EMPLOYMENT AGREEMENT
     THIS EMPLOYMENT AGREEMENT (this “Agreement”), dated April 7, 2008, is made
between Specialty Underwriters’ Alliance, Inc., a Delaware corporation (the
“Company”), and Gary J. Ferguson (the “Executive”).
WITNESSETH:
     WHEREAS, on November 19, 2003, the Company and the Executive (collectively,
the “Parties”) entered into an agreement (as such agreement was amended and
amended and restated prior to the date hereof, the “Prior Agreement”) whereby
the Company agreed to employ the Executive as Senior Vice President and Chief
Claims Officer (“Chief Claims Officer”) and the Executive accepted such
employment; and
     WHEREAS, the Company has an interest in ensuring continuity of its
leadership; and
     WHEREAS, the Company wishes to continue the services of the Executive in
the capacity of Chief Claims Officer upon the terms and conditions hereinafter
set forth and the Executive wishes to accept such employment; and
     WHEREAS, it is desirable that the Prior Agreement be replaced by this
Agreement so that, on and after the date of this Agreement, this Agreement shall
contain the terms and conditions governing the employment of the Executive in
the capacity as Chief Claims Officer of the Company.
     NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants and agreements herein contained, and for other valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the Parties hereby
agree as follows:
          SECTION 1. Employment. The Company hereby employs the Executive, and
the Executive hereby accepts employment by the Company, upon the terms and
conditions hereinafter set forth.
          SECTION 2. Term. The term of this Agreement shall commence on the date
hereof and shall terminate by its terms as follows: (i) on December 31, 2008, if
on or before October 1, 2008 the Company delivers to the Executive a written
notice that this Agreement shall not be extended beyond December 31, 2008, or
(ii) if no such notice is delivered by October 1, 2008, then this Agreement
automatically shall terminate on December 31, 2009 (if in effect, the period
from January 1, 2009 to December 31, 2009 is herein referred to as the
“Extension Period”); provided, that the Executive’s employment hereunder may be
terminated on an earlier date in accordance with the provisions of this
Agreement. For purposes of this Agreement, all references to “Employment Period”
shall mean the period beginning on the date hereof and ending on the effective
termination of the Executive’s employment, and “Termination Date” shall mean the
last day of the Executive’s employment under this Agreement (and not the date on
which any notice described in the first sentence of this Section 2 is given).
          SECTION 3. Duties. During the Employment Period, the Executive shall
be employed as Chief Claims Officer of the Company and shall perform such duties
consistent with

 

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such title and shall report to the Chief Executive Officer of the Company. If
requested by the Company, during the Employment Period, the Executive shall also
serve, without additional compensation, in one or more executive positions
and/or as a member of the board of directors of the Company (the “Board of
Directors”) or any Affiliate (as defined herein) of the Company. The Executive
shall comply fully with all applicable laws, rules and regulations as well as
with the Company’s policies, compliance manuals and procedures.
          SECTION 4. Time to be devoted to Employment. The Executive shall
devote his entire working time to the business of the Company and shall use his
best efforts, skills and abilities in his diligent and faithful performance of
his duties and responsibilities hereunder; provided, however, that during the
Extension Period, if applicable, the Executive shall be a “part-time” employee
and shall not be required to work more than 30 hours per week. During the
Employment Period, the Executive shall not engage in any other business
activities or hold any office or positions regardless of whether any such
activity, office or position is pursued for profit or other pecuniary advantage,
without the prior consent of the Company; provided, however, the Executive may
own, solely as an investment, 1.0% or less of the securities of any publicly
traded corporation.
          SECTION 5. Compensation; Business Expenses; Benefits; Other Matters.
(a)  Base Salary. The Company shall pay the Executive an annual salary (the
“Base Salary”) of $289,500, less applicable withholding and other deductions,
payable in accordance with the Company’s then current payroll practices;
provided, however, for and during the Extension Period, if applicable, the Base
Salary shall be $125,000, less applicable withholding and other deductions,
payable in accordance with the Company’s then current payroll practices.
          (b) Annual Bonus. At such times that the Company has a bonus plan(s)
for its senior executive officers, the Executive shall be eligible to
participate in such plan(s) and, if determined in the sole judgment of the Board
of Directors or any committee that administers such bonus plan, to receive an
annual bonus pursuant to such bonus plan. Notwithstanding the foregoing, nothing
in this Agreement shall be construed as requiring the Company to establish or
maintain any bonus plan or to pay to the Executive any annual bonus. The amount
and timing of any annual bonus that may be paid to the Executive will be in the
sole discretion of the Board of Directors or any committee that administers such
bonus plan.
          (c) Equity Compensation. The Executive shall be eligible to receive
such stock options, awards of restricted stock or other types of equity-based
compensation as may be determined by the Board of Directors or the Compensation
Committee of the Board of Directors (the “Compensation Committee”) in its sole
discretion and upon such terms and conditions as are determined by the Board of
Directors or the Compensation Committee in its sole discretion
          (d) Participation in Benefits. Other than during the Extension Period,
if applicable, the Executive shall be eligible to participate in, and receive
benefits under, any pension, profit sharing, medical, group health,
hospitalization and disability insurance, stock purchase, stock option, stock
ownership, vacation or other employee benefit plan, program or policy of the
Company which may be in effect at any time during the course of his employment
by the Company and which shall be generally available to senior executive
officers of the Company occupying positions of comparable status or
responsibility, subject to the terms of such

