Exhibit 10.3**SECURITIES PURCHASE AGREEMENT**This Securities Purchase Agreement (this “Agreement”) is made as of October 1, 2007, by andamong the purchaser listed on Schedule A attached hereto (the “Purchaser”) and SpecialtyUnderwriters’ Alliance, Inc., a Delaware corporation (the “Company”).WHEREAS, the Company desires to sell to Purchaser shares of the Company’s Class B CommonStock, par value $.01 per share (the “Shares”),NOW THEREFORE, in consideration of the foregoing recitals and the mutual covenants, agreementsand 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 theShares, having the rights, preferences, privileges and restrictions set forth in the Company’sAmended 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 purchasefrom 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 considerationspecified in Section 1(c).(c) Purchase Price. The Purchaser agrees to pay to the Company an aggregate purchaseprice of $1,000,000 (the “Purchase Price”) to purchase Shares in installments, as provided for onSchedule C attached hereto (the “Installment Schedule,” and each date individually, an “InstallmentDate”). The number of Shares that Purchaser will receive in consideration for such payments willbe determined by dividing (i) the applicable portion of the purchase price due on each InstallmentDate (each individually, a “Payment”) by (ii) the Closing Price of the Company’s Common Stock onthe date of actual payment (with fractional Shares rounded up to the next whole Share). IfPurchaser fails to make full payment on any Installment Date, the number of Shares that Purchasershall be entitled to receive, with respect to such Installment Date, will be equal to the Paymentdivided by the Closing Price of the Common Stock on the date of actual payment, or if such day isnot a Trading Day, the Trading Day first preceding the date of actual payment. Each Payment shallbe 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 suchShares would result in (i) the aggregate number of all Shares issued pursuant to this Agreementbeing greater than 19.9% of the number of shares of the Company’s Common Stock issued andoutstanding 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 otherrules and regulations of the NASD or the Nasdaq National Market or any other market or exchange onwhich the Company’s Common Stock is then listed or quoted; in which case the Company and thePurchaser will, if legally permissible, adjust the amount of the Payment due, and the number ofShares to be issued, so that the conditions specified in sub-clauses (i) and (ii) would besatisfied.(d) Delivery. With respect to each installment, the Company shall deliver, or causeto be delivered, the applicable number of Shares to the Purchaser as promptly as practical afterfull 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.
 
1

 
(b) The Purchaser has such knowledge and experience in financial and business matters that thePurchaser is capable of evaluating the merits and risks of its investment in the Company and ofprotecting 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 thePurchaser has requested concerning its investment in the Company. The Purchaser has had theopportunity to ask questions of the Company’s management, which questions were answered to itssatisfaction.(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 connectionwith the purchase of the Shares. The Purchaser has not received any public media advertisementsand 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 dulyauthorized by the Purchaser by all necessary action. This Agreement is a valid and bindingobligation of the Purchaser, enforceable in accordance with its terms, except as such enforcementmay 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 thetransactions contemplated hereby will violate or result in any violation of, or be in conflict withor 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 thePurchaser, except such that are obtained or waived. No consent, approval, order or authorizationof, or registration, declaration or filing with, any governmental authority is required on the partof the Purchaser in connection with the execution and delivery of this Agreement or the performanceby 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 underthe laws of the state of Delaware.(b) The Company has full corporate power and authority to execute and deliver this Agreementand 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 validand binding obligation of the Company, enforceable in accordance with its terms, except as suchenforcement may be limited by bankruptcy, insolvency, moratorium or other similar laws affectingcreditors’ 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 bevalidly issued and outstanding, fully paid and nonassessable.(e) Neither the execution and delivery of this Agreement nor the consummation of thetransactions contemplated hereby will violate or result in any violation of, or be in conflict withor 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 theCompany, 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 ofthe Company in connection with the execution and delivery of this Agreement or the performance bythe Company of its obligations hereunder.
 
