdaq, or, if not furnished by Nasdaq, by any New York Stock Exchange, Inc. member firm regularly making a market in the Common Stock and selected for such purpose by the Company’s board of directors; or (iv) if no public market exists for the Common Stock, as determined in good faith by the Company’s board of directors. If the aggregate value of the Class B Stock held by the Purchaser is determined to be less than $500,000, then the Purchaser shall purchase from the Company such number of shares of Class B Stock as would equal the difference between the value of the Class B Stock as determined herein and $500,000. The purchase price of such shares of Class B Stock would be payable to the Company by wire transfer in immediately available funds to an account designated by the Company no later than one business day after the determination of the value as provided herein. If such six-month anniversary falls on any day that is not a business day, then the determination of the value of the Class B Stock shall be made on the next immediately following business day.

5. Taxes on Exchange. The Company will pay any and all stamp or similar taxes that may be payable in respect of the issuance and delivery of shares of Common Stock upon exchange of shares of Class B Stock pursuant to Section 4(c)(i).

6. No Registration under Federal or State Securities Laws. (a) The Purchaser acknowledges that the Shares have not been registered under the Securities Act or the securities laws of any state by reason of a specific exemption or exemptions from registration under the Securities Act and applicable state securities laws, and that the Company’s reliance on such exemptions is predicated on the accuracy and completeness of the Purchaser’s representations, warranties, acknowledgements and agreements contained herein. Accordingly, the Shares may not be offered, sold, transferred, pledged or otherwise disposed of by the Purchaser without an effective registration statement under the Securities Act and any applicable state securities laws or an opinion of counsel acceptable to the Company that the proposed transaction will be exempt from registration. The Purchaser acknowledges that the Company is not required to register the Shares under the Securities Act or any applicable state securities laws or to make any exemption from registration available. The Purchaser understands that the Shares, and any shares of Common Stock issued in exchange for Shares, will bear legends substantially to the effect of the following:

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“THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR THE SECURITIES LAWS OF ANY STATE. THE SHARES MAY NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND UNDER ANY APPLICABLE STATE SECURITIES LAWS, RECEIPT OF A NO-ACTION LETTER ISSUED BY THE SECURITIES AND EXCHANGE COMMISSION (TOGETHER WITH EITHER REGISTRATION OR AN EXEMPTION UNDER APPLICABLE STATE SECURITIES LAWS) OR AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT THE PROPOSED TRANSACTION WILL BE EXEMPT FROM REGISTRATION UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS.”

and that the Company will place a stop order against the transfer of the certificates representing the Shares and refuse to effect any transfers thereof in the absence of satisfying the conditions contained in the foregoing legend.

(b) The Purchaser acknowledges that no public market now exists for Class B Common Stock and there is no assurance that a public market will ever exist for the such securities.

7. Transfers. The Purchaser shall not sell, assign, transfer, pledge, hypothecate, mortgage or dispose of, by gift or otherwise, or in any way encumber, any shares of Class B Stock owned by the Purchaser, except for exchanges and repurchases in compliance with Section 4.

8. No Preemptive Rights. The Purchaser shall have no preemptive or preferential right of subscription to any shares of stock of the Company, or to options, warrants or other interests therein or therefor, or to any obligations convertible or exchangeable into stock of the Company (except as provided herein), issued or sold, or any right of subscription to any security thereof other than such, if any, as the Company’s board of directors, in its discretion, may determine from time to time and at such price or prices as the Company’s board of directors may fix from time to time.

9. Miscellaneous.

(a) Payment of Expenses. Each party shall pay its own expenses incurred in connection with this Agreement.

(b) Entire Agreement; Amendments. This Agreement constitutes the entire agreement of the parties with respect to the transactions contemplated hereby and may not be modified, amended, altered or supplemented except upon the execution and delivery of a written agreement executed by the party or parties sought to be affected.

(c) Binding Effect. This Agreement shall be binding upon, inure to the benefit of and be enforceable by, the Company and the Purchaser, and the Company’s or the Purchaser’s respective heirs, beneficiaries, executors, successors, representatives and assigns, as the case may be.

(d) Further Assurances. From time to time, at the other party’s request and without further consideration, each party hereto shall execute and deliver such additional documents and take all such further lawful action as may be necessary or desirable to consummate and make effective, in the most expeditious manner practicable, the transactions contemplated by this Agreement.

(e) Notices. All notices, claims, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given at the time when hand delivered, when received if sent by facsimile or by same day or overnight recognized commercial courier service, or three days after being mailed (registered or certified mail, postage prepaid, return receipt requested) as follows:

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If to the Purchaser:

First Light Program Managers, Inc.
2800 W. State Road 84, Suite 118
Dania, FL 33312
Facsimile: 1-954-942-9081
Attention: Anthony L. Johnson

If to the Company:

Specialty Underwriters’ Alliance, Inc.
222 South Riverside Plaza
Chicago, Illinois 60606
Facsimile: 312-277-1800
Attention: Scott W. Goodreau

with a copy to:

Stroock & Stroock & Lavan LLP
180 Maiden Lane
New York, New York 10038
Facsimile: 212-806-6006
Attention: William W. Rosenblatt, Esq.

or to such other address as the person to whom notice is to be given may have previously furnished to the other party in writing in the manner set forth above (provided that notice of any change of address shall be effective only upon receipt thereof).

