Document:

exv10w1w5

 

Exhibit 10.1.5

2004 STOCK OPTION PLAN

OF

SPECIALTY UNDERWRITERS’ ALLIANCE, INC.

(As Amended and Restated)

     1. Purpose. The purpose of this Stock Option Plan is to advance the
interests of the Corporation by encouraging and enabling the acquisition of a
larger personal proprietary interest in the Corporation by directors,
employees, consultants and independent contractors who are employed by, or
perform services for, the Corporation and its Subsidiaries and upon whose
judgment and keen interest the Corporation is largely dependent for the
successful conduct of its operations. It is anticipated that the acquisition
of such proprietary interest in the Corporation will stimulate the efforts of
such directors, employees, consultants and independent contractors on behalf of
the Corporation and its Subsidiaries and strengthen their desire to remain with
the Corporation and its Subsidiaries. It is also expected that the opportunity
to acquire such a proprietary interest will enable the Corporation and its
Subsidiaries to attract desirable personnel, directors and other service
providers.

     2. Definitions. When used in this Plan, unless the context otherwise
requires:

     a. “Board of Directors” shall mean the Board of Directors of the
Corporation, as constituted at any time.

     b. “Chairman of the Board” shall mean the person who at the time
shall be Chairman of the Board of Directors.

     c. “Committee” shall mean the Committee hereinafter described in
Section 3.

     d. “Corporation” shall mean Specialty Underwriters’ Alliance, Inc.

     e. “Fair Market Value” on a specified date shall mean the closing
price at which one Share is traded on the stock exchange, if any, on
which Shares are primarily traded, or the last sale price or average of
the bid and asked closing prices at which one Share is traded on the
over-the-counter market, as reported on the National Association of
Security Dealers Automated Quotation System, but if no Shares were traded
on such date, then on the last previous date on which a Share was so
traded, or, if none of the above are applicable the value of a Share as
established by the Committee for such date using any reasonable method of
valuation.

     f. “Options” shall mean the stock options granted pursuant to this
Plan.

 

 

     g. “Plan” shall mean this 2004 Stock Option Plan of Specialty
Underwriters’ Alliance, Inc. as adopted by the Board of Directors and
approved by the shareholders of the Corporation as of April 27, 2004, and
as amended and restated as of September 14, 2004 (which amendment and
restatement was approved by the Board of Directors and the shareholders
of the Corporation as of such date), as such Plan from time to time may
further be amended.

     h. “Share” shall mean a share of common stock of the Corporation.

     i. “Subsidiary” shall mean any corporation 50% or more of whose
stock having general voting power is owned by the Corporation, or by
another Subsidiary as herein defined, of the Corporation.

     3. Committee. The Plan shall be administered by the Board of Directors;
provided, however, that from and after the date on which the Corporation is
required to register any class of its equity securities under Section 12 of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Plan
shall be administered by a Committee which shall consist of two or more
directors of the Corporation, each of whom shall be a “Non-Employee Director”
within the meaning of Rule 16b-3 under the Exchange Act and an “outside
director” within the meaning of Section 162 (m) of the Internal Revenue Code of
1986, as amended (the “Internal Revenue Code”). The members of the Committee
shall be selected by the Board of Directors. Any member of the Committee may
resign by giving written notice thereof to the Board of Directors, and any
member of the Committee may be removed at any time, with or without cause, by
the Board of Directors. If, for any reason, a member of the Committee shall
cease to serve, the vacancy shall be filled by the Board of Directors. The
Committee shall establish such rules and procedures as are necessary or
advisable to administer the Plan. During any period of time in which the Plan
is administered by the Board of Directors, all references in the Plan to the
Committee shall be deemed to refer to the Board of Directors. No member of the
Committee shall be liable for any action, failure to act, determination or
interpretation made in good faith with respect to this Plan or any transaction
hereunder, except for liability arising from his own willful misfeasance, gross
negligence or reckless disregard of his duties. The Corporation hereby agrees
to indemnify each member of the Committee for all costs and expenses and, to
the extent permitted by applicable law, any liability incurred in connection
with defending against, responding to, negotiating for the settlement of or
otherwise dealing with any claim, cause of action or dispute of any kind
arising in connection with any actions in administering this Plan or in
authorizing or denying authorization of any transaction hereunder.

     4. Participants. The class of persons who are potential recipients of
Options granted under this Plan consist of the (i) directors of the Corporation
or a Subsidiary, (ii) employees of the Corporation or a Subsidiary, and (iii)
consultants and independent contractors used by the Corporation or a
Subsidiary, in each case as determined by the Committee in its sole discretion.
The directors, employees, consultants and independent contractors to whom
Options are granted under this Plan, and the number of Shares subject to each
such Option, shall be determined by the Committee in its sole discretion,
subject, however, to the terms and conditions of this Plan.

     5. Shares and Grants of Options. The Committee may, but shall not be
required to, grant, in accordance with this Plan, Options to purchase an
aggregate of up to 2,400,000 Shares,

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which may be either Shares held in treasury or authorized but unissued Shares. The maximum number of Shares which
may be the subject of Options granted to any individual during any calendar
year shall not exceed 500,000 Shares. If the Shares that would be issued or
transferred pursuant to any Option are not issued or transferred and cease to
be issuable or transferable for any reason, the number of Shares subject to
such Option will no longer be charged against the limitation provided for
herein and may again be made subject to Options; provided, however, that with
respect to any Option granted on or after the date on which any class of equity
securities issued by the Corporation is required to be registered under Section
12 of the Exchange Act to any person who is a “covered employee” as defined in
Section 162(m) of the Code and the regulations promulgated thereunder that is
canceled or repriced, the number of Shares subject to such Option shall
continue to count against the maximum number of Shares which may be the subject
of Options granted to such person and such maximum number of Shares shall be
determined in accordance with Section 162(m) of the Code and the regulations
promulgated thereunder.

     At the time an Option is granted, the Committee may, in its sole
discretion, designate whether such Option (a) is to be considered as an
incentive stock option within the meaning of Section 422 of the Internal
Revenue Code, or (b) is not to be treated as an incentive stock option for
purposes of this Plan and the Internal Revenue Code. No Option which is
intended to qualify as an incentive stock option shall be granted under this
Plan to any person who, at the time of such grant, is not an employee of the
Corporation or a Subsidiary.

     Notwithstanding any other provision of this Plan to the contrary, to the
extent that the aggregate Fair Market Value (determined as of the date an
Option is granted) of the Shares with respect to which Options which are
designated as incentive stock options, and any other incentive stock options,
granted to an employee (under this Plan, or any other incentive stock option
plan maintained by the Corporation or any Subsidiary that meets the
requirements of Section 422 of the Internal Revenue Code) first become
exercisable in any calendar year exceeds $100,000, such Options shall be
treated as Options which are not incentive stock options. Options with respect
to which no designation is made by the Committee shall be deemed to be
incentive stock options to the extent that the $100,000 limitation described in
the preceding sentence is met. This paragraph shall be applied by taking
options into account in the order in which they are granted.

     If any Option shall expire, be cancelled or terminate for any reason
without having been exercised in full, the unpurchased Shares subject thereto
may again be made subject to Options under the Plan.

     Nothing herein contained shall be construed to prohibit the issuance of
Options at different times to the same employee, director, consultant or
independent contractor.