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plans, programs or policies. In addition, other than during the Extension
Period, the Executive shall receive annual reimbursement of up to $10,000 per
calendar year for aggregate expenses incurred for financial planning, including
the preparation of income tax returns, upon presentation of appropriate receipts
for such expenses; provided that (i) the amount of such expenses eligible for
reimbursement in one calendar year shall not affect the amount of such expenses
eligible for reimbursement in any other calendar year, and (ii) such
reimbursement shall be made promptly and in no event later than December 31st of
the calendar year next following the calendar year in which such expenses were
paid by the Executive. During the Extension Period, if applicable, the Executive
shall not eligible to participate in, and receive benefits under, any benefit
plans or arrangements of the Company, including, without limitation, those
described in this Section 5(d).
          (e) Expense Reimbursement. The Company shall, upon presentation by the
Executive to the Company of such appropriate documentation as may be required by
the Company, reimburse the Executive, in accordance with its practice from time
to time for officers of the Company, for all reasonable and authorized expenses
and other disbursements incurred by the Executive for or on behalf of the
Company in the performance of his duties hereunder.
          (f) Paid Time Off. During the Employment Period, other than during the
Extension Period, if applicable, the Executive shall be entitled to take
twenty-nine paid time off days (“PTO”) for each year during the Employment
Period, all or a portion of which may be carried over from year to year in
accordance with the then-current PTO policy of the Company. The Executive may
schedule the PTO as he elects, subject to the Company’s business needs. For the
avoidance of doubt, during the Extension Period, if applicable, the Executive
shall not be entitled to any PTO days. The Executive shall also be entitled to
the paid holidays set forth in the Company’s policies.
          (g) Indemnification. To the fullest extent permitted under applicable
law and the charter and by-laws of the Company, the Company and any of its
Affiliates shall indemnify and hold harmless the Executive, and advance payment
to Executive for costs and expenses, for all liability incurred by him to any
third party as a result of the performance of his duties under this Agreement,
subject to the recoupment of such advances by the Company if it is ultimately
determined that the Executive was not entitled to such indemnification. The
Company shall ensure that the Executive is covered by the Company’s director and
officer liability insurance policies during the Employment Period and for at
least six (6) years thereafter in an amount reasonably determined by the Board
of Directors.
          SECTION 6. Involuntary Termination. (a) Disability. If the Executive
is incapacitated or disabled (as determined by a physician mutually acceptable
to the Company and the Executive) by accident, sickness or otherwise so as to
render him mentally or physically incapable of performing the services required
to be performed by him under this Agreement (such condition being hereinafter
referred to as a “Disability”) for an aggregate period of 180 days or more
during any twelve month period (whether or not consecutive and after using up
any accrued PTO), the Company may, at any time thereafter during the
continuation of such Disability, at its option, terminate the Employment Period
and the employment of the Executive under this Agreement immediately by giving
him written notice to that effect. Until the Executive’s employment hereunder
shall have been terminated in accordance with the