(f) Severability. Whenever possible, each provision or portion of any provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law; however, if any provision or portion of any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or portion of any provision in such jurisdiction, and this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision or portion of any provision had never been contained herein.

(g) Remedies Cumulative. All rights, powers and remedies provided under this Agreement or otherwise available in respect hereof at law or in equity shall be cumulative and not alternative, and the exercise of any thereof by any party shall not preclude the simultaneous or later exercise of any other such right, power or remedy by such party. All representations, warranties, covenants and agreements contained herein shall survive the execution and delivery of this Agreement, the closing and any investigation made by any party hereto.

(h) No Waiver. The failure of any party hereto to exercise any right, power or remedy provided under this Agreement or otherwise available in respect hereof at law or in equity, or to insist upon compliance by any other party hereto with its obligations hereunder, and any custom or practice of the parties at variance with the terms hereof, shall not constitute a waiver by such party of its right to exercise any such or other right, power or remedy or to demand such compliance.

(i) No Third Party Beneficiaries. This Agreement is not intended to be for the benefit of, and shall not be enforceable by, any person or entity who or which is not a party hereto.

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(j) Counterparts. This Agreement may be executed in two or more counterparts, each of which will be deemed to be an original, but all of which together will constitute one and the same instrument.

(k) Governing Law. This Agreement will be governed as to formation, performance, interpretation and enforcement by the laws of the state of New York, without regard to principles of conflicts of law to the extent that the application of the laws of another jurisdiction would be required thereby.

(l) Arbitration. (i) Any dispute arising out of the interpretation, performance or breach of this Agreement, including the formation or validity thereof, shall be submitted for decision to a panel of three arbitrators. Notice requesting arbitration shall be in writing and sent certified or registered mail, return receipt requested. One arbitrator shall be chosen by each of the Company and the Purchaser and the two arbitrators shall, before instituting the hearing, choose an impartial third arbitrator who shall preside at the hearing. If either party fails to appoint its arbitrator within thirty (30) days after being requested to do so by the other party, the latter, after ten (10) days’ notice by certified or registered mail of its intention to do so, shall request the American Arbitration Association (“AAA”) to appoint the second arbitrator. If the two arbitrators are unable to agree upon the third arbitrator within thirty (30) days of their appointment, the arbitrators shall request the AAA to select the third arbitrator.

(ii) Within thirty (30) days after notice of appointment of all arbitrators, the panel shall meet and determine timely periods for briefs, discovery procedures and schedules for hearings. The panel shall be relieved of all judicial formality and shall not be bound by the strict rules of procedure and evidence. Unless the panel agrees otherwise, arbitration shall take place in New York, New York, and the panel shall apply the law of the state of New York. The decision of any two arbitrators when rendered in writing shall be final and binding. The panel is empowered to grant interim relief, as it may deem appropriate. In no event shall the panel award punitive or exemplary damages. The panel shall make its decision considering the custom and practice of the applicable insurance business within forty-five (45) days following the termination of the hearings. Either party may apply to a United States District Court or to a State Court of competent jurisdiction for an order confirming the arbitration award; a judgment of such court shall thereupon be entered on the award. If such an order is issued, the attorneys’ fees of the party so applying and court costs will be paid by the party against whom confirmation is sought.

(iii) The parties hereto shall share the expense of the arbitrators equally. The remaining costs of the arbitration shall be allocated by the panel. The panel may, at its discretion, award such further costs, interest and expenses as it considers appropriate, including but not limited to attorneys’ fees, to the extent not prohibited by law.

(iv) Any arbitration proceeding under this Agreement will not be consolidated or joined with any arbitration proceeding under any other agreement, or involving any other property or premises, and will not proceed as a class action.

(m) Approval. The Purchaser acknowledges that (i) the Company has not sought, or received, stockholder approval as may be required under the rules and regulations of the NASD or Nasdaq National Market in respect of transactions that may result in, among other things, a change of control or the issuance of more than 20% of a company’s outstanding common stock, (ii) all of the Company’s representations and warranties contained herein are deemed modified by the disclosures in this Section 9(m), (iii) the restrictions on the issuance of Shares set forth in the last sentence of Section 1(c) are intended to ensure that the Company does not violate any rules, regulations or listing requirements of the NASD or the Nasdaq National Market, and (iv) if the Company ever needs to seek stockholder approval with respect to such matters, the Purchaser shall not be entitled to vote on such matters.