2

 
(f) The Company has delivered to the Purchaser true, correct and complete copies of theCompany’s Certificate of Incorporation and By-laws of the Company, reflecting all amendmentsthereto. Such Certificate of Incorporation and By-laws have not been amended, modified or waivedsince the date thereof.4. Terms of the Class B Common Stock.(a) Voting Rights; Redemption Rights. Holders of Class B Stock are not entitled toany voting rights in the Company. Holders of Class B Stock have no redemption or preemptiverights, except as provided herein.(b) Dividends; Liquidation and Distribution. Subject to the terms of any outstandingseries of preferred stock of the Company, holders of Class B Stock are entitled to dividends inamounts and at times as may be declared by the board of directors of the Company out of fundslegally available, in the same proportion as holders of the Company’s common stock, par value $.01per share (the “Common Stock”). Upon liquidation or distribution, holders of Class B Stock will beentitled to share ratably, *pari passu*with the holders of the Common Stock, in all net assetsavailable for distribution to stockholders, after payment of any liquidation preferences to holdersof preferred stock of the Company.(c) Exchange Right. (i) At any time and from time to time after the fifthanniversary of the date of that certain Partner Agent Program Agreement between the Company and thePurchaser (the “Partner Agent Agreement”), provided that the Partner Agent Agreement is still ineffect and has not been terminated by either party thereto, the Purchaser shall have the right, butnot the obligation, to exchange its shares of Class B Stock for an equal number of shares of CommonStock (subject to equitable adjustment in the event of any stock dividend, stock split,combination, reorganization, recapitalization, reclassification or other similar event involving achange in such security); provided, further, that after the fifth anniversary of the date of thePartner Agent Agreement and for so long as the Partner Agent Agreement is in effect, including anyday or days on which the Purchaser exercises such exchange right, the Purchaser must retain legaland beneficial ownership for its own benefit of such number of shares of Class B Stock as could beexchanged for the same number of shares of Common Stock with a value on such date of $500,000, asdetermined pursuant to Section 4(g).(ii) Upon the Purchaser’s exercise of the exchange right, the Purchaser shall surrender thecertificate or certificates for the shares of Class B Stock to be so exchanged, accompanied bywritten notice of exchange duly executed, to the Company at any time during regular business hoursat the office of the Company. If so required by the Company, the shares of Class B Stock soexchanged shall be accompanied by a written instrument or instruments of transfer in formsatisfactory to the Company, duly executed by the Purchaser.(d) Issuance of Shares on Exchange. (i) As promptly as practicable after thesurrender, as provided herein, of any shares of Class B Stock for exchange, the Company shalldeliver to the Purchaser certificates representing the number of fully paid and nonassessableshares of Common Stock into which such shares of Class B Stock have been exchanged in accordancewith the provisions of Section 4(c)(i). Such exchange shall be deemed to have been made as of theclose of business on the date that such shares of Class B Stock shall have been surrendered forexchange by delivery thereof with a written notice of exchange duly executed, so that the rights ofthe 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 allpurposes 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 beclosed shall be effective to constitute the Purchaser as the record holder of such shares of CommonStock on such date, but such surrender shall be effective to constitute the Purchaser as the recordholder thereof for all purposes at the close of business on the next succeeding day on which suchstock transfer books are open. The Company shall issue and deliver to the Purchaser, at theexpense of the Company, a new certificate covering the number of shares of Class B Stockrepresenting the unexchanged portion of the certificate so surrendered, which new certificate shallentitle in all respects the Purchaser to the rights of the Class B Stock represented thereby to thesame extent as if the certificate theretofore covering such unexchanged shares had not beensurrendered for exchange.(ii) All shares of Class B Stock that shall have been surrendered for exchange as providedherein shall no longer be deemed to be outstanding and all rights with respect to such shares shallimmediately cease and terminate on the surrender date, except only the right of the Purchaser toreceive shares of Common Stock inexchange therefor, and such shares shall not thereafter be transferred on the books of theCompany or be deemed to be outstanding for any purpose whatsoever.
 