     Notwithstanding any other provision of the Plan to the contrary, each
director of the Corporation who is not also an employee of the Corporation
shall, automatically and without any action by the Committee, be granted a
non-qualified Option on each of the following dates (and shall not be granted
any other Options pursuant to the Plan): (i) the first business day following
each annual meeting of the shareholders of the Corporation in each year that
the Plan is in effect and while such director is a member of the Board of
Directors and (ii) with respect to any such

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director who first becomes a member
of the Board of Directors before the first annual meeting of the shareholders
of the Corporation, the latest of the date on which such director becomes a
member of the Board of Directors, the effective date of the Plan, or the
effective date of an initial public offering by the Corporation of Shares as
described in Section 13 (subject, in each case, to availability of sufficient
Shares under the Plan pursuant to the first paragraph of this Section 5). Each
such Option shall entitle the director to purchase 10,000 Shares at a per Share
exercise price equal to the Fair Market Value of a Share on the date on which
the Option is granted, and shall vest and become exercisable cumulatively at
the rate of 33.33% on each of the first three anniversaries of the date of
grant, provided that the director is still in the service of the Corporation on
the applicable vesting date (subject, however, to acceleration of such vesting
pursuant to the acceleration provisions of Section 11 hereof). Each such
Option shall have a duration of ten years from the date of grant, subject,
however, to earlier termination of exercisability of the Option pursuant to
Section 12 hereof in connection with the director’s termination of service with
the Corporation.

     An Option shall be evidenced by an agreement executed on behalf of the
Corporation by the Chairman of the Board of Directors, or the President or a
Vice President of the Corporation, and each person to whom an Option is
granted. The agreement for an Option shall be legended to indicate whether or
not the Option is an incentive stock option. The form of agreement for an
Option which is an incentive stock option and for an Option which is a
non-qualified stock option shall be as attached hereto as Annex 1 and Annex 2,
respectively, or in such other form as may be determined by the Committee from
time to time.

     6. Price. The price per Share of the Shares to be purchased pursuant to
the exercise of any Option shall be fixed by the Committee at the time of
grant; provided, however, that the purchase price per share of the Shares to be
purchased pursuant to the exercise of an Option which is intended to be an
incentive stock option shall not be less than the Fair Market Value of a Share
on the day on which the Option is granted.

     7. Duration of Options. The duration of any Option granted under this
Plan shall be fixed by the Committee in its sole discretion; provided, however,
that no Option shall remain in effect for a period of more than ten years from
the date upon which the Option is granted.

     8. Ten Percent Shareholders. Notwithstanding any other provision of this
Plan to the contrary, no Option which is intended to qualify as an incentive
stock option may be granted under this Plan to any employee who, at the time
the Option is granted, owns shares possessing more than ten percent of the
total combined voting power of all classes of stock of the Corporation, unless
the exercise price under such Option is at least 110% of the Fair Market Value
of a Share on the date such Option is granted and the duration of such Option
is no more than five years.

     9. Consideration for Options. The Corporation shall obtain such
consideration for the grant of an Option as the Committee in its discretion may
request.

     10. Restrictions on Transferability of Options. Options shall not be
transferable otherwise than by will or by the laws of descent and distribution
or as provided in this Section 10. Notwithstanding the foregoing, the
Committee may, in its discretion, authorize a transfer of

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all or a portion of any Option, other than an Option which is intended to
qualify as an incentive stock option, by the initial holder to (i) the spouse,
children, stepchildren, grandchildren or other family members of the initial
holder (“Family Members”), (ii) a trust or trusts for the exclusive benefit of
such Family Members, (iii) a corporation or partnership in which such Family
Members and the initial holder are the only shareholders or partners, or (iv)
such other persons or entities which the Committee may permit; provided,
however, that subsequent transfers of such Options shall be prohibited except
by will or the laws of descent and distribution. Any transfer of such an
Option shall be subject to such terms and conditions as the Committee shall
approve, including that such Option shall continue to be subject to the terms
and conditions of the Option and of the Plan as amended from time to time. The
events of termination of employment or service under Section 12 shall continue
to be applied with respect to the initial holder, following which a transferred
Option shall be exercisable by the transferee only to the extent and for the
periods specified under Section 12. An Option which is intended to qualify as
an incentive stock option shall not be transferable otherwise than by will or
by the laws of descent and distribution and shall be exercisable during the
holder’s lifetime only by the holder thereof.

     11. Exercise of Options. Except as otherwise provided herein, or as
otherwise determined by the Committee and provided in an applicable Option
agreement, or as otherwise provided in the holder’s employment agreement (if
any) with the Corporation or a Subsidiary, Options, after the grant thereof,
shall vest and become exercisable cumulatively at the rate of 33.33% on each of
the first three anniversaries of the date of grant, provided that the holder is
still in the employ or service of the Corporation or a Subsidiary on the
applicable vesting date.

     Notwithstanding the foregoing, all or any part of any remaining
unexercised Options granted to any person may be exercised in the following
circumstances (but in no event after the expiration of the term of the Option):
(a) subject to the timing provisions of Section 12 hereof, upon the Disability
or the death of the holder, (b) subject to the timing provisions of Section 12
hereof, in the event of a termination of the holder’s employment or service
with the Corporation or a Subsidiary by the Corporation other than due to
death, Disability or Cause (as defined in Section 12 hereof) upon or within six
months following a Change in Control, or (c) upon the occurrence of such
special circumstances or event as in the opinion of the Committee merits
special consideration. For purposes of this Plan, “Disability” shall mean,
with respect to the holder of an Option, the following: (i) if the holder has
an employment agreement in effect with the Corporation or a Subsidiary which
contains a definition of disability, then the definition of the term
“Disability” for purposes of the Plan shall be as defined in such employment
agreement, or (ii) if the holder does not have an employment agreement in
effect with the Corporation or a Subsidiary which contains a definition of
disability, then “Disability” for purposes of the Plan shall be as defined in
Section 22(e)(3) of the Internal Revenue Code. For purposes of the Plan, the
following shall constitute a “Change in Control”: (i) any person or group of
persons acting in concert is or becomes entitled to more than 50% of the
combined voting power of the Corporation’s outstanding voting securities (other
than any person who is a holder of voting securities before a private equity
offering of the capital stock of the Corporation or an initial public offering
of Shares pursuant to an effective registration statement under the Securities
Act of 1933, as amended (the “Securities Act”), other than pursuant to a
registration statement on Form S-4 or Form S-8 or any successor or similar
form, in each case in which the proceeds to the Corporation are not less than
$200,000,000 before deduction of underwriting commissions,

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placement agent fees or similar charges and other offering expenses (a
“Qualified Equity Offering”)), or (ii) following a Qualified Equity Offering,
the consummation of a merger or consolidation of the Corporation with any other
corporation, other than a merger or consolidation which would result in all or
substantially all of the holders of the Corporation’s voting securities
immediately prior thereto continuing to hold at least 50% of the combined
voting power of the outstanding voting securities of the Corporation or of the
surviving entity immediately after such merger or consolidation, or (iii)
following a Qualified Equity Offering, a complete liquidation of the
Corporation or the consummation of the sale or disposition by the Corporation
of all or substantially all of the Corporation’s assets, other than any such
sale or disposition where all or substantially all of the holders of the
Corporation’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.

