SeaBright DEF 14A Definitive proxy

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

(Rule 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION

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Exchange Act of 1934 (Amendment No.  )

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þ Definitive Proxy Statement

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o Soliciting Material under Rule 14a-12

SEABRIGHT INSURANCE HOLDINGS, INC.

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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

To our Stockholders:

We are pleased to invite you to attend the annual meeting of stockholders of SeaBright Insurance Holdings, Inc. to be held on Tuesday, May 15, 2007, at 9:00 a.m. Pacific time at the Seattle Marriott Waterfront Hotel located at 2100 Alaskan Way, Seattle, WA 98121.

Details regarding admission to the meeting and the business to be conducted are more fully described in the accompanying notice of annual meeting of stockholders and proxy statement. The notice of annual meeting of stockholders, proxy statement and proxy are being mailed to stockholders on or about April 17, 2007.

Your vote is important. Whether or not you plan to attend the annual meeting, we hope you will vote as soon as possible by following the instructions on the enclosed proxy card or voting instruction card. Voting by written proxy will ensure your representation at the annual meeting regardless of whether you attend in person.

Thank you for your ongoing support of and continued interest in SeaBright.

Sincerely,

John G. Pasqualetto

Chairman, President and Chief Executive Officer

2007 ANNUAL MEETING OF STOCKHOLDERS

NOTICE OF ANNUAL MEETING AND PROXY STATEMENT

TABLE OF CONTENTS

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS	1
QUESTIONS AND ANSWERS	2
Proxy Materials	2
Voting Information	2
Stock Ownership Information	4
PROPOSALS TO BE VOTED ON	5
Proposal No. 1: Election of Directors	5
Proposal No. 2: Ratification of the Audit Committee’s Appointment of KPMG LLP as Independent Auditor for the Year Ending December 31, 2007	7
BOARD OF DIRECTORS AND CORPORATE GOVERNANCE	8
Board Composition	8
Communication with the Board of Directors	8
Board Committees	8
Compensation Committee Interlocks and Insider Participation	10
Code of Ethics	10
EXECUTIVE OFFICERS AND KEY EMPLOYEES	11
EXECUTIVE COMPENSATION	13
Compensation Discussion and Analysis	13
Compensation Committee Report	17
Summary Compensation Table	17
Grants of Plan Based Awards	19
Employee Benefit Plans	21
Outstanding Equity Awards	24
Options Exercised and Vested Stock	25
Potential Payments Upon Termination or Change of Control	25
Equity Compensation Plan Information	30
DIRECTOR COMPENSATION	31
Summary of Director Compensation	31
Director Compensation	32
BENEFICIAL OWNERSHIP TABLE	34
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE	37
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS	38
Registration Agreement	38
AUDIT COMMITTEE DISCLOSURE	39
Principal Accounting Fees and Services	39
Report of the Audit Committee	40
OTHER MATTERS	41
Stockholder Proposals and Director Nominations	41
Cost of Solicitation	41

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

The annual meeting of stockholders of SeaBright Insurance Holdings, Inc. (“SeaBright” or the “Company”) will be held on Tuesday, May 15, 2007, at 9:00 a.m. Pacific time at the Seattle Marriott Waterfront Hotel, 2100 Alaskan Way, Seattle, WA 98121, for the following purposes:

1. To elect six directors to the Board of Directors;

2. To ratify the Audit Committee’s appointment of KPMG LLP as our independent auditor for the fiscal year ending December 31, 2007; and

3. To transact any other business as may properly come before the meeting or any adjournment or postponement thereof.

Our Board of Directors recommends you vote“FOR”the election of directors and“FOR”the appointment of KPMG LLP as our independent auditor.

Stockholders of record at the close of business on April 10, 2007, are entitled to notice of and to vote at the annual meeting and any adjournment or postponement thereof.

Whether or not you expect to be present at the meeting, please vote your shares by following the instructions on the enclosed proxy card or voting instruction card. If your shares are held in the name of a bank, broker or other record holder, telephone or Internet voting may be available to you only if offered by them. Their procedures should be described on the voting form they send to you. Any person voting by proxy has the power to revoke it at any time prior to its exercise at the meeting in accordance with the procedures described in the accompanying proxy statement.

