AGREEMENT AND PLAN OF MERGER

Exhibit 2.1

EXECUTION COPY

AGREEMENT AND PLAN OF MERGER

DATED AS OF JUNE 21, 2009

AMONG

TOWER GROUP, INC.,

TOWER S.F. MERGER CORPORATION

AND

SPECIALTY UNDERWRITERS’ ALLIANCE, INC.

TABLE OF CONTENTS

     This AGREEMENT AND PLAN OF MERGER, dated as of June 21, 2009 (this “ Agreement ”), is by and among TOWER GROUP, INC., a Delaware corporation (“ Parent ”), TOWER S.F. MERGER CORPORATION, a Delaware corporation and a wholly owned Subsidiary of Parent (“ Merger Sub ”), and SPECIALTY UNDERWRITERS’ ALLIANCE, INC., a Delaware corporation (the “ Company ” and, collectively with Parent and Merger Sub, the “ parties ”).

RECITALS

     WHEREAS, the respective Boards of Directors of Parent and Merger Sub have determined that it is in the best interests of their respective companies to enter into this Agreement and to consummate the merger of Merger Sub with and into the Company (the “ Merger ”), upon the terms and subject to the conditions set forth in this Agreement;

     WHEREAS, the Board of Directors of the Company has determined that it is in the best interests of the Company to enter into this Agreement and to consummate the Merger, upon the terms and subject to the conditions set forth in this Agreement, and that the Merger is fair to, and in the best interests of, the stockholders of the Company; and

     WHEREAS, for United States federal income tax purposes, it is intended that the Merger shall qualify as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the “ Code ”), and the regulations promulgated thereunder.

     NOW, THEREFORE, in consideration of the foregoing and the representations, warranties, covenants and agreements set forth in this Agreement, and intending to be legally bound hereby, the parties hereby agree as follows:

ARTICLE I
THE MERGER; CERTAIN RELATED MATTERS

     Section 1.1 The Merger . Upon the terms and subject to the conditions set forth in this Agreement and in accordance with the DGCL, at the Effective Time, Merger Sub shall be merged with and into the Company. As a result of the Merger, the separate corporate existence of Merger Sub will cease and the Company will continue under the name “Stinger” as the surviving corporation of the Merger under the DGCL (the “ Surviving Corporation ”).

     Section 1.2 Closing; Effective Time . Subject to the provisions of Article VII, the closing of the Merger (the “ Closing ”) will take place at 10:00 a.m., New York City time, on the fifth Business Day after the satisfaction or, to the extent permitted by Law, waiver of the conditions set forth in Article VII (excluding conditions that, by their terms, cannot be satisfied until the Closing, but the Closing shall be subject to the satisfaction or, to the extent permitted by Law, waiver of those conditions), at the offices of Stroock & Stroock & Lavan LLP, 180 Maiden Lane, New York, New York, unless another time, date or place is agreed to in writing by the parties; provided , however , in the event that the Company delivers a Walk-Away Notice pursuant to Section 8.1(d)(iii) and Parent elects to deliver a Top-Up Notice, subject to the satisfaction or, to the extent permitted by Law, waiver of the conditions set forth in Article VII, the “Closing Date” shall be the third Business Day following delivery of such Top-Up Notice, unless another time, date or place is agreed to in writing by the parties. The date on which the

Closing actually occurs is hereinafter referred to as the “ Closing Date ”. Subject to the provisions of this Agreement, as soon as practicable on the Closing Date the Company shall file with the Secretary of State of the State of Delaware a certificate of merger, executed in accordance with, and in such form as is required by, the relevant provisions of the DGCL (the “ Certificate of Merger ”). The Merger shall become effective upon the filing of the Certificate of Merger or at such later time as is agreed to by the parties hereto and specified in the Certificate of Merger (the time at which the Merger becomes effective is herein referred to as the “ Effective Time ”). The parties shall make all other filings or recordings required under the DGCL in connection with the Merger.

     Section 1.3 Effects of the Merger . The Merger shall have the effects set forth in the applicable provisions of the DGCL. Without limiting the generality of the foregoing and subject thereto, at the Effective Time, all the property, rights, privileges, immunities, powers and franchises of the Company and Merger Sub shall vest in the Surviving Corporation and all debts, liabilities and duties of the Company and Merger Sub shall become the debts, liabilities and duties of the Surviving Corporation.

     Section 1.4 Certificate of Incorporation; Bylaws . At the Effective Time, the Certificate of Incorporation of the Company shall by virtue of the Merger be amended and restated in its entirety to read as set forth on Exhibit A hereto and, as so amended and restated, shall be the certificate of incorporation of the Surviving Corporation following the Effective Time until thereafter amended in accordance with its terms and applicable Law. At the Effective Time, the bylaws of Merger Sub, as in effect immediately prior to the Effective Time, shall be the bylaws of the Surviving Corporation following the Effective Time until thereafter amended in accordance with the Constituent Documents of the Surviving Corporation and applicable Law, except that references to Merger Sub’s name shall be replaced by references to “Stinger.” This Section 1.4 shall be subject to the obligations of Parent and the Surviving Corporation under Section 6.10.

     Section 1.5 Directors and Officers of Surviving Corporation . As of the Effective Time, each of the directors of the Company shall resign and the directors of Merger Sub, at the Effective Time, shall be the directors of the Surviving Corporation until their successors have been duly elected and qualified or until their earlier death, resignation or removal in accordance with the Constituent Documents of the Surviving Corporation. The officers of the Company, at the Effective Time, shall, from and after the Effective Time, be the officers of the Surviving Corporation until their successors have been duly appointed and qualified or until their earlier death, resignation or removal in accordance with the Constituent Documents of the Surviving Corporation.

     Section 1.6 Effect on Capital Stock . At the Effective Time, by virtue of the Merger and without any action on the part of Parent, Merger Sub, the Company or the holders of any of the following securities:

     (a) Each share of common stock of Merger Sub issued and outstanding immediately prior to the Effective Time shall be converted into and become one validly issued, fully paid and nonassessable share of common stock, par value $0.01 per share, of the Surviving Corporation.

     (b) Each share of (i) common stock, par value $0.01 per share, of the Company (such shares, collectively, the “ Common Stock ”, and each, a “ Common Share ”) and (ii) Class B Common Stock, par value $0.01 per share, of the Company (the “ Class B Stock ”, and each, a “ Class B Share ”, and the Class B Shares collectively with the Common Shares, the “ Company Shares ”), in each case issued and outstanding immediately prior to the Effective Time (other than any shares of Common Stock or Class B Stock to be canceled pursuant to Section 1.6(c) and any Dissenting Shares), shall be converted into the right to receive an amount per Company Share (subject to any applicable withholding Tax specified in Section 2.2) equal to an amount of Parent Common Stock equal to the product of one Company Share and the Common Exchange Ratio (which Common Exchange Ratio is subject to adjustment as set forth herein) and any cash paid in lieu of fractional shares in accordance with Section 2.1(d) (collectively, the “ Merger Consideration ”). At the Effective Time, each Company Share converted into the right to receive the Merger Consideration pursuant to this Article I shall automatically be cancelled and shall cease to exist and each holder of a certificate theretofore representing any such Company Shares (each, a “ Certificate ”) or non-certificated Company Shares represented by book-entry (“ Book-Entry Shares ”) shall cease to have any rights with respect thereto, except the right to receive (i) the Merger Consideration upon surrender of such Certificates or Book-Entry Shares in accordance with Section 2.1(c), without interest (subject to any applicable withholding Tax specified in Section 2.2); and (ii) any dividends and other distributions in accordance with Section 1.8.

     (c) Each Company Share held in the treasury of the Company, if any, or otherwise owned by Parent or Merger Sub, or owned by any direct or indirect Subsidiary of any such Person (other than Company Shares held in an investment portfolio), in each case immediately prior to the Effective Time, shall automatically be canceled and retired and cease to exist without any conversion thereof and no consideration shall be paid in exchange therefor.

     Section 1.7 Treatment of Options and Other Company Equity Awards

     (a) At the Effective Time, by virtue of the Merger and without any action on the part of the holders thereof, each stock option issued pursuant to an Incentive Plan (each, an “ Option ”) and other equity-based awards (excluding Deferred Stock Awards, which are discussed in Section 1.7(b) below) issued pursuant to an Incentive Plan denominated in shares of Common Stock (each such award, a “ Company Compensatory Award ”) that is outstanding immediately prior to the Effective Time, whether or not then vested, deliverable or exercisable, shall be assumed by Parent and converted automatically at the Effective Time into an option or such other substantially identical equity-based award, as the case may be, denominated in shares of Parent Common Stock and which has other terms and conditions substantially identical to those of the related Company Compensatory Award (including any accelerated vesting provisions therein) except that (i) the number of shares of Parent Common Stock subject to each such award shall be determined by multiplying the number of shares of Common Stock subject to such Company Compensatory Award immediately prior to the Effective Time by the Award Exchange Ratio and (ii) if applicable, the exercise or purchase price per share of Parent Common Stock (rounded upwards to the nearest whole cent) shall equal (x) the per share exercise or purchase price for the shares of Common Stock otherwise purchasable pursuant to such Company Compensatory Award immediately prior to the Effective Time divided by (y) the Award Exchange Ratio; provided , however , that in no case shall the exchange of an Option or

any other Company Compensatory Award be performed in a manner that is not in compliance with the adjustment requirements of Section 409A of the Code and in the case of any Option that is intended to be an “incentive stock option” under Section 422 of the Code, such Option shall be determined in a manner consistent with the requirements of Section 424(a) of the Code. The portion of any Options that are vested and/or exercisable at the Effective Time shall be converted into vested and/or exercisable options, as applicable, denominated in shares of Parent Common Stock, and the portion of any Options that are unvested and/or not exercisable at the Effective Time shall, after being converted into options denominated in shares of Parent Common Stock, be subject to the same terms and conditions of vesting and exercisability as the applicable Option was immediately prior to the Effective Time.

     (b) Prior to the Effective Time, the Board of Directors of the Company or the appropriate committee of the Board of Directors of the Company, if necessary, shall adopt a resolution providing that, at the Effective Time, each deferred stock award in respect of a Company Share issued pursuant to an Incentive Plan (a “ Deferred Stock Award ”) shall be converted into the right to receive a deferred stock award in respect of a share of Parent Common Stock at the Award Exchange Ratio, rounded down to the nearest whole share (subject to any applicable withholding Tax specified in Section 2.2); provided that such converted deferred stock awards in respect of Parent Common Stock shall remain subject to the same restrictions that applied to the Deferred Stock Award immediately prior to the Effective Time and shall otherwise have the same terms and conditions (including vesting dates and date of settlement in shares) as were in effect with respect to the corresponding Deferred Stock Award immediately prior to the Effective Time. Any portion of any Deferred Stock Award that is vested as of the Effective Time shall be converted into vested deferred stock awards in respect of shares of Parent Common Stock, and any portion of any Deferred Stock Awards that is unvested at the Effective Time shall, after being converted into deferred stock awards denominated in shares of Parent Common Stock, be subject to the same terms and conditions of vesting (including any accelerated vesting provisions therein) and delivery as the applicable Deferred Stock Award was immediately prior to the Effective Time.