     An Option shall be exercised by the delivery of a written notice duly
signed by the holder thereof to such effect, together with the Option
certificate and the full purchase price of the Shares purchased pursuant to the
exercise of the Option, to the Chairman of the Board or an officer of the
Corporation appointed by the Chairman of the Board for the purpose of receiving
the same. Payment of the full purchase price shall be made as follows: in
cash; by check payable to the order of the Corporation; by delivery to the
Corporation of Shares which shall be valued at their Fair Market Value on the
date of exercise of the Option; or by such other methods as the Committee may
permit from time to time; provided, however, that a holder may not use any
Shares to pay the exercise price unless the holder has beneficially owned such
Shares for at least six months. No Option may be granted pursuant to the Plan
or exercised at any time when such Option, or the granting, exercise or payment
thereof, may result in the violation of any law or governmental order or
regulation.

     Within a reasonable time after the exercise of an Option, the Corporation
shall cause to be delivered to the person entitled thereto, a certificate for
the Shares purchased pursuant to the exercise of the Option. If the Option
shall have been exercised with respect to less than all of the Shares subject
to the Option, the Corporation shall also cause to be delivered to the person
entitled thereto a new Option certificate in replacement of the certificate
surrendered at the time of the exercise of the Option, indicating the number of
Shares with respect to which the Option remains available for exercise, or the
original Option certificate shall be endorsed to give effect to the partial
exercise thereof.

     12. Termination of Employment or Service. Except as otherwise provided in
the holder’s employment agreement, if any, with the Corporation or a
Subsidiary, all or any part of any Option, to the extent unexercised, shall
terminate immediately (i) in the case of an employee, upon the cessation or
termination for any reason of the Option holder’s employment by the Corporation
and all Subsidiaries, or (ii) in the case of a director, consultant or
independent contractor of the Corporation or a Subsidiary who is not also an
employee of the Corporation or a Subsidiary, upon the holder’s ceasing to serve
as a director, consultant or independent contractor of the Corporation or a
Subsidiary, except that in either case the Option holder shall have three
months following the cessation of his employment with the Corporation and
Subsidiaries or his service as a director, consultant or independent contractor
of the Corporation or a Subsidiary, as the case may be, and no longer, within
which to exercise any unexercised

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Option that he could have exercised on the day on which such employment,
or service as a director, consultant or independent contractor, terminated
(including any portion of an Option as to which the exercisability is
accelerated pursuant to Section 11); provided that such exercise must be
accomplished prior to the expiration of the term of such Option.
Notwithstanding the foregoing, if the cessation of employment or service as a
director, consultant or independent contractor is due to Disability or to
death, the Option holder or the representative of the Estate or the heirs of a
deceased Option holder shall have the privilege of exercising the Options which
are unexercised at the time of such Disability or death; provided, however,
that such exercise must be accomplished prior to the expiration of the term of
such Option and within six months of the Option holder’s Disability or death,
as the case may be. The Committee may, in its sole discretion, at the time of
grant and as set forth in an agreement for an Option, extend the
post-termination exercise period under this Section 12 with respect to any
Option, but in no event beyond the expiration of the term of such Option. If
the employment or service of any Option holder with the Corporation or a
Subsidiary shall be terminated for Cause, then, except as otherwise provided in
the holder’s employment agreement, if any, with the Corporation or a
Subsidiary, all unexercised Options of such Option holder shall terminate
immediately upon such termination of the holder’s employment or service with
the Corporation and all Subsidiaries, and an Option holder whose employment or
service with the Corporation and Subsidiaries is so terminated, shall have no
right after such termination to exercise any unexercised Option he might have
exercised prior to the termination of his employment or service with the
Corporation and Subsidiaries. For purposes of this Plan, “Cause” shall mean,
with respect to the holder of an Option, the following: (i) if the holder has
an employment agreement in effect with the Corporation or a Subsidiary which
contains a definition of cause, then the definition of the term “Cause” for
purposes of the Plan shall be as defined in such employment agreement, or (ii)
if the holder does not have an employment agreement in effect with the
Corporation or a Subsidiary which contains a definition of cause, then “Cause”
for purposes of the Plan shall be as determined by the Committee in its sole
discretion.

     Nothing contained herein or in the Option certificate shall be construed
to confer on any employee or director any right to be continued in the employ
of the Corporation or any Subsidiary or as a director of the Corporation or a
Subsidiary or derogate from any right of the Corporation and any Subsidiary to
request the resignation of or discharge any employee, director, consultant or
independent contractor (without or with pay), at any time, with or without
cause.

     13. Corporation’s Repurchase Rights; Drag Along; and Lock-Up. Upon a
proposed sale of any Shares purchased pursuant to the exercise of an Option or
following a termination of an Option holder’s (or, in the case of any Option
which has been transferred in accordance with Section 10, the initial holder’s)
employment or service with the Corporation and its Subsidiaries (a “Repurchase
Event”), the Corporation shall have a right of first refusal (if the Repurchase
Event is a proposed sale) or a right, but not an obligation (if the Repurchase
Event is a termination of employment or service), to purchase all or part of
the Shares purchased pursuant to the exercise of the Option (if any) at a
repurchase price equal to (i) the proposed sale price if the Repurchase Event
is a proposed sale of Shares or (ii) the Fair Market Value of the Shares on the
date of the repurchase if the Repurchase Event is the Option holder’s (or
initial holder’s) termination of employment or service. The Corporation’s
repurchase rights with respect to any

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Shares shall not be exercisable until at least six months have elapsed
since the date of the issuance of the Shares to the Option holder, but the
Shares shall nevertheless be subject to the Corporation’s repurchase rights
until such rights expire or terminate as hereinafter provided. The
Corporation’s right to repurchase Shares will expire on the later of (i) 90
days from the time the Corporation has received notice from the holder of the
later of a Repurchase Event due to a proposed sale or due to termination of
employment or service (or, if later, seven months after the Shares were issued
to the holder), or (ii) seven months from the time the last Option was
exercised by the holder of the Shares; provided, however, that in the case of
Shares issued pursuant to the exercise of an Option which is an incentive stock
option, the Corporation’s repurchase rights shall expire on the later of 13
months after the Shares were issued to the holder or 25 months after the grant
of the Option. Notwithstanding the foregoing, the Corporation’s repurchase
rights pursuant to this Section 13 shall terminate upon an initial public
offering by the Corporation of Shares pursuant to an effective registration
statement under the Securities Act, other than pursuant to a registration
statement on Form S-4 or Form S-8 or any successor or similar form.

     Notwithstanding any other provision of the Plan, if the shareholders
owning more than 50% of the Corporation’s Shares (the “Requisite Holders”)
approve a sale of the Corporation or substantially all of its assets to a third
party in an arm’s-length transaction in which such purchaser is not the
Corporation or an affiliate of the Corporation (an “Approved Sale”), whether by
way of merger, consolidation, sale of stock or assets, or otherwise, all
holders of any Shares issued pursuant to Options shall consent to and raise no
objections against the Approved Sale, and if the Approved Sale is structured as
(i) a merger or consolidation of the Corporation, or a sale of all or
substantially all of the Corporation’s assets, each holder of any Shares issued
pursuant to an Option shall waive any dissenters’ rights, appraisal rights or
similar rights in connection with such merger, consolidation or asset sale, or
(ii) a sale of the stock of the Corporation, such holders shall agree to sell
their Shares on the terms and conditions approved by the Requisite Holders;
provided, however, that the obligations under this paragraph shall terminate
upon an initial public offering by the Corporation of Shares as described
above.

