Document:

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                                                                   EXHIBIT 10.18

                       Lumbermens Mutual Casualty Company

                               September 29, 2003

SeaBright Insurance Holdings, Inc.
SeaBright Insurance Company
2101 4th Avenue, Suite 1600
Seattle, Washington  98121

Ladies and Gentlemen:

            Reference is hereby made to that certain Purchase Agreement (as
amended, the "Purchase Agreement"), dated as of July 14, 2003, by and among
SeaBright Insurance Holdings, Inc., a Delaware corporation (formerly known as
Insurance Holdings, Inc., "Buyer"), Kemper Employers Group, Inc., a Washington
corporation ("KEG"), Lumbermens Mutual Casualty Company, an Illinois domiciled
mutual insurance company ("LMC"), Eagle Pacific Insurance Company, a Washington
domiciled insurance company ("Eagle Pacific"), and Pacific Eagle Insurance
Company, a California domiciled insurance company ("Pacific Eagle" and, together
with KEG, LMC and Eagle Pacific, the "Sellers"), as amended by that certain
letter agreement, dated as of July 30, 2003 (the "July 30 Letter"), and that
certain letter agreement, dated as of September 15, 2003. Capitalized terms used
but not defined herein shall have the respective meanings ascribed to them in
the Purchase Agreement.

            In connection with the Purchase Agreement, Buyer and Sellers hereby
            agree that:

1.    Section 8.2(b) of the Purchase Agreement shall be amended and restated to
      read in its entirety as follows:

      (b) On or prior to the Closing Date, Buyer shall arrange for the
      establishment by Kemper Employers Insurance Company of a defined
      contribution plan under Section 401(k) of the Code (the "KEIC 401(k)
      Plan"). Within two business days following the Closing, Sellers shall
      cause the trustee of the Eagle Employees Savings and Profit Sharing Plan
      (the "Eagle 401(k) Plan") to transfer in cash (but including promissory
      notes evidencing participant loans) to the KEIC 401(k) Plan the account
      balances of the Transferred Employees. Such transfer of account balances
      shall be in accordance with Section 414(l) of the Code.

2.    The reference to "Buyer's 401(k) Plan" in Section 8.2(a) of the Purchase
      Agreement is hereby amended to read as follows: "KEIC's 401(k) Plan".

3.    In order to clarify the intent of the parties at the time of the execution
      of the Purchase Agreement and the July 30 Letter, the definition of KEIC
      Book Value in the Purchase Agreement shall be amended and restated to read
      in its entirety as follows:

      "KEIC Book Value" means an amount equal to the book value of KEIC as of
      the close of business on the day prior to the Closing Date, calculated in
      accordance with the Agreed Accounting Principles, after giving effect to
      the Commutation Agreement, and increased (without duplication) by the
      aggregate amount of (i) the California Prepayments

<PAGE>

      transferred by LMC to KEIC pursuant to Section 7.11, (ii) the non-admitted
      prepaid unallocated loss adjustment expense asset resulting from Sellers'
      agreement to be responsible for the servicing of claims under all
      insurance policies written by KEIC prior to the Closing Date and the
      prepayment therefor, regardless of whether such prepayments would
      otherwise be included in calculating book value in accordance with SAP and
      (iii) the net aggregate unrealized gain, if any, as of the close of
      business on the day prior to the Closing Date (net of Taxes) with respect
      to the assets owned by KEIC that are then held on deposit with any
      Administrative Authority.

4.    Notwithstanding anything to the contrary contained in the Purchase
      Agreement, the Commutation Agreement shall be executed by both of LMC and
      KEIC, and the transactions contemplated thereunder shall be consummated,
      immediately following the sale of shares of KEIC by KEG to Buyer, and each
      of Buyer and the Sellers agrees to cause such execution and delivery of
      the Commutation Agreement and the consummation of such transactions to
      occur as of such time. The parties acknowledge that the Commutation
      Agreement is an integral component of the transactions contemplated by the
      Purchase Agreement, and each of Buyer and the Sellers shall report and
      file all Tax Returns on the basis that the transactions occurring under
      the Commutation Agreement are for the account of, and included entirely
      within, LMC's consolidated Tax Return, and no party shall take any
      position inconsistent with the foregoing; provided, however, that
      notwithstanding anything to the contrary in the Purchase Agreement, Buyer
      shall indemnify and hold harmless each of the Seller Group Members from
      and against any and all Losses and Expenses incurred by such Seller Group
      Members in connection with any dispute or other proceeding, if any,
      arising as a result of reporting the transactions on such basis.

5.    Section 7 of the July 30 Letter shall be amended and restated to read in
      its entirety as follows:

      Buyer shall have the right to purchase its own Oracle software licenses
      after the Closing, in lieu of assuming any obligations with respect to any
      of Seller's Oracle software licenses. Buyer shall notify Sellers of its
      decision in this regard within five business days following the Closing.

6.    At the Closing, in lieu of entering into the form of Reinsurance Trust
      Agreement contemplated by the Purchase Agreement and July 30 Letter, LMC
      and KEIC shall enter into the Trust Agreement in the form attached hereto
      as Exhibit A (the "Interim Trust Agreement") with The Bank of New York, as
      trustee. Following the Closing, LMC and Buyer shall use their reasonable
      best efforts to cause as soon as reasonably practicable the amendment and
      restatement of the Interim Trust Agreement to conform to the form of
      Reinsurance Trust Agreement contemplated by the Purchase Agreement and
      July 30 Letter, with such changes as may be requested by The Bank of New
      York and reasonably agreed to by LMC and Buyer; provided, that LMC and
      Buyer shall use their reasonable best efforts to minimize such changes
      from the contemplated form. In the event that LMC and Buyer cannot
      reasonably agree to all of the proposed changes requested by The Bank of
      New York (or such proposed changes materially alter the underlying
      agreement of Buyer and the Sellers with respect to the reinsurance trust
      arrangement), LMC and Buyer agree to use their reasonable best efforts to,
      as soon as reasonably practicable, (i)

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      identify a successor trustee reasonably acceptable to both LMC and Buyer
      and to whom the form of Reinsurance Trust Agreement is acceptable, with
      such changes as may be requested by such successor trustee and reasonably
      agreed to by LMC and Buyer (the "Agreed Trust Agreement"), and (ii) cause
      such Person to succeed to The Bank of New York as trustee of the
      reinsurance trust created pursuant to the Interim Trust Agreement
      simultaneously with an amendment and restatement of the Interim Trust
      Agreement to conform to the form of the Agreed Trust Agreement.