3

 
(e) Repurchase Right. (i) (A) At any time prior to the fifth anniversary of theexecution of the Partner Agent Agreement, if the Partner Agent Agreement is terminated by eitherthe Company or the Purchaser, for any reason, the Company shall have the right, but not theobligation, to repurchase the Shares currently held by the Purchaser for a price per Share equal tothe lesser of (1) the weighted average purchase price per Share as provided herein or (2) theCurrent Market Price (as defined herein) of the Common Stock; and (B) at any time on or after thefifth anniversary of the execution of the Partner Agent Agreement, if the Partner Agent Agreementis terminated by either the Company or the Purchaser, for any reason, the Company shall have theright, but not the obligation, to repurchase the Shares currently held by the Purchaser for a priceper Share equal to the Current Market Price of the Common Stock. Such right of the Company may beexercised by providing a notice of repurchase (the “Repurchase Notice”) to the Purchaser not lessthan 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 BStock to be repurchased. The Repurchase Notice having been so given by the Company, the aggregaterepurchase price for the shares of Class B Stock to be so repurchased shall become due and payableon 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 averagedaily Closing Price (as defined herein) of such security for the 20 consecutive Trading Days (asdefined herein) preceding such date (subject to equitable adjustment in the event of any stockdividend, stock split, combination, reorganization, recapitalization, reclassification or othersimilar event involving a change in such security); provided, however, that in the case of theCommon Stock, where no public market exists for the Common Stock at the time of exchange, theCurrent Market Price per share of the Common Stock shall be as determined by an independentinvestment banking firm experienced in the valuation of securities of property and casualtyinsurance companies and selected by the Company (at the Company’s expense); provided that, afterreceipt of the determination by such firm, the Purchaser shall have the right to select (at theexpense of the Purchaser) a second such investment banking firm to make such determination, inwhich case the Current Market Price shall be the average of the two determinations; and providedfurther that such determination need not be made more frequently than once every six months and anydetermination shall be superceded by a good faith determination by the Company’s board of directorsthat shall be required if a material event reasonably likely to affect the value of the CommonStock (such as a placement of equity securities) should occur after the next precedingdetermination, whether by an investment banking firm or firms, or by the Company’s board ofdirectors.(B) “Closing Price” shall mean, with respect to any Trading Day: (1) if the Common Stock islisted or admitted to trading on a national securities exchange, the last reported sale price ofthe Common Stock, regular way, or in case no sale takes place on such day, the average of thereported closing bid and asked prices of the Common Stock, regular way, in either case as reportedon such exchange; or (2) if the Common Stock is not listed or admitted to trading on any nationalsecurities exchange, but is listed on the Nasdaq National Market, the closing sale price of theCommon Stock on such day, or in case no sale is publicly reported for such day, the average of therepresentative 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 averageof the bid and asked prices for the Common Stock as furnished for such day by Nasdaq, or, if notfurnished by Nasdaq, by any New York Stock Exchange, Inc. member firm regularly making a market inthe 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 takesplace (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 totrading, (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 BStock to the Company in the manner and at the place designated by the Company. From and after theRepurchase Date, unless there shall have been a default in the payment of the repurchase price, allrights of the Purchaser withrespect to the Shares shall cease, and such Shares shall not thereafter be transferred on thebooks of the Company or be deemed to be outstanding for any purpose whatsoever.
 