(n) Descriptive Headings. The descriptive headings used herein are inserted for convenience of reference only and are not intended to be part of or to affect the meaning or interpretation of this Agreement.

(o) Gender and Number. Any words used in the masculine, feminine or neuter shall read and be construed in the masculine, feminine or neuter where they would so apply. Words in the singular shall be read and construed as though used in the plural in all cases where they would so apply.

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IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by the Purchaser and the Company as of the day and year first above written.

THE COMPANY: SPECIALTY UNDERWRITERS’ ALLIANCE, INC.
By:	/s/ William S. Loder
	Name:	William S. Loder
	Title:	Senior Vice President and Chief Underwriting Officer
THE PURCHASER:
By:	/s/ Anthony L. Johnson
	Name:	Anthony L. Johnson
	Title:	President

9

Schedule A

PURCHASER:

First Light Program Managers, Inc.
2800 W. State Road 84, Suite 118
Dania, FL 33312
Facsimile: 1-954-942-9081
Attention: Anthony L. Johnson

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Schedule B

AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION OF
SPECIALTY UNDERWRITERS’ ALLIANCE, INC.

The undersigned, being the Chief Executive Officer of Specialty Underwriters’ Alliance, Inc. (the “Corporation”), a corporation organized and existing under the laws of the State of Delaware, hereby certifies as follows:

1. The name of the Corporation is Specialty Underwriters’ Alliance, Inc. The original Certificate of Incorporation of the Corporation was filed with the Secretary of State of the State of Delaware on April 3, 2003. The Amended and Restated Certificate of Incorporation was filed with the Secretary of State of the State of Delaware on May 14, 2004.

2. This Amended and Restated Certificate of Incorporation was duly adopted by the stockholders at the 2005 annual meeting in accordance with the applicable provisions of Sections 228, 242 and 245 of the Delaware General Corporation Law.

3. This Amended and Restated Certificate of Incorporation restates and integrates and further amends the provisions of the Corporation’s Certificate of Incorporation as heretofore restated and amended.

4. The text of the Amended and Restated Certificate of Incorporation is hereby amended and restated in its entirety to read as follows:

FIRST: The name of the Corporation is Specialty Underwriters’ Alliance, Inc.

SECOND: The Corporation’s registered office in the State of Delaware is at 160 Greentree Drive, Suite 101, in the City of Dover, County of Kent. The name of its registered agent at such address is National Registered Agents, Inc.

THIRD: The nature of the business of the Corporation and its purpose is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware.

FOURTH: The maximum number of shares that the Corporation shall be authorized to issue and have outstanding at any one time shall be (i) thirty million (30,000,000) shares of Common Stock, par value $0.01 per share (the “Common Stock”), (ii) two million (2,000,000) shares of Class B Common Stock, par value $0.01 per share (the “Class B Stock”), and (iii) one million (1,000,000) shares of Preferred Stock, par value $0.01 per share (the “Preferred Stock”).

Common Stock

The holders of the Common Stock shall be entitled to one vote per share. The holders of the Class B Stock shall not be entitled to any voting rights except as otherwise required by law but shall otherwise have the same rights as the holders of Common Stock, including the right to share equally in any dividends distributed to the holders of the Common Stock and in any distribution to the holders of the Common Stock pursuant to a dissolution. Certain holders of the Class B Stock may have a contractual right to exchange their shares into shares of Common Stock. The Corporation may have a contractual right to repurchase shares of the Class B Stock from certain holders thereof.

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Preferred Stock

The Board of Directors of the Corporation is authorized, subject to limitations prescribed by law and the provisions of this Paragraph FOURTH, to provide for the issuance of the shares of Preferred Stock in series, and to establish from time to time the number of shares included in each such series, but not below the number of shares then issued, and to fix the designation, powers, preferences, and relative rights of the shares of each such series and the qualifications, or restrictions thereof. The authority of the Board of Directors with respect to each shall include, but not be limited to, determination of the following:

(a)	The number of shares constituting that series and the distinctive designation of that series;
(b)	The dividend rate on the shares of that series, whether dividends shall be cumulative, and, if so, from which date or dates, and the relative rights of priority, if any, of payments of dividends on shares of that series;
(c)	Whether that series shall have voting rights, in addition to the voting rights provided by law, and, if so, the terms of such voting rights;
(d)	Whether that series shall have conversion privileges, and, if so, the terms and conditions of such conversion, including provisions for adjustment of the conversion rate in such events as the Board of Directors shall determine;
(e)	Whether or not the shares of that series shall be redeemable, and, if so, the terms and conditions of such redemption, including the date or dates upon or after which they shall be redeemable, and the amount per share payable in case of redemption, which amount may vary under different conditions and at different rates;
(f)	Whether that series shall have a sinking fund for the redemption or purchase of shares of that series, and, if so, the terms and amount of such sinking fund;
(g)	The rights of the shares of that series in the event of voluntary or involuntary liquidation, dissolution or winding-up of the Corporation, and the relative rights of priority, if any, of payment of shares of that series; and
(h)	Any other relative rights, preferences and limitations of that series.