IF YOU PLAN TO ATTEND:

Please note that space limitations make it necessary to limit attendance to stockholders. Registration will begin at 8:00 a.m. Each stockholder may be asked to present valid picture identification, such as a driver’s license or passport. Stockholders holding stock in brokerage accounts (“street name” holders) will need to bring a copy of the voting instruction card or a brokerage statement reflecting stock ownership as of the record date. Cameras, recording devices and other electronic devices will not be permitted at the meeting.

By Order of the Board of Directors,

/s/  D. Drue Wax

D. Drue Wax
Senior Vice President, General Counsel and
Secretary

Seattle, Washington

April 17, 2007

QUESTIONS AND ANSWERS

Proxy Materials

Why am I receiving this proxy statement?

SeaBright is soliciting proxies for the 2007 annual meeting of stockholders. You are receiving a proxy statement because you owned shares of SeaBright common stock on April 10, 2007, the record date, and that entitles you to vote at the meeting. By use of a proxy, you can vote whether or not you attend the meeting. This proxy statement describes the matters on which we would like you to vote and provides information on those matters so that you can make an informed decision.

What information is contained in this proxy statement?

The information in this proxy statement relates to the proposals to be voted on at the annual meeting, the voting process, SeaBright’s Board of Directors (the “Board of Directors” or the “Board”) and Board committees, the compensation of directors and executive officers for the 2006 fiscal year and other required information.

Will I receive a copy of SeaBright’s annual report?

A copy of our 2006 Annual Report onForm 10-K and a letter from John G. Pasqualetto, our Chairman, President and Chief Executive Officer, are enclosed.

Stockholders may request another free copy of our 2006 Annual Report onForm 10-K from:

SeaBright Insurance Holdings, Inc.
Attn: Investor Relations
2101 4th Avenue, Suite 1600
Seattle, Washington 98121
(206) 269-8500

Alternatively, stockholders can access the 2006 Annual Report onForm 10-K and other financial information in the Investor Relations section of SeaBright’s web site at www.sbic.com. SeaBright will also furnish any exhibit to the 2006Form 10-K if specifically requested.

Voting Information

What will I be voting on?

•  Election of directors (see page 5).

•  Ratification of the Audit Committee’s appointment of KPMG LLP as independent auditor for the year ending December 31, 2007 (see page 7).

How does the Board of Directors recommend that I vote?

SeaBright’s Board recommends that you vote your shares “FOR” each of the nominees to the Board and “FOR” the ratification of our independent auditor for the 2007 fiscal year.

How do I vote?

If you are a holder of record (that is, your shares are registered in your own name with our transfer agent at the close of business on April 10, 2007), you can vote eitherin personat the annual meeting orby proxywithout attending the annual meeting. We urge you to vote by proxy even if you plan to attend the annual meeting so that we will know as soon as possible that enough votes will be present for us to hold the meeting. If you attend the meeting in person, you may vote at the meeting and your proxy will not be counted.

If you hold your shares in “street name,” you must either direct the bank, broker or other record holder of your shares as to how to vote your shares, or obtain a proxy from the bank, broker or other record holder to vote at the meeting. Please refer to the voting instruction cards used by your bank, broker or other record holder for specific instructions on methods of voting, including by telephone or using the Internet if such services are offered by your bank, broker or other record holder.

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Your shares will be voted as you indicate. If you return the proxy card but you do not indicate your voting preferences, then the individuals named on the proxy card will vote your shares in accordance with the recommendations of the Board. The Board and management do not now intend to present any matters at the annual meeting other than those outlined in the notice of the annual meeting. Should any other matter requiring a vote of stockholders arise, stockholders returning the proxy card confer upon the individuals named on the proxy card discretionary authority to vote the shares represented by such proxy on any such other matter in accordance with their best judgment.

Can I change my vote?

Yes. If you are a holder of record, at any time before your proxy is voted, you may change your vote by:

•  revoking it by written notice to the Secretary of SeaBright at the address on the cover of this proxy statement;

•  delivering a later-dated proxy; or

•  voting in person at the meeting.