     (c) Parent shall take such actions as are necessary for the assumption and conversion of the Options and other Company Compensatory Awards pursuant to Section 1.7(a), including the reservation, issuance and listing of shares of Parent Common Stock as is necessary to effectuate the transactions contemplated by Section 1.7(a). As soon as reasonably practicable after the Effective Time, Parent shall deliver to each holder of any Options and other Company Compensatory Awards an appropriate notice setting forth such holder’s rights pursuant to such Options and agreements evidencing the grants of such Company Compensatory Awards, and stating that the Incentive Plans and such Options and agreements have been assumed by Parent and shall continue in effect on the same terms and conditions (subject to the adjustments required by Section 1.7(a) after giving effect to the Merger and the terms of the Incentive Plans). Parent shall prepare and file with the SEC a registration statement on Form S-8 with respect to the shares of Parent Common Stock issuable upon exercise of the assumed Company Compensatory Awards promptly following the Effective Time (and in no event later than 10 Business Days after the Effective Time) and Parent shall exercise commercially reasonable efforts to maintain the effectiveness of such registration statement for so long as such assumed Company Compensatory Awards remain outstanding. The Company and its counsel shall reasonably cooperate with and assist Parent in the preparation of such registration statement.

     (d) Subject to Parent’s compliance with the preceding provisions of this Section 1.7, the parties agree that, following the Effective Time, no holder of an Option, a Company Compensatory Award or a Deferred Stock Award or any participant in any Incentive Plan or employee benefit arrangement of the Company or under any employment agreement shall have any right hereunder to acquire any equity interest (including any “phantom” stock or stock appreciation rights) in the Company, any of its Subsidiaries or the Surviving Corporation.

     (e) As soon as reasonably practicable following the date of this Agreement and in any event prior to the Effective Time, the Company’s Board of Directors (or, if appropriate, any committee administering Incentive Plans) shall adopt such resolutions and take such actions that are necessary for the treatment of the Options, Company Compensatory Awards and Deferred Stock Awards pursuant to this Section 1.7.

     Section 1.8 Certain Adjustments . If, between the date of this Agreement and the Effective Time, the Common Stock or Parent Common Stock is changed into a different number of shares or a different class by reason of any reclassification, recapitalization, reorganization, combination or exchange of shares, stock split, reverse stock split or a stock dividend or dividend payable in any other securities or any similar transaction or any transaction having the effect of any of the foregoing, the Merger Consideration shall be appropriately adjusted to provide to the holders of Company Shares and the holders of Options and Deferred Stock Awards the same economic effect as contemplated by this Agreement prior to such action and as so adjusted shall, from and after the date of such event, be the Merger Consideration.

     Section 1.9 Appraisal Rights . Notwithstanding anything in this Agreement to the contrary, Class B Shares that are issued and outstanding immediately prior to the Effective Time and which are held by a stockholder who did not vote in favor of the Merger (or consent thereto in writing) and who is entitled to demand and properly demands appraisal of such shares pursuant to, and who complies in all respects with, the provisions of Section 262 of the DGCL (the “ Dissenting Stockholders ”), shall not be converted into or be exchangeable for the right to receive the Merger Consideration (the “ Dissenting Shares ”), but instead such holder shall be entitled to payment by the Company of the fair value of such shares in accordance with the provisions of Section 262 of the DGCL (and at the Effective Time, such Dissenting Shares shall no longer be outstanding and shall automatically be canceled and shall cease to exist, and such holder shall cease to have any rights with respect thereto, except the right to receive the fair value of such Dissenting Shares in accordance with the provisions of Section 262 of the DGCL), unless and until such holder shall have failed to perfect or shall have effectively withdrawn or lost rights to appraisal under the DGCL. If any Dissenting Stockholder shall have failed to perfect or shall have effectively withdrawn or lost such right, such holder’s Class B Shares shall thereupon be treated as if they had been converted into and become exchangeable for the right to receive, as of the Effective Time, the Merger Consideration for each such Class B Share, in accordance with Section 1.6(b), without any interest thereon. The Company shall give Parent (i) prompt notice of any written demands for appraisal of any Class B Shares, attempted withdrawals of such demands and any other instruments served pursuant to Section 262 of the DGCL and received by the Company relating to stockholders’ rights of appraisal, and (ii) the opportunity to participate in all negotiations and proceedings with respect to demands for appraisal under the DGCL.

ARTICLE II
PAYMENT AND EXCHANGE OF CERTIFICATES; WITHHOLDING

     Section 2.1 Payment and Exchange of Certificates .

     (a) Following the date of this Agreement and in any event not less than five (5) Business Days prior to the mailing of the Proxy Statement/Prospectus to the stockholders of the Company, Parent shall designate a bank or trust company reasonably acceptable to the Company to act as exchange agent (the “ Exchange Agent ”) for purposes of, among other things, paying the Merger Consideration. At or prior to the Effective Time, Parent shall deposit with the Exchange Agent, for the benefit of the holders of Certificates, Book-Entry Shares and Deferred Stock Awards, cash and certificates, or at Parent’s option, shares in book entry form representing the shares of Parent Common Stock to be exchanged in the Merger, in an amount sufficient to pay the aggregate Merger Consideration to which all holders of Company Shares and Deferred Stock Awards become entitled pursuant to Article I and such cash in lieu of fractional shares to be paid pursuant to Section 2.1(d) (the “ Aggregate Merger Consideration ”) (the Aggregate Merger Consideration, and any proceeds thereof being hereinafter referred to as the “ Exchange Fund ”).

     (b) The Exchange Agent shall invest the cash included in the Exchange Fund as directed in writing by Parent in (i) direct obligations of the United States of America, (ii) obligations for which the full faith and credit of the United States of America is pledged to provide for payment of all principal and interest, and (iii) commercial paper obligations rated A-1 or P1 or better by Moody’s Investors Service, Inc. or Standard & Poor’s Corporation, respectively, or a combination of the foregoing or in certificates of deposit, bank repurchase agreements or banker’s acceptances of commercial banks with capital exceeding $1,000,000,000 and, in any such case, no such instrument shall have a maturity exceeding three months. Any interest and other income resulting from such investments shall be paid to and be income of Parent. If for any reason (including losses) the cash in the Exchange Fund shall be insufficient to fully satisfy all of the payment obligations to be made in cash by the Exchange Agent hereunder, Parent shall promptly deposit cash into the Exchange Fund in an amount that is equal to the deficiency required to fully satisfy such cash payment obligations.

     (c) Promptly, and in any event no later than three (3) Business Days, after the Effective Time, the Surviving Corporation shall cause the Exchange Agent to mail to each Person who was a record holder of Company Shares immediately prior to the Effective Time, whose Company Shares were converted pursuant to Article I into the right to receive the Merger Consideration, (A) a form of letter of transmittal for use in effecting the surrender of Certificates in order to receive payment of the Merger Consideration (which letter of transmittal shall specify that delivery shall be effected, and risk of loss and title to the Certificate shall pass, only upon actual delivery of the Certificates to the Exchange Agent (or effective affidavits of loss in lieu thereof), and shall otherwise be in customary form and contain customary provisions), and (B) instructions for use in effecting the surrender of the Certificates (or effective affidavits of loss in lieu thereof) in exchange for the Merger Consideration and any dividends or other distributions to which such holder is entitled pursuant to Section 1.8. Upon surrender to the Exchange Agent of a Certificate (or effective affidavit of loss in lieu thereof), together with a properly completed and executed letter of transmittal and any other required documents, the Exchange Agent shall promptly deliver to the holder of the Company Shares represented by the Certificate (or effective

affidavit of loss in lieu thereof), or as otherwise directed in the letter of transmittal, the Merger Consideration in the form of shares of Parent Common Stock and cash and any dividends or other distributions to which such holder is entitled pursuant to Section 1.8, with regard to each Company Share represented by such Certificate, less any required withholding Taxes as specified in Section 2.2, and the Certificate shall be canceled. No interest shall be paid or accrued on the Merger Consideration, payable upon the surrender of Certificates. If delivery of the Merger Consideration is to be made to a Person holding a Certificate other than the Person in whose name a surrendered Certificate is registered, it shall be a condition of delivery that the Certificate so surrendered must be properly endorsed or otherwise be in proper form for transfer, and the Person who surrenders the Certificate must provide funds for payment of any transfer or other Taxes required by reason of delivery to a Person other than the registered holder of the surrendered Certificate or establish to the reasonable satisfaction of the Surviving Corporation that all Taxes have been paid or are not applicable. Subject to Section 1.9, after the Effective Time, a Certificate shall represent only the right to receive the Merger Consideration in respect of the Company Shares represented by such Certificate. Notwithstanding anything to the contrary contained in this Agreement, any holder of Book-Entry Shares shall not be required to deliver a Certificate or an executed letter of transmittal to the Exchange Agent in order to receive the Merger Consideration that such holder is entitled to receive pursuant to this Article II.

     (d) Notwithstanding anything in this Agreement to the contrary, no fraction of a share of Parent Common Stock will be issued in connection with the Merger, and, in lieu thereof, any Company stockholder who would otherwise have been entitled to a fraction of a share of Parent Common Stock, upon surrender of title to Company Shares for exchange, shall be paid upon such surrender (and after taking into account and aggregating Company Shares represented by all Certificates and Book-Entry Shares surrendered by such holder), cash (without interest) in an amount equal to the product obtained by multiplying (i) the fractional share interest to which such stockholder (after taking into account and aggregating all Company Shares represented by all Certificates and Book-Entry Shares) would otherwise be entitled by (ii) the Closing Date Market Price.

     (e) If a Certificate has been lost, stolen or destroyed, Parent and the Surviving Corporation will cause the Exchange Agent to accept an affidavit of that fact by the Person claiming such Certificate to be lost, stolen or destroyed instead of the Certificate; provided that the Surviving Corporation may require the Person to whom any Merger Consideration is paid, as a condition precedent to the payment thereof, to give the Surviving Corporation a bond in such reasonable amount as it may direct or otherwise indemnify the Surviving Corporation in a manner reasonably satisfactory to the Surviving Corporation against any claim that may be made against the Surviving Corporation with respect to the Certificate claimed to have been lost, stolen or destroyed.

     (f) At any time which is more than six (6) months after the Effective Time, Parent shall be entitled to require the Exchange Agent to deliver to it any portion of the Exchange Fund that had been deposited with the Exchange Agent and has not been disbursed in accordance with this Article II (including interest and other income received by the Exchange Agent in respect of the funds made available to it), and after the Exchange Fund has been delivered to Parent, Persons entitled to payment in accordance with this Article II shall be entitled to look solely to Parent (subject to abandoned property, escheat or similar Laws) for payment of the Merger

Consideration upon surrender of the Certificates held by them, without any interest thereon. Any portion of the Exchange Fund deposited with the Exchange Agent remaining unclaimed by holders of Company Shares five (5) years after the Effective Time shall, to the extent permitted by applicable Law, become the property of Parent free and clear of any claims or interest of any Person previously entitled thereto. None of the Surviving Corporation, Parent, Merger Sub, any of their respective Affiliates or the Exchange Agent will be liable to any Person entitled to payment under this Article II for any consideration which is delivered, in accordance with the terms of this Agreement, to Parent in accordance with the immediately preceding sentence or to a public official or Governmental Entity pursuant to any abandoned property, escheat or similar Law.