FIFTH: The name and mailing address of the incorporator is as follows:

Purvi Shah
Debevoise & Plimpton
919 Third Avenue
New York, New York 10022

SIXTH: The following provisions are inserted for the management of the business and for the conduct of the affairs of the Corporation and for the purpose of creating, defining, limiting and regulating the powers of the Corporation and its directors and stockholders:

(a)	The number of directors of the Corporation shall be fixed and may be altered from time to time in the manner provided in the By-Laws, and vacancies in the Board of Directors and newly created directorships resulting from any increase in the authorized number of directors may be filled, and directors maybe removed, as provided in the By-Laws.
(b)	The election of directors may be conducted in any manner approved by the stockholders at the time when the election is held and need not be by written ballot.
(c)	All corporate powers and authority of the Corporation (except as at the time otherwise provided by law, by this Certificate of Incorporation or by the By-Laws) shall be vested in and exercised by the Board of Directors.

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(d)	The Board of Directors shall have the power without the assent or vote of the stockholders to adopt, amend, alter or repeal the By-Laws of the Corporation, except to the extent that the By-Laws or this Certificate of Incorporation otherwise provide.
(e)	The personal liability of the directors of the corporation is hereby eliminated to the fullest extent permitted by the provisions of paragraph (7) of subsection (b) of Section 102 of the General Corporation Law of the State of Delaware, as the same may be amended and supplemented. Neither the amendment or repeal of this section nor the adoption of any provision of this Certificate of Incorporation inconsistent with this section shall adversely affect any right or protection of a director of the Corporation existing at the time of such amendment, repeal or adoption.
(f)	The Corporation shall, to the fullest extent permitted by Section 145 of the General Corporation Law of the State of Delaware, as the same may be amended and supplemented, or by any successor thereto, indemnify any and all persons whom it shall have power to indemnify under said section from and against any and all of the expenses, liabilities or other matters referred to in or covered by said section. The Corporation shall advance expenses to the fullest extent permitted by said Section. Such right to indemnification and advancement of expenses shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person. The indemnification and advancement of expenses provided for herein shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any By-Law, agreement, vote of stockholders or disinterested directors or otherwise.

SEVENTH: The Corporation reserves the right to amend or repeal any provision contained in this Certificate of Incorporation in the manner now or hereafter prescribed by the laws of the State of Delaware, and all rights herein conferred upon stockholders or directors are granted subject to this reservation.

IN WITNESS WHEREOF, the Corporation has caused this Amended and Restated Certificate of Incorporation to be signed by Courtney C. Smith, its Chief Executive Officer, this 19th day of May, 2005.

/s/ Courtney C. Smith
Name:	Courtney C. Smith
Title:	Chief Executive Officer

13

Schedule C

INSTALLMENT SCHEDULE

$250,000 due and payable at the execution of this Agreement and each ninety days thereafter, until the obligation under this Agreement is satisfied.

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EX-10.4

Exhibit 10.4

2007 STOCK INCENTIVE PLAN
OF
SPECIALTY UNDERWRITERS’ ALLIANCE, INC.

RESTRICTED STOCK AGREEMENT

This confirms that on ___, 20___ (the “Award Date”), ___ (the “Recipient”) was granted a restricted stock award with respect to 3,000 shares (the “Shares”) of the common stock of Specialty Underwriters’ Alliance, Inc. (the “Company”), pursuant to the terms of the 2007 Stock Incentive Plan of Specialty Underwriters’ Alliance, Inc. (the “Plan”) (which terms are hereby incorporated by reference).

The Shares are fully vested as of the Award Date, and are subject only to any applicable restrictions or conditions under the requirements of the stock exchange upon which the Shares or shares of the same class are listed, and under any securities law applicable to the Shares.

WITNESS the signature of the Company’s duly authorized officer as of the date first written above. By countersigning below, the Recipient acknowledges receipt of this agreement and the Shares.

SPECIALTY UNDERWRITERS’ ALLIANCE, INC.
 

By:  

Acknowledged:

[Name of Recipient]

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EX-10.5

Exhibit 10.5

2007 STOCK INCENTIVE PLAN
OF
SPECIALTY UNDERWRITERS’ ALLIANCE, INC.

RESTRICTED STOCK AGREEMENT

AGREEMENT made as of ___, 20___, by and between SPECIALTY UNDERWRITERS’ ALLIANCE, INC., a Delaware corporation (the “Company”), and ___ (the “Recipient”).