     In connection with the Corporation’s initial public offering, each holder
of any Shares issued pursuant to an Option shall agree, upon the request of the
principal underwriter managing the initial public offering of the Corporation,
not to sell publicly any such Shares without the prior written consent of such
underwriter for a period of time (not to exceed 180 days) from the effective
date of such registration as the underwriter may specify.

     14. Adjustment of Optioned Shares. If prior to the complete exercise of
any Option there shall be declared and paid a stock dividend upon the common
stock of the Corporation or if the common stock of the Corporation shall be
split up, converted, exchanged, reclassified, or in any way substituted for,
the Option, to the extent that it has not been exercised, shall entitle the
holder thereof upon the future exercise of the Option to such number and kind
of securities or other property subject to the terms of the Option to which he
would have been entitled had he actually owned the Shares subject to the
unexercised portion of the Option at the time of the occurrence of such stock
dividend, split-up, conversion, exchange, reclassification or substitution; and
the aggregate purchase price upon the future exercise of the Option shall be
the same as if the originally optioned Shares were being purchased thereunder.
Any fractional

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shares or securities payable upon the exercise of the Option as a result
of such adjustment shall be payable in cash based upon the Fair Market Value of
such shares or securities at the time of such exercise. If any such event
should occur, the number of Shares with respect to which Options remain to be
issued, or with respect to which Options may be reissued, shall be adjusted in
a similar manner.

     Notwithstanding the foregoing, upon the dissolution or liquidation of the
Corporation, or the occurrence of a merger or consolidation in which the
Corporation is not the surviving corporation, or in which the Corporation
becomes a subsidiary of another corporation or in which the voting securities
of the Corporation outstanding immediately prior thereto do not continue to
represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity) more than 50% of the combined voting
securities of the Corporation or such surviving entity immediately after such
merger or consolidation, or upon a spin-off (including a reverse spin-off) by
the Corporation, but only as to the holders of Options who are to be employed
immediately after the spin-off by the entity which represents less than 50% of
the value of the Corporation immediately prior to the transaction and any
holders who will serve as directors of such entity and not of the Corporation,
or upon the sale of all or substantially all of the assets of the Corporation,
then the following shall apply: (i) if the consideration received by the
stockholders of the Corporation in connection with such transaction is solely
in the form of cash, then such holder of any vested Option not theretofore
exercised shall be entitled to receive from the Corporation, or the acquiror or
a successor entity, an amount of cash equal to the excess of (A) the amount of
cash which the holder would have been entitled to receive if he had actually
owned the Shares subject to the portion of the Option not theretofore exercised
but which is then vested, over (B) the aggregate purchase price which would be
payable for such Shares upon the exercise of the Option; or (ii) if the
consideration received by the stockholders of the Corporation in connection
with such transaction is in the form of shares of stock or other securities or
property, or part cash and part shares or other securities or property, then
the Corporation shall provide, in connection with such transaction, for the
assumption of Options theretofore granted, or the substitution for such Options
of new options of the acquiror or successor corporation or a parent or
subsidiary thereof, with appropriate adjustments as to the number and kinds of
shares or other securities or property and the per share exercise prices. Any
amount payable pursuant to clause (i) shall be paid at the same time as payment
of the cash consideration is made to the stockholders of the Corporation in
connection with the applicable transaction.

     In the event of any other change in the corporate structure or outstanding
Shares, the Committee may make such equitable adjustments to the number of
Shares and the class of shares available hereunder or to any outstanding
Options as it shall deem appropriate to prevent dilution or enlargement of
rights.

     15. Issuance of Shares and Compliance with Securities Act. The
Corporation may postpone the issuance and delivery of Shares upon any exercise
of an Option until (a) the admission of such Shares to listing on any stock
exchange on which Shares of the Corporation of the same class are then listed,
and (b) the completion of such registration or other qualification of such
Shares under any State or Federal law, rule or regulation as the Corporation
shall determine to be necessary or advisable. Any person exercising an Option
shall make such representations

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and furnish such information as may, in the opinion of counsel for the
Corporation, be appropriate to permit the Corporation, in the light of the then
existence or non-existence with respect to such Shares of an effective
registration statement under the Securities Act, to issue the Shares in
compliance with the provisions of the Securities Act or any comparable act.
The Corporation shall have the right, in its sole discretion, to legend any
Shares which may be issued pursuant to the exercise of an Option, or may issue
stop transfer orders in respect thereof.

     16. Income Tax Withholding. If the Corporation or a Subsidiary shall be
required to withhold any amounts by reason of any Federal, State or local tax
rules or regulations in respect of the issuance of Shares pursuant to the
exercise of such Option, the Corporation or the Subsidiary shall be entitled to
deduct and withhold such amounts from any cash payments to be made to the
holder of such Option. In any event, the holder shall make available to the
Corporation or Subsidiary, promptly when requested by the Corporation or such
Subsidiary, sufficient funds to meet the requirements of such withholding; and
the Corporation or Subsidiary shall be entitled to take and authorize such
steps as it may deem advisable in order to have such funds made available to
the Corporation or Subsidiary out of any funds or property due or to become due
to the holder of such Option.

     17. Administration and Amendment of the Plan. Except as hereinafter
provided, the Board of Directors or the Committee may at any time withdraw or
from time to time amend the Plan as it relates to, and the terms and conditions
of, any Options not theretofore granted, and the Board of Directors or the
Committee, with the consent of the affected holder of an Option, may at any
time withdraw or from time to time amend the Plan as it relates to, and the
terms and conditions of, any outstanding Option. Notwithstanding the
foregoing, any amendment by the Board of Directors or the Committee which would
increase the number of Shares issuable under Options granted pursuant to the
Plan or to any individual during any calendar year or change the class of
persons to whom Options may be granted shall be subject to the approval of the
stockholders of the Corporation within one year of such amendment.

     Determinations of the Committee as to any question which may arise with
respect to the interpretation of the provisions of the Plan and Options shall
be final. The Committee may authorize and establish such rules, regulations
and revisions thereof not inconsistent with the provisions of the Plan, as it
may deem advisable to make the Plan and Options effective or provide for their
administration, and may take such other action with regard to the Plan and
Options as it shall deem desirable to effectuate their purpose. Without
limiting the generality of the foregoing, and notwithstanding any other
provision of the Plan to the contrary, the Committee shall have the power, in
its sole discretion, to determine on an individual basis whether a leave of
absence or a change in status from or to employee, director, consultant or
independent contractor constitutes a termination of employment or service for
purposes of the Plan.

     Where the Plan grants to the Committee, the Board of Directors, the
Corporation or a Subsidiary discretion to take certain actions or permit or
prohibit certain actions by others, such discretion shall not be limited in any
manner, directly or by implication, but may be exercised by the Committee, the
Board of Directors, the Corporation or the Subsidiary, as the case may be, as
it determines.