     (g) From and after the Effective Time, the Surviving Corporation shall not record on the stock transfer books of the Company or the Surviving Corporation any transfers of shares of Common Stock or shares of Class B Stock that were outstanding immediately prior to the Effective Time. If, after the Effective Time, Certificates (or effective affidavits of loss in lieu thereof) or Book-Entry Shares are presented for transfer, they shall be canceled and treated as having been surrendered for the Merger Consideration in respect of the Company Shares represented thereby.

     Section 2.2 Withholding Rights . Each of Parent and the Exchange Agent shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement to any holder of Company Shares, Options, Company Compensatory Awards or Deferred Stock Awards such amounts as it is lawfully required to deduct and withhold with respect to the making of such payment under the Code or any provision of state or local Law or the Laws of any other domestic or foreign jurisdiction. To the extent that amounts are so withheld and paid to the appropriate taxing authority by Parent or the Exchange Agent, as the case may be, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the holder of the Company Shares, Options, Company Compensatory Awards or Deferred Stock Awards, as the case may be, in respect of which such deduction and withholding was made.

ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY

     Except as (x) disclosed in the Company SEC Documents filed with or furnished to the SEC prior to the date of this Agreement (other than statements in the Risk Factors sections contained in the Company SEC Documents or any statements included in any “forward-looking statements” disclaimer contained in the Company SEC Documents) or (y) set forth in the disclosure letter delivered by the Company to Parent on or prior to the execution and delivery of this Agreement (the “ Company Disclosure Schedule ”), the Company represents and warrants to Parent and Merger Sub as set forth in this Article III. For purposes of the representations and warranties of the Company contained herein, disclosure in any section of the Company Disclosure Schedule of any facts or circumstances shall be deemed to be disclosure of such facts or circumstances with respect to all representations or warranties by the Company to which the relevance of such disclosure to the applicable representation and warranty is reasonably apparent on the face thereof. The inclusion of any information in the Company Disclosure Schedule or other document delivered by the Company pursuant to this Agreement shall not be deemed to be

an admission or evidence of the materiality of such item, nor shall it establish a standard of materiality for any purpose whatsoever.

     Section 3.1 Corporate Existence and Power . The Company is a corporation duly incorporated, validly existing and in good standing under the Laws of the State of Delaware. Each of the Company and its Subsidiaries has all requisite corporate, partnership or other similar powers and authorities and all governmental licenses, authorizations, permits, certificates, registrations, consents, franchises, variances, exemptions, orders and approvals required to own, lease and operate their respective properties and to carry on their respective businesses as currently conducted (the “ Company Permits ”), except for those powers, licenses, authorizations, permits, consents, franchises, variances, exemptions, orders and approvals the absence of which would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect. The Company and its Subsidiaries are in compliance with the terms of the Company Permits, except where the failure to be in such compliance would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect. The Company is duly qualified to do business as a foreign corporation and is in good standing in each jurisdiction where such qualification is required, except for those jurisdictions where the failure to be so qualified would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect. The Company has made available to Parent true and complete copies of the Constituent Documents of the Company and each of its Subsidiaries as currently in effect.

     Section 3.2 Corporate Authorization .

     (a) The Company has all necessary corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions to which it is a party contemplated hereby subject, in the case of the Merger, to obtaining the affirmative vote of the stockholders of the Company representing a majority of the votes eligible to be cast by such holders approving the Merger and adopting this Agreement at a stockholders meeting duly called and held for such purpose (the “ Requisite Stockholder Vote ”). The execution, delivery and performance by the Company of this Agreement and the consummation by the Company of the transactions to which it is a party contemplated hereby have been duly and validly authorized and approved by the Board of Directors of the Company, and no other corporate action on the part of the Company is necessary to authorize this Agreement or to consummate the transactions to which it is a party contemplated hereby, except that consummation of the Merger is subject to the Requisite Stockholder Vote, and to the effectiveness of the Certificate of Merger with the Secretary of State of the State of Delaware.

     (b) The Board of Directors of the Company, at a meeting duly called and held and at which a quorum of directors was present, has by resolutions duly adopted unanimously (i) determined that this Agreement and the Merger are fair to and in the best interests of the Company and its stockholders and declared the Merger to be advisable, (ii) approved and adopted this Agreement and the plan of merger herein providing for the Merger, upon the terms and subject to the conditions set forth herein, (iii) approved the execution, delivery and performance by the Company of this Agreement and the consummation of the transactions to which it is a party contemplated hereby, upon the terms and subject to the conditions set forth herein and (iv) resolved, subject to Section 6.3, to recommend approval of each of the matters

constituting the Requisite Stockholder Vote by the stockholders of the Company (such recommendation, the “ Company Board Recommendation ”) and that such matters and recommendation be submitted for consideration at the Company Stockholders Meeting.

     (c) This Agreement has been duly executed and delivered by the Company and, assuming due power and authority of, and due execution and delivery by, the other parties, constitutes a valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, moratorium, reorganization or similar Laws affecting the rights of creditors generally and the availability of equitable remedies (regardless of whether such enforceability is considered in a proceeding in equity or at law) (together, the “ Bankruptcy and Equity Exception ”). The Requisite Stockholder Vote is the only vote of the holders of any class or series of capital stock of the Company necessary to adopt this Agreement or approve the transactions to which the Company is a party contemplated hereby.

     Section 3.3 Governmental Authorization . The execution, delivery and performance by the Company of this Agreement and the consummation by the Company of the transactions to which it is a party contemplated hereby require at or prior to the Closing no consent or approval by, or filing with, any Governmental Entity, other than (a) the filing of the Certificate of Merger with the Secretary of State of the State of Delaware and appropriate documents with the relevant authorities of other states in which the Company is qualified to do business, (b) compliance with any applicable requirements of the HSR Act, (c) compliance with any applicable requirements of the Securities Act, the Exchange Act, and any other applicable federal or state securities Laws or “blue sky” Laws, (d) compliance with any applicable requirements of Nasdaq, (e) approvals or filings under all applicable state Laws regulating the business of insurance (collectively, “ Insurance Laws ”) as set forth in Section 3.3 of the Company Disclosure Schedule (the “ Company Insurance Approvals ”), (f) the Parent Insurance Approvals (assuming the accuracy and completeness of Section 4.3(e)), (g) those consents, approvals or filings as may be required as a result of the business or identity of Parent or any of its Affiliates (assuming the accuracy and completeness of Section 4.3(e)) and (h) any other consents, approvals or filings the failure of which to be obtained or made would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect or prevent or materially delay the consummation of the transactions contemplated by this Agreement.

     Section 3.4 Non-Contravention . The execution, delivery and performance by the Company of this Agreement do not, and the consummation of the transactions to which it is a party contemplated hereby will not, (a) violate or conflict with or result in any breach of any provision of the Constituent Documents of the Company or any of its Subsidiaries, (b) assuming receipt of the Requisite Stockholder Vote and compliance with the matters referred to in Section 3.3 and Section 4.3 (and assuming the accuracy and completeness of Section 4.3(e)), violate or conflict with any provision of any applicable Law, Order or Company Permit, (c) violate or conflict with or result in any breach or constitute a default, or an event that, with or without notice or lapse of time or both, would constitute a default under, or cause the termination, cancellation, acceleration or other change of any right or obligation or the loss of any benefit to which the Company or any of its Subsidiaries is entitled, or require consent by any Person under, any loan or credit agreement, note, mortgage, indenture, lease, Company Benefit Plan, or other agreement, obligation or instrument to which the Company or any Subsidiary of the Company is

a party, or by which they or any of their respective properties or assets may be bound or affected and the performance of which involves, alone or together with a series of other related loans, credit agreements, notes, mortgages, indentures, leases, Company Benefit Plans, agreements, obligations or instruments, annual consideration in excess of $250,000 or (d) subject to the receipt of the Parent Insurance Approvals (and assuming the accuracy and completeness of Section 4.3(e)), result in the creation or imposition of any Lien on any asset of the Company or any of its Subsidiaries, except in the case of clause (b), (c) or (d), as would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect or prevent or materially delay the consummation of the transactions contemplated by this Agreement.

     Section 3.5 Capitalization .

     (a) The authorized capital stock of the Company consists of (i) thirty million (30,000,000) shares of Common Shares, par value $0.01 per share, (ii) two million (2,000,000) Class B Shares, par value $0.01 per share, and (iii) one million (1,000,000) shares of preferred stock, par value $0.01 per share (the “ Company Preferred Stock ”). As of June 19, 2009 (the “ Company Capitalization Date ”), (A) 14,779,417 Common Shares were issued and outstanding, (B) 1,333,884 Class B Shares were issued and outstanding and (C) no shares of Company Preferred Stock were issued and outstanding. As of the Company Capitalization Date, (1) Options to purchase an aggregate of 718,066 Common Shares (of which, Options to purchase an aggregate of 713,066 Common Shares were currently exercisable) were issued and outstanding, (2) Deferred Stock Awards in respect of an aggregate of 291,866 Common Shares were issued and outstanding and (3) 219,821 Common Shares were held by the Company in its treasury and 1,414,526 Common Shares were reserved for issuance upon the exercise of outstanding Options and Deferred Stock Awards. Except for issuances of 29,012 Class B Shares to Partner Agents and 1,000 shares of common stock of SUA Insurance Services, Inc. to the Company, from March 31, 2009 to the date hereof, the Company has not issued or permitted to be issued any Company Securities or Company Subsidiary Securities, other than pursuant to and as required by the terms of the Incentive Plans and, from March 31, 2009 to the date hereof, the Company has not issued any stock options or other awards under the Incentive Plans. All outstanding shares of capital stock of the Company have been, and all Common Shares that may be issued pursuant to any Incentive Plan will be, when issued in accordance with the respective terms thereof, duly authorized and validly issued and are (or, in the case of Common Shares that have not yet been issued, will be) fully paid and nonassessable, and free and clear of preemptive or other similar rights, and were not (or, in the case of Common Shares that have not yet been issued, will not be) issued in violation of the Constituent Documents of the Company. No Subsidiary or controlled Affiliate of the Company owns any Company Shares.