4

 
(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 theproperty and assets of the Company to a non-affiliated third party; (ii) any merger orconsolidation with a non-affiliated third party to which the Company is a party and as a result ofwhich the holders of the voting securities of the Company immediately prior thereto own less than amajority of the outstanding voting securities of the surviving entity immediately following suchtransaction; or (iii) any Person or group of Persons (as such term is used in Section 13(d) of theSecurities Exchange Act of 1934, as amended (the “Exchange Act”)) shall beneficially own (asdefined in Rule 13d-3 under the Exchange Act) securities of the Company representing 50% or more ofthe combined voting power of the voting securities of the Company then outstanding, then thePurchaser shall thereafter have the right to convert its shares of the Class B Stock into the kindand amount of securities, cash and other property receivable upon such reorganization,reclassification, consolidation, merger or disposition by the Purchaser of the number of shares ofCommon Stock that the Purchaser would have received had it converted its shares of Class B Stockimmediately prior to such reorganization, reclassification, consolidation, merger or dispositionpursuant to Section 4(c)(i). For purposes of this section, “voting securities” shall meansecurities, the holders of which are ordinarily, in the absence of contingencies, entitled to electthe corporate directors (or Persons performing similar functions). The foregoing provisions ofthis section shall similarly apply to successive reorganizations, reclassifications,consolidations, mergers or dispositions.(g) Purchase obligation. Following the five-year anniversary of the date of thisAgreement, on each six-month anniversary thereafter, the Company shall determine the aggregatevalue of the shares of Class B Stock held by the Purchaser. The value of each share of Class BStock shall equal the fair market value of one share of the Common Stock on such date, to becalculated as follows: (i) if the Common Stock is listed or admitted to trading on a nationalsecurities exchange, the last reported sale price of the Common Stock, regular way, on such day orin case no sale takes place on such day, the average of the reported closing bid and asked pricesof 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, butis listed on the Nasdaq National Market, the closing sale price of the Common Stock on such day, orin case no sale is publicly reported for such day, the average of the representative closing bidand asked quotations for the Common Stock, as reported on Nasdaq; or (iii) if the Common Stock isnot listed or admitted to trading on the Nasdaq National Market, the average of the bid and askedprices for the Common Stock as furnished for such day by Nasdaq, or, if not furnished by Nasdaq, byany New York Stock Exchange, Inc. member firm regularly making a market in the Common Stock andselected for such purpose by the Company’s board of directors; or (iv) if no public market existsfor the Common Stock, as determined in good faith by the Company’s board of directors. If theaggregate 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 wouldequal the difference between the value of the Class B Stock as determined herein and $500,000. Thepurchase price of such shares of Class B Stock would be payable to the Company by wire transfer inimmediately available funds to an account designated by the Company no later than one business dayafter the determination of the value as provided herein. If such six-month anniversary falls onany day that is not a business day, then the determination of the value of the Class B Stock shallbe 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 bepayable in respect of the issuance and delivery of shares of Common Stock upon exchange of sharesof Class B Stock pursuant to Section 4(c)(i).6. No Registration under Federal or State Securities Laws. (a) The Purchaser acknowledgesthat the Shares have not been registered under the Securities Act or the securities laws of anystate by reason of a specific exemption or exemptions from registration under the Securities Actand applicable state securities laws, and that the Company’s reliance on such exemptions ispredicated 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 effectiveregistration statement under the Securities Act and any applicable state securities laws or anopinion of counsel acceptable to the Company that the proposed transaction will be exempt fromregistration. The Purchaser acknowledges that theCompany is not required to register the Shares under the Securities Act or any applicable statesecurities laws or to make any exemption from registration available. The Purchaser understandsthat the Shares, and any shares of Common Stock issued in exchange for Shares, will bear legendssubstantially to the effect of the following:
 
5

 
“THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTEREDUNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR THESECURITIES LAWS OF ANY STATE. THE SHARES MAY NOT BE OFFERED, SOLD,TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF WITHOUT AN EFFECTIVEREGISTRATION STATEMENT UNDER THE ACT AND UNDER ANY APPLICABLE STATESECURITIES LAWS, RECEIPT OF A NO-ACTION LETTER ISSUED BY THESECURITIES AND EXCHANGE COMMISSION (TOGETHER WITH EITHERREGISTRATION OR AN EXEMPTION UNDER APPLICABLE STATE SECURITIES LAWS)OR AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT THE PROPOSEDTRANSACTION WILL BE EXEMPT FROM REGISTRATION UNDER THE ACT ANDAPPLICABLE STATE SECURITIES LAWS.”and that the Company will place a stop order against the transfer of the certificates representingthe Shares and refuse to effect any transfers thereof in the absence of satisfying the conditionscontained in the foregoing legend.(b) The Purchaser acknowledges that no public market now exists for Class B Common Stock andthere 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 Stockowned 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 ofsubscription to any shares of stock of the Company, or to options, warrants or other intereststherein 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 thereofother than such, if any, as the Company’s board of directors, in its discretion, may determine fromtime to time and at such price or prices as the Company’s board of directors may fix from time totime.9. Miscellaneous.(a) Payment of Expenses. Each party shall pay its own expenses incurred in connectionwith this Agreement.(b) Entire Agreement; Amendments. This Agreement constitutes the entire agreement ofthe 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 bythe party or parties sought to be affected.(c) Binding Effect. This Agreement shall be binding upon, inure to the benefit of andbe enforceable by, the Company and the Purchaser, and the Company’s or the Purchaser’s respectiveheirs, 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 withoutfurther consideration, each party hereto shall execute and deliver such additional documents andtake all such further lawful action as may be necessary or desirable to consummate and makeeffective, in the most expeditious manner practicable, the transactions contemplated by thisAgreement.(e) Notices. All notices, claims, requests, demands and other communicationshereunder shall be in writing and shall be deemed to have been duly given at the time when handdelivered, when received if sent byfacsimile or by same day or overnight recognized commercial courier service, or three daysafter being mailed (registered or certified mail, postage prepaid, return receipt requested) asfollows:
 
6

 
If to the Purchaser:First Light Program Managers, Inc.