If you hold your shares in “street name,” please refer to the information forwarded by your bank, broker or other record holder for procedures on revoking or changing your proxy.

How many votes do I have?

You will have one vote for every share of SeaBright common stock that you owned on April 10, 2007.

How many shares are entitled to vote?

There were 20,776,704 shares of SeaBright common stock outstanding as of the record date and entitled to vote at the meeting. Each share is entitled to one vote.

How many shares must be present to hold the meeting?

Under SeaBright’s Amended and Restated By-Laws, holders of a majority of the outstanding shares of capital stock entitled to vote must be present, in person or by proxy, to hold the annual meeting.

How many votes are needed for the proposals to pass?

•  The six nominees for director who receive the highest number of votes at the annual meeting will be elected.

•  The affirmative vote of a majority of the shares present in person or by proxy must be cast in favor of the ratification of the appointment of the independent auditor.

What if I vote “withhold” or “abstain”?

In the election of directors, you may vote “FOR” all or some of the nominees or you may vote to “WITHHOLD” with respect to one or more of the nominees. A vote to “WITHHOLD” on the election of directors will have no effect on the outcome.

For the other items of business, you may vote “FOR,” “AGAINST” or “ABSTAIN.” A vote to “ABSTAIN” on the other items of business will have the same effect of a vote “AGAINST.”

If you vote “ABSTAIN,” your shares will be counted as present for purposes of determining whether enough votes are present to hold the annual meeting.

Is cumulative voting permitted for the election of directors?

No.

What if I don’t return my proxy card and don’t attend the annual meeting?

If you are a holder of record and you don’t vote your shares, your shares will not be voted.

If you hold your shares in “street name,” and you don’t give your bank, broker or other record holder specific voting instructions, the votes will be “broker non-votes.” “Broker non-votes” will have no effect on the vote for the election of directors or any other items of business.

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What happens if a nominee for director declines or is unable to accept election?

If you vote by proxy, and if unforeseen circumstances make it necessary for the Board to substitute another person for a nominee, the individuals named on the proxy card will vote your shares for that other person.

Is my vote confidential?

Yes. Your voting records will not be disclosed to us except:

•  as required by law;

•  to the inspector of election; or

•  if the election is contested.

If you are a holder of record, and you write comments on your proxy card, your comments will be provided to us, but your vote will remain confidential.

Stock Ownership Information

What is the difference between holding shares as a stockholder of record and as a beneficial owner?

Most SeaBright stockholders hold their shares through a bank, broker or other record holder rather than directly in their own name. As summarized below, there are some distinctions between shares held of record and those owned beneficially.

Stockholder of Record

If your shares are registered directly in your name with SeaBright’s transfer agent, Computershare Trust Company, N.A. (“Computershare”), you are considered, with respect to those shares, the stockholder of record, and these proxy materials are being sent directly to you by SeaBright. As the stockholder of record, you have the right to grant your voting proxy directly to SeaBright or to a third party, or to vote in person at the meeting. SeaBright has enclosed a proxy card for you to use.

Beneficial Owner

If your shares are held in a brokerage account or by another nominee, you are considered the beneficial owner of shares held in “street name,” and these proxy materials are being forwarded to you together with a voting instruction card on behalf of your bank, broker or other record holder. As the beneficial owner, you have the right to direct your bank, broker or other record holder how to vote and you also are invited to attend the annual meeting. Your bank, broker or other record holder has enclosed or provided voting instructions for you to use in directing the bank, broker or other record holder how to vote your shares.

Since a beneficial owner is not the stockholder of record, you may not vote these shares in person at the meeting unless you obtain a “legal proxy” from the bank, broker or other record holder that holds your shares, giving you the right to vote the shares at the meeting.

What if I have questions for SeaBright’s transfer agent?

Please contact Computershare at the phone number or address listed below, with questions concerning stock certificates, transfer of ownership or other matters pertaining to your stock account.