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immediately preceding sentence, the Executive shall be entitled to receive the
compensation and benefits provided in Section 5 notwithstanding any such
Disability (less any Company-paid benefits that he receives, such as short term
disability or workers compensation, during such period).
          (b) Death. If the Executive dies, the Employment Period and his
employment hereunder shall cease as of the date of his death.
          SECTION 7. Termination For Cause. (a) The Company may terminate the
employment of the Executive hereunder at any time for Cause (as hereinafter
defined) (such termination being referred to herein as a “Termination For
Cause”) by giving the Executive written notice of such termination in accordance
with Section 7(b). As used in this Agreement, “Cause” means that the Executive:
(i) has committed an act constituting a misdemeanor involving moral turpitude or
a felony under the laws of the United States or any state or political
subdivision thereof; (ii) has committed an act constituting a breach of
fiduciary duty, gross negligence or willful misconduct; (iii) has engaged in
conduct that violated the Company’s then existing material internal policies or
procedures and which is detrimental to the business, reputation, character or
standing of the Company or any of its Affiliates; (iv) has committed an act of
fraud, self dealing, conflict of interest, dishonesty or misrepresentation; or
(v) has materially breached his obligations as set forth in this Agreement.
          (b) Termination for Cause shall occur only if the Company shall have
given written notice to the Executive specifying the nature of the breach or
behavior, and, if the Termination for Cause is pursuant to clauses (ii),
(iii) or (v) of Section 7(a), the Executive fails to correct (if correctable)
such breach or behavior as soon as practicable thereafter but no later than ten
(10) days after receipt of the applicable notice, provided that there shall be
only one notice and opportunity to correct with respect to clauses (ii),
(iii) or (v) of Section 7(a).
          SECTION 8. Termination Without Cause. The Company may terminate the
employment of the Executive hereunder without Cause (such termination being
hereinafter referred to as a “Termination Without Cause”) by giving the
Executive written notice of such termination, such termination to take effect on
the date specified in such notice, which date shall not be earlier than the date
on which such notice is given. For the avoidance of doubt, any notice given by
the Company to the Executive pursuant to clause (i) in the first sentence of
Section 2 shall not be deemed or considered a notice of a Termination Without
Cause.
          SECTION 9. Good Reason; Termination due to a Change in Control.
(a) The Executive may terminate his employment hereunder upon the existence of
Good Reason. For purposes of this Agreement, the following shall constitute
“Good Reason”: after written notice setting forth the alleged Good Reason by the
Executive to the Company (which notice must be delivered within ninety (90) days
of the initial existence of the event or circumstances that constitutes the Good
Reason), and the expiration of a 60-day cure period, there continues to be:
(i) a material diminution in the Executive’s authority, duties or
responsibilities; and/or (ii) a material breach by the Company of any material
provision of this Agreement.
          (b) If the Executive terminates this Agreement and his employment
hereunder within twenty-four (24) months of a Change in Control (as defined
below) for Good Reason, for

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purposes of this Agreement such termination shall be considered a “Termination
due to a Change in Control”. For purpose of this Agreement, any termination of
the Executive’s employment by the Company within twenty-four (24) months of a
Change in Control other than pursuant to Section 6 or Section 7 also shall be
considered a Termination due to a Change in Control. A “Change in Control” shall
be deemed to have occurred if:
     (i) any “person” or group of “persons” (as the term “person” is used in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended)
(“Person”), acquires (or has acquired during the twelve-month period ending on
the date of the most recent acquisition by such Person) direct or indirect
beneficial ownership of securities of the Company representing 50% or more of
the combined voting power of the then outstanding securities of the Company
(provided that acquisitions by the Executive or any existing stockholder of the
Company owning more than 20% of the combined voting power of the then
outstanding securities of the Company as of the date of this Agreement shall be
ignored for this purpose),
     (ii) a merger or consolidation of the Company with any other corporation is
consummated, other than a merger or consolidation which resulted in all or
substantially all of the holders of the Company’s voting securities immediately
prior thereto continuing to hold at least 50% of the combined voting power of
the outstanding voting securities of the Company or of the surviving entity
immediately after such merger or consolidation,
     (iii) the Board of Directors of the Company approves a plan of complete
liquidation of the Company or the Company is sold or all or substantially all of
the Company’s assets are sold or disposed of other than any such sale or
disposition where all or substantially all of the holders of the Company’s
voting securities immediately prior thereto continue to hold at least 50% of the
combined voting power of the outstanding voting securities of the acquiror or
transferee entity immediately after such sale or disposition, or
     (iv) individuals who, on the date following the date of the Company’s 2007
annual meeting of stockholders, are directors (the “Incumbent Board”) cease for
any reason to constitute at least a majority of the directors; provided,
however, that if the appointment or election (or nomination for election) of any
new director was approved or recommended by a majority vote of the Incumbent
Board, such new director shall be considered a member of the Incumbent Board,
unless such new director’s initial assumption of office occurs as a result of or
in connection with either an actual or threatened election contest (as such
terms are used in Rule 14a-11 of Regulation 14A promulgated under the Securities
Exchange Act of 1934, as amended) or other actual or threatened solicitation of
proxies or consents by or on behalf of an entity other than the Incumbent Board.
     Notwithstanding the foregoing, for purposes of clause (i), a Change in
Control will not be deemed to have occurred if the power to control (directly or
indirectly) the management and policies of the Company is not transferred from a
Person to another Person; and, for purposes of clause (ii), a Change in Control
will not be deemed to occur if the assets of the Company are transferred: (A) to
a stockholder in exchange for his stock, (B) to an entity in which the