7.    Except as expressly amended by this letter agreement, the Purchase
      Agreement is not otherwise amended or modified and remains in full force
      and effect in accordance with its original terms (as previously amended in
      writing prior to the date of this letter agreement).

                  [Remainder of page intentionally left blank]

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      In witness whereof, each of the parties has caused this letter to be
executed as of the date first written above.

                                SEABRIGHT INSURANCE
                                HOLDINGS, INC.

                                By:      /s/ John G. Pasqualetto
                                    --------------------------------------------
                                    Name: John G. Pasqualetto
                                    Title: President

                                KEMPER EMPLOYERS GROUP, INC.

                                By:      /s/ William A. Hickey
                                    --------------------------------------------
                                    Name: William A. Hickey
                                    Title: Vice President

                                LUMBERMENS MUTUAL CASUALTY COMPANY

                                By:      /s/ William A. Hickey
                                    --------------------------------------------
                                    Name: William A. Hickey
                                    Title: Chief Financial Officer and
                                           Executive Vice President

                                EAGLE PACIFIC INSURANCE COMPANY

                                By:      /s/ John K. Conway
                                    --------------------------------------------
                                    Name: John K. Conway
                                    Title: Secretary

                                PACIFIC EAGLE INSURANCE COMPANY

                                By:      /s/ John K. Conway
                                    --------------------------------------------
                                    Name: John K. Conway
                                    Title: Secretary

                                       4<PAGE>

                                                                   EXHIBIT 10.21

                                                                  EXECUTION COPY

                            STOCK PURCHASE AGREEMENT

                                  BY AND AMONG

                       SEABRIGHT INSURANCE HOLDINGS, INC.

                                       AND

                       EACH OF THE PURCHASERS NAMED HEREIN

                         DATED AS OF SEPTEMBER 30, 2003

<PAGE>

                                TABLE OF CONTENTS

Section 1.  Authorization and Closing......................................1
       1A.  Authorization of the Convertible Preferred Stock...............1
       1B.  Purchase and Sale of the Convertible Preferred Stock...........1
       1C.  The Closing....................................................2

Section 2.  Conditions of Each Purchaser's Obligation at the Closing.......2
       2A.  Representations and Warranties; Covenants......................2
       2B.  Certificate of Incorporation...................................2
       2C.  Stockholders Agreement.........................................2
       2D.  Registration Agreement.........................................2
       2E.  Stock Option Plan..............................................2
       2F.  Employment Agreements..........................................2
       2G.  Executive Stock Agreements.....................................3
       2H.  Director Indemnification Agreements............................3
       2I.  Management Rights Agreement....................................3
       2J.  Sale of the Convertible Preferred Stock to Each Purchaser......3
       2K.  Acquisition Agreement..........................................3
       2L.  Litigation.....................................................3
       2M.  Filings........................................................3
       2N.  Governmental Consents and Approvals............................3
       2O.  Waiver.........................................................3

Section 3.  Covenants......................................................4
       3A.  Financial Statements and Other Information.....................4
       3B.  Inspection of Property.........................................4

Section 4.  Transfer of Restricted Securities..............................5
       4A.  General Provisions.............................................5
       4B.  Rule 144A......................................................5
       4C.  Legend Removal.................................................5

Section 5.  Representations and Warranties of the Company..................5
       5A.  Organization, Corporate Power and Licenses.....................5
       5B.  Capital Stock and Related Matters..............................6
       5C.  Authorization; No Breach.......................................6
       5D.  Conduct of Business; Liabilities...............................7
       5E.  Acquisition Agreement Representations..........................7

Section 6.  Definitions....................................................7
       6A.  Definitions....................................................7

Section 7.  Miscellaneous..................................................8
       7A.  Expenses.......................................................8
       7B.  Remedies.......................................................9
       7C.  Purchaser's Investment Representations.........................9

                                      -i-
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       7D.  Consent to Amendments.........................................10
       7E.  Survival of Representations and Warranties....................10
       7F.  Successors and Assigns........................................10
       7G.  Severability..................................................11
       7H.  Entire Agreement..............................................11
       7I.  Counterparts..................................................11
       7J.  Descriptive Headings; Interpretation..........................11
       7K.  Governing Law.................................................11
       7L.  Notices.......................................................11
       7M.  No Strict Construction........................................12
       7N.  Understanding Among the Purchasers............................12

                             SCHEDULES AND EXHIBITS

Schedule of Purchasers

Exhibit A    -  Certificate of Incorporation
Exhibit B    -  Stockholders Agreement
Exhibit C    -  Registration Agreement
Exhibit D-1  -  Stock Option Plan
Exhibit D-2  -  Form of Stock Option Agreement
Exhibit E-1  -  Form of Employment Agreement for John G. Pasqualetto
Exhibit E-2  -  Form of Employment Agreement for Richard J. Gergasko
Exhibit E-3  -  Form of Employment Agreement for Jeffrey Wanamaker
Exhibit E-4  -  Form of Employment Agreement for Joe De Vita
Exhibit E-5  -  Form of Employment Agreement for Richard Seelinger
Exhibit F    -  Form of Executive Stock Agreement
Exhibit G    -  Form of Director Indemnification Agreement
Exhibit H    -  Form of Management Rights Agreement

                                      -ii-
<PAGE>

                            STOCK PURCHASE AGREEMENT

         THIS STOCK PURCHASE AGREEMENT is made as of September 30, 2003, by and
among SeaBright Insurance Holdings, Inc., a Delaware corporation (the
"Company"), and the Persons listed on the Schedule of Purchasers attached hereto
(collectively referred to herein as the "Purchasers" and individually as a
"Purchaser"). Except as otherwise indicated herein, capitalized terms used
herein are defined in Section 6 hereof.