Computershare Trust Company, N.A.
c/o Computershare Investor Services
P.O. Box 43078
Providence, RI02940-3078
(781) 575-3400

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PROPOSALS TO BE VOTED ON

Proposal No. 1: Election of Directors

There are six nominees for election to our Board of Directors this year. Messrs. Pasqualetto and Chung have served on our Board of Directors since 2003. Messrs. Feldman, Josephson and Morvis have served on our Board of Directors since 2004. Mr. Edwards has served on our Board of Directors since 2006. Information regarding the business experience of each nominee is provided below. Each director is elected annually to serve until the next annual meeting or until his or her successor is elected. There are no family relationships among our executive officers and directors.

If you sign your proxy or voting instruction card but do not give instructions with respect to voting for directors, your shares will be voted for the six persons recommended by the Board. If you wish to give specific instructions with respect to voting for directors, you may do so by indicating your instructions on your proxy or voting instruction card.

All of the nominees have indicated to SeaBright that they will be available to serve as directors. In the event that any nominee should become unavailable, however, the proxy holders, John G. Pasqualetto (our Chairman, President and Chief Executive Officer), Joseph S. De Vita (our Senior Vice President, Chief Financial Officer and Assistant Secretary) and D. Drue Wax (our Senior Vice President, General Counsel and Secretary), will vote for a nominee or nominees designated by the Board, unless the Board chooses to reduce the number of directors serving on the Board.

Our Board recommends a vote “FOR” the election to the Board of the each of the following nominees.

Vote Required

The six persons receiving the highest number of “FOR” votes represented by shares of SeaBright common stock present in person or represented by proxy at the annual meeting will be elected.

John G. Pasqualetto Director since 2003 Age 64

Mr. Pasqualetto has served as the Chairman of our Board of Directors since September 2004 and as our President and Chief Executive Officer and one of our directors since July 2003. In addition, he has served as Chairman of the Board of Directors, President and Chief Executive Officer of our insurance company subsidiary, SeaBright Insurance Company, since September 2003. He was formerly President and Chief Executive Officer of Eagle Pacific Insurance Company and Pacific Eagle Insurance Company (the “Eagle Entities”), President of Kemper Employers Group and Senior Vice President of the Kemper insurance companies, holding these positions concurrently since joining Kemper in 1998. Mr. Pasqualetto’s prior experience includes serving as President of American International Group’s (“AIG”) workers’ compensation specialty group, co-founding Great States Insurance Company, a California-based specialty workers’ compensation company, and holding executive positions with Argonaut Insurance Company and the State Compensation Insurance Fund of California. Mr. Pasqualetto has a B.A. from California State University at Northridge.

Peter Y. Chung Director since 2003 Age 39

Mr. Chung has served as a director since June 2003. Mr. Chung is a managing partner and member of various entities affiliated with Summit Partners, a private equity and venture capital firm, where he has been employed since August 1994. Mr. Chung also serves as a director of NightHawk Radiology Holdings, Inc., a provider of teleradiology services, and several privately held companies. In addition, he has served as a director of our insurance company subsidiary, SeaBright Insurance Company, since September 2003. Mr. Chung received an A.B. from Harvard University and an M.B.A. from Stanford University.