10

 

     18. Effective Date. This Plan is effective April 27, 2004.

     19. Final Issuance Date. No Option shall be granted under the Plan after
April 26, 2014.

     IN WITNESS WHEREOF, the Corporation has caused these presents to be
executed by its duly authorized officer on September 14, 2004.

	 	 	 	 	 
	 	SPECIALTY UNDERWRITERS’ ALLIANCE, INC.

 	 
	 	By:  	/s/ Courtney C. Smith
 	 
	 	 	Courtney C. Smith 	 
	 	 	President 	 

11

 

	 	 	 	 	 

Annex 1

OPTION AGREEMENT

INCENTIVE STOCK OPTION

(Non-Assignable)

Issued Pursuant to the 2004 Stock

Option Plan of Specialty Underwriters’ Alliance, Inc.

     THIS
CERTIFIES that on              
                
       , 20       
           ,                                                          (the “Holder”) was granted an option (“Option”) to
purchase at the Option exercise price of $                    per share all or any part
of                                        fully paid and non-assessable shares (“Shares”) of
the common stock of Specialty Underwriters’ Alliance, Inc. (the “Corporation”),
pursuant to the 2004 Stock Option Plan of Specialty Underwriters’ Alliance,
Inc. (the “Plan”), upon and subject to the following terms and conditions.

     This Option shall expire on                                       , 20                   .

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

     Except as otherwise provided pursuant to the Plan [or as set forth in the
Employment Agreement (“Employment Agreement”) dated as of                                        between
the Corporation and the Holder], this Option shall vest and become exercisable
cumulatively at a rate of 33.33% on each of the first three anniversaries of
the date of grant, provided that the Holder is still in the employ or service
of the Corporation or a Subsidiary on the applicable vesting date. In no
event, however, may the Option be exercised after the Option’s expiration date
or after an earlier termination of exercisability of the Option pursuant to
[the Employment Agreement or, to the extent not inconsistent with the
Employment Agreement,] the Plan in

 

 

connection with the Holder’s termination of employment or service with the
Corporation or its Subsidiaries.

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

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

	 	 	 	 	 
	 	SPECIALTY UNDERWRITERS’

ALLIANCE, INC.

 	 
	 	By:  	                                                                              
 	 
	 	 	 	 
	 	 	 	 
	 

Acknowledged and
agreed to:

                                                                                               

Holder

13

 

Annex 2

OPTION AGREEMENT

NON-QUALIFIED STOCK OPTION

Issued Pursuant to the 2004 Stock

Option Plan of Specialty Underwriters’ Alliance, Inc.

     THIS
CERTIFIES that on              
                
       , 20       
           ,                                                          (the “Holder”) was granted an option (“Option”)
which is not to be treated as an incentive stock option under Section 422 of
the Internal Revenue Code, to purchase at the Option exercise price of
$                    per share all or any part of                                        fully paid and
non-assessable shares (“Shares”) of the common stock of Specialty Underwriters’
Alliance, Inc. (the “Corporation”), pursuant to the 2004 Stock Option Plan of
Specialty Underwriters’ Alliance, Inc. (the “Plan”), upon and subject to the
following terms and conditions.

     This Option shall expire on                                       , 20                   .

     This Option shall not be transferable by the Holder otherwise than by will
or by the laws of descent and distribution or as otherwise provided pursuant to
the Plan.

     Except as otherwise provided pursuant to the Plan [or as set forth in the
Employment Agreement (“Employment Agreement”) dated as of                     between
the Corporation and the Holder], this Option shall vest and become exercisable
cumulatively at a rate of 33.33% on each of the first three anniversaries of
the date of grant, provided that the Holder is still in the employ or service
of the Corporation on the applicable vesting date. In no event, however, may
the Option be exercised after the Option’s expiration date or after an earlier
termination of exercisability of the Option pursuant to [the Employment
Agreement or, to the

 

 

extent not inconsistent with the Employment Agreement,] the Plan in
connection with the Holder’s termination of employment or service with the
Corporation or its Subsidiaries.

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

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

	 	 	 	 	 
	 	SPECIALTY UNDERWRITERS’ 

ALLIANCE, INC.

 	 
	 	By:  	                                                                             
 	 
	 	 	 	 
	 	 	 	 
	 

Acknowledged and
agreed to:

                                                                                               

Holderexv10w1w8

 

EXHIBIT 10.1.8

EMPLOYMENT AGREEMENT

     This AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the “Agreement”) is made
as of this 17th day of October 2004, by and between Courtney C. Smith (the
“Executive”) and Specialty Underwriters’ Alliance, Inc. (“Holding Co.”).

W I T N E S S E T H:

     WHEREAS, Holding Co. desires to continue the employment of the Executive
and the Executive desires to continue his employment, under the terms and
conditions of this Agreement.

     WHEREAS, Holding Co. and the Executive (collectively, the “Parties”)
entered into the Employment Agreement dated as of November 19, 2003, as amended
by the First Amendment dated April 2nd, 2004, the Second Amendment dated May
26, 2004, and the Amended and Restated Employment Agreement dated
August 9, 2004. (the “Employment Agreement”).

     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 to amend and restate the Employment Agreement as
follows:

     1. Employment. Holding Co. hereby employs the Executive, and the
Executive hereby accepts employment, as the President and Chief Executive
Officer under the terms and conditions set forth herein. During the Term (as
defined herein), the Executive agrees to serve, without additional
compensation, in one or more executive positions and/or as a member of the
board of directors of Holding Co. or any affiliate of Holding Co.

     2. Term. Subject to paragraph 6, the term of this Agreement shall
commence on the date of the Holding Co.’s Qualified Equity Offering (as defined
below) and shall continue until December 31, 2007 (the “Initial
Term”). Upon the expiration of the Initial Term, this Agreement shall
automatically extend for three successive one-year periods, unless terminated
by either party by written notice to that effect not less than three months
prior to the expiration of the Initial Term. The Initial Term and any
extension periods are referred to herein collectively as the “Term”.

     3. Duties. During the Term, the Executive shall report to the
Board of Directors and shall initially perform such duties and responsibilities
as Holding Co.’s Board of Directors may determine. The Executive and Holding
Co. shall create a job description which outlines the duties and
responsibilities that the Executive shall perform. Such job description shall
be mutually created within one year of the Executive’s employment. The
Executive shall comply fully with all applicable laws, rules and regulations as
well as with Holding Co.’s policies, compliance manuals and procedures. The
Executive shall devote his entire working time to the business of Holding Co.
and shall use his best efforts, skills and abilities in his diligent and
faithful performance of his duties and responsibilities hereunder. During the
Term, 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 Holding Co.; provided, however, the Executive may own, solely as an
investment, 1.0% or less of the securities of any publicly traded corporation.