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Company has (directly or indirectly) more than 50% ownership, or (C) to a Person
that has (directly or directly) more than 50% ownership of the Company with
respect to its stock outstanding, or to any entity in which such Person
possesses (directly or indirectly) more than 50% ownership.
          SECTION 10. Effect of Termination.
          (a) Definitions. For purposes of this Agreement, the terms “Accrued
Rights,” “Severance Payments” and “Change in Control Severance Payments” shall
have the following meanings:
Accrued Rights. The Company shall pay Executive a one-time, lump-sum amount
equal to the sum of (A) his earned but unpaid Base Salary, and, if applicable,
any accrued and unpaid bonus, each pro-rated through the Termination Date and
(B) any unreimbursed business expenses or other amounts due to Executive from
the Company as of the Termination Date. In addition, the Company shall provide
to Executive all payments, rights and benefits due as of the Termination Date
under the terms of the Company’s employee and fringe benefit plans, practices,
programs and arrangements referred to in Section 5 hereof (together with clauses
(A) and (B), the “Accrued Rights”).
Severance Payments. The Company shall pay Executive a lump–sum amount equal to
the sum of 150% of his Base Salary if a Termination Without Cause or Termination
for Good Reason occurs on or before the applicable stated termination date set
forth in the first sentence of Section 2, and (B) any unreimbursed business
expenses or other amounts due to Executive from the Company as of the
Termination Date (if not already covered by a payment of Accrued Rights).
Change in Control Severance Payments. The Company shall pay Executive a lump–sum
amount equal to the sum of (A) two times his Base Salary, if the Change in
Control occurred on or before the applicable stated termination date set forth
in the first sentence of Section 2, and (B) any unreimbursed business expenses
or other amounts due to Executive from the Company as of the Termination Date;
in addition, all stock options, restricted stock awards or other types of
equity-based compensation then held by the Executive which were not previously
vested or exercised shall become fully vested and/or exercisable.
          (b) Termination for Cause; Resignation by Executive; Disability;
Death. Upon the termination of the Executive’s employment hereunder due to a
Termination for Cause, the Resignation by Executive, Disability or death,
neither the Executive nor his beneficiary or estate shall have any further
rights or claims against the Company under this Agreement or otherwise, except
the Accrued Rights, which shall be paid to the Executive immediately upon
termination or as otherwise provided pursuant to the applicable plan, practice,
program or arrangement. For purposes of this Agreement, the defined terms
“Resignation” and “Resigns” shall refer to the Executive voluntarily terminating
his employment hereunder, other than for Good Reason or Termination due to a
Change in Control.

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          (c) Termination Without Cause; Termination for Good Reason. Upon the
termination of the Executive’s employment hereunder due to a Termination Without
Cause or Termination for Good Reason, neither the Executive nor his beneficiary
or estate shall have any further rights or claims against the Company under this
Agreement or otherwise, except the Accrued Rights and the Severance Payments as
provided herein. The Accrued Rights shall be paid to the Executive immediately
upon termination or as otherwise provided pursuant to the applicable plan,
practice, program or arrangement. In consideration for such Severance Payments,
and as a condition of the receipt thereof, the Executive agrees to execute a
release releasing the Company and its Affiliates from all actions, claims,
demands, causes of action, obligations, damages, liabilities, expenses and
controversies of any nature, excluding those arising in connection with the
enforcement of Executive’s indemnification rights. As used in this Agreement,
“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. Such release must
become effective on or before March 15th of the calendar year next following the
calendar year in which such termination occurs. Provided the release becomes so
effective, the Severance Payments shall be paid to the Executive upon the
effective date of the release (and no later than such March 15th date).
          (d) Termination due to a Change in Control.
               (i) Upon the termination of the Executive’s employment hereunder
due to a Termination due to a Change in Control, neither the Executive nor his
beneficiary or estate shall have any further rights or claims against the
Company under this Agreement or otherwise, except the Accrued Rights and the
Change in Control Severance Payments as provided herein. The Accrued Rights
shall be paid to the Executive immediately upon termination or as otherwise
provided pursuant to the applicable plan, practice, program or arrangement. In
consideration for the Change in Control Severance Payments, and as a condition
of the receipt thereof, the Executive agrees to execute a release releasing the
Company and its Affiliates from all actions, claims, demands, causes of action,
obligations, damages, liabilities, expenses and controversies of any nature,
excluding those arising in connection with the enforcement of Executive’s
indemnification rights. Such release must become effective on or before
March 15th of the calendar year next following the calendar year in which such
termination occurs. Provided the release becomes so effective, the Severance
Payments shall be paid to the Executive (and full vesting with respect to stock
options, restricted stock awards or other types of equity-based compensation
shall occur) upon the effective date of the release (and no later than such
March 15th date).
               (ii) Notwithstanding any other provisions of this Agreement, if
any of the benefits and payments provided under this Agreement, either alone or
together with other benefits and payments which the Executive has the right to
receive either directly or indirectly from the Company or any of its Affiliates,
would constitute an excess parachute payment (the “Excess Payment”) under
Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”), the
Executive hereby agrees that the benefits and payments provided under this
Agreement shall be reduced (but not below zero) by the amount necessary to
prevent any such