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Joseph A. Edwards Director since 2006 Age 56	Mr. Edwards has served as a director since November 2006. In addition, he has served as a director of our insurance company subsidiary, SeaBright Insurance Company, since November 2006. He has been a workers’ compensation consultant since 1991. Mr. Edwards administers workers’ compensation self-insured trusts in the State of Maine and is a consultant for the American Insurance Association. From 1987 to 1991, Mr. Edwards was Superintendent of Insurance for the State of Maine. Mr. Edwards holds a J.D. degree from Yale Law School and an S.B. degree from the Massachusetts Institute of Technology.
William M. Feldman Director since 2004 Age 53	Mr. Feldman has served as a director since November 2004. In addition, he has served as a director of our insurance company subsidiary, SeaBright Insurance Company, since November 2004. Mr. Feldman is the co-owner, Chairman and Chief Executive Officer of Feldman, Ingardona & Co., a registered investment advisor and securities broker/dealer that provides asset management and investment advisory services to high net worth families and institutions. He has held these positions since organizing the company in 1997. Mr. Feldman received a B.S. in Accountancy from the University of Illinois, Urbana, and is a member of the American Institute of Certified Public Accountants.
Mural R. Josephson Director since 2004 Age 58	Mr. Josephson has served as a director since July 2004. In addition, he has served as a director of our insurnace company subsidiary, SeaBright Insurance Company, since March 2004. Following his retirement as Senior Vice President and Chief Financial Officer of Lumbermens Mutual Casualty Company (“LMC”) and as an officer and director of certain affiliated entities including the Eagle Entities, Kemper Employers Insurance Company and PointSure Insurance Services, Inc. in October 2002, where he served for approximately four years, Mr. Josephson has served as a consultant to various financial institutions. Prior to his role at LMC, Mr. Josephson retired as a partner at KPMG LLP after 28 years at the firm. Mr. Josephson also serves as a director of HealthMarkets, Inc., a provider of health, life and related insurance products to the self-employed, individual and student insurance markets, PXRE Group Ltd., which specializes in property reinsurance, and ALPS Corporation, which provides malpractice coverage for attorneys. In addition, he has served as a director of our insurance company subsidiary, SeaBright Insurance Company, since March 2004. Mr. Josephson is a licensed Certified Public Accountant in the State of Illinois, and is a member of the American Institute of Certified Public Accountants.
George M. Morvis Director since 2004 Age 66	Mr. Morvis has served as a director since July 2004. In addition, he has served as a director of our insurnace company subsidiary, SeaBright Insurance Company, since March 2004. Mr. Morvis is the founder, President and Chief Executive Officer of Financial Shares Corporation, a Chicago-based consulting firm specializing in strategic marketing, financial communications, and human resources consulting. Prior to founding Financial Shares Corporation in 1974, Mr. Morvis was a director of public relations and Executive Secretary for the Illinois Bankers Association. Mr. Morvis serves on the board of directors of numerous privately held companies. In addition, he has served as a director of our insurance company subsidiary, SeaBright Insurance Company, since March 2004. Mr. Morvis holds a degree in Journalism from the University of Illinois, Urbana, an M.B.A. from The George Washington University, and is a graduate of the Harvard Business School executive management program.

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Proposal No. 2: Ratification of the Audit Committee’s Appointment of KPMG LLP as Independent Auditor for the Year Ending December 31, 2007

The Audit Committee of the Board has appointed KPMG LLP as the independent auditor to audit SeaBright’s consolidated financial statements for the fiscal year ending December 31, 2007. During fiscal year 2006, KPMG LLP served as SeaBright’s independent auditor and also provided certain tax and other audit-related services. See “Principal Accounting Fees and Services” on page 39 of this Proxy Statement. Representatives of KPMG LLP are expected to attend the annual meeting, where they will be available to respond to appropriate questions and, if they desire, to make a statement.

This proposal is put before the stockholders because, though the stockholder vote is not binding on the Audit Committee, the Board believes that it is good corporate practice to seek stockholder ratification of the Audit Committee’s appointment of the independent auditors. If the appointment of KPMG LLP is not ratified, the Audit Committee will evaluate the basis for the stockholders’ vote when determining whether to continue the firm’s engagement, but may ultimately determine to continue the engagement of the firm or another audit firm without re-submitting the matter to stockholders. Even if the appointment of KPMG LLP is ratified, the Audit Committee may in its sole discretion terminate the engagement of the firm and direct the appointment of another independent auditor at any time during the year.

Our Board recommends a vote “FOR” the ratification of the appointment of KPMG LLP as SeaBright’s independent auditor for fiscal year 2007. If the appointment is not ratified, our Audit Committee will consider whether it should select another independent auditor.

Vote Required

Ratification of the appointment of KPMG LLP as SeaBright’s independent auditor for fiscal year 2007 requires the affirmative vote of a majority of the shares of SeaBright common stock present in person or represented by proxy at the annual meeting.

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BOARD OF DIRECTORS AND CORPORATE GOVERNANCE

Board Composition

Our amended and restated certificate of incorporation provides that our Board of Directors shall consist of such number of directors as determined from time to time by resolution adopted by a majority of the total number of directors then in office. Our Board of Directors currently consists of six members. Newly created directorships resulting from any increase in the number of directors or any vacancies in the Board of Directors may be filled only by the Board of Directors. The term of office for each director will be until his successor is elected and qualified or until his earlier death, resignation or removal. Elections for directors will be held annually.