         WHEREAS, pursuant to this Agreement, the Company desires to issue and
sell and the Purchasers desire to purchase an aggregate of 45,250,000 shares of
the Company's Convertible Preferred Stock, par value $.01 per share (the
"Convertible Preferred Stock"), for an aggregate purchase price of $45,250,000;

         WHEREAS, pursuant to that certain Purchase Agreement, dated as of July
14, 2003, by and among the Company and the Sellers named therein (as such
agreement may be amended or modified from time to time in accordance with its
terms, the "Acquisition Agreement"), the Company will purchase (the
"Acquisition") all of the outstanding capital stock of PointSure Insurance
Services, Inc. a Washington corporation ("PointSure") and Kemper Employers
Insurance Company, an Illinois domiciled insurance company ("KEIC" and, together
with PointSure, the "Acquired Companies") and certain assets of the Sellers;

         WHEREAS, the Purchasers are purchasing the Convertible Preferred Stock
hereunder in order to provide a portion of the financing necessary to consummate
the Acquisition; and

         WHEREAS, the purchase and sale of the Convertible Preferred Stock
contemplated by this Agreement will be consummated contemporaneously with the
consummation of the Acquisition pursuant to the terms of the Acquisition
Agreement.

         NOW, THEREFORE, in consideration of the mutual covenants, agreements
and understandings herein contained, the Purchasers and the Company hereby agree
as follows:

         Section 1. Authorization and Closing.

         1A. Authorization of the Convertible Preferred Stock. The Company shall
authorize the issuance and sale to the Purchasers of an aggregate of 45,250,000
shares of Convertible Preferred Stock having the rights and preferences set
forth in the Certificate of Incorporation (as defined below).

         1B. Purchase and Sale of the Convertible Preferred Stock. At the
Closing (as defined below), the Company shall sell to each Purchaser and,
subject to the terms and conditions set forth herein, each Purchaser shall
purchase from the Company the number of shares of Convertible Preferred Stock
set forth opposite such Purchaser's name on the Schedule of Purchasers attached
hereto at the price set forth opposite such Purchaser's name on the Schedule of
Purchasers attached hereto. The sale of the Convertible Preferred Stock to each
Purchaser shall constitute a separate sale hereunder.

<PAGE>

         1C. The Closing. The closing of the separate purchases and sales of the
Convertible Preferred Stock (the "Closing") shall take place at the offices of
Kirkland & Ellis, 333 Bush Street, San Francisco, California 94104, or at such
other place as may be mutually agreeable to each of the Purchasers and the
Company, at 10:00 a.m., local time, on the date hereof or at such other time as
may be mutually agreeable to each of the Purchasers and the Company. At the
Closing, the Company shall deliver to each Purchaser stock certificates
evidencing the Convertible Preferred Stock to be purchased by such Purchaser
registered in such Purchaser's name, upon payment of the purchase price therefor
by wire transfer of immediately available funds to an account designated by the
Company prior to the Closing, in the amount(s) set forth opposite such
Purchaser's name on the Schedule of Purchasers attached hereto.

         Section 2. Conditions of Each Purchaser's Obligation at the Closing.
The obligation of each Purchaser to purchase and pay for the Convertible
Preferred Stock to be purchased by such Purchaser at the Closing is subject to
the satisfaction as of the Closing of the following conditions:

         2A. Representations and Warranties; Covenants. The representations and
warranties contained in Section 5 hereof shall be true and correct at and as of
the Closing as though then made and the Company shall have performed all of the
covenants required to be performed by it hereunder prior to the Closing.

         2B. Certificate of Incorporation. The Company's Certificate of
Incorporation (the "Certificate of Incorporation") shall include the provisions
set forth in Exhibit A attached hereto, shall be in full force and effect under
the laws of the State of Delaware as of the Closing and shall not have been
amended or modified.

         2C. Stockholders Agreement. The Company, the Purchasers and the other
stockholders of the Company shall have entered into a stockholders agreement in
the form of Exhibit B attached hereto (the "Stockholders Agreement"), and the
Stockholders Agreement shall be in full force and effect as of the Closing and
shall not have been amended or modified.

         2D. Registration Agreement. The Company and the Purchasers shall have
entered into a registration agreement in the form of Exhibit C attached hereto
(the "Registration Agreement"), and the Registration Agreement shall be in full
force and effect as of the Closing and shall not have been amended or modified.

         2E. Stock Option Plan. The Company shall have adopted a stock option
plan in the form of Exhibit D-1 attached hereto (the "Stock Option Plan"), and a
form of stock option agreement in the form of Exhibit D-2 attached hereto (the
"Stock Option Agreement"), and the Stock Option Plan shall be in full force and
effect as of the Closing and shall not have been amended or modified.

         2F. Employment Agreements. Target shall have entered into employment
agreements with each of John G. Pasqualetto, Richard J. Gergasko, Jeffrey
Wanamaker, Joseph De Vita and Richard Seelinger in the form of Exhibits E-1,
E-2, E-3, E-4 and E-5 attached hereto (the "Employment Agreements"),
respectively, and each of the Employment Agreements shall be in full force and
effect as of the Closing.