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benefits and payments to the Executive from constituting an Excess Payment;
provided, however, that such reduction shall be made only if, by reason of such
reduction, the Executive’s net after-tax economic benefit shall exceed the net
after-tax economic benefit to the Executive if such reduction were not made.
               (iii) All determinations required to be made under clause (ii) of
this Section 10(d), and the assumptions to be utilized in arriving at such
determination, shall be made by the certified public accounting firm used for
auditing purposes by the Company immediately prior to the date of termination
or, if the parties determine that the certified public accounting firm used for
auditing purposes by the Company immediately prior to the date of termination
cannot make such determination because of legal restrictions, the parties shall
agree on a different certified public accounting firm (such certified public
accounting firm is hereinafter referred to as the “Accounting Firm”), which
shall promptly provide detailed supporting calculations both to the Company and
the Executive. The Company shall pay all fees and expenses of the Accounting
Firm.
          (e) Severance upon expiration of this Agreement pursuant to Section 2.
Unless the Executive’s employment hereunder has not been otherwise terminated on
an earlier date in accordance with the provisions of this Agreement, this
Agreement expires by its terms on the applicable stated termination date set
forth in the first sentence of Section 2, and, upon such expiration of this
Agreement, the Executive’s employment shall terminate and neither the Executive
nor his beneficiary or estate shall have any further rights or claims against
the Company under this Agreement or otherwise, except the Accrued Rights and the
Severance Payments as provided herein. The Accrued Rights shall be paid to the
Executive immediately upon termination or as otherwise provided pursuant to the
applicable plan, practice, program or arrangement. In consideration for such
Severance Payments, and as a condition of the receipt thereof, the Executive
agrees to execute a release releasing the Company and its Affiliates from all
actions, claims, demands, causes of action, obligations, damages, liabilities,
expenses and controversies of any nature, excluding those arising in connection
with the enforcement of Executive’s indemnification rights. Such release must
become effective on or before March 15th of the calendar year next following the
calendar year in which such termination occurs. Provided the release becomes so
effective, the Severance Payments shall be paid to the Executive upon the
effective date of the release (and no later than such March 15th date).
          (f) 409A.
               (i) In the event that any cash severance benefit or other benefit
under this Section 10 shall be subject to Section 409A of the Code and would
fail to satisfy the distribution requirement of Section 409A(a)(2)(A) of the
Code, as a result of the application of Section 409A(a)(2)(B)(i) of the Code,
then the payment of such benefits shall be delayed to the minimum extent
necessary so that such benefits are not subject to the provisions of
Section 409A(a)(1) of the Code, and any such payments or benefits will be
accumulated and paid or provided on the earliest permissible date pursuant to
Section 409A(a)(2)(B)(i) of the Code. The Board of Directors or the Compensation
Committee may attach conditions to or adjust the amounts paid pursuant to this
Section 10(f) to preserve, as closely as possible, the economic consequences
that would have applied in the absence of this Section 10(f); provided, however,
that no such condition or adjustment shall result in the payments being subject
to Section

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409A(a)(1) of the Code. The awards or grants of options, restricted stock and/or
other types of equity-based compensation may contain additional provisions
relating to the application of Section 409A of the Code and to this Agreement
and the payments and benefits distributed hereunder.
               (ii) To the extent required in order to comply with Section 409A
of the Code (if applicable), amounts that would otherwise be payable under
Section 10 during the six-month period immediately following the date of
termination shall instead be paid on the first business day after the date that
is six months following the Executive’s “separation from service” within the
meaning of Section 409A of the Code.
          (g) Clawback. If the Company, based upon a final, non-appealable
judicial or regulatory determination, determines that Section 304 of the
Sarbanes-Oxley Act of 2002 is applicable to the Executive hereunder, to the
extent that the Company is required to prepare an accounting restatement due to
the material noncompliance of the Company, as a result of misconduct, with any
financial reporting requirement under the securities laws, (A) the Executive
shall reimburse the Company for (i) any discretionary bonus or other
incentive-based or equity-based compensation received by the Executive from the
Company or any of its Affiliates and (ii) any profits realized from the sale of
securities of the Company, in either case during the 12-month period following
the first public issuance or filing with the Securities and Exchange Commission
(whichever first occurs) of the financial document embodying such financial
reporting requirement and (B) if the material noncompliance resulted from
misconduct by the Executive, (i) neither the Executive nor the Executive’s
estate shall be entitled to exercise any stock options or other types of
equity-based compensation then held by the Executive and (ii) such written
conclusion of legal counsel or judicial determination shall be the grounds for
termination of the Executive’s employment by the Company pursuant to Section 7
hereof.
          SECTION 11. Disclosure of Information; Work Product; Warranty. (i) The
Executive acknowledges and agrees that there are certain trade secrets and
confidential and proprietary information (collectively, “Confidential
Information”) which have been developed by the Company and which are used by the
Company in its business. Confidential Information shall include, without
limitation: (i) customer lists and supplier lists; (ii) the details of the
Company’s relationships with its customers, including the financial relationship
with a customer, knowledge of the internal “politics”/workings of a customer
organization, a customer’s technical needs and job specifications, knowledge of
a customer’s strategic plans and the identities of contact persons within a
customer’s organization; (iii) the Company’s marketing and development plans,
business plans; and (iv) other information proprietary to the Company’s
business. The Executive shall not, at any time during or after the Employment
Period, use or disclose any Confidential Information, except to authorized
representatives of the Company or the customer or as required in the performance
of his duties and responsibilities hereunder. Upon the termination of the
Executive’s employment hereunder for any reason, the Executive shall as promptly
as practicable return all customer and/or Company property, such as computers,
software and cell phones, and documents (and any copies including in machine or
human-readable form), to the Company. The Executive shall not be required to
keep confidential any information, which is or becomes publicly available or is
already in his possession (unless obtained from the Company or one of its
customers). Further, the Executive shall be free to use and employ his general
skills, know-how and expertise, and to use, disclose