W I T N E S S E T H :

WHEREAS, the Company has adopted the 2007 Stock Incentive Plan of Specialty Underwriters’ Alliance, Inc. (the “Stock Incentive Plan”) pursuant to which shares of the Company’s common stock (“Shares”) may be awarded to employees and directors of, and consultants and independent contractors used by, the Company and its Subsidiaries; and

WHEREAS, the Company has granted to the Recipient a restricted stock award pursuant to the Stock Incentive Plan; and

WHEREAS, it is intended that this Agreement shall set forth the terms, conditions and restrictions imposed with respect to said restricted stock award;

NOW, THEREFORE, in consideration of the mutual covenants herein contained and other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:

FIRST: Pursuant to the Stock Incentive Plan, the Recipient has been awarded on ___, 20___ (the “Award Date”), a restricted stock award with respect to ___ Shares (the “Restricted Stock Award” and such Shares, the “Restricted Shares”), subject to the terms, conditions and restrictions set forth in the Stock Incentive Plan and in this Agreement. [The purchase price payable for the Restricted Shares shall be $  per Share, payable by cash, or by check to the order of the Company, within 30 days after the Award Date. [TO BE INCLUDED ONLY IF A PURCHASE PRICE IS TO BE PAID.]]

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SECOND: Restrictions shall be imposed on a transfer of the Restricted Shares and such Shares shall be subject to risk of forfeiture, as follows:

Item 3: (a) Except as otherwise provided pursuant to the Plan [or as set forth in the Employment Agreement dated as of ______between the Company and the Recipient (the “Employment Agreement”)], the Shares issued pursuant to the Restricted Stock Award shall become vested as follows: [ADD VESTING RATE], provided the Recipient is still in the employ or service of the Company or a Subsidiary on each such respective vesting date. In addition, in the event of the Recipient’s Retirement (as defined below) prior to the date on which the Restricted Shares have become vested, then the Restricted Shares shall continue to vest in accordance with the foregoing provisions as if the Recipient were still in the employ or service of the Company or a Subsidiary, provided that the Recipient continues to comply with the restrictive covenants set forth in Paragraph FOURTH. For purposes hereof, “Retirement” shall mean the Recipient’s retirement from the Company (or a Subsidiary) at or after age 55 and the completion of at least five years of service with the Company (or a Subsidiary) after November 17, 2004 (subject to waiver by the Committee), and where the sum of the Recipient’s age and years of service as of the date of such retirement exceeds 65 years, provided that (unless waived by the Committee for medical or other unforeseen exigencies) the Recipient shall have given at least nine months’ advance written notice to the Company of such retirement. If the Recipient’s employment with the Company and its Subsidiaries terminates prior to the date on which the Restricted Shares become vested, or if, after the Recipient’s Retirement, the Recipient breaches the restrictive covenants set forth in Paragraph FOURTH, any Restricted Shares (and any dividends, distributions and adjustments with respect thereto) which were not theretofore vested shall be forfeited.

Item 4: (b) Any other applicable restrictions or conditions under the requirements of any stock exchange upon which the Restricted Shares or shares of the same class are then listed, and under any securities law applicable to such Restricted Shares, shall be imposed.

THIRD: Restrictions shall be imposed on a transfer of the Restricted Shares, and the Company shall place a stop order with the transfer agent against any transfer of such Shares and shall retain the stock certificate representing such Shares, until such time as the Restricted Shares shall become vested in accordance with Paragraph SECOND. In addition, the Recipient shall execute and deliver to the Company, at the same time as this Agreement is executed and delivered by the Recipient, an undated stock power, to enable the Company to cause Restricted

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Shares to be transferred back to the Company in the event of a forfeiture pursuant to Paragraph SECOND (or for tax withholding purposes pursuant to paragraph FIFTH.) Prior to the lapse of the restrictions on the transferability of the Restricted Shares, the Recipient shall have all other rights and privileges of a beneficial and record owner with respect to such Shares, including, without limitation, voting rights and the right to receive dividends, distributions and adjustments with respect to such Shares; provided, however, that any dividends, distributions and adjustments with respect to the Restricted Shares shall be retained by the Company for the Recipient’s account and for delivery to the Recipient, together with the stock certificate representing such Shares, only as and when such Restricted Shares have become vested.

FOURTH: The Recipient hereby agrees to restrictive covenants, and remedies for any breach thereof, as follows:

Item 5: (a) The Recipient hereby acknowledges and recognizes that during the Recipient’s employment or service with the Company or a Subsidiary, the Recipient will be privy to trade secrets and confidential information critical to the Company’s business and that the Company would find it extremely difficult or impossible to replace the Recipient. Accordingly, the Recipient agrees that, in consideration of the grant of the Restricted Stock Award and the continued vesting of the Restricted Shares as provided in this Agreement, the Recipient will not, and will not permit any of the Recipient’s Affiliates to, except with the Company’s prior written consent, during the period in which any of the Restricted Shares continue to be subject to becoming vested (the “Non-Competition Period”), engage, directly or indirectly, whether as an employee, officer, director, consultant or otherwise, in any activity that competes with the Company or any of its Affiliates in the business of insurance. Nothing in this Paragraph FOURTH shall prohibit the Recipient or any of the Recipient’s Affiliates from owning for passive investment purposes less than 5% of the publicly traded securities of any corporation listed on the New York Stock Exchange or the American Stock Exchange or the NASDAQ. For purposes hereof, “Affiliate” means, with respect to any person or entity, any other person or entity who directly or indirectly through one or more intermediaries controls, is controlled by, or is under common control with such person or entity; “control” means the power, directly or indirectly, to direct or cause the direction of the management and policies of a person or entity whether through ownership of voting securities, by contract or otherwise.