     (b) Except as set forth in Section 3.5(a), as of the Company Capitalization Date, there are no outstanding (i) shares of capital stock or voting securities of or ownership interests in the Company, (ii) securities of the Company convertible into or exercisable or exchangeable for shares of capital stock or voting securities of or ownership interests in the Company or (iii) options or other rights to acquire from the Company, or other obligations of the Company to issue or pay cash valued by reference to, any capital stock or other voting securities or ownership interests in or securities convertible into or exercisable or exchangeable for capital stock or voting securities or ownership interests in the Company (the items in clauses (i), (ii), and (iii) being referred to collectively as the “ Company Securities ”). As of the date of this Agreement,

there are no binding obligations of the Company or any of its Subsidiaries to repurchase, redeem or otherwise acquire any of the Company Securities.

     (c) Since March 31, 2009 through the date of this Agreement, the Company has not declared, set aside, made or paid to the stockholders of the Company any dividends or other distributions (whether in cash, stock or property) in respect of any of its capital stock.

     Section 3.6 Subsidiaries . Section 3.6 of the Company Disclosure Schedule lists, as of the date of this Agreement, each of the Company’s Subsidiaries and its jurisdiction of incorporation, formation or domicile. All of the outstanding capital stock of, or other voting securities or ownership interests in, each of the Company’s Subsidiaries is owned beneficially and of record by the Company, directly or indirectly, free and clear of any Lien and free of any restriction on the right to vote, sell or otherwise dispose of such capital stock or other voting securities or ownership interests, including preemptive or other similar rights (other than those restrictions under applicable Insurance Laws, the Securities Act and the Exchange Act). All outstanding shares of capital stock of each Subsidiary of the Company have been duly authorized and validly issued and are fully paid and nonassessable and were not issued in violation of the Constituent Documents of such Subsidiary of the Company. There are no outstanding (a) shares of capital stock or voting securities of or ownership interests in any Subsidiary of the Company, (b) securities of the Company or any Subsidiary of the Company convertible into or exercisable or exchangeable for shares of capital stock or other voting securities or ownership interests in any Subsidiary of the Company or (c) options or other rights to acquire from the Company or any Subsidiary of the Company, or other obligation of the Company or any Subsidiary of the Company to issue or pay cash valued by reference to, any capital stock or other voting securities or ownership interests in, or any securities convertible into or exercisable or exchangeable for any capital stock or other voting securities or ownership interests in, any Subsidiary of the Company (the items in clauses (a), (b) and (c) being referred to collectively as the “ Company Subsidiary Securities ”). As of the date of this Agreement, there are no binding obligations of the Company or any Subsidiary of the Company to repurchase, redeem or otherwise acquire any of the Company Subsidiary Securities. Each of the Subsidiaries of the Company is a corporation duly organized, validly existing and in good standing under the Laws of the jurisdiction in which it is organized and has all requisite power and authority to own, lease and operate its properties and assets and to carry on its business as it is currently being conducted. Each of the Subsidiaries of the Company is duly qualified, authorized or licensed to do business in each jurisdiction in which the nature of its business or the ownership, leasing or operation of its properties makes such qualification, authorization or licensing necessary, except to the extent that the failure to be so qualified, authorized or licensed or to be in good standing would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect.

     Section 3.7 Company SEC Filings, etc .

     (a) The Company has timely filed all reports, schedules, forms, registration statements and other documents required to be filed by the Company with the SEC since January 1, 2007 (together with any documents furnished during such period by the Company to the SEC on a voluntary basis on Current Reports on Form 8-K and any reports, schedules, forms, registration statements and other documents filed with the SEC subsequent to the date hereof, collectively, the “ Company SEC Documents ”). Each of the Company SEC Documents, as

amended prior to the date of this Agreement, complied (and each Company SEC Document filed subsequent to the date hereof will comply) in all material respects with, to the extent in effect at the time of filing or furnishing, the requirements of the Securities Act and the Exchange Act applicable to such Company SEC Documents, and none of the Company SEC Documents when filed or furnished or, if amended prior to the date of this Agreement, as of the date of such amendment, contained, or with respect to Company SEC Documents filed subsequent to the date hereof, will contain, any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.

     (b) The Company maintains a system of internal control over financial reporting (within the meaning of Rules 13a-15(f) and 15d-15(f) of the Exchange Act) sufficient to provide reasonable assurances regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. The Company (i) maintains disclosure controls and procedures (within the meaning of Rules 13a-15(e) and 15d-15(e) of the Exchange Act) sufficient to ensure that information required to be disclosed by the Company in the reports that it files and submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, including that information required to be disclosed by the Company in the reports that it files and submits under the Exchange Act is accumulated and communicated to management of the Company, as appropriate, to allow timely decisions regarding required disclosure and (ii) has disclosed, based upon the most recent (prior to the date of this Agreement) evaluation by the chief executive officer and chief financial officer of the Company of the Company’s internal control over financial reporting, to its auditors and the audit committee of the Board of Directors of the Company (A) all significant deficiencies and material weaknesses in the design or operation of the Company’s internal control over financial reporting which are reasonably likely to adversely affect in any material respect its ability to record, process, summarize and report financial data and (B) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting. The Company has made available to Parent true and complete copies of any such disclosure made by management to the Company’s independent auditors and the audit committee of the Board of Directors of the Company since January 1, 2007.

     (c) Neither the Company nor any of its Subsidiaries is a party to, or has any commitment to become a party to, any joint venture, off-balance sheet partnership or any similar Contract (including any Contract relating to any transaction or relationship between or among the Company and any of its Subsidiaries, on the one hand, and any unconsolidated Affiliate, including any structured finance, special purpose or limited purpose entity, on the other hand, or any “off-balance sheet arrangement” (as defined in Item 303(a) of Regulation S-K of the SEC)), where the result, purpose or intended effect of such Contract is to avoid disclosure of any material transaction involving, or material liabilities of, the Company or any of its Subsidiaries in the Company SEC Documents.

     Section 3.8 Company Financial Statements . The consolidated financial statements (including all related notes thereto) of the Company included in the Company SEC Documents (if amended, as of the date of the last such amendment filed prior to the date of this Agreement) fairly present in all material respects the consolidated financial position of the Company and its

consolidated Subsidiaries, as at the respective dates thereof, and the consolidated results of their operations, the changes in stockholder’s equity and their consolidated cash flows for the respective periods then ended (subject, in the case of the unaudited statements, to normal year-end audit adjustments and to the absence of information or notes not required by GAAP to be included in interim financial statements) in conformity with GAAP during the periods involved (except, in the case of the unaudited statements, as permitted by the SEC) applied on a consistent basis (except as may be indicated therein or in the notes thereto).

     Section 3.9 Company SAP Statements . Since January 1, 2007, each of the Company Insurance Subsidiaries has filed all annual and quarterly statements, together with all exhibits, interrogatories, notes, schedules and any actuarial opinions, affirmations or certifications or other supporting documents in connection therewith required to be filed with or submitted to the insurance departments of their respective jurisdictions of domicile on forms prescribed or permitted by such department (collectively, the “ Company SAP Statements ”), except for such failures to file or submit which would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect. The Company has delivered or made available to Parent, to the extent permitted by applicable Law, true and complete copies of all annual Company SAP Statements for each Company Insurance Subsidiary for the periods beginning January 1, 2007 and through the date hereof and the quarterly Company SAP Statements for each Company Insurance Subsidiary for the quarterly periods ended March 31, 2009 and, once duly and timely filed, June 30, 2009, each in the form (including exhibits, annexes and any amendments thereto) filed with the applicable insurance regulatory authority and true and complete copies of all examination reports of insurance departments and any insurance regulatory authorities received by the Company or any of its Subsidiaries on or after January 1, 2007 and through the date hereof. The Company SAP Statements were prepared in all material respects in conformity with SAP applied on a consistent basis for the periods covered thereby (except as may be indicated in the notes thereto), and the Company SAP Statements fairly present, in all material respects, the statutory financial position of such Company Insurance Subsidiaries as at the respective dates thereof and the statutory results of operations of such Company Insurance Subsidiaries for the respective periods then ended. No material deficiency has been asserted in writing with respect to the Company SAP Statements by the domiciliary state insurance department of such filing Company Insurance Subsidiary that has not been remedied. The annual statutory balance sheets and income statements included in the Company SAP Statements have been, where required by applicable Insurance Law, audited by an independent accounting firm of recognized national or international reputation, and the Company has delivered or made available to Parent true and complete copies of such audit opinions.

     Section 3.10 Information Supplied . The information supplied or to be supplied by the Company specifically for inclusion in the Form S-4 shall not, at the time the Form S-4 is declared effective by the SEC, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, except that no representation or warranty is made by the Company with respect to statements made therein based on information supplied by or on behalf of Parent or Merger Sub specifically for inclusion in the Form S-4. The Proxy Statement/Prospectus will not, at the date the Proxy Statement/Prospectus is first mailed to the stockholders of the Company and at the time of the Company Stockholders Meeting, contain any untrue statement of a material fact or omit to state

any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, except that, in each case, no representation or warranty is made by the Company with respect to statements made therein based on information supplied by or on behalf of Parent or Merger Sub specifically for inclusion in the Proxy Statement/Prospectus.

     Section 3.11 Absence of Certain Changes or Events . Since December 31, 2008, (i) the Company and its Subsidiaries have conducted their respective businesses in the ordinary course consistent with their past practices, (ii) there has not been any event, change, circumstance or effect that has had or is reasonably likely to have, individually or in the aggregate, a Company Material Adverse Effect and (iii) the Company has not taken any action or failed to take any action that would have resulted in a breach of Sections 5.1(a), 5.1(b)(ii), 5.1(b)(iv), 5.1(b)(v), 5.1(b)(vi), 5.1(b)(viii), 5.1(b)(xi), 5.1(b)(xii), 5.1(b)(xiii), 5.1(b)(xvii), 5.1(b)(xviii) (other than with respect to underwriting, claims handling or loss control practices, guidelines or policies), or with respect to the forgoing sections, Section 5.1(b)(xx), had such sections been in effect since December 31, 2008.

     Section 3.12 No Undisclosed Material Liabilities . There are no liabilities or obligations of the Company or any of its Subsidiaries of any nature, whether accrued, contingent, absolute, determined, determinable or otherwise, whether or not required by GAAP to be reflected on a consolidated balance sheet of the Company and its Subsidiaries other than: (a) liabilities or obligations reflected or reserved against in the Company’s consolidated balance sheet as of March 31, 2009 included in the Company SEC Documents or in the notes thereto; (b) insurance claims or related litigation or arbitration arising in the ordinary course of business since March 31, 2009; (c) liabilities or obligations that were incurred since March 31, 2009 in the ordinary course of business; and (d) liabilities or obligations which would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect.

     Section 3.13 Compliance with Laws .

     (a) Since January 1, 2007, (i) the business and operations of the Company and its Subsidiaries have been conducted in compliance with all applicable Laws (including Insurance Laws) and (ii) the Company has complied with the applicable listing and corporate governance rules and regulations of Nasdaq except, in each case, where the failure to so conduct such business and operations or comply with such rules and regulations would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect, or prevent or materially delay the consummation of the transactions contemplated by this Agreement.