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and employ any generalized ideas, concepts, know-how, methods, techniques or
skills, including those gained or learned during the course of the performance
of any services hereunder, so long as he applies such information without
disclosure or use of any Confidential Information.
               (ii) The Executive agrees that all copyrights, patents, trade
secrets or other intellectual property rights associated with any ideas,
concepts, techniques, inventions, processes, or works of authorship developed or
created by him during the Employment Period and for a period of six (6) months
thereafter, that (i) relate, whether directly or indirectly, to the Company’s
actual or anticipated business, research or development or (ii) are suggested by
or as a result of any work performed by the Executive on the Company’s behalf,
shall, to the extent possible, be considered works made for hire within the
meaning of the Copyright Act (17 U.S.C. § 101 et. seq.) (the “Work Product”).
All Work Product shall be and remain the property of the Company. To the extent
that any such Work Product may not, under applicable law, be considered works
made for hire, the Executive hereby grants, transfers, assigns, conveys and
relinquishes, and agrees to grant, transfer, assign, convey and relinquish from
time to time, on an exclusive basis, all of his right, title and interest in and
to the Work Product to the Company in perpetuity or for the longest period
otherwise permitted by applicable law. Consistent with his recognition of the
Company’s absolute ownership of all Work Product, the Executive agrees that he
shall (i) not use any Work Product for the benefit of any party other than the
Company and (ii) perform such acts and execute such documents and instruments as
the Company may now or hereafter deem reasonably necessary or desirable to
evidence the transfer of absolute ownership of all Work Product to the Company;
provided, however, if following ten (10) days’ written notice from the Company,
the Executive refuses, or is unable, due to disability, incapacity, or death, to
execute such documents relating to the Work Product, he hereby appoints any of
the Company’s officers as his attorney-in-fact to execute such documents on his
behalf. This agency is coupled with an interest and is irrevocable without the
Company’s prior written consent.
               (iii) The Executive represents and warrants to the Company that
(i) there are no claims that would adversely affect his ability to assign all
right, title and interest in and to the Work Product to the Company; (ii) the
Work Product does not violate any patent, copyright or other proprietary right
of any third party; (iii) the Executive has the legal right to grant the Company
the assignment of his interest in the Work Product as set forth in this
Agreement; and (iv) he has not brought and will not bring to his employment
hereunder, or use in connection with such employment, any trade secret,
confidential or proprietary information, or computer software, except for
software that he has a right to use for the purpose for which it shall be used,
in his employment hereunder.
          SECTION 12. Restrictive Covenants. (a) Non-Competition. The Executive
hereby acknowledges and recognizes that during the Employment Period he 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 Executive. Accordingly, Executive agrees that, in consideration of
the premises contained herein, and the consideration to be received by the
Executive hereunder, he will not and will not permit any of his Affiliates to,
except with the Company’s prior written consent, during the Employment Period
and for the applicable period specified in Section 12(g) below from and after
the Termination Date (the Employment Period and such additional applicable
period collectively being the “Non-Competition Period”), engage, directly or
indirectly, whether as an employee, officer, director,