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Item 6: (b) During the Non-Competition Period, the Recipient shall not, and shall not permit any of the Recipient’s Affiliates to, directly or indirectly, solicit, whether as an employee, officer, director, consultant or otherwise, any person or entity which is then a customer or party to any insurance-related contract with the Company and/or its Affiliates or has been a customer or supplier or such a party or solicited by the Company and/or its Affiliates in the preceding two-year period, to divert their business to any entity other than the Company and/or its Affiliates.

Item 7: (c) During the Non-Competition Period, the Recipient shall not, and shall not permit any of the Recipient’s Affiliates to, directly or indirectly, (i) solicit for employment, engage and/or hire, whether directly or indirectly, any person who is then employed by the Company and/or its Affiliates or engaged by the Company and/or its Affiliates as an independent contractor or consultant; and/or (ii) encourage or induce, whether directly or indirectly, any person who is then employed by the Company and/or its Affiliates or engaged by the Company and/or its Affiliates as an independent contractor or consultant to end his/her business relationship with the Company and/or its Affiliates.

Item 8: (d) The Recipient covenants that the Recipient will not, directly or indirectly at any time during or after the Recipient’s employment or service with the Company or any Subsidiary, disparage the Company or any of its shareholders, directors, officers, employees, or agents.

Item 9: (e) The Recipient understands that the foregoing restrictions may limit the Recipient’s ability to earn a livelihood in a business similar to the business of the Company, but the Recipient nevertheless believes that the Recipient has received and will receive sufficient consideration and other benefits as an employee or other service provider of the Company or a Subsidiary and as otherwise provided hereunder to clearly justify such restrictions which, in any event (given the Recipient’s education, skills and ability), the Recipient does not believe would prevent the Recipient from earning a living other than in a business which competes with the Company.

Item 10: (f) It is the desire and intent of the Company and the Recipient that the provisions of this Paragraph FOURTH shall be enforced to the fullest extent permissible under the laws and public policies applied in each jurisdiction in which enforcement is sought. Accordingly, if any particular provision of this Paragraph FOURTH is adjudicated to be invalid or unenforceable or shall for any reason be held to be excessively broad as to duration, geographic scope, activity or subject, it shall be construed by limiting and reducing it, so as to be enforceable to the extent compatible with applicable law and such provision shall be deemed modified and amended to the extent necessary to render such provision enforceable in such jurisdiction.

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Item 11: (g) It is understood by the Company and the Recipient that the Recipient’s obligations and the restrictions and remedies set forth in this Paragraph FOURTH are essential elements of this Agreement and that but for the Recipient’s agreement to comply with and/or agree to such obligations, restrictions and remedies, the Company would not have granted the Restricted Stock Award to the Recipient or entered into this Agreement. The Recipient acknowledges and understands that the provisions of this Paragraph FOURTH are of a special and unique nature, the loss of which cannot be adequately compensated for in damages by an action at law, and that the breach or threatened breach of the provisions of this Paragraph FOURTH would cause the Company irreparable harm. In the event of a breach or threatened breach by the Recipient of the provisions of this Paragraph FOURTH, the Company shall be entitled to an injunction restraining the Recipient from such breach or other equitable relief, without posting a bond, in addition to other remedies available to the Company. In the event of a breach by the Recipient of the provisions of this Paragraph FOURTH, the term of the Non-Competition Period shall be extended by the period of the duration of such breach. All remedies available for breach of this Paragraph FOURTH are cumulative, and neither the pursuit of any remedy nor anything contained in this Agreement shall be construed as an election of a remedy or as prohibiting the Company from or limiting the Company in pursuing any other remedies available for any breach or threatened breach of this Paragraph FOURTH.