     (b) All of the Company Permits of each Company Insurance Subsidiary conducting insurance operations are in full force and effect in accordance with their terms and there is no proceeding or investigation to which the Company or any Subsidiary of the Company is subject before a Governmental Entity that is pending or threatened in writing that would reasonably be expected to result in the revocation, failure to renew or suspension of, or placement of a restriction on, any such Company Permits, except where the failure to be in full force and effect in accordance with their terms, revocation, failure to renew, suspension or restriction would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse

Effect, or prevent or materially delay the consummation of the transactions contemplated by this Agreement.

     (c) There is no proceeding to which the Company or any Subsidiaries of the Company is subject before any Governmental Entity pending or threatened in writing regarding whether any of the Subsidiaries of the Company has violated any applicable Laws (including Insurance Laws), nor, any investigation by any Governmental Entity pending or threatened in writing with respect to possible violations of any applicable Laws, except for proceedings or investigations relating to violations or possible violations which would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect, or prevent or materially delay the consummation of the transactions contemplated by this Agreement. Since January 1, 2007, each Company Insurance Subsidiary has filed all material reports required to be filed by it with its domiciliary state insurance department or such failure to file has been remedied. There are no written agreements, memoranda of understanding, commitment letters or similar undertakings binding on the Company Insurance Subsidiaries to which the Company or any Company Insurance Subsidiary is a party, on the one hand, and any Governmental Entity is a party or addressee, on the other hand, or Orders specifically with respect to the Company or any Company Insurance Subsidiary, that (i) limit in any material respect the ability of any of the Company Insurance Subsidiaries to issue insurance policies under the Company Permits, (ii) impose any requirements on the Company or any of the Company Insurance Subsidiaries in respect of risk-based capital requirements that materially increase or modify the risk-based capital requirements imposed under applicable Insurance Laws, (iii) relate to the ability of any of the Company Insurance Subsidiaries to pay dividends or (iv) restrict in any material respect the conduct of business of the Company or any of the Company Insurance Subsidiaries.

     Section 3.14 Litigation . There is no action, suit, investigation, claim, complaint, demand, summons, cease and desist letter, subpoena, injunction, notice of violation or other proceeding pending against or threatened in writing against the Company or any of its Subsidiaries or pending against or threatened in writing against any present or former officer, director or employee of the Company or any Subsidiary of the Company in connection with which the Company or any Subsidiary of the Company has an indemnification obligation, before any Governmental Entity (other than insurance claims litigation or arbitration arising in the ordinary course of business), which, if determined or resolved adversely in accordance with the plaintiff’s or claimant’s demands, would, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect, or would reasonably be expected to prevent or materially delay the consummation of the transactions contemplated hereby. There is no Order outstanding against the Company or any of its Subsidiaries which would, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect, or would reasonably be expected to prevent or materially delay the consummation of the transactions contemplated hereby.

     Section 3.15 Insurance Matters .

     (a) Except for immaterial facultative reinsurance placements, Section 3.15 of the Company Disclosure Schedule sets forth a true and complete list, as of the date hereof, of all ceded and assumed reinsurance or retrocession treaties, contracts and arrangements, including pooling arrangements (i) in force as of the date of this Agreement to which the Company or any

of its Subsidiaries is a party, including any such treaty, contract or arrangement with any Affiliate of the Company and (ii) that have expired or terminated and under which any material liability, obligation or right continues in force as of the date hereof (the treaties, contracts or arrangements referred to in clauses (i) and (ii) collectively, the “ Company Reinsurance Agreements ”). Neither the Company nor any of its Subsidiaries has any liabilities or obligations under any Company Reinsurance Agreement that has expired or terminated, other than possible reinstatement premiums if the Company makes a claim under the Company Reinsurance Agreements set forth in Section 3.15 of the Company Disclosure Schedule. The Company Reinsurance Agreements are in full force and effect in accordance with their terms. Neither the Company nor any Subsidiary of the Company is in material default as to any material provision of any Company Reinsurance Agreement. Since January 1, 2007, neither the Company nor any of its Subsidiaries has received any written notice to the effect that (i) the financial condition of any reinsurer party to any Company Reinsurance Agreement is materially impaired with the result that a default thereunder may reasonably be anticipated or (ii) there is a dispute with respect to any material amounts recoverable or payable by the Company or any of its Subsidiaries pursuant to any Company Reinsurance Agreement.

     (b) With respect to any Company Reinsurance Agreement for which any Company Insurance Subsidiary has taken credit for reinsurance ceded on its Company SAP Statement, (i) there is no written or oral agreement between any of the Company or any Subsidiary of the Company and the assuming reinsurer that would under any circumstances reduce, limit, mitigate or otherwise affect any actual or potential loss to the parties under any such Company Reinsurance Agreement, other than inuring contracts that are explicitly defined in any such Company Reinsurance Agreement, (ii) for each such Company Reinsurance Agreement entered into, renewed or amended on or after January 1, 2007, for which risk transfer is not reasonably considered to be self-evident, documentation concerning the economic intent of the transaction and the risk transfer analysis evidencing the proper accounting treatment, as required by SSAP No. 62, is available for review by the domiciliary state insurance departments for each of the Company Insurance Subsidiaries, (iii) from and after January 1, 2007, each of the Company Insurance Subsidiaries complies and has complied in all material respects with all of the requirements set forth in SSAP No. 62 and (iv) from and after January 1, 2007, each of the Company Insurance Subsidiaries has and has had appropriate controls in place to monitor the use of reinsurance and comply with the provisions of SSAP No. 62.

     (c) Prior to the date of this Agreement, the Company has made available to Parent a true and complete copy of all actuarial reports prepared by actuaries, independent or otherwise, (i) with respect to any Company Insurance Subsidiary since January 1, 2007 and (ii) relating to, prepared pursuant to or prepared in connection with, any of the OneBeacon Arrangements, in each case, along with all material attachments, addenda, supplements and modifications thereto (the “ Company Actuarial Analyses ”). Each Company Actuarial Analysis was based upon, in all material respects, an accurate inventory of policies in force for the Company and the Company Insurance Subsidiaries, as the case may be, at the relevant time of preparation and was prepared in conformity with generally accepted actuarial principles in effect at such time, consistently applied (except as may be noted therein).

     (d) Except for regular periodic assessments in the ordinary course of business or assessments based on developments that are publicly known within the insurance industry, as of

the date of this Agreement, no material claim or material assessment is pending or threatened in writing against any Company Insurance Subsidiary by any state insurance guaranty association in connection with such association’s fund relating to insolvent insurers.

     (e) Since January 1, 2007, to the knowledge of the Company, (i) each Partner Agent, at the time such Partner Agent wrote, sold or produced business for or on behalf of the Company or any Subsidiary of the Company that requires a License, was duly licensed and appointed as required by applicable Law, in the particular jurisdiction in which such Partner Agent wrote, sold or produced business and (ii) each of the Partner Agent Agreements and any other agency agreements and appointments between the Partner Agents and the Company and/or any Subsidiary of the Company is valid and binding and in full force and effect in accordance with its terms, except in the case of clause (i) or (ii), as would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect. To the knowledge of the Company, no Partner Agent has been since January 1, 2007, or is currently, in material violation (or with or without notice or lapse of time or both, would be in material violation) of any term or provision of any Law applicable to the writing, sale or production of insurance or other business for the Company or any Subsidiary of the Company. As of the date of this Agreement, no Partner Agent individually accounting for five percent (5%) or more of the total gross premiums of the insurance business of the Company and its Subsidiary for the year ended December 31, 2008 has indicated in writing to the Company or any Subsidiary of the Company that such Partner Agent will be unable or unwilling to continue its relationship as a Partner Agent with the Company or any Subsidiary of the Company within 12 months after the Closing. Since January 1, 2007, no Person other than a Partner Agent has acted as an insurance producer, reinsurance intermediary, agent, managing general agent, wholesaler, broker, solicitor, adjuster or customer representative for or on behalf of the Company or any of the Subsidiaries of the Company, in each case, with respect to writing, selling or producing insurance business.

     (f) All policies, binders, slips, certificates, and other agreements of insurance, in effect as of the date hereof (including all applications, supplements, endorsements, riders and ancillary agreements in connection therewith) that are issued by the Company or the Subsidiaries of the Company and any and all marketing materials, agents agreements, brokers agreements or managing general agents agreements are, to the extent required under applicable Law, on forms approved by applicable insurance regulatory authorities or which have been filed and not objected to by such authorities within the period provided for objection, and such forms comply in all material respects with the Insurance Laws applicable thereto and, as to premium rates established by the Company or any Subsidiary of the Company which are required to be filed with or approved by insurance regulatory authorities, the rates have been so filed or approved, the premiums charged conform thereto in all material respects, and such premiums comply in all material respects with the Insurance Laws applicable thereto.

     (g) Prior to the date of this Agreement, the Company has made available to Parent (i) a true and complete copy of each OneBeacon Arrangement and (ii) true and complete copies of all material consents or approvals received from and all material filings made with any Governmental Entity in connection with the acquisition of Potomac Insurance Company of Illinois by the Company (the “ Potomac Acquisition ”) and the OneBeacon Arrangements. The Potomac Acquisition and each OneBeacon Arrangement complied, and is currently in compliance, with all requirements under applicable Laws and the Company received all required

consents, approvals or non-disapprovals from, and made all required filings with, any Governmental Entity in connection with the Potomac Acquisition and the OneBeacon Arrangements. Except for the OneBeacon Arrangements, the Company has no risks, liabilities or obligations under any underwriting contract, insurance policy, endorsement, reinsurance contract, facultative contract or retrocession agreement, in each case, written or entered into prior to November 23, 2004.

     Section 3.16 Liabilities and Reserves . The reserves carried on the Company SAP Statements of each Subsidiary of the Company were, as of the respective dates of such Company SAP Statements, in compliance in all material respects with the requirements for reserves established by the insurance departments of the state of domicile of such Subsidiary of the Company, were determined in all material respects in accordance with generally accepted actuarial principles in effect at such time, consistently applied and were computed on the basis of methodologies consistent in all material respects with those used in prior periods, except as otherwise noted in the Company SAP Statements to the extent required under SAP; provided , that it is acknowledged and agreed by Parent and Merger Sub that the Company is not making any representation or warranty in this Section 3.16 as to the adequacy or sufficiency of reserves.

     Section 3.17 Title to Properties; Absence of Liens . Section 3.17 of the Company Disclosure Schedule sets forth a true and complete list of all real property leased to or by the Company or any of its Subsidiaries providing for an annual rent of more than $100,000 (collectively, the “ Leased Real Property ”). The Company or one of its Subsidiaries has in all material respects a valid leasehold interest in all Leased Real Property, in each case as to such leasehold interest, free and clear of all material Liens (other than Permitted Liens). Neither the Company nor any of its Subsidiaries owns any real property or any interests in real property.