     4. Compensation and Related Matters. As full compensation for the
Executive’s performance of his duties and responsibilities hereunder during the
Term, Holding Co. shall pay the Executive the compensation and provide the
benefits set forth below:

          
a. Base Salary. Holding Co. shall pay the Executive an annual
salary (the “Base Salary”) of $400,000, less applicable withholding and other
deductions, payable in accordance with Holding Co.’s then current payroll
practices. The Base Salary will be reviewed annually by Holding Co.’s Board of
Directors or, if a compensation committee of the Board of Directors is
appointed, then by such Compensation Committee (the “Compensation Committee”),
and may be increased, but not decreased, in the sole discretion of the Board of
Directors or Compensation Committee; provided, however, that for each of the
second and third full fiscal years of the Term, the Base Salary shall be increased by 5%
thereof.

          
b. Bonuses. The Executive shall be eligible to receive bonuses
(“Bonuses”) of not more than 100% of Base Salary for any
full fiscal year during the Term,
as hereinafter provided. For the partial year ending December 31, 2004,
the Executive shall receive a Bonus of $100,000 in recognition of
Executive’s contribution to establishing the Holding Co.’s
business platform and successfully completing a Qualified Equity
Offering. For each of the first three full fiscal years of
the Term, the Executive shall receive a Bonus equal to 25% of the
Executive’s Base Salary level for such full fiscal year,
payable in a cash lump sum payment as
soon as practicable following the end of the respective fiscal year
provided that Executive is employed by Holding Co. at the end of such
fiscal year. In addition, for each full fiscal year of Holding Co. during the Term, the Executive
shall be eligible to receive a performance-based Bonus, of up to 75% of Base
Salary (or up to 100% of Base Salary for any full fiscal year following the first
three full fiscal years during the Term), if Holding Co. achieves such performance
goals as are determined by the Board of Directors or the Compensation Committee
(if one has been appointed) for the respective fiscal year. The payment of any
performance-based Bonus shall be deferred until the last day of the
Term (until 60 days thereafter with respect to performance-based
bonuses relating to the last full fiscal year of the Term), and
shall be forfeited by the Executive if the Executive’s employment terminates
hereunder before the end of the Term by: (i) Holding Co. due to cause pursuant
to paragraph 6.c., or (ii) the Executive other than for good reason pursuant to
paragraph 6.d.

          
c. Stock Options. In the event of a private equity offering of the
capital stock of Holding Co. or an initial public offering of shares of Holding
Co. pursuant to an effective registration statement under the Securities Act of
1933, as amended, other than pursuant to a registration statement on Form S-4
or Form S-8 or any successor or similar form, in each case in which the
proceeds to Holding Co. are not less than $200,000,000.00, before deduction of
underwriting commissions, placement agent fees or similar charges, and other
offering expenses (a “Qualified Equity Offering”), the Executive shall be
granted a stock option to purchase 475,000 shares of Holding Co.’s common stock
for an exercise price per share equal to the per share offering price of the
Qualified Equity Offering. Such option shall be granted as of the effective
date of the Qualified Equity Offering and shall vest and become exercisable
cumulatively at a rate of 33.33% on each of the first three anniversaries of
the date of grant, provided that the Executive is still employed by Holding Co.
on the applicable vesting date. Such option, to the extent vested, shall be
exercisable until the earliest of (i) the tenth anniversary of the date of
grant, (ii) six months following the Executive’s termination of employment due
to death or disability pursuant to paragraph 6.a. or 6.b. (in which case the
option shall be fully vested and exercisable), or (iii) if the Executive’s
employment is terminated by Holding Co.

-2-

 

other than due to the Executive’s
death, disability pursuant to paragraph 6.a., or 6 b, or by Executive other
than for “good reason” as defined below, prior to the expiration of the Initial
Term, then the later of three months following such termination of employment
or the date on which the Term would have otherwise ended. Such option shall be
treated as an “incentive stock option” as defined in Section 422 of the
Internal Revenue Code of 1986, as amended (the “Code”), to the maximum extent
permissible without any change in the vesting provided for
herein. Following the Qualified Equity Offering, the Executive shall be
eligible to receive such additional stock options as may be determined by the
Board of Directors or the Compensation Committee (if one has been appointed) 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. Benefits. The Executive shall be eligible to receive the
benefits that Holding Co. generally makes available to its senior officers (as
may be revised from time-to-time), including health, life and long-term
disability insurance benefits, 401(k) plan benefits and non-qualified
supplemental savings plan benefits which are designed to offset the Code
limitations applicable under the 401(k) plan. In addition, the Executive shall
receive annual reimbursement of up to $10,000 for aggregate expenses incurred
for financial planning, including the preparation of income tax returns, upon
presentation of appropriate receipts for such expenses.

          e. Vacation. The Executive shall receive four weeks’ paid vacation
for each year during the Term. The Executive may schedule the vacation as he
elects, subject to Holding Co.’s business needs. Any unused vacation days in
any one year may not be carried over to subsequent years; provided, however,
that not more than ten unused vacation days in any one year may be carried over
to the next succeeding year.

     5. Expenses. The Executive shall be reimbursed for documented
reasonable and necessary out-of-pocket expenses incurred on Holding Co.’s
behalf in accordance with the policies established by Holding Co., as they may
exist from time to time.

     6. Termination. This Agreement and the Executive’s employment
hereunder shall terminate immediately upon the earlier to occur of any of the
following:

          a. By Holding Co. immediately upon the Executive’s death.

          b. By Holding Co. immediately upon the Executive being unable to perform
his duties and responsibilities hereunder due to his “disability” (as defined
below). For purposes of this Agreement, the term “disability” shall mean that
the Executive has been unable to perform the duties and responsibilities
required of him hereunder due to a physical and/or mental disability for a
period of 180 days, whether or not consecutive, during any 12-month period.
During such period of disability, the Executive shall continue to receive the
Base Salary (less any Holding Co.-paid benefits that he receives, such as short
term disability or workers compensation, during such period).

          c. By Holding Co. immediately upon the existence of “cause” (as defined
below). For purposes of this Agreement, “cause” shall mean that the Executive:
(i) has

-3-

 

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 Holding Co.’s then existing material internal policies or
procedures and which is detrimental to the business, reputation, character or
standing of Holding Co. or any of its affiliates; (iv) has committed an act of
fraud, self dealing, conflict of interest, dishonesty or misrepresentation; or
(v) after written notice by Holding Co. and a reasonable opportunity to cure,
has materially breached his obligations as set forth in this Agreement.

          d. By the Executive immediately upon the existence of “good reason” (as
defined below). For purposes of this Agreement, the following shall constitute
“good reason”: After written notice setting forth the alleged good reason by
the Executive to Holding Co., and the expiration of a 60-day cure period, there
continues to be: (i) a material adverse change in the Executive’s title,
position or responsibilities; and/or (ii) a material breach by Holding Co. of
any material provision of this Agreement.

          e. Compensation Upon Death, Disability, Cause and Termination Without
Good Reason. If the Executive’s employment is terminated by: (i) Holding
Co. due to the Executive’s death or disability or cause pursuant to paragraph
6.a., b. or c., or (ii) the Executive other than for good reason pursuant to
paragraph 6.d., then, unless the parties otherwise mutually agree, in full
satisfaction of Holding Co.’s obligations under this Agreement, the Executive,
his beneficiaries or estate, as appropriate, shall be entitled to receive: (1)
the Base Salary provided for herein up to and including the effective date of
termination, prorated on a daily basis; (2) payment for any accrued, unused
vacation as of the effective date of termination; (3) in the event of
termination due to the Executive’s death or disability as provided in paragraph
6.a. or 6.b., respectively, any performance-based Bonus previously earned but
not paid, which shall become fully vested and shall be paid as soon as
practicable following such termination; (4) a pro rated amount of any
guaranteed bonus, as provided for in paragraph 4b, if termination occurs during
the first three fiscal years during the Term, which shall be paid as soon as
practicable following such termination; and (5) any other benefits (if any)
payable upon the Executive’s death or disability, respectively.