                                      -2-
<PAGE>

         2G. Executive Stock Agreements. The Company shall have entered into
executive stock purchase agreements, in the form of Exhibit F attached hereto
(the "Executive Stock Agreements"), with each of John G. Pasqualetto, Richard J.
Gergasko, Jeffrey Wanamaker, Joseph De Vita and Richard Seelinger, and the
Executive Stock Agreements shall not have been amended or modified and shall be
in full force and effect as of the Closing and the transactions contemplated
thereby shall have been consummated simultaneously with the Closing hereunder in
accordance with the terms of the Executive Stock Agreements.

         2H. Director Indemnification Agreements. The Company and each of the
directors designated by the Purchasers pursuant to the Stockholders Agreement
shall have entered into a director indemnification agreement in the form of
Exhibit G attached hereto (the "Director Indemnification Agreements"), and the
Director Indemnification Agreements shall be in full force and effect as of the
Closing.

         2I. Management Rights Agreement. The Company, Summit Ventures VI-A,
L.P. and Summit Ventures VI-B, L.P. shall have entered into a management rights
agreement in the form of Exhibit H attached hereto (the "Management Rights
Agreement"), and the Management Rights Agreement shall be in full force and
effect as of the Closing.

         2J. Sale of the Convertible Preferred Stock to Each Purchaser. The
Company shall have simultaneously sold to each Purchaser the Convertible
Preferred Stock to be purchased by such Purchaser hereunder at the Closing and
shall have received payment therefor in full as provided herein.

         2K. Acquisition Agreement. The Acquisition Agreement shall be in full
force and effect as of the Closing and shall not have been amended or modified
and the Acquisition shall have been consummated simultaneously with the Closing
hereunder in accordance with the terms of the Acquisition Agreement.

         2L. Litigation. No suit, action or other proceeding shall be pending
before any court or governmental or regulatory official, body or authority in
which it is sought to restrain or prohibit the transactions contemplated hereby
and no injunction, judgment, order, decree or ruling with respect thereto shall
be in effect.

         2M. Filings. The Company shall have made all filings required to be
made by the Company and shall have obtained all permits and other authorizations
required to be obtained by the Company under all applicable federal and state
securities laws to consummate the transactions contemplated by this Agreement in
compliance with such laws.

         2N. Governmental Consents and Approvals. The Company and the Purchasers
shall have received or obtained all governmental and regulatory consents and
approvals that are necessary for the consummation of the transactions
contemplated hereby, in each case on terms and conditions satisfactory to the
Purchasers.

         2O. Waiver. Any condition specified in this Section 2 may be waived if
consented to by the Purchasers.

                                      -3-
<PAGE>

         Section 3. Covenants.

         3A. Financial Statements and Other Information. The Company shall
deliver to each Purchaser (so long as such Purchaser holds any Convertible
Preferred Stock or any Common Stock issued upon conversion of the Convertible
Preferred Stock):

         (i) as soon as available but in any event within 30 days after the end
of each monthly accounting period in each fiscal year, unaudited consolidating
and consolidated statements of income and cash flows of the Company and its
Subsidiaries for such monthly period and for the period from the beginning of
the fiscal year to the end of such month, and unaudited consolidating and
consolidated balance sheets of the Company and its Subsidiaries as of the end of
such monthly period, setting forth in each case comparisons to the corresponding
period in the preceding fiscal year, and all such statements shall be prepared
in accordance with generally accepted accounting principles, consistently
applied (subject to the absence of footnote disclosures), and shall be certified
by the Company's chief financial officer;

         (ii) within 90 days after the end of each fiscal year, consolidating
and consolidated statements of income and cash flows of the Company and its
Subsidiaries for such fiscal year, and consolidating and consolidated balance
sheets of the Company and its Subsidiaries as of the end of such fiscal year,
setting forth in each case comparisons to the preceding fiscal year, all
prepared in accordance with generally accepted accounting principles,
consistently applied, and accompanied by (A) with respect to the consolidated
portions of such statements, an opinion containing no exceptions or
qualifications (except for qualifications regarding specified contingent
liabilities) of an independent accounting fir of recognized national standing,
and (B) a copy of such firm's annual management letter to the Company's board of
directors;

         (iii) promptly (but in any event within five business days) after the
discovery or receipt of notice of any breach under this Agreement or any other
material agreement to which it or any of its Subsidiaries is a party or any
other material adverse change, event, or circumstance affecting the Company or
any Subsidiary (including the filing of any material litigation against the
Company or any Subsidiary or the existence of any dispute with any person which
involves a reasonable likelihood of such litigation being commenced), an
Officer's Certificate specifying the nature and period of existence thereof and
what actions the Company and its Subsidiaries have taken and propose to take
with respect thereto; and

         (iv) with reasonable promptness, such other information and financial
data concerning the Company and its Subsidiaries as any Person entitled to
receive information under this Section 3A may reasonably request.

Each of the financial statements referred to in subparagraph (i) and (ii) shall
be true and correct in all material respects as of the dates and for the periods
stated therein, subject in the case of the unaudited financial statements to
changes resulting from normal year-end adjustments for recurring accruals (none
of which would, alone or in the aggregate, be materially adverse to the
financial condition, operating results, assets, operations or business prospects
of the Company and its Subsidiaries taken as a whole).

         3B. Inspection of Property. The Company shall permit any
representatives designated by any Purchaser (so long as such Purchaser holds any
Convertible Preferred Stock or

                                      -4-
<PAGE>

any Common Stock issued upon conversion of the Convertible Preferred Stock),
upon reasonable notice and during normal business hours and at such other times
as any such Purchaser may reasonably request, to (i) visit and inspect any of
the properties of the Company and its Subsidiaries, (ii) examine the corporate
and financial records of the Company and its Subsidiaries and make copies
thereof or extracts therefrom and (iii) discuss the affairs, finances and
accounts of the Company and its Subsidiaries with the directors and officers of
the Company and its Subsidiaries. Except as otherwise required by law or
judicial order or decree or by any governmental agency or authority, each Person
entitled to receive information regarding the Company and its Subsidiaries under
this Section 3B or Section 3A above shall use the same standards and controls
which such Person uses to maintain the confidentiality of its own confidential
information (but in no event less than reasonable care) to maintain the
confidentiality of all nonpublic information of the Company or any of its
Subsidiaries obtained by it pursuant to this Section 3B or Section 3A above;
provided that such Purchaser may disclose such information in connection with
the sale or transfer of any Convertible Preferred Stock or Common Stock if such
Purchaser's transferee agrees in writing to be bound by the provisions hereof.