     Section 3.18 Opinion of Financial Advisor . The Board of Directors of the Company has received an opinion from FBR Capital Markets & Co., Inc. (“ FBR ”), dated as of the date of this Agreement and addressed to the Board of Directors of the Company to the effect that, as of the date hereof and based upon and subject to the limitations, qualifications and assumptions set forth therein, the Merger Consideration to be received by the holders of Company Shares pursuant to this Agreement is fair, from a financial point of view, to such holders of Company Shares (other than Parent and its Subsidiaries, except in the case of Company Shares held in investment portfolios of Parent or any of its Subsidiaries). The Company has been authorized by FBR to include such opinion in its entirety in the Proxy Statement/Prospectus.

     Section 3.19 Taxes .

     (a) All material Tax Returns required by applicable Law to be filed with any Taxing Authority by, or on behalf of, the Company or any of its Subsidiaries have been duly filed when due (including extensions) in accordance with all applicable Laws, and all such Tax Returns are true, correct and complete in all material respects.

     (b) The Company and each of its Subsidiaries has duly and timely paid or has duly and timely withheld and remitted to the appropriate Taxing Authority all material Taxes due and payable, or, where payment is not yet due, has established in accordance with the applicable

accounting standard an adequate accrual for all material Taxes on the most recent financial statements contained in the Company SEC Documents and on the Company SAP Statements.

     (c) The federal income Tax Returns of the Company and its Subsidiaries, through the Tax year ended December 31, 2004, have closed and no federal income Tax Return has been examined.

     (d) There is no claim, audit, action, suit, request for written ruling, proceeding or investigation pending or threatened in writing against or with respect to the Company or any of its Subsidiaries in respect of any Tax, Tax Return or Tax Asset which (except in the case of a request for a written ruling) if determined adversely would, individually or in the aggregate, be expected to result in a material Tax deficiency.

     (e) Neither the Company nor any of its Subsidiaries has constituted either a “distributing corporation” or a “controlled corporation” (within the meaning of Section 355(a)(1)(A) of the Code) in a distribution of stock qualifying for tax-free treatment under Section 355 of the Code (i) in the two (2) years prior to the date of this Agreement or (ii) in a distribution that would otherwise constitute part of a “plan” or “series of related transactions” (within the meaning of Section 355(e) of the Code) in conjunction with this Agreement.

     (f) The Company and each of its Subsidiaries have withheld all material amounts required to have been withheld by them in connection with amounts paid or owed to any employee, independent contractor, creditor, shareholder or any other third party; such withheld amounts were either duly paid to the appropriate Taxing Authority or set aside in accounts for such purpose. The Company and each of its Subsidiaries have reported such withheld amounts to the appropriate Taxing Authority and to each such employee, independent contractor, creditor, shareholder or any other third party, as required under applicable Law.

     (g) Neither the Company nor any of its Subsidiaries is liable for any Taxes of any Person (other than the Company and its Subsidiaries) as a result of being (i) a transferee or successor of such Person, (ii) a member of an affiliated, consolidated, combined or unitary group that includes such Person as a member or (iii) a party to a tax sharing, tax indemnity or tax allocation agreement or any other agreement to indemnify such Person.

     (h) Neither the Company nor any of its Subsidiaries will be required to include any item of income in, or exclude any item of deduction from, taxable income for any period (or portion thereof) ending after the Effective Date, as a result of any change in method of accounting for a taxable period ending on or prior to the Effective Date under Section 481 of the Code (or any corresponding provision of state, local or foreign Law).

     (i) No Subsidiary of the Company is organized in a jurisdiction other than the United States.

     (j) Neither the Company nor any of its Subsidiaries has entered into any transaction that is a “listed transaction”, as defined in Treasury Regulation § 1.6011-4(b)(2).

     (k) As of the date of this Agreement, neither the Company nor any of its Subsidiaries has taken or agreed to take any action or knows of any fact or circumstance that is reasonably

likely to prevent the Merger from qualifying as a “reorganization” within the meaning of Section 368(a) of the Code.

     (l) All Deferred Stock Awards are in respect of stock entitled to vote within the meaning of Section 368(c) of the Code.

     Section 3.20 Employee Benefit Plans and Related Matters; ERISA .

     (a) Section 3.20(a) of the Company Disclosure Schedule sets forth as of the date of this Agreement a true and complete list of the Company Benefit Plans, including all Company Benefit Plans subject to ERISA or similar provisions of non-U.S. Law. With respect to each such Company Benefit Plan, the Company has made available to Parent a true and complete copy of such Company Benefit Plan, if written, or a description of the material terms of such Company Benefit Plan if not written, and to the extent applicable, (i) all trust agreements, insurance contracts or other funding arrangements, (ii) the most recent actuarial and trust reports for both ERISA funding and financial statement purposes, (iii) the most recent Form 5500 with all attachments required to have been filed with the IRS or the Department of Labor or any similar reports filed with any comparable Governmental Entity in any non-U.S. jurisdiction having jurisdiction over any Company Benefit Plan and all schedules thereto, (iv) the most recent IRS determination or opinion letter, and (v) all current summary plan descriptions.

     (b) Each Company Benefit Plan intended to be qualified under Section 401(a) of the Code, and the trust (if any) forming a part thereof, has received a favorable determination letter from the IRS that the Company Benefit Plan is so qualified, or an advisory or opinion letter that the form of such plan document satisfies the requirements to be so qualified, and, to the knowledge of the Company, there are no existing circumstances or any events that would reasonably be expected to adversely affect the qualified status of any such plan. Each Company Benefit Plan has been administered and operated in all material respects in accordance with its terms and with applicable Law.

     (c) Neither the Company nor any of its Subsidiaries, nor any of their ERISA Affiliates contributes to, sponsors or maintains or has in the past sponsored, maintained, contributed to or had any liability in respect of any pension plan subject to Section 412 of the Code or Section 302 or Title IV of ERISA.

     (d) There are no claims pending or threatened in writing with respect to any of the Company Benefit Plans by any employee or otherwise involving any such plan or the assets of any such plan (other than routine claims for benefits), except as would not, individually or in the aggregate, be material.

     (e) No Company Benefit Plan is a “multiemployer plan” within the meaning of Section 4001(a)(3) of ERISA or is a “multiple employer plan” within the meaning of Section 4063 or 4064 of ERISA. Neither the Company nor any of its Subsidiaries has at any time during the last six (6) years contributed to or been obligated to contribute to any such type of plan.

     (f) Neither the Company nor any of its Subsidiaries has any material liability in respect of post-retirement health, medical or life insurance benefits for retired, former or current employees of the Company or its Subsidiaries except as required by Law.

     (g) Except as set forth in Section 3.20(g) of the Company Disclosure Schedule, the consummation of the transactions to which the Company is a party contemplated hereby, will not, either alone or in combination with another event, (i) entitle any current or former director, officer or employee of the Company or of any of its Subsidiaries to severance pay, unemployment compensation or any other payment, (ii) result in any payment becoming due, accelerate the time of payment or vesting, or increase the amount of compensation due to any such director, officer or employee, (iii) result in any forgiveness of indebtedness, trigger any funding obligation under any Company Benefit Plan or impose any restrictions or limitations on the Company’s rights to administer, amend or terminate any Company Benefit Plan or (iv) result in any payment (whether in cash or property or the vesting of property) to any “disqualified individual” (as such term is defined in Treasury Regulation Section 1.280G-1) that would reasonably be construed, individually or in combination with any other such payment, to constitute an “excess parachute payment” (as defined in Section 280G(b)(1) of the Code).

     Section 3.21 Employees, Labor Matters .

     (a) Neither the Company nor any of its Subsidiaries is a party to or bound by any collective bargaining agreement, and there are no labor unions or other organizations representing, purporting to represent or, to the knowledge of the Company, attempting to represent any employees of the Company or any of its Subsidiaries in their capacity as such.

     (b) Since January 1, 2007, there has not occurred or been threatened in writing any material strike, slowdown, work stoppage, concerted refusal to work overtime or other similar labor activity or union organizing campaign with respect to any employees of the Company or any of its Subsidiaries. There are no labor disputes subject to any formal grievance procedure, arbitration or litigation and there is no representation petition pending or threatened in writing with respect to any employee of the Company or any of its Subsidiaries.

     Section 3.22 Environmental Matters . Except as would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect, (a) neither the Company nor any of its Subsidiaries has received any written notice, demand, request for information, citation, summons or order, and no complaint has been filed, no penalty has been assessed, no liability has been incurred, and no investigation, action, written claim, suit or proceeding is pending or is threatened in writing by any Governmental Entity or other Person with respect to or arising out of any applicable Environmental Law and (b) to the knowledge of the Company, no “release” of a “hazardous substance” (as those terms are defined in the Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. § 9601 et seq.) has occurred at, on, above, under or from any properties that currently or formerly owned, leased, operated or used by the Company, any Subsidiary of the Company or any predecessors in interest that are reasonably likely to result in any cost, liability or obligation of the Company or any Subsidiary of the Company under any applicable Environmental Law.

     Section 3.23 Intellectual Property .

     (a) Except as would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect, (i) each of the Company and each of its Subsidiaries owns or otherwise has a valid and enforceable license right to use Intellectual Property used in

the respective businesses of the Company and each of its Subsidiaries as currently conducted and (ii) all patents and all registrations for trademarks, service marks and copyrights owned by the Company or its Subsidiaries are valid and subsisting.

     (b) Except as would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect, (i) there are no claims pending or threatened in writing by any Person alleging that the Company or its Subsidiaries or their respective businesses as conducted on the date of this Agreement infringes the Intellectual Property of any Person and (ii) to the knowledge of the Company, no Person is infringing the Intellectual Property owned by the Company or any of its Subsidiaries.

     (c) The Company and its Subsidiaries have established and are in compliance with commercially reasonable security programs that are sufficient to protect ( i ) the security, confidentiality and integrity of transactions executed through their computer systems, including encryption and/or other security protocols and techniques when appropriate and ( ii ) the security, confidentiality and integrity of all confidential or proprietary data except, in each case, which would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect. Neither the Company nor any of its Subsidiaries has suffered a material security breach with respect to their data or systems, and neither the Company nor any of its Subsidiaries has notified customers or employees of any information security breach.

     Section 3.24 Material Contracts .

     (a) The Company has made available to Parent a true and complete copy of each Contract to which the Company or any of its Subsidiaries is a party as of the date of this Agreement or by which the Company, any of its Subsidiaries or any of its respective properties or assets is bound as of the date of this Agreement, which: (i) is a “material contract” within the meaning of Item 601(b)(10) of Regulation S-K promulgated by the SEC; (ii) contains covenants of the Company or any of its Subsidiaries not to compete or engage in any line of business or compete with any Person in any geographic area; (iii) requires referrals of business or requires the Company or any of its Subsidiaries to make available investment opportunities to any person on a priority, equal or exclusive basis; (iv) pursuant to which the Company or any of its Subsidiaries has entered into a partnership or joint venture with any other Person (other than the Company or any of its Subsidiaries) that is material to the business of the Company and its Subsidiaries, taken as a whole; (v) provides for future payments that are conditioned on, in whole or in part, or that cause an event of default as a result of, a change of control or similar event; (vi) is a Company Reinsurance Agreement; (vii) is a Partner Agent Agreement; (viii) is a OneBeacon Arrangement; (ix) relates to or evidences indebtedness for borrowed money or any guarantee of indebtedness for borrowed money by the Company or any of its Subsidiaries in excess of one hundred thousand dollars ($100,000); (x) evidences any guarantee of obligations of any Person other than a wholly-owned Subsidiary of the Company; or (xi) would prevent or materially delay the consummation or otherwise reduce the contemplated benefits of any of the transactions contemplated by this Agreement. Each instrument of the type described in clauses (i) through (xi) of this Section 3.24 is referred to herein as a “ Material Contract ”.