The Board has determined that each of the directors, with the exception of Mr. Pasqualetto, are “independent” directors, as independence is defined in Rule 4200(a)(15) of the Nasdaq Stock Market LLC (“Nasdaq”) marketplace rules. The Board has not adopted categorical standards in making its determination of independence and instead relies on standards set forth in the Nasdaq marketplace rules.

Our Board of Directors met 10 times in 2006. Directors are expected to attend Board meetings and meetings of committees on which they serve, and to spend the time needed and meet as frequently as necessary to properly discharge their responsibilities. During 2006, all of the directors attended 75% or more of the meetings of the Board and the committees on which they served. Directors are encouraged to attend the annual meeting of stockholders.

Communication with the Board of Directors

Stockholders may communicate with the Board by directing communications to the Secretary and should prominently indicate on the outside of the envelope that the communication is intended for the Board or for individual directors. In accordance with instructions from the Board, the Secretary will review all communications, will organize the communications for review by the Board and will promptly forward communications (other than communications unrelated to the operation of the Company, such as advertisements, mass mailings, solicitations and job inquiries) to the Board or individual directors.

Board Committees

We currently have an Audit Committee, a Compensation Committee and a Nominating and Corporate Governance Committee. Each committee consists of three persons. All of the members of our Audit Committee, Nominating and Corporate Governance Committee and Compensation Committee are “independent” as defined by Nasdaq marketplace rules and all of the members of the Audit Committee are independent under the heightened independence standards for Audit Committee members under the Nasdaq marketplace rules and the rules of the U.S. Securities and Exchange Commission (“SEC”).

Audit Committee

The Audit Committee is comprised of Messrs. Josephson (Chairman), Feldman and Morvis. The Audit Committee oversees our accounting, financial reporting and control processes and the audits of our financial statements, including: the preparation, presentation and integrity of our financial statements; our compliance with legal and regulatory requirements; our independent auditor’s qualifications and independence; and the performance of our independent auditor. Our Audit Committee, among other things:

•  has sole responsibility to retain and terminate our independent auditor;

•  pre-approves all audit and non-audit services performed by our independent auditor and the fees and terms of each engagement; and

•  reviews our quarterly and annual audited financial statements and related public disclosures, earnings press releases and other financial information provided to analysts or rating agencies.

Each member of the Audit Committee has the ability to read and understand fundamental financial statements. Our Board of Directors has determined that Mural R. Josephson meets the requirements for an “audit committee financial expert” as defined by the rules of the SEC.

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The charter of the Audit Committee, as amended on February 21, 2007, is available in the Investor Relations section of our website at www.sbic.com.

Compensation Committee

The Compensation Committee is comprised of Messrs. Chung (Chairman), Feldman and Josephson. The Compensation Committee oversees the administration of our benefit plans, reviews and administers all compensation arrangements for executive officers and establishes and reviews general policies relating to the compensation and benefits of our officers and employees. Certain of our executive officers, including the Chief Executive Officer and the Secretary, may from time to time attend Compensation Committee meetings when executive compensation is discussed and evaluated by Compensation Committee members. Each year, the Compensation Committee receives from the Chief Executive Officer recommendations on compensation for executive officers other than the Chief Executive Officer, but the Compensation Committee retains full discretion in determining executive officer compensation. The Compensation Committee has the authority to retain and terminate legal, accounting or other consultants or experts, including compensation consultants, as it deems necessary in the performance of its duties.

In April 2006, the Compensation Committee retained a nationally recognized compensation consulting firm, Pearl Meyer & Partners, to provide information regarding executive and director compensation practices and to assist with review of compensation programs for executive officers and directors.

The charter of the Compensation Committee, as amended on January 24, 2007, is available in the Investor Relations section of our website at www.sbic.com.

Nominating and Corporate Governance Committee

The Nominating and Corporate Governance Committee is comprised of Messrs. Morvis (Chairman), Chung and Edwards. The Nominating and Corporate Governance Committee’s responsibilities include identifying and recommending to the Board appropriate director nominee candidates and providing oversight with respect to corporate governance matters.