         Section 4. Transfer of Restricted Securities.

         4A. General Provisions. Restricted Securities are transferable only
pursuant to (i) public offerings registered under the Securities Act, (ii) Rule
144 or Rule 144A of the Securities and Exchange Commission (or any similar rule
or rules then in force) if such rule is available and (iii) subject to the
conditions specified in paragraph 4B below, any other legally available means of
transfer.

         4B. Rule 144A. Upon the request of a holder of Restricted Securities,
the Company shall promptly supply to such holder or its prospective transferees
all information regarding the Company required to be delivered in connection
with a transfer pursuant to Rule 144A of the Securities and Exchange Commission.

         4C. Legend Removal. If any Restricted Securities become eligible for
sale pursuant to Rule 144(k), the Company shall, upon the request of the holder
of such Restricted Securities, remove the legend set forth in Section 7C from
the certificates for such Restricted Securities.

         Section 5. Representations and Warranties of the Company. As a material
inducement to the Purchasers to enter into this Agreement and purchase the
Convertible Preferred Stock hereunder, the Company hereby represents and
warrants that:

         5A. Organization, Corporate Power and Licenses. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and is qualified to do business in every jurisdiction
in which the failure to so qualify would reasonably be expected to have a
material adverse effect on the financial condition, operating results, assets,
operations or business prospects of the Company and its Subsidiaries taken as a
whole. The Company possesses all requisite corporate power and authority and all
material licenses, permits and authorizations necessary to own and operate its
properties, to carry

                                      -5-
<PAGE>

on its businesses as now conducted and presently proposed to be conducted and to
carry out the transactions contemplated by this Agreement.

         5B. Capital Stock and Related Matters.

         (i) As of the Closing and after giving effect to the transactions
contemplated by this Agreement, the authorized capital stock of the Company
shall consist of (a) 750,000 shares of Convertible Preferred Stock, of which
456,750 shares shall be issued and outstanding, and (b) 750,000 shares of Common
Stock, of which no shares shall be issued and outstanding and 50,750 of which
shall be reserved for issuance upon exercise of stock options to be issued under
the Stock Option Plan and 456,750 shares shall be reserved for issuance upon
conversion of the Convertible Preferred Stock. As of the Closing, neither the
Company nor any of its Subsidiaries shall have outstanding any stock or
securities convertible or exchangeable for any shares of its capital stock or
containing any profit participation features, nor shall it have outstanding any
rights or options to subscribe for or to purchase its capital stock or any stock
or securities convertible into or exchangeable for its capital stock or any
stock appreciation rights or phantom stock plans, except for the Convertible
Preferred Stock and except for any options issued under the Stock Option Plan as
of the Closing. As of the Closing, neither the Company nor any of its
Subsidiaries shall be subject to any obligation (contingent or otherwise) to
repurchase or otherwise acquire or retire any shares of its capital stock or any
warrants, options or other rights to acquire its capital stock, except as set
forth in the Certificate of Incorporation and except pursuant to any rights
exercised by the Company pursuant to the Stockholders Agreement or the Executive
Stock Agreements. As of the Closing, all of the outstanding shares of the
Company's capital stock shall be validly issued, fully paid and nonassessable.

         (ii) There are no statutory or contractual stockholders preemptive
rights or rights of refusal with respect to the issuance of the Convertible
Preferred Stock hereunder. The Company has not violated any applicable federal
or state securities laws in connection with the offer, sale or issuance of any
of its capital stock, and the offer, sale and issuance of the Convertible
Preferred Stock hereunder does not require registration under the Securities Act
or any applicable state securities laws.

         5C. Authorization; No Breach. The execution, delivery and performance
of this Agreement and all other agreements and instruments contemplated hereby
to which the Company is a party and the offering, sale and issuance of the
Convertible Preferred Stock hereunder has been duly authorized by the Company.
This Agreement and all other agreements and instruments contemplated hereby to
which the Company is a party each constitutes a valid and binding obligation of
the Company, enforceable in accordance with its terms. The execution and
delivery by the Company of this Agreement and all other agreements and
instruments contemplated hereby to which the Company is a party, the offering,
sale and issuance of the Convertible Preferred Stock hereunder and the
fulfillment of and compliance with the respective terms hereof and thereof by
the Company, do not and shall not (i) conflict with or result in a breach of the
terms, conditions or provisions of, (ii) constitute a default under, (iii)
result in the creation of any Lien upon the Company's or any of its
Subsidiaries' capital stock or assets pursuant to, (iv) give any third party the
right to modify, terminate or accelerate any obligation under, (v) result in a
violation of, or (vi) require any authorization, consent, approval, exemption or
other action by or notice or declaration to, or filing with, any court or
administrative or

                                      -6-
<PAGE>

governmental body or agency pursuant to, the charter or bylaws of the Company or
any of its Subsidiaries, or any law, statute, rule or regulation to which the
Company or any of its Subsidiaries is subject, or any agreement, instrument,
order, judgment or decree to which the Company or any of its Subsidiaries is
subject.

         5D. Conduct of Business; Liabilities. Except as contemplated by this
Agreement and all other agreements and instruments contemplated hereby to which
the Company is a party (including the Acquisition Agreement) and the
consummation of the transactions contemplated herein and therein, prior to the
Closing, the Company has not conducted any business, incurred any expenses,
obligations or liabilities or entered into any contracts or agreements.