     (b) Each Material Contract is (assuming due power and authority of, and due execution and delivery by the parties thereto other than the Company or any of its Subsidiaries) a

valid and binding obligation of the Company or its Subsidiaries party thereto, subject to the Bankruptcy and Equity Exception, except (i) to the extent it has previously expired or terminated in accordance with their terms and (ii) for any failures to be valid and binding which would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect. Neither the Company nor any of its Subsidiaries nor, to the knowledge of the Company, any other party to any Material Contract is in breach of or in default under any Material Contract, and no event has occurred that, with the lapse of time or the giving of notice or both, would constitute a default thereunder by any party thereto, except for such breaches and defaults which would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect.

     Section 3.25 Brokers and Finders’ Fees . Except for FBR, the fees and expenses of which will be paid by the Company, there is no investment banker, broker, finder or other intermediary that has been retained by or is authorized to act on behalf of the Company or any of its Subsidiaries who is entitled to any fee or commission from the Company or any of its Subsidiaries in connection with the transactions to which the Company is a party contemplated hereby.

     Section 3.26 Takeover Laws . No “fair price,” “moratorium,” “control share acquisition”, “interested stockholder” or other anti-takeover statute or regulation is applicable to this Agreement, the Merger or the other transactions contemplated hereby by reason of the Company being a party to this Agreement, performing its obligations hereunder and consummating the Merger and the other transactions contemplated hereby.

     Section 3.27 Rating . As of the date hereof, A.M. Best Company has not threatened in writing to lower or place under surveillance any rating presently assigned to the Company or any of its Subsidiaries.

     Section 3.28 Affiliate Transactions . There are no transactions, agreements, arrangements or understandings between ( i ) the Company or any of its Subsidiaries, on the one hand, and ( ii ) any directors, officers or stockholders of the Company, on the other hand, of the type that would be required to be disclosed under Item 404 of Regulation S-K under the Securities Act.

     Section 3.29 No Other Representations and Warranties; Disclaimer .

     (a) Except for the representations and warranties made by the Company in this Article III, neither the Company nor any other Person makes any express or implied representation or warranty with respect to the Company or any of its Subsidiaries or their respective businesses, operations, assets, liabilities, condition (financial or otherwise) or prospects, and the Company hereby disclaims any such other representations or warranties. In particular, without limiting the foregoing disclaimer, except for the representations and warranties made by the Company in this Article III, neither the Company nor any other Person makes or has made any representation or warranty to Parent, Merger Sub, or any of their Affiliates or Representatives with respect to (i) any financial projection, forecast, estimate, budget or prospect information relating to the Company, any of its Subsidiaries or their respective businesses or operations, or (ii) any oral or written information presented to Parent,

Merger Sub, or any of their Affiliates or Representatives in the course of their due diligence investigation of the Company, the negotiation of this Agreement or in the course of the transactions contemplated hereby.

     (b) Notwithstanding anything contained in this Agreement to the contrary, the Company acknowledges and agrees that neither Parent, Merger Sub nor any other Person has made or is making any representations or warranties whatsoever, express or implied, beyond those expressly given by Parent and Merger Sub in Article IV hereof, including any implied representation or warranty as to the accuracy or completeness of any information regarding Parent furnished or made available to the Company or any of its Affiliates or Representatives. Without limiting the generality of the foregoing, the Company acknowledges and agrees that no representations or warranties are made with respect to any projections, forecasts, estimates, budgets or prospect information that may have been made available to the Company or any of its Affiliates or Representatives.

ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB

     Except as (x) disclosed in the Parent SEC Documents filed with or furnished to the SEC prior to the date of this Agreement (other than statements in the Risk Factors sections contained in the Parent SEC Documents or any statements included in any “forward-looking statements” disclaimer contained in the Parent SEC Documents) or (y) set forth in the disclosure letter delivered by Parent to the Company on or prior to the execution and delivery of this Agreement (the “ Parent Disclosure Schedule ”), Parent and Merger Sub represent and warrant to the Company as set forth in this Article IV. For purposes of the representations and warranties of Parent and Merger Sub contained herein, disclosure in any section of the Parent Disclosure Schedule of any facts or circumstances shall be deemed to be disclosure of such facts or circumstances with respect to all representations or warranties by Parent and Merger Sub to which the relevance of such disclosure to the applicable representation and warranty is reasonably apparent on the face thereof. The inclusion of any information in the Parent Disclosure Schedule or other document delivered by Parent or Merger Sub pursuant to this Agreement shall not be deemed to be an admission or evidence of the materiality of such item, nor shall it establish a standard of materiality for any purpose whatsoever.

     Section 4.1 Corporate Existence and Power . Each of Parent and Merger Sub is duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation. Each of Parent and its Subsidiaries has all requisite corporate, partnership or other similar powers and authorities and all governmental licenses, authorizations, permits, certificates, registrations, consents, franchises, variances, exemptions, orders and approvals required to own, lease and operate their respective properties and to carry on their respective businesses as currently conducted (the “ Parent Permits ”), except for those powers, licenses, authorizations, permits, consents, franchises, variances, exemptions, orders and approvals the absence of which would not, individually or in the aggregate, reasonably be expected to have a Parent Material Adverse Effect. Parent and its Subsidiaries are in compliance with the terms of the Parent Permits, except where the failure to be in such compliance would not, individually or in the aggregate, reasonably be expected to have a Parent Material Adverse Effect. Parent is duly qualified to do business as a foreign corporation and is in good standing in each jurisdiction

where such qualification is required, except for those jurisdictions where the failure to be so qualified would not, individually or in the aggregate, reasonably be expected to have a Parent Material Adverse Effect. Parent has made available to the Company true and complete copies of the Constituent Documents of Parent and Merger Sub as currently in effect.

     Section 4.2 Corporate Authorization .

     (a) Each of Parent and Merger Sub has all necessary corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions to which it is a party contemplated hereby. The execution, delivery and performance by each of Parent and Merger Sub of this Agreement and the consummation by each of Parent and Merger Sub of the transactions to which it is a party contemplated hereby have been duly authorized and approved by all necessary corporate or other similar action on the part of Parent and Merger Sub, and no other corporate action on the part of Parent or Merger Sub are necessary to authorize this Agreement or to consummate the transactions to which it is a party contemplated hereby, except that consummation of the Merger is subject to the effectiveness of the Certificate of Merger with the Secretary of State of the State of Delaware. This Agreement has been duly executed and delivered by each of Parent and Merger Sub and, assuming due power and authority of, and due execution and delivery by, the Company, constitutes a valid and binding obligation of Parent and Merger Sub, enforceable against Parent and Merger Sub in accordance with its terms, subject to the Bankruptcy and Equity Exception.

     (b) The respective Boards of Directors of Parent and Merger Sub, each at a meeting duly called and held and at which a quorum of directors was present, have by resolutions duly adopted unanimously (i) determined that this Agreement and the Merger are in the best interests of Parent and Merger Sub, respectively, and declared the Merger to be advisable, (ii) approved and adopted this Agreement and the plan of merger herein providing for the Merger, upon the terms and subject to the conditions set forth herein and (iii) approved the execution, delivery and performance by Parent or Merger Sub, as the case may be, of this Agreement and the consummation of the transactions to which Parent or Merger Sub, as the case may be, is a party contemplated hereby, upon the terms and subject to the conditions set forth herein.

     (c) Parent, as the sole stockholder of Merger Sub as of the date of this Agreement, has adopted this Agreement. No other vote of the holders of any class or series of capital stock of Parent or Merger Sub is required by Law, the Constituent Documents of Parent or Merger Sub or otherwise for Parent and Merger Sub to issue the shares of Parent Common Stock representing the Merger Consideration or to otherwise consummate the transactions to which they are a party contemplated hereby.

     Section 4.3 Governmental Authorization . The execution, delivery and performance by Parent and Merger Sub of this Agreement and the consummation by each of Parent and Merger Sub of the transactions to which it is a party contemplated hereby require at or prior to the Closing no consent or approval by, or filing with, any Governmental Entity, other than (a) the filing of the Certificate of Merger with the Secretary of State of the State of Delaware and appropriate documents with the relevant authorities of other states in which Parent and Merger Sub are qualified to do business, (b) compliance with any applicable requirements of the HSR Act, (c) compliance with any applicable requirements of the Securities Act, the Exchange Act,

and any other applicable federal or state securities Laws or “blue sky” Laws, (d) compliance with any applicable requirements of Nasdaq, (e) approvals or filings under Insurance Laws as set forth in Section 4.3 of the Parent Disclosure Schedule (the “ Parent Insurance Approvals ” and, with the Company Insurance Approvals, the “ Transaction Approvals ”), (f) the Company Insurance Approvals (assuming the accuracy and completeness of Section 3.3(e)), (g) those consents, approvals or filings as may be required as a result of the business or identity of the Company or any of its Affiliates (assuming the accuracy and completeness of Section 3.3(e)) and (h) any other consents, approvals or filings the failure of which to be obtained or made would not, individually or in the aggregate, reasonably be expected to have a Parent Material Adverse Effect or prevent or materially delay the consummation of the transactions contemplated by this Agreement.

     Section 4.4 Non-Contravention . The execution, delivery and performance by Parent and Merger Sub of this Agreement do not, and the consummation by each of Parent and Merger Sub of the transactions to which it is a party contemplated hereby will not, (a) violate or conflict with or result in any breach of any provision of the Constituent Documents of Parent or any of its Subsidiaries, (b) assuming compliance with the matters referred to in Section 3.3 and Section 4.3 (and assuming the accuracy and completeness of Section 3.3(e)), violate or conflict with any provision of any applicable Law, Order or Parent Permit, (c) violate or conflict with or result in any breach or constitute a default or an event that, with or without notice or lapse of time or both, would constitute a default under, or cause the termination, cancellation, acceleration or other change of any right or obligation or the loss of any benefit to which Parent or any of its Subsidiaries is entitled, or require consent by any Person under, any contracts which are “material contracts” as such term is defined in Item 601(b)(10) of Regulation S-K promulgated by the SEC or (d) subject to the receipt of the Company Insurance Approvals (and assuming the accuracy and completeness of Section 3.3(e)), result in the creation or imposition of any Lien on any asset of Parent or any of its Subsidiaries, except in the case of clause (b), (c) or (d), as would not, individually or in the aggregate, reasonably be expected to have a Parent Material Adverse Effect or prevent or materially delay the consummation of the transactions contemplated by this Agreement.