The policy of the Nominating and Corporate Governance Committee is to consider individuals recommended by stockholders for nomination as a director in accordance with the procedures described under “Other Matters — Stockholder Proposals and Director Nominations.” The Nominating and Corporate Governance Committee will consider all nominees for election as directors of SeaBright, including all nominees recommended by stockholders, in accordance with the mandate contained in its charter. In evaluating candidates, the Nominating and Corporate Governance Committee considers the person’s judgment, skills, experience, age, independence, understanding of SeaBright’s business or other related industries as well as the needs of the Board, and will review all candidates in the same manner, regardless of the source of the recommendation. The Nominating and Corporate Governance Committee will select qualified candidates and review its recommendations with the Board.

SeaBright has not paid a fee to any third party to identify or assist in identifying or evaluating potential nominees.

The charter of the Nominating and Corporate Governance Committee, as amended on February 21, 2007, is available in the Investor Relations section of our website at www.sbic.com.

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The following table shows the current membership of each committee and the number of meetings held by each committee in 2006:

			Nominating
			and Corporate
	Audit	Compensation	Governance
Name of Director	Committee	Committee	Committee
Peter Y. Chung		Chairman	Member
Joseph A. Edwards			Member
William M. Feldman	Member	Member
Mural R. Josephson	Chairman	Member
George M. Morvis	Member		Chairman
Number of meetings in 2006	9	4	3

Compensation Committee Interlocks and Insider Participation

No member of our Compensation Committee serves as a member of the board of directors or compensation committee of any entity that has one or more executive officers serving as a member of our Board of Directors or Compensation Committee.

Code of Ethics

We have adopted a code of ethics for senior financial employees that applies to our Chief Executive Officer, Chief Financial Officer, Principal Accounting Officer and other employees. The code of ethics is available in the Investor Relations section of our website at www.sbic.com and is available in print to any stockholder who requests it. If we waive any material provision of our code of ethics or substantively change the code, we will disclose that fact on our website within four business days.

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EXECUTIVE OFFICERS AND KEY EMPLOYEES

The following table sets forth information concerning our executive officers and key employees. Executive officers serve at the request of the Board of Directors.

Name	Age		Positions
John G. Pasqualetto		64	Chairman, President and Chief Executive Officer
Richard J. Gergasko		48	Executive Vice President — Operations
Joseph S. De Vita		65	Senior Vice President, Chief Financial Officer and Assistant Secretary
D. Drue Wax		56	Senior Vice President, General Counsel and Secretary
Richard W. Seelinger		47	Senior Vice President — Policyholder Services
Marc B. Miller, M.D.		50	Senior Vice President and Chief Medical Officer
Jeffrey C. Wanamaker		40	Senior Vice President — Underwriting
M. Philip Romney		52	Vice President — Finance, Principal Accounting Officer and Assistant Secretary
James L. Borland, III		45	Vice President and Chief Information Officer
Chris A. Engstrom		46	President — PointSure Insurance Services, Inc.

Set forth below is information concerning our executive officers who are not directors.

Richard J. Gergaskohas served as our Executive Vice President — Operations since July 2003. He also served in this capacity and as the head of underwriting and research and development at the Eagle Entities from May 1999 until September 2003. Prior to joining the Eagle Entities, Mr. Gergasko held a variety of positions in the insurance industry, including Underwriting Vice President of AIG’s workers’ compensation specialty group, as well as various actuarial positions at Crum and Forster, William M. Mercer, Inc. and MBA, Inc. Mr. Gergasko holds a B.A. in Statistics from Rutgers College, is a Fellow of the Casualty Actuarial Society and a Member of the American Academy of Actuaries.