         5E. Acquisition Agreement Representations. The representations and
warranties made by the Acquired Companies in the Acquisition Agreement are true
and correct in all material respects, and the representations and warranties
made by the Company in the Acquisition Agreement are true and correct in all
material respects, in each case regardless of any limitation on survival set
forth in the Acquisition Agreement.

         Section 6. Definitions.

         6A. Definitions. For the purposes of this Agreement, the following
terms have the meanings set forth below

         "Lien" means any mortgage, pledge, security interest, encumbrance, lien
or charge of any kind (including any conditional sale or other title retention
agreement or lease in the nature thereof), any sale of receivables with recourse
against the Company, any filing or agreement to a file a financing statement as
debtor under the Uniform Commercial Code or any similar statute (other that to
reflect ownership by a third party of property leased to the Company under a
lease which is not in the nature of a conditional sale or title retention
agreement), or any subordination arrangements in favor of another Person.

         "Officer's Certificate" means a certificate signed by the Company's
chief executive officer, president or its chief financial officer, stating that
(i) the officer signing such certificate has made or has caused to be made such
investigations as are reasonably necessary in order to permit him to verify the
accuracy of the information set forth in such certificate and (ii) to the best
of such officer's knowledge, such certificate does not misstate any material
fact and does not omit to state any fact necessary to make the certificate not
misleading.

         "Options" means options to purchase Common Stock which are issued under
the Stock Option Agreements in accordance with the Stock Option Plan.

         "Person" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.

         "Restricted Securities" means (i) the Convertible Stock issued
hereunder, (ii) the Convertible Preferred Stock issued under the Executive Stock
Agreements, (iii) the Common

                                      -7-
<PAGE>

Stock issued upon exercise of the Options and conversion of the Convertible
Preferred Stock and (iv) any securities issued with respect to the securities
referred to in clauses (i), (ii) or (iii) above by way of a stock dividend or
stock split or in connection with a combination of shares, recapitalization,
merger, consolidation or other reorganization. As to any particular Restricted
Securities, such securities shall cease to be Restricted Securities when they
have (a) been effectively registered under the Securities Act and disposed of in
accordance with the registration statement covering them, (b) been distributed
to the public through a broker, dealer or market maker pursuant to Rule 144 (or
any similar provision then in force) under the Securities Act or become eligible
for sale pursuant to Rule 144(k) (or any similar provision then in force) under
the Securities Act or (c) been otherwise transferred and new certificates for
them not bearing the Securities Act legend set forth in paragraph 7C have been
delivered by the Company in accordance with Section 4. Whenever any particular
securities cease to be Restricted Securities, the holder thereof shall be
entitled to receive from the Company, without expense, new securities of like
tenor not bearing a Securities Act legend of the character set forth in
paragraph 7C.

         "Securities Act" means the Securities Act of 1933, as amended, or any
similar federal law then in force.

         "Securities and Exchange Commission" includes any governmental body or
agency succeeding to the functions thereof.

         "Subsidiary" means, with respect to any Person, any corporation,
limited liability company, partnership, association or other business entity of
which (i) if a corporation, a majority of the total voting power of shares of
stock entitled (without regard to the occurrence of any contingency) to vote in
the election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by that Person or one or more of the other
Subsidiaries of that Person or a combination thereof, or (ii) if a limited
liability company, partnership, association or other business entity, a majority
of the partnership or other similar ownership interest thereof is at the time
owned or controlled, directly or indirectly, by that Person or one or more
Subsidiaries of that Person or a combination thereof. For purposes hereof, a
Person or Persons shall be deemed to have a majority ownership interest in a
limited liability company, partnership, association or other business entity if
such Person or Persons shall be allocated a majority of the limited liability
company, partnership, association or other business entity gains or losses or
shall be or control any managing member or general partner of such limited
liability company, partnership, association or other business entity.

         Section 7. Miscellaneous.

         7A. Expenses. The Company shall pay, and hold each Purchaser and its
affiliates and all holders of Convertible Preferred Stock harmless against
liability for the payment of, (i) all costs, fees and expenses incurred by the
Purchasers or any of their respective affiliates in connection with the
negotiation and execution of this Agreement and the Acquisition Agreement and
the consummation of the transactions contemplated hereby and thereby (including
fees and expenses of legal counsel, accountants, consultants and other
representatives and consultants and due diligence (including travel-related)
fees and expenses) and the fees and expenses incurred by the Purchasers with
respect to any amendments or waivers (whether or not the same became effective)
under or in respect of this Agreement, the agreements and

                                      -8-
<PAGE>

instruments contemplated hereby or the Certificate of Incorporation (including,
without limitation, in connection with any proposed merger, sale or
recapitalization of the Company or the Acquired Companies), (ii) the reasonable
fees and expenses incurred with respect to the enforcement of the rights granted
under this Agreement, the agreements contemplated hereby and the Certificate of
Incorporation, (iii) stamp and other taxes which may be payable in respect of
the execution and delivery of this Agreement or the issuance, delivery or
acquisition of any Convertible Preferred Stock and (iv) the reasonable fees and
expenses incurred by each Purchaser in any filing with any governmental agency
with respect to its investment in the Company or in any other filing with any
governmental agency with respect to the Company which mentions such Person.

         7B. Remedies. Each holder of Convertible Preferred Stock shall have all
rights and remedies set forth in this Agreement or the Certificate of
Incorporation and all rights and remedies which such holders have been granted
at any time under any other agreement or contract and all of the rights which
such holders have under any law. Any Person having any rights under any
provision of this Agreement shall be entitled to enforce such rights
specifically (without posting a bond or other security), to recover damages by
reason of any breach of any provision of this Agreement and to exercise all
other rights granted by law.