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consultant or otherwise, in any activity that competes with the Company or any
of its Affiliates in the business of insurance. Nothing in this Section 12(a)
shall prohibit the Executive or any of his 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.
          (b) Customer Non-Solicitation. During the Non-Competition Period, the
Executive shall not, and shall not permit any of his Affiliates to solicit,
directly or indirectly, any person or entity which (i) is currently a customer
or party to any insurance-related contract with the Company and/or its
Affiliates, (ii) has been a customer or party to any insurance-related contract
with the Company and/or its Affiliates during the two year period immediately
preceding such solicitation or (iii) was solicited by the Company and/or its
Affiliates during the two year period immediately preceding such solicitation,
provided that in the case of (b)(i) above such solicitation diverted or
attempted to divert the business of the Company and/or its Affiliates to another
person or entity or in the case of (b)(ii) and (b)(iii) above, the business
solicited is business in which the Company is currently engaged.
          (c) Employee Non-Solicitation. During the Non-Competition Period, the
Executive shall not, and shall not permit any of his 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.
          (d) Non-Disparagement of the Company. The Executive covenants that he
will not, directly or indirectly at any time during or after the Employment
Period, disparage the Company or any of its shareholders, directors, officers,
employees, or agents.
          (e) Non-Disparagement of the Executive. The Company covenants that it
will not, directly or indirectly at any time during or after the Employment
Period, disparage the Executive.
          (f) Acknowledgement. The Executive understands that the foregoing
restrictions may limit his ability to earn a livelihood in a business similar to
the business of the Company, but he nevertheless believes that he has received
and will receive sufficient consideration and other benefits as an employee of
the Company and as otherwise provided hereunder to clearly justify such
restrictions which, in any event (given his education, skills and ability), the
Executive does not believe would prevent him from earning a living other than in
a business which competes with the Company.
          (g) Period of Non-Competition following Employment Period. For
purposes of this Agreement, with respect to the Non-Competition Period, the
applicable period following the Termination Date, in respect of the following
reasons for termination, shall be:

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               (i) Resignation by Executive: two (2) years; unless the Executive
shall have given the Company at least nine (9) months notice of his effective
resignation date, in which case fifteen (15) months;
               (ii) Death or Disability: none;
               (iii) Termination for Cause: one (1) year;
               (iv) Termination Without Cause: one (1) year;
               (v) Termination for Good Reason: one (1) year;
               (vi) Termination due to Change in Control: two (2) years.
          SECTION 13. Enforcement; Severability; Etc. It is the desire and
intent of the Parties that this Agreement, including, without limitation, the
provisions of Sections 11, 12, 13 and 14 of this Agreement, 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 Sections 11, 12 and 14 of this Agreement 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. The
terms of this Agreement are intended to be, and shall be interpreted so as to,
comply with Section 409A of the Code, and without having the Executive incur any
tax or penalty under Section 409A of the Code as a consequence of the receipt of
any payments or benefits under this Agreement. In the event that it is
determined that any term or provision of this Agreement does not so comply, then
such non-compliant term or provision shall be amended so as to conform to
Section 409A of the Code and, to the extent possible, preserve the original
intent of the Agreement.
          SECTION 14. Remedies. It is understood by the Parties hereto that the
Executive’s obligations and the restrictions and remedies set forth in
Sections 11 and 12 are essential elements of this Agreement and that but for his
agreement to comply with and/or agree to such obligations, restrictions and
remedies, the Company would not have entered into this Agreement or employed (or
continued to employ) him. The Executive acknowledges and understands that the
provisions of Sections 11 and 12 of this Agreement 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
Sections 11 and 12 of this Agreement would cause the Company irreparable harm.
In the event of a breach or threatened breach by the Executive of the provisions
of Sections 11 and 12 of this Agreement, the Company shall be entitled to an
injunction restraining him 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 Executive of the provisions of Section 12 of this
Agreement, 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
Agreement 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

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prohibiting the Company from or limiting the Company in pursuing any other
remedies available for any breach or threatened breach of this Agreement.
          SECTION 15. Notices. All notices, claims, certificates, requests,
demands and other communications hereunder shall be in writing and shall be
deemed to have been duly given and delivered if personally delivered or if sent
by nationally recognized overnight courier, by telecopy, or by registered or
certified mail, return receipt requested and postage prepaid, addressed, if to
the Company, at Specialty Underwriters’ Alliance, Inc., 222 South Riverside
Plaza, Suite 1600, Chicago, IL 60606-6001, Facsimile: (312) 277-1800, Attention:
General Counsel with a copy to Stroock & Stroock & Lavan LLP, 180 Maiden Lane,
New York, NY 10038, Attn: William W. Rosenblatt, Esq., Facsimile: 212-806-6006,
and if to the Executive, at the address set forth under the name of the
Executive on the signature page hereto, or to such other address as the Party to
whom notice is to be given may have furnished to the other Party or Parties in
writing in accordance herewith. Any such notice or communication shall be deemed
to have been received (a) in the case of personal delivery, on the date of such
delivery, (b) in the case of nationally recognized overnight courier, on the
next business day after the date when sent, (c) in the case of telecopy
transmission, when received, and (d) in the case of mailing, on the third
business day following that on which the piece of mail containing such
communication is posted. Written notice from the Company’s Board of Directors
shall constitute proper notice from the Company in all cases relating to this
Agreement.
          SECTION 16. Tax Withholding. The payments and benefits under this
Agreement may be compensation and as such may be included in either the
Executive’s W-2 earnings statements or 1099 statements. The Company may withhold
from any amounts payable under this Agreement such federal, state or local taxes
as shall be required to be withheld pursuant to any applicable law or
regulation.
          SECTION 17. Binding Agreement; Benefit. Subject to Section 23 below,
the provisions of this Agreement will be binding upon, and will inure to the
benefit of, the respective heirs, legal representatives, successors and assigns
of the Parties. The Executive acknowledges and agrees that each Affiliate of the
Company shall be an intended third party beneficiary of this Agreement.
          SECTION 18. Governing Law. This Agreement will be governed by, and
construed and enforced in accordance with, the laws of the State of Illinois
without giving effect to any principles of conflict of laws. Each Party hereby
irrevocably submits to the non-exclusive jurisdiction of the state and federal
courts sitting in the State of Illinois, for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein, and hereby irrevocably waives, and agrees not to assert in
any suit, action or proceeding, any claim that it is not personally subject to
the jurisdiction of any such court, that such suit, action or proceeding is
brought in an inconvenient forum or that the venue of such suit, action or
proceeding is improper. Each Party hereby irrevocably waives personal service of
process and consents to process being served in any such suit, action or
proceeding by mailing a copy thereof to such Party at the address for such
notices to it under this Agreement and agrees that such service shall constitute
good and sufficient service of process and notice thereof. Nothing contained
herein shall be deemed to limit in any way any right to serve process in any
manner permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT

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IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF
ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT
OR ANY TRANSACTION CONTEMPLATED HEREBY.
          SECTION 19. Waiver of Breach. The failure of a Party to enforce any
term, provision, or condition of this Agreement at any time or times shall not
be deemed a waiver of that term, provision, or condition. The waiver by either
Party of a breach of any provision of this Agreement by the other Party must be
in writing and shall not operate or be construed as a waiver of any other or
subsequent breach by such other Party.
          SECTION 20. Entire Agreement; Amendments. This Agreement contains the
entire agreement between the Parties with respect to the subject matter hereof
and supersedes all prior agreements or understandings between the Parties with
respect thereto. Notwithstanding the foregoing, this Agreement is not intended
to exclude any other types of benefits not addressed by this Agreement that may
be available to the Executive upon a termination of employment with the Company
or its Affiliates, such as “COBRA” continuation. This Agreement may be amended
only by an agreement in writing signed by the Parties hereto and authorized by
the Company’s Board of Directors or Compensation Committee.
          SECTION 21. Representations and Warranties by Executive. The Executive
represents and warrants that he is not a party to or subject to any restrictive
covenants, legal restrictions or other agreements in favor of any person or
entity which would in any way preclude, inhibit, impair or limit the Executive’s
ability to perform his obligations under this Agreement, including, but not
limited to, non-competition agreements, non-solicitation agreements or
confidentiality agreements. The Executive acknowledges that he has had a
sufficient period of time within which to review this Agreement, including
Sections 11 and 12, with an attorney of his choice and he has done so to the
extent he desired.
          SECTION 22. Headings. The section headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
          SECTION 23. Assignment. This Agreement and the Executive’s performance
hereunder are personal to the Executive and shall not be assignable by the
Executive. The Company may assign this Agreement to any Affiliate or to any
successor to all or substantially all of the business and/or assets of the
Company, whether directly or indirectly, by purchase, merger, consolidation,
acquisition of stock, or otherwise. This Agreement shall inure to the benefit of
and be binding upon the Company and its successors and assigns. However, any
such assignment by the Company shall still be subject to the Executive’s rights
under Sections 9(b) and 10(d).
          SECTION 24. Interpretation; Counterparts. No provision of this
Agreement is to be interpreted for or against any Party because that Party
drafted such provision. For purposes of this Agreement: “herein,” “hereby,”
“hereinafter,” “herewith,” “hereafter” and “hereinafter” refer to this Agreement
in its entirety, and not to any particular subsection or paragraph. This
Agreement may be executed in counterparts, including a facsimile, and each such
counterpart

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shall be deemed to be an original instrument, but all such counterparts together
shall constitute but one agreement.
          SECTION 25. No Mitigation. The Executive shall not be required to
mitigate the amount of any benefits under this Agreement by seeking other
employment or otherwise. The benefits to be provided pursuant to this Agreement
shall not be reduced by any compensation or benefits payable or provided to the
Executive as a result of employment by another employer after the date of
termination or otherwise.
          SECTION 26. Survival. The provisions of Sections 5(g), 11, 12, 13, 14,
15, 17, 18 and 21 and any other provisions of this Agreement that by their
meaning are intended to survive shall survive termination of this Agreement or
termination of the employment of the Executive for any reason.

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

            SPECIALTY UNDERWRITERS’ ALLIANCE, INC.
      By:        /s/ Courtney C. Smith         Courtney C. Smith       
President & Chief Executive Officer   

            EXECUTIVE
      By:        /s/ Gary J. Ferguson         Gary J. Ferguson             

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