          f. Severance Upon Certain Events of Termination. If the
Executive’s employment is terminated by: (i) Holding Co. other than due to the
Executive’s death or disability or cause pursuant to paragraph 6.a., b. or c.,
or (ii) the Executive for good reason pursuant to paragraph 6.d., then, unless
the parties otherwise mutually agree, in full satisfaction of Holding Co.’s
obligations under this Agreement, the Executive shall be entitled to receive:
(1) a lump sum payment of an amount equal to the amount of the Executive’s Base
Salary which would have been paid to the Executive through the date on which
the Term would have otherwise ended (or through the date on which the Initial
Term would have otherwise ended), provided, however, that if such termination
occurs within 18 months before the date on which the Term would have otherwise
ended, or as a result of Holding Co.’s failure to extend the Initial Term, to
the full extent of the three one-year extension periods contemplated by this
Agreement, or during any extension period, then the Executive shall instead
receive a lump sum payment of an amount equal to 150% of the annual amount of
the Executive’s Base Salary calculated at the rate in effect at the date of
such termination; (2) a lump sum payment of an amount equal to 50% of the
amount of the Executive’s Base Salary paid pursuant to clause (1) of this
paragraph 6.f.;

-4-

 

(3) any performance-based Bonus previously earned but not paid,
which shall become fully vested and shall be paid as soon as practicable
following such termination; and (4) payment for any accrued, unused vacation as
of the date of termination.

          g. Effect of Change in Control Termination. Notwithstanding any
other provision of this Agreement to the contrary, if the Executive’s
employment is terminated by: (i) Holding Co. other than due to the Executive’s
death or disability or cause pursuant to paragraph 6.a., b. or c., or (ii) the
Executive for good reason pursuant to paragraph 6.d., in either case upon or
within six months following a “change in control” (as defined below), then,
unless the parties otherwise mutually agree, in full satisfaction of Holding
Co.’s obligations under this Agreement and in lieu of the provisions of
paragraph 6.f., the following shall apply: (1) all stock options then held by
the Executive which were not previously exercised shall become fully
vested and exercisable; (2) any performance-based Bonus previously earned
but unpaid shall become fully vested and shall be paid as soon as practicable
following such termination; and (3) the Executive shall be entitled to receive
a lump sum payment of an amount equal to three times the annual amount of the
Executive’s Base Salary calculated at the rate in effect at the date of such
termination. Notwithstanding the preceding, if the benefits and payments
provided under this paragraph 6.f., either alone or together with other
benefits and payments which the Executive has the right to receive either
directly or indirectly from Holding Co. or any of its affiliates, would
constitute an excess parachute payment (the “Excess Payment”) under Section
280G of the Code, the Executive hereby agrees that the benefits and payments
provided under this paragraph 6.f. shall be reduced (but not below zero) by the
amount necessary to prevent any such benefits and payments to the Executive
from constituting an Excess Payment, as determined by Holding Co.’s independent
auditor. For purposes of this Agreement, the following shall constitute a
“change in control”:

               (A) any person or group of persons acting in concert (other than any
person who, prior to the Qualified Equity Offering, is a holder of voting
securities of Holding Co.) is or becomes entitled to more than 50% of the
combined voting power of Holding Co.’s outstanding voting securities; or

               (B) following a Qualified Equity Offering, the Board of Directors of
Holding Co. approves a merger or consolidation of Holding Co. with any other
corporation, other than a merger or consolidation which would result in all or
substantially all of the holders of Holding Co.’s voting securities immediately
prior thereto continuing to hold at least 50% of the combined voting power of
the outstanding voting securities of Holding Co. or of the surviving entity
immediately after such merger or consolidation; or

               (C) following a Qualified Equity Offering, the Board of Directors of
Holding Co. approves a plan of complete liquidation of Holding Co. or an
agreement for the sale or disposition by Holding Co. of all or substantially
all of Holding Co.’s assets, other than any such sale or disposition where all
or substantially all of the holders of Holding Co.’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.

-5-

 

     7. Confidential and Proprietary Information; Work Product; Warranty; Non-Competition; Non-Solicitation.

          a. Confidentiality. The Executive acknowledges and agrees that
there are certain trade secrets and confidential and proprietary information
(collectively, “Confidential Information”) which have been developed by Holding
Co. and which are used by Holding Co. in its business. Confidential
Information shall include, without limitation: (i) customer lists and supplier
lists; (ii) the details of Holding Co.’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) Holding
Co.’s marketing and development plans, business plans; and (iv) other
information proprietary to Holding Co.’s business. The Executive shall not, at
any time during or after his employment hereunder, use or disclose such
Confidential Information, except to authorized representatives of Holding Co.
or the customer or as required in the performance of his duties and
responsibilities hereunder. The Executive shall return all
customer and/or Holding Co. property, such as computers, software and cell
phones, and documents (and any copies including in machine or human-readable
form), to Holding Co. when his employment terminates. 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 Holding Co. 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 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.

          b. Work Product. 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 his employment by Holding Co. and for a
period of six months thereafter, that (i) relate, whether directly or
indirectly, to Holding Co.’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 Holding Co.’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 Holding Co. 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 Holding Co. in perpetuity or for the longest period otherwise
permitted by law. Consistent with his recognition of Holding Co.’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 Holding Co. and (ii)
perform such acts and execute such documents and instruments as Holding Co. may
now or hereafter deem reasonably necessary or desirable to evidence the
transfer of absolute ownership of all Work Product to Holding Co.; provided,
however, if following ten days’ written notice from Holding Co., 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 Holding Co.’s
officers as his attorney-in-fact to execute such documents

-6-

 

on his behalf. This
agency is coupled with an interest and is irrevocable without Holding Co.’s
prior written consent.

          c. Warranty. The Executive represents and warrants to Holding Co.
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 Holding Co.; (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
Holding Co. 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.