         7C. Purchaser's Investment Representations.

         (i) Each Purchaser hereby represents that it is acquiring the
Restricted Securities purchased hereunder or acquired pursuant hereto for its
own account with the present intention of holding such securities for purposes
of investment, and that it has no intention of selling such securities in a
public distribution in violation of the federal securities laws or any
applicable state securities laws; provided that nothing contained herein shall
prevent any Purchaser and subsequent holders of Restricted Securities from
transferring such securities in compliance with the provisions of Section 4
hereof. Each certificate or instrument representing Restricted Securities shall
be imprinted with a legend in substantially the following form:

         "The securities represented by this certificate were originally issued
         on September 30, 2003, and have not been registered under the
         Securities Act of 1933, as amended. The transfer of the securities
         represented by this certificate is subject to the conditions specified
         in the Stock Purchase Agreement, dated as of September 30, 2003, and as
         amended and modified from time to time, between the issuer (the
         "Company") and certain investors, and the Company reserves the right to
         refuse the transfer of such securities until such conditions have been
         fulfilled with respect to such transfer. A copy of such conditions
         shall be furnished by the Company to the holder hereof upon written
         request and without charge."

         (ii) Each Purchaser has been given full access to all information
regarding the Company (including access to the Acquisition Agreement) that it
has requested from the Company and has had the opportunity to ask questions and
receive answers concerning the terms and conditions of the Convertible Preferred
Stock to be purchased by it hereunder. Each Purchaser is capable of evaluating
and has evaluated the merits and risks of its purchase of the Convertible
Preferred Stock hereunder and is able to bear the economic risk of its
investment in the Convertible Preferred Stock.

                                      -9-
<PAGE>

         (iii) Each Purchaser is an "accredited investor" as defined in Rule
501(a) under the Securities Act and has such knowledge, sophistication and
experience in business and financial matters so as to be capable of evaluating
the merits and risks of its prospective investment in the Convertible Preferred
Stock, is able to bear the economic risk of such investment and, at the present
time, is able to afford a complete loss of such investment.

         (iv) Each Purchaser recognizes that it must bear the economic risk of
the investment represented by its purchase of the Convertible Preferred Stock
for an indefinite period. Each Purchaser understands that the Convertible
Preferred Stock has not been registered under the Securities Act on the basis
that the sale provided for in this Agreement is exempt from the registration
provisions thereof and that the Company's reliance on such exemption is
predicated upon the representations of the Purchasers set forth herein.

         (v) Each Purchaser has the requisite power and authority to purchase
the Restricted Securities to be purchased by such Purchaser hereunder. This
Agreement is a valid and binding obligation of such Purchaser enforceable in
accordance with its terms.

         (vi) The representations and warranties in this Section 7C are made
severally by each Purchaser with respect to such Purchaser and not jointly with
respect to all Purchasers.

         7D. Consent to Amendments. The provisions of this Agreement may be
amended and the Company may take any action herein prohibited, or omit to
perform any act herein required to be performed by it, only if the Company has
obtained the written consent of the holders of a majority of the Common Stock
(assuming conversion of the Convertible Preferred Stock) issued and sold
hereunder. No course of dealing between the Company and the holder of any
Convertible Preferred Stock or Common Stock issued and sold hereunder or any
delay in exercising any rights hereunder or under the Certificate of
Incorporation shall operate as a waiver of any rights of any such holders
hereunder. For purposes of this Agreement, shares of Convertible Preferred Stock
or Common Stock held by the Company or any of its Subsidiaries shall not be
deemed to be outstanding.

         7E. Survival of Representations and Warranties. All representations and
warranties contained herein or made in writing by any party to this Agreement in
connection herewith shall survive the execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby, regardless of any
investigation made by any Purchaser or on its behalf.

         7F. Successors and Assigns. Except as otherwise expressly provided
herein, all covenants and agreements contained in this Agreement by or on behalf
of any of the parties hereto shall bind and inure to the benefit of the
respective successors and assigns of the parties hereto whether so expressed or
not. In addition, and whether or not any express assignment has been made, the
provisions of this Agreement which are for any Purchaser's benefit as a
purchaser or holder of Restricted Securities are also for the benefit of, and
enforceable by, any subsequent holder of such Restricted Securities. If a sale,
transfer, assignment or other disposition of any Restricted Securities is made
in accordance with the provisions of this Agreement to any Person and such
Restricted Securities remain Restricted Securities immediately after such
disposition, such Person shall, at or prior to the time such Restricted
Securities are acquired, execute a

                                      -10-
<PAGE>

counterpart of this Agreement with such modifications thereto as may be
necessary to reflect such Person's agreement to become a party to, and to be
bound by, all covenants, terms and conditions of this Agreement and the
Stockholders Agreement as theretofore amended.

         7G. Severability. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement or the application of any
such provision to any Person or circumstance shall be held to be prohibited by,
illegal or unenforceable under applicable law in any respect by a court of
competent jurisdiction, such provision shall be ineffective only to the extent
of such prohibition or illegality or unenforceability, without invalidating the
remainder of such provision or the remaining provisions of this Agreement.

         7H. Entire Agreement. This Agreement and the agreements and documents
referred to herein contain the entire agreement and understanding between the
parties with respect to the subject matter hereof and supersede all prior
agreements and understandings, whether written or oral, relating to such subject
matter in any way.

         7I. Counterparts. This Agreement may be executed simultaneously in two
or more counterparts (including by means of telecopied signature
pages), any one of which need not contain the signatures of more than one party,
but all such counterparts taken together shall constitute one and the same
Agreement.

         7J. Descriptive Headings; Interpretation. The descriptive headings of
this Agreement are inserted for convenience only and do not constitute a
substantive part of this Agreement. The use of the word "including" in this
Agreement shall be by way of example rather than by limitation and shall mean in
each instance "including without limitation."