     Section 4.5 Capitalization; Interim Operations of Merger Sub .

     (a) The authorized capital stock of Parent consists of one hundred million (100,000,000) shares of common stock, $0.01 par value per share (“ Parent Common Stock ”) and two million (2,000,000) shares of Series A Perpetual Preferred Stock. As of the close of business on June 16, 2009, 40,484,732 shares of Parent Common Stock were issued and outstanding (including shares held in treasury), of which 495,966 were shares of Parent Common Stock subject to vesting or other restrictions and 1,255,066 shares of Parent Common Stock were reserved for issuance upon the exercise or payment of outstanding stock options or other equity related awards (such stock option and restricted share plans and programs, collectively, the “ Parent Incentive Plans ”), and 73,858 shares of Parent Common Stock were held by Parent in its treasury or by its Subsidiaries. From March 31, 2009 to the date hereof, Parent has not issued or permitted to be issued any shares of capital stock or Parent Securities, other than pursuant to and as required by the terms of the Parent Incentive Plans and, from March 31, 2009 to the date hereof, Parent has not issued any stock options or other awards under the Parent Incentive Plans. All outstanding shares of capital stock of Parent have been, and all shares of Parent Common

Stock to be issued in connection with the Merger and the other transactions contemplated by this Agreement, will be, when so issued, validly issued and outstanding, fully paid, nonassessable and free and clear of preemptive or other similar rights, and were not (or, in the case of Parent Common Stock to be issued in the Merger, will not be) issued in violation of the Constituent Documents of Parent.

     (b) Except as set forth in Section 4.5(a), as of June 16, 2009, there are no outstanding (i) shares of capital stock or voting securities of or ownership interests in Parent, (ii) securities of Parent convertible into or exercisable or exchangeable for shares of capital stock or voting securities of or ownership interests in Parent or (iii) options or other rights to acquire from Parent, or other obligations of Parent to issue or pay cash valued by reference to, any capital stock or other voting securities or ownership interests in or securities convertible into or exercisable or exchangeable for capital stock or voting securities or ownership interests in Parent (the items in clauses (i), (ii), and (iii) being referred to collectively as the “ Parent Securities ”). As of the date of this Agreement, there are no binding obligations of Parent or any of its Subsidiaries to repurchase, redeem or otherwise acquire any of the Parent Securities.

     (c) The authorized capital stock of Merger Sub consists solely of 1,000 shares of common stock, par value $0.01 per share, all of which are issued and outstanding and all of which are owned beneficially and of record by Parent. All of the issued and outstanding shares of capital stock of Merger Sub have been duly authorized and validly issued and are fully paid and nonassessable and free and clear of preemptive or other similar rights, and were not issued in violation of the Constituent Documents of Merger Sub. Merger Sub has not conducted any business prior to the date of this Agreement and has, and prior to the Effective Time will have, no assets, liabilities or obligations of any nature other than those incident to its formation or contemplated by this Agreement.

     Section 4.6 Parent SEC Filings, etc .

     (a) Parent has timely filed all reports, schedules, forms, registration statements and other documents required to be filed by Parent with the SEC since January 1, 2007 (together with any documents furnished during such period by Parent to the SEC on a voluntary basis on Current Reports on Form 8-K and any reports, schedules, forms, registration statements and other documents filed with the SEC subsequent to the date hereof, collectively, the “ Parent SEC Documents ”). Each of the Parent SEC Documents, as amended prior to the date of this Agreement, complied (and each Parent SEC Document filed subsequent to the date hereof will comply) in all material respects with, to the extent in effect at the time of filing or furnishing, the requirements of the Securities Act and the Exchange Act applicable to such Parent SEC Documents, and none of the Parent SEC Documents when filed or furnished or, if amended prior to the date of this Agreement, as of the date of such amendment, contained, or with respect to Parent SEC Documents filed subsequent to the date hereof, will contain, any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.

     (b) Parent maintains a system of internal control over financial reporting (within the meaning of Rules 13a-15(f) and 15d-15(f) of the Exchange Act) sufficient to provide reasonable

assurances regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. Parent (i) maintains disclosure controls and procedures (within the meaning of Rules 13a-15(e) and 15d-15(e) of the Exchange Act) sufficient to ensure that information required to be disclosed by Parent in the reports that it files and submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, including that information required to be disclosed by Parent in the reports that it files and submits under the Exchange Act is accumulated and communicated to management of Parent, as appropriate, to allow timely decisions regarding required disclosure and (ii) has disclosed, based upon the most recent (prior to the date of this Agreement) evaluation by the chief executive officer and chief financial officer of Parent of the Parent’s internal control over financial reporting, to its auditors and the audit committee of the Board of Directors of Parent (A) all significant deficiencies and material weaknesses in the design or operation of the Parent’s internal control over financial reporting which are reasonably likely to adversely affect in any material respect its ability to record, process, summarize and report financial data and (B) any fraud, whether or not material, that involves management or other employees who have a significant role in the Parent’s internal control over financial reporting. Parent has made available to Company true and complete copies of any such disclosure made by management to Parent’s independent auditors and the audit committee of the Board of Directors of Parent since January 1, 2007.

     (c) Neither Parent nor any of its Subsidiaries is a party to, or has any commitment to become a party to, any joint venture, off-balance sheet partnership or any similar Contract (including any Contract relating to any transaction or relationship between or among Parent and any of its Subsidiaries, on the one hand, and any unconsolidated Affiliate, including any structured finance, special purpose or limited purpose entity, on the other hand, or any “off-balance sheet arrangement” (as defined in Item 303(a) of Regulation S-K of the SEC)), where the result, purpose or intended effect of such Contract is to avoid disclosure of any material transaction involving, or material liabilities of, Parent or any of its Subsidiaries in the Parent SEC Documents.

     Section 4.7 Parent Financial Statements . The consolidated financial statements (including all related notes thereto) of Parent included in the Parent SEC Documents (if amended, as of the date of the last such amendment filed prior to the date of this Agreement) fairly present in all material respects the consolidated financial position of Parent and its consolidated Subsidiaries, as at the respective dates thereof, and the consolidated results of their operations, the changes in stockholder’s equity and their consolidated cash flows for the respective periods then ended (subject, in the case of the unaudited statements, to normal year-end audit adjustments and to the absence of information or notes not required by GAAP to be included in interim financial statements) in conformity with GAAP during the periods involved (except, in the case of the unaudited statements, as permitted by the SEC) applied on a consistent basis (except as may be indicated therein or in the notes thereto).

     Section 4.8 Information Supplied . The information supplied or to be supplied by Parent or Merger Sub specifically for inclusion in the Form S-4 shall not, at the time the Form S-4 is declared effective by the SEC, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, except that no

representation or warranty is made by Parent or Merger Sub with respect to statements made therein based on information supplied by or on behalf of the Company specifically for inclusion in the Form S-4. The information supplied or to be supplied by Parent or Merger Sub specifically for inclusion in the Proxy Statement/Prospectus to be sent to the stockholders of the Company in connection with the Company Stockholders Meeting shall not, on the date the Proxy Statement/Prospectus is first mailed to the stockholders of the Company or at the time of the Company Stockholders Meeting, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, except that, no representation or warranty is made by Parent or Merger Sub with respect to statements made therein based on information supplied by or on behalf of the Company specifically for inclusion in the Proxy Statement/Prospectus.

     Section 4.9 Absence of Certain Changes or Events . Since December 31, 2008, (i) Parent and its Subsidiaries have conducted their respective businesses in the ordinary course consistent with their past practices, (ii) there has not been any event, change, circumstance or effect that has had or is reasonably likely to have, individually or in the aggregate, a Parent Material Adverse Effect and (iii) Parent has not taken any action or failed to take any action that would have resulted in a breach of Section 5.2, except for Sections 5.2(c) or (d), had such section been in effect since December 31, 2008.

     Section 4.10 No Undisclosed Material Liabilities . There are no liabilities or obligations of Parent or any of its Subsidiaries of any nature, whether accrued, contingent, absolute, determined, determinable or otherwise, whether or not required by GAAP to be reflected on a consolidated balance sheet of Parent and its Subsidiaries other than: (a) liabilities or obligations reflected or reserved against in Parent’s consolidated balance sheet as of March 31, 2009 included in the Parent SEC Documents or in the notes thereto; (b) insurance claims or related litigation or arbitration arising in the ordinary course of business since March 31, 2009; (c) liabilities or obligations that were incurred since March 31, 2009 in the ordinary course of business; and (d) liabilities or obligations which would not, individually or in the aggregate, reasonably be expected to have a Parent Material Adverse Effect.

     Section 4.11 Compliance with Laws .

     (a) Since January 1, 2007, (i) the business and operations of Parent and its Subsidiaries have been conducted in compliance with all applicable Laws (including Insurance Laws) and (ii) Parent has complied with the applicable listing and corporate governance rules and regulations of Nasdaq except, in each case, where the failure to so conduct such business and operations or comply with such rules and regulations would not, individually or in the aggregate, reasonably be expected to have a Parent Material Adverse Effect, or prevent or materially delay the consummation of the transactions contemplated by this Agreement.

     (b) All of the Parent Permits of each Parent Insurance Subsidiary conducting insurance operations are in full force and effect in accordance with their terms and there is no proceeding or investigation to which Parent or any Subsidiary of the Parent is subject before a Governmental Entity that is pending or threatened in writing that would reasonably be expected to result in the revocation, failure to renew or suspension of, or placement of a restriction on, any

such Parent Permits, except where the failure to be in full force and effect in accordance with their terms, revocation, failure to renew, suspension or restriction would not, individually or in the aggregate, reasonably be expected to have a Parent Material Adverse Effect, or prevent or materially delay the consummation of the transactions contemplated by this Agreement.

     (c) There is no proceeding to which Parent or any Subsidiary of the Parent is subject before any Governmental Entity pending or, threatened in writing regarding whether any of the Subsidiaries of the Parent has violated any applicable Laws (including Insurance Laws) nor, any investigation by any Governmental Entity pending or threatened in writing with respect to possible violations of any applicable Laws, except for proceedings or investigations relating to violations or possible violations which would not individually or in the aggregate, reasonably be expected to have a Parent Material Adverse Effect, or prevent or materially delay the consummation of the transactions contemplated by this Agreement. Since January 1, 2007, each Parent Insurance Subsidiary has filed all material reports required to be filed by it with its domiciliary state insurance department or such failure to file has been remedied. There are no written agreements, memoranda of understanding, commitment letters or similar undertakings binding on the Parent Insurance Subsidiaries to which Parent or any Parent Insurance Subsidiary is a party, on the one hand, and any Governmental Entity is a party or addressee, on the other hand, or Orders specifically with respect to Parent or any Parent Insurance Subsidiary, that (i) limit in any material respect the ability of any of the Parent Insurance Subsidiaries to issue insurance policies under the Parent Permits, (ii) impose any requirements on Parent or any of the Parent Insurance Subsidiaries in respect