          d. Non-Competition; Non Solicitation. The Executive agrees that
during his employment by Holding Co. (and for any period thereafter as provided
below), he shall not within the United States (i) engage, directly or
indirectly, whether as an employee, officer, director, consultant or otherwise,
in any activity that competes with Holding Co. or any of its affiliates in the
business of insurance; (ii) solicit, directly, or indirectly, whether as an
employee, officer, director, consultant or otherwise, any person or entity
which is then a customer or party to any insurance-related contract with, Holding Co.
and/or its affiliates or has been a customer or supplier or such a party or
solicited by Holding Co. and/or its affiliates in the preceding two-year
period, to divert their business to any entity other than Holding Co. and/or
its affiliates; (iii) solicit for employment, engage and/or hire, whether
directly or indirectly, any person who is then employed by Holding Co. and/or
its affiliates or engaged by Holding Co. and/or its affiliates as an
independent contractor or consultant; and/or (iv) encourage or induce, whether
directly or indirectly, any person who is then employed by Holding Co. and/or
its affiliates or engaged by Holding Co. and/or its affiliates as an
independent contractor or consultant to end his/her business relationship with
Holding Co. and/or its affiliates. If the Executive’s employment with Holding
Co. is terminated by the Executive other than for good reason pursuant to
paragraph 6.d, before the date on which the Term would have otherwise ended,
then the Executive shall continue to be subject to the restrictions contained
in this paragraph 7.d. through the date on which the Term would have otherwise
ended. If the Executive’s employment with Holding Co. is terminated for cause
pursuant to paragraph 6.c., then the Executive shall continue to be subject to
the restrictions contained in this paragraph 7.d through the longer of (A) one
year following such termination of employment, or (B) the period during which
the Term would have otherwise continued in effect. However, during such
period, the Executive will continue to be paid by the Holding Co. the
Executive’s Base salary, and any guaranteed bonus, if applicable, as provided
for in paragraph 4.b. The Holding Co., at its sole option, may choose to
terminate said payments at any time during the restricted period, at which time
the Executive shall no longer be subject to the restrictions contained in this
paragraph 7.d. If the Executive’s employment with Holding Co. is terminated
under any circumstances which result in any payments provided pursuant to
paragraph 6.f or 6.g., then the Executive shall continue to be subject to the
restrictions contained in this paragraph 7.d. through the longer of (A) one
year following such termination of employment, or (B) the period during which
Base Salary continues to be paid to the Executive pursuant to paragraph 6.f.,
if applicable, or (C) two years following a termination of employment under
circumstances resulting in payments provided pursuant to paragraph 6.g., if
applicable. However, the Executive, at his sole option, may at any time during
such period advise Holding

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Co. that Executive will forfeit receipt of any
further payments provided pursuant to paragraph 6.f. or 6.g., at which time the
Executive will no longer be subject to the restrictions contained in this
paragraph 7.d.

          e. Injunctive Relief. The Executive acknowledges that a breach or
threatened breach of any of the terms set forth in this paragraph 7 shall
result in an irreparable and continuing harm to Holding Co. for which there
shall be no adequate remedy at law. Holding Co. shall, without posting a bond,
be entitled to obtain injunctive and other equitable relief, in addition to any
other remedies available to Holding Co.

          f. Essential and Independent Agreements. It is understood by the
parties hereto that the Executive’s obligations and the restrictions and
remedies set forth in this paragraph 7 are essential elements of this Agreement
and that but for his agreement to comply with and/or agree to such obligations,
restrictions and remedies, Holding Co. would not have entered into this
Agreement or employed (or continued to employ) him. The Executive’s
obligations and the restrictions and remedies set forth in this paragraph 7 are
independent agreements and the existence of any claim or claims by him against
Holding Co. under this Agreement or otherwise will not excuse his breach of any
of his obligations or affect the restrictions and remedies set forth under this
paragraph 7.

          g. Survival of Terms; Representations. The Executive’s obligations
under this paragraph 7 hereof shall remain in full force and effect
notwithstanding the
termination of his employment. He acknowledges that he is sophisticated
in business, and that the restrictions and remedies set forth in this paragraph
7 do not create an undue hardship on him and will not prevent him from earning
a livelihood. He further acknowledges that he has had a sufficient period of
time within which to review this Agreement, including this paragraph 7, with an
attorney of his choice and he has done so to the extent he desired. The
Executive and Holding Co. agree that the restrictions and remedies contained in
this paragraph 7 are reasonable and necessary to protect Holding Co.’s
legitimate business interests regardless of the reason for or circumstances
giving rise to such termination and that he and Holding Co. intend that such
restrictions and remedies shall be enforceable to the fullest extent
permissible by law. The Executive agrees that given the scope of Holding Co.’s
business and the sophistication of the information highway, any further
geographic limitation on such remedies and restrictions would deny Holding Co.
the protection to which it is entitled hereunder. If it shall be found by a
court of competent jurisdiction that any such restriction or remedy is
unenforceable but would be enforceable if some part thereof were deleted or
modified, then such restriction or remedy shall apply with such modification as
shall be necessary to make it enforceable to the fullest extent permissible
under law. 

     8. Successors. This Agreement and the Executive’s performance
hereunder are personal to the Executive and shall not be assignable by the
Executive. Holding Co. may assign this Agreement to any affiliate or to any
successor to all or substantially all of the business and/or assets of Holding
Co., 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 Holding Co. and its successors and assigns. However,
any such assignment by Holding Co. shall still be subject to the Executive’s
rights under paragraph 6.g.

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     9. Miscellaneous.

          a. Waiver; Amendment. 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 for the future, nor shall
any specific waiver of a term, provision, or condition at one time be deemed a
waiver of such term, provision, or condition for any future time or times.
This Agreement may be amended or modified only by a writing signed by both
parties hereto.

          b. Governing Law; Jurisdiction; No Jury Trial. This Agreement shall
be governed and construed in accordance with the laws of the State of Illinois
without giving effect to principles of conflicts of law. 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
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.

          c. 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. Holding Co. 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.

          d. Paragraph Captions. Paragraph and other captions contained in
this Agreement are for reference purposes only and are in no way intended to
describe, interpret, define or limit the scope, extent or intent of this
Agreement or any provision hereof.

          e. Severability. Each provision of this Agreement is intended to
be severable. If any term or provision hereof is illegal or invalid for any
reason whatsoever, such illegality or invalidity shall not affect the validity
of the remainder of this Agreement.

          f. Integrated Agreement. This Agreement constitutes the entire
under-standing and agreement between the parties hereto with respect to the
subject matter hereof, and supersedes all prior agreements, understandings,
memoranda, term sheets, conversations and negotiations.

-9-

 

          g. 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 any number of counterparts, each of which shall be deemed an
original, and all of which shall constitute one and the same instrument.

          h. Notices. All notices and other communications hereunder shall
be in writing and shall be deemed to have been duly given if delivered by hand
delivery, or by facsimile (with confirmation of transmission), or by overnight
courier, or by registered or certified mail, return receipt requested, postage
prepaid, in each case addressed as follows:

	 
	If to the Executive:

	 

	Courtney C. Smith

	330 Las Colinas Blvd. E, #1614

	Irving, TX 75039

	Facsimile: (972) 506-7774

	 

	If to Holding Co.:

	 

	Specialty Underwriters’ Alliance, Inc.

	8585 Stemmons Freeway

	Suite 200, South Freeway

	Dallas, TX 75247

	Facsimile: (214) 689-1877

	 

	with copies to:

	 

	Stroock & Stroock & Lavan LLP

	180 Maiden Lane

	New York, New York 10038-4982

	Attention: William W. Rosenblatt

	Facsimile: 212-806-6006

or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notices and communications shall be effective
when actually received by addressee.

          i. No Limitations. The Executive represents that his employment by
Holding Co. hereunder does not conflict with, or breach any confidentiality,
non-competition or other agreement to which he is a party or to which he may be
subject.

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     IN WITNESS WHEREOF, each of the parties hereto has executed this Agreement
as of the date first above written.

	 	 	 	 	 
	 	 	SPECIALTY UNDERWRITERS’ ALLIANCE, INC.
	 
	 	 	 	 
	

	 	By:
	 	/s/Peter E. Jokiel
	

	 	 	 	

	

	 	 	 	Name: Peter E. Jokiel
	

	 	 	 	Title: Chief Financial Officer
	 
	 	 	 	 
	 	 	/s/Courtney C. Smith
	 	 	

	 	 	Courtney C. Smith

-11-

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