         7K. Governing Law. All issues and questions concerning the
construction, validity, enforcement and interpretation of this Agreement and the
exhibits and schedules hereto shall be governed by, and construed in accordance
with, the laws of the State of Delaware, without giving effect to any choice of
law or conflict of law rules or provisions (whether of the State of Delaware or
any other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of Delaware.

         7L. Notices. All notices, demands or other communications to be given
or delivered under or by reason of the provisions of this Agreement shall be in
writing and shall be deemed to have been given when delivered personally, sent
by telecopy (with receipt confirmed) on a business day during regular business
hours of the recipient (or, if not, on the next succeeding business day) or two
business days after being sent by reputable overnight courier service (charges
prepaid). Such notices, demands and other communications shall be sent to each
Purchaser at the address indicated on the Schedule of Purchasers and to the
Company at the address indicated below:

         SeaBright Insurance Holdings, Inc.
         2101 4th Avenue, Suite 1600
         Seattle, Washington 98121
         Attn: Chief Executive Officer
         Telephone: (206) 770-8300
         Telecopy:  (206) 448-4442

                                      -11-
<PAGE>

         with copies to (which shall not constitute notice to the Company):

         Summit Partners, L.P.
         499 Hamilton Avenue
         Palo Alto, California 94301
         Attention: Peter Y. Chung
                    J. Scott Carter
         Telephone: (650) 321-1166
         Telecopy:  (650) 321-1188

         Kirkland & Ellis LLP
         200 East Randolph Drive
         Chicago, Illinois 60601
         Attention: Ted H. Zook, P.C.
                    Stephen D. Oetgen
         Telephone: (312) 861-2000
         Telecopy:  (312) 861-2200

or to such other address or to the attention of such other person as the
recipient party has specified by prior written notice to the sending party.

         7M. No Strict Construction. The parties have participated jointly in
the negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties, and no presumption or burden of proof
shall arise favoring or disfavoring any party by virtue of the authorship of any
of the provisions of this Agreement.

         7N. Understanding Among the Purchasers. The determination of each
Purchaser to purchase the Convertible Preferred Stock pursuant to this Agreement
has been made by such Purchaser independent of any other Purchaser and
independent of any statements or opinions as to the advisability of such
purchase or as to the properties, business, prospects or condition (financial or
otherwise) of the Company which may have been made or given by any other
Purchaser or by any agent or employee of any other Purchaser. In addition, it is
acknowledged by each of the Purchasers that no Purchaser has acted as an agent
of any other Purchaser in connection with making its investment hereunder and
that no Purchaser shall be acting as an agent of any other Purchaser in
connection with monitoring its investment hereunder.

                                    * * * * *

                                      -12-
<PAGE>

         IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first written above.

                                SEABRIGHT INSURANCE HOLDINGS, INC.

                                By:  /s/ John G. Pasqualetto
                                     ----------------------------------------
                                Its: President
                                     ---------------------------------------

                                SUMMIT VENTURES V, L.P.

                                By:  Summit Partners V, L.P.
                                Its: General Partner

                                By:  Summit Partners, LLC
                                Its: General Partner

                                By:  /s/  Peter Chung
                                     ----------------------------------------
                                     Member

                                SUMMIT V COMPANION FUND, L.P.

                                By:  Summit Partners V, L.P.
                                Its: General Partner

                                By:  Summit Partners, LLC
                                Its: General Partner

                                By:  /s/  Peter Chung
                                     -----------------------------------------
                                     Member

                                SUMMIT V ADVISORS FUND (QP), L.P.

                                By:  Summit Partners V, L.P.
                                Its: General Partner

                                By:  Summit Partners, LLC
                                Its: General Partner

                                By:  /s/  Peter Chung
                                     ----------------------------------------
                                     Member

<PAGE>

                                SUMMIT V ADVISORS FUND, L.P.

                                By:  Summit Partners V, L.P.
                                Its: General Partner

                                By:  Summit Partners, LLC
                                Its: General Partner

                                By:  /s/  Peter Chung
                                     ----------------------------------------
                                     Member

                                SUMMIT VENTURES VI-A, L.P.

                                By:  Summit Partners VI (GP), L.P.
                                Its: General Partner

                                By:  Summit Partners VI (GP), LLC
                                Its: General Partner

                                By:  /s/  Peter Chung
                                     ----------------------------------------
                                     Member

                                SUMMIT VENTURES VI-B, L.P.

                                By:  Summit Partners VI (GP), L.P.
                                Its: General Partner

                                By:  Summit Partners VI (GP), LLC
                                Its: General Partner

                                By:  /s/  Peter Chung
                                     ----------------------------------------
                                     Member

                                SUMMIT VI ADVISORS FUND, L.P.

                                By:  Summit Partners VI (GP), L.P.
                                Its: General Partner

                                By:  Summit Partners VI (GP), LLC
                                Its: General Partner

                                By:  /s/  Peter Chung
                                     ----------------------------------------
                                     Member

                                      -2-
<PAGE>

                                SUMMIT VI ENTREPRENEURS FUND, L.P.

                                By:  Summit Partners VI (GP), L.P.
                                Its: General Partner

                                By:  Summit Partners VI (GP), LLC
                                Its: General Partner

                                By:  /s/  Peter Chung
                                     ----------------------------------------
                                     Member

                                SUMMIT INVESTORS VI, L.P.

                                By:  Summit Partners VI (GP), L.P.
                                Its: General Partner

                                By:  Summit Partners, VI (GP), LLC
                                Its: General Partner

                                By:  /s/  Peter Chung
                                     ----------------------------------------
                                     Member

                                RANDOLPH STREET PARTNERS V

                                By:  /s/  Stephen Oetgen
                                     ----------------------------------------
                                Its: General Partner
                                     ----------------------------------------

                                      -3-

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