FIFTH: If, with respect to the Restricted Shares (and any dividends, distributions and adjustments to such Shares), the Company (or a Subsidiary) shall be required to withhold amounts under applicable federal, state or local tax laws, rules or regulations, the Company (or Subsidiary) shall be entitled to take such action as it deems appropriate in order to ensure compliance with such withholding requirements and may, at its election, (i) deduct from any cash payment otherwise due to the Recipient, the appropriate withholding amount, (ii) require the Recipient to make payment in cash to the Company (or Subsidiary) in such amount as is required to be withheld, (iii) have the Company withhold such number of Restricted Shares as shall have a Fair Market Value, valued on the date on which such withholding requirement arises, equal to the amount required to be withheld (provided that this shall only apply to, and the Company shall only withhold, Restricted Shares that have become vested), or (iv) deliver to the Company Shares already owned by the Recipient for at least six months and having a Fair Market Value, valued on the date on which such withholding requirement arises, equal to the amount required to be withheld.

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SIXTH: The Company and the Recipient each hereby agree to be bound by the terms and conditions set forth in the Stock Incentive Plan, which terms and conditions are hereby incorporated by reference. Any capitalized terms used in this Agreement which are not defined herein [(or by reference to the Employment Agreement)] shall have the same definitions as set forth in the Stock Incentive Plan.

SEVENTH: This Agreement shall not be construed as giving the Recipient any rights to be retained by, or in the employ or service of, the Company (or any of its Subsidiaries), or any other employment rights or relationship.

EIGHTH: This Agreement shall inure to the benefit of, and be binding on, the Company and its successors and assigns, and shall inure to the benefit of, and be binding on, the Recipient and his heirs, executors, administrators and legal representatives. This Agreement shall not be assignable by the Recipient.

NINTH: Each provision of this Agreement is intended to be severable. If any term or provision hereof is held by a court of competent jurisdiction to be illegal or invalid for any reason whatsoever, such illegality or invalidity shall not affect the validity of the remaining provisions of this Agreement, which shall continue in full force and effect.

6

TENTH: Except as required by Delaware corporate law, this Agreement shall be subject to, and construed in accordance with, the laws of the State of Illinois without giving effect to principles of conflicts of law. The Company and the Recipient each hereby consent to the personal jurisdiction and venue of the state (and federal, if applicable) courts in the State of Illinois, for resolution of all disputes and causes of action arising out of the Stock Incentive Plan, the Restricted Stock Award or this Agreement, and the Company and the Recipient each hereby waive all questions of personal jurisdiction and venue of such courts, including, without limitation, the claim or defense therein that such courts constitute an inconvenient forum. THE COMPANY AND THE RECIPIENT EACH HEREBY WAIVE THEIR RESPECTIVE RIGHT TO A JURY TRIAL IN ANY ACTION ARISING OUT OF THE STOCK INCENTIVE PLAN, THE RESTRICTED STOCK AWARD OR THIS AGREEMENT.

ELEVENTH: This Agreement, together with the Stock Incentive Plan, constitutes the entire agreement between the parties hereto with respect to the Restricted Stock Award.

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

SPECIALTY UNDERWRITERS’ ALLIANCE, INC.
 

By:  

Acknowledged and agreed to:

[Name of Recipient]

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EX-10.6

Exhibit 10.6

2007 STOCK INCENTIVE PLAN
OF
SPECIALTY UNDERWRITERS’ ALLIANC, INC.

OPTION AGREEMENT

NON-QUALIFIED STOCK OPTION

THIS CERTIFIES that on                     , 20___,                                          (the “Holder”) was granted an option (“Option”), which is not to be treated as an incentive stock option under Section 422 of the Internal Revenue Code, to purchase at the Option exercise price of $                     per share all or any part of                                          fully paid and non-assessable shares (“Shares”) of the common stock of Specialty Underwriters’ Alliance, Inc. (the “Corporation”), pursuant to the 2007 Stock Incentive Plan of Specialty Underwriters’ Alliance, Inc. (the “Plan”), upon and subject to the following terms and conditions.

This Option shall expire on                     , 20___.

This Option may be exercised or surrendered during the Holder’s lifetime only by the Holder. This Option shall not be transferable by the Holder otherwise than by will or by the laws of descent and distribution or as otherwise provided pursuant to the Plan.

Except as otherwise provided pursuant to the Plan [or as set forth in the Employment Agreement (“Employment Agreement”) dated as of                      between the Corporation and the Holder], this Option shall vest and become exercisable as follows: [ADD VESTING RATE], provided that the Holder is still in the employ or service of the Corporation or a Subsidiary on the applicable vesting date. In no event, however, may the Option be exercised on or after the Option’s expiration date or after an earlier termination of exercisability of the Option pursuant to [the Employment Agreement or, to the extent not inconsistent with the Employment Agreement,] the Plan in connection with the Holder’s termination of employment or service with the Corporation or its Subsidiaries.

The Option and this Option agreement are issued pursuant to and are subject to all of the terms and conditions of the Plan, the terms and conditions of which are hereby incorporated as though set forth at length, and a copy of which is attached to this agreement. Capitalized terms not otherwise defined in this agreement shall have the same meanings as defined in the Plan. A determination of the Committee under the Plan as to any questions which may arise with respect to the interpretation of the provisions of the Option and of the Plan shall be final. The Committee may authorize and establish such rules, regulations and revisions thereof not inconsistent with the provisions of the Plan, as it may deem advisable.

