exv10w1w16



 





EXHIBIT 10.1.16






AMENDED AND RESTATED

SECURITIES PURCHASE AGREEMENT




          This Amended and Restated Securities Purchase Agreement (this “Agreement”)
is made as of the 30th day of September, 2004, 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 and the Purchaser are parties to a Securities
Purchase Agreement dated as of May 18, 2004 (the “Old Securities Purchase
Agreement”); and



          WHEREAS, in connection with the sale by the Company to the Purchaser of
shares (the “Shares”) of the Company’s Class B Common Stock, par value $.01 per
share (the “Class B Stock”), the parties to the Old Securities Purchase
Agreement desire to amend and restate the Old Securities Purchase Agreement,
pursuant to Section 9(b) thereof, as set forth herein, effective upon the
execution of this Agreement;



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



1. Sale and Purchase of Securities; Closing.




     (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”).



     (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, on the Closing
Date (as defined in Section 1(d)), the 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 million (the “Purchase Price”) to purchase such
number of Shares equal to



 









 




the Purchase Price divided by the initial public offering price per share of the Company’s initial
public offering of equity securities (the “IPO”) pursuant to an effective
registration statement under the Securities Act of 1933, as amended (the
“Securities Act”). The Purchaser agrees to pay to the Company, and the Company
agrees to accept from the Purchaser, as consideration for the Shares, the
Purchase Price. Payment shall be made by wire transfer in immediately
available funds to an account designated by the Company.








     (d) Closing. (i) The closing date of the purchase and sale of the
Shares (the “Closing Date”) shall occur upon payment in full of the Purchase
Price by the Purchaser, subject to satisfaction or waiver of the terms and
conditions set forth herein.



          (ii) The Closing of the transactions contemplated by this Agreement is
contingent on the closing by the Company of its IPO.



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.



     (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



2









 




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) On the date hereof, the Company has full record and beneficial
ownership of, and good, valid and marketable title to, the Shares, free and
clear of all liens, encumbrances, security interests, rights, claims or
equities of any nature whatsoever (including, without limitation, any voting
rights granted to any third party with respect to the Shares). 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.



3









 





     (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



4









 




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 therefore, and such shares shall not thereafter be
transferred on the books of the Company or be deemed to be outstanding for any
purpose whatsoever.



     (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 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



5









 





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 superseded by a good faith determination by the
Company’s board of directors that shall be superceded 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.



6









 





     (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



7









 




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:






	 	 	“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.




8









 








     (b) The Purchaser acknowledges that no public market now exists for any of
the securities issued by the Company and there is no assurance that a public
market will ever exist for the Common Stock.


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 therefore, 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:



     If to the Purchaser:




	 	 	AEON Insurance Group, Inc.

18525 Sutter Blvd., Suite 140





9









 












	 	 	Morgan Hill, CA 95037

Facsimile: 408-779-7399

Attention: Lee Wendleton, President
	 
	 	 	If to the Company:
	 
	 	 	Specialty Underwriters’ Alliance, Inc.

8585 Stemmons Freeway

Suite 200, South Tower

Dallas, Texas 75247

Facsimile: 214-889-8800

Attention: Courtney C. Smith
	 
	 	 	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



10









 




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.



     (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.



11









 





          (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) Jurisdiction. Subject to the provisions of Section 10(l), the
Company and the Purchaser each (i) hereby irrevocably submits to the
jurisdiction of the state and federal courts located in the city and state of
New York for the purpose of any suit, action or other proceeding arising out of
or based upon this Agreement or the transactions contemplated hereby and (ii)
hereby waives to the extent not prohibited by applicable law, and agrees not to
assert, by way of motion, as a defense or otherwise, in any such proceeding,
any claim that it is not subject personally to the jurisdiction of the
above-named courts, that its property is exempt or immune from attachment or
execution, that any such proceedings brought in one of the above-named courts
is improper, or that this Agreement, or the transactions contemplated hereby,
may not be enforced in or by such court. Nothing contained in this section
shall affect the right of the Company or the Purchaser to serve process in any
other manner permitted by law or commence legal proceedings or otherwise
proceed against the Company or the Purchaser in any other jurisdiction. In the
event the Company or the Purchaser should commence or maintain any action
arising out of or related to this Agreement in a forum other than the state and
federal courts located in the city and state of New York, the Purchaser or the
Company, as the case may be, shall be entitled to request the dismissal of such
action, and the Company or the Purchaser, as the case may be, stipulate that
such action shall be dismissed.



     (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.



[Remainder of Page Intentionally Left Blank]




12









 








     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/ Courtney C. Smith
	

	 	 	
 
	

	 	 	Name: Courtney C. Smith
	

	 	 	Title: President and CEO
	 
	 	 	 	 
	 	 	THE PURCHASER:
	 
	 	 	 	 
	 	 	AEON INSURANCE GROUP, INC.
	 
	 	 	 	 
	

	 	By:
	 /s/ Lee Wendleton
	

	 	 	
 
	

	 	 	Name: Lee Wendleton
	

	 	 	Title: President







13









 






Schedule A




PURCHASER:




(Please provide company name, address, telephone, facsimile and contact person)




AEON Insurance Group, Inc.

18525 Sutter Blvd., Suite 140

Morgan Hill, CA 95037

Facsimile: 408-779-7399

Attention: Lee Wendleton, President



 









 





Schedule B




AMENDED AND RESTATED

CERTIFICATE OF INCORPORATION OF

SPECIALTY UNDERWRITERS’ ALLIANCE, INC.










Pursuant to Sections 228 and 242 of the

Delaware General Corporation Law








          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 Certificate
of Amendment of the Certificate of Incorporation was filed with the Secretary
of State of the State of Delaware on November 10, 2003.



     2. This Amended and Restated Certificate of Incorporation was duly adopted
by written consent of the stockholders 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 9 East Loockerman Street, Suite 1B, 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)
seventy-five million (75,000,000) shares of Common Stock, par value $0.01 per
share (the “Common Stock”), (ii)



15









 








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”).





	1.	 	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.




	2.	 	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;




16









 






          (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.



          (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




17









 






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 10th day of May, 2004.



	 	 	 	 	 
	 	 	/s/ Courtney C. Smith
	 	 	

	

	 	Name:
	 	Courtney C. Smith
	

	 	Title:
	 	Chief Executive Officer






18