1

WITNESS the signature of the Corporation’s duly authorized officer as of the date first written above. By countersigning below, the Holder agrees to be bound by all of the terms and conditions of this agreement and of the Plan.

	SPECIALTY UNDERWRITERS’ ALLIANCE, INC.
	By:
Acknowledged and agreed to:
[Holder]

2

EX-10.7

Exhibit 10.7

2007 STOCK INCENTIVE PLAN
OF
SPECIALTY UNDERWRITERS’ ALLIANCE, INC.

OPTION AGREEMENT

INCENTIVE STOCK OPTION
(Non-Assignable)

THIS CERTIFIES that on                     , 20___,                                          (the “Holder”) was granted an option (“Option”) to purchase at the Option exercise price of $                     per share all or any part of                                          fully paid and non-assessable shares (“Shares”) of the common stock of Specialty Underwriters’ Alliance, Inc. (the “Corporation”), pursuant to the 2007 Stock Incentive Plan of Specialty Underwriters’ Alliance, Inc. (the “Plan”), upon and subject to the following terms and conditions.

This Option shall expire on                     , 20___.

This Option may be exercised or surrendered during the Holder’s lifetime only by the Holder. This Option shall not be transferable by the Holder otherwise than by will or by the laws of descent and distribution.

Except as otherwise provided pursuant to the Plan [or as set forth in the Employment Agreement (“Employment Agreement”) dated as of                      between the Corporation and the Holder], this Option shall vest and become exercisable as follows: [ADD VESTING RATE], provided that the Holder is still in the employ or service of the Corporation or a Subsidiary on the applicable vesting date. In no event, however, may the Option be exercised on or after the Option’s expiration date or after an earlier termination of exercisability of the Option pursuant to [the Employment Agreement or, to the extent not inconsistent with the Employment Agreement,] the Plan in connection with the Holder’s termination of employment or service with the Corporation or its Subsidiaries.

The Option and this Option agreement are issued pursuant to and are subject to all of the terms and conditions of the Plan, the terms and conditions of which are hereby incorporated as though set forth at length, and a copy of which is attached to this agreement. Capitalized terms not otherwise defined in this agreement shall have the same meanings as defined in the Plan. A determination of the Committee under the Plan as to any questions which may arise with respect to the interpretation of the provisions of the Option and of the Plan shall be final. The Committee may authorize and establish such rules, regulations and revisions thereof not inconsistent with the provisions of the Plan, as it may deem advisable.

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WITNESS the signature of the Corporation’s duly authorized officer as of the date first written above. By countersigning below, the Holder agrees to be bound by all of the terms and conditions of this agreement and of the Plan.

	SPECIALTY UNDERWRITERS’ ALLIANCE, INC.
	By:
Acknowledged and agreed to:
[Holder]

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EX-31.1

Exhibit 31.1

CERTIFICATION

I, Courtney C. Smith, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Specialty Underwriters’ Alliance, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principals;
(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 2, 2007

/s/ Courtney C. Smith  

Courtney C. Smith 

President and Chief Executive Officer 

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Peter E. Jokiel, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Specialty Underwriters’ Alliance, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principals;
(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 2, 2007

/s/ Peter E. Jokiel  

Peter E. Jokiel 

Executive Vice President and Chief
Financial Officer 

EX-32.1

Exhibit 32.1

Certification pursuant to
18 U.S.C. Section 1350,
as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002

I, Courtney C. Smith, Chief Executive Officer of Specialty Underwriters’ Alliance, Inc. (the “Company”), pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, do hereby certify as follows:

(i) The quarterly report on Form 10-Q of the Company for the period ended September 30, 2007 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(ii) The information contained in such Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

IN WITNESS WHEREOF, I have executed this Certification this 2nd day of November, 2007.

/s/ Courtney C. Smith  

Courtney C. Smith 

Chief Executive Officer 

A signed original of this written statement required by Section 906 has been provided to Specialty Underwriters’ Alliance, Inc. and will be retained by Specialty Underwriters’ Alliance, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

Exhibit 32.2

Certification pursuant to
18 U.S.C. Section 1350,
as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002

I, Peter E. Jokiel, Chief Financial Officer of Specialty Underwriters’ Alliance, Inc. (the “Company”), pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, do hereby certify as follows:

(i) The quarterly report on Form 10-Q of the Company for the period ended September 30, 2007 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(ii) The information contained in such Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

IN WITNESS WHEREOF, I have executed this Certification this 2nd day of November, 2007.

/s/ Peter E. Jokiel  

Peter E. Jokiel 

Chief Financial Officer 

A signed original of this written statement required by Section 906 has been provided to Specialty Underwriters’ Alliance, Inc. and will be retained by Specialty Underwriters’ Alliance, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.