Joseph S. De Vitahas served as our Senior Vice President and Chief Financial Officer since July 2003 and as our Assistant Secretary since January 2005. From January 2003 until June 2003, Mr. De Vita served as a consultant to the Eagle Entities. From November 2000 until December 2002, Mr. De Vita served as the Vice President and Chief Financial Officer of Lifeguard, Inc., a health plan provider based in California. Lifeguard, Inc. was placed in receivership by the California Department of Managed Care in October 2002. Mr. De Vita started his career in the insurance industry in 1972 with INA Corporation (Cigna). In 1978, he joined Fremont General Corporation as Vice President of Finance. In 1987, Mr. De Vita co-founded Great States Insurance Company, a specialty workers’ compensation insurer, with Mr. Pasqualetto. Mr. De Vita has held executive positions with managed care organizations, and began his financial career with PricewaterhouseCoopers. Mr. De Vita holds a B.A. in Accounting from St. Joseph’s University, an M.B.A. in Finance from Drexel University, is a licensed Certified Public Accountant in the Commonwealth of Pennsylvania and is a member of the American Institute of Certified Public Accountants.

D. Drue Waxhas served as our Senior Vice President, General Counsel and Secretary since January 2005. Prior to that, she, through her law firm, represented us on various regulatory and corporate issues. From 1998 through March 2004, she served as senior counsel in the corporate legal department of the Kemper insurance companies, where her responsibilities involved regulatory and corporate work for the various Kemper corporations, including the Eagle Entities and KEIC. Prior to 1998, Ms. Wax advised on insurance regulatory matters for Davidson, Goldstein, Mandell & Menkes, and was an associate in the Chicago office of Sidley & Austin. She received her J.D. from Chicago Kent College of Law, and her B.A. from Middlebury College.

Richard W. Seelingerhas served as our Senior Vice President — Policyholder Services since July 2003. He served in the same capacity with the Eagle Entities, which he joined in 2000. From 1985 through 1999, Mr. Seelinger held a series of executive positions of increasing responsibility at Kemper insurance companies, including Workers’ Compensation Claims Officer. Mr. Seelinger holds a B.A. in History from Western Illinois University.

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Marc B. Miller, M.D. has served as our Senior Vice President and Chief Medical Officer since August 2004. Since 1998, Dr. Miller has been an independent consultant serving in various capacities for several businesses, including: acting as Vice President of Customer Relations for ExactCost, Inc., a healthcare cost analysis technology company; representing various foreign healthcare services, biotech, medical device, and pharmaceutical companies in connection with partnerships, investment and business development; acting as medical director charged with revamping Orange County’s Medical Services Indigents Program; and acting as medical director advising on quality assurance and credentialing for MedLink HealthCare Networks, Inc., a diagnostic managed care organization. Dr. Miller also co-founded ConflictSolvers, LLC, astart-up venture which develops dispute resolution products, and held various positions with ConflictSolvers from 1998 until 2001, most recently serving as its Chief Executive Officer. Dr. Miller is board certified in preventive medicine, public health and medical management. Dr. Miller holds a B.A. from Stanford University, an M.B.A. from Golden Gate University, an M.P.H. from the University of California, Los Angeles and an M.D. from Rush University.

Jeffrey C. Wanamakerhas served as our Senior Vice President — Underwriting since March 2006. From July 2003 through March 2006, Mr. Wanamaker served as our Vice President — Underwriting. He served as Vice President — Underwriting at the Eagle Entities, which he joined in May 1999. Prior to 1999, Mr. Wanamaker served as a Vice President of Alaska National Insurance Company. From 1989 to 1999, while employed by Alaska National Insurance Company, he underwrote most commercial lines and ultimately specialized in accounts with a combination of state act workers’ compensation, longshore and maritime employment exposures. Mr. Wanamaker holds Bachelor of Business Administration degrees in Finance and Economics from the University of Alaska and has earned the Chartered Property Casualty Underwriter and Associate in Reinsurance professional designations.

M. Philip Romneyhas served as our Vice President — Finance and Principal Accounting Officer since November 2004 and as our Assistant Secretary since January 2005. From February 2000 until October 2004, Mr. Romney served as Director of Finance, Controller and Assistant Secretary for Eden Bioscience Corporation, a biotechnology company in Washington. Prior to that, Mr. Romney served in various positions (most recently as Deputy Treasurer and Senior Manager, Risk Management and Treasury Services) at Public Utility District No. 1 of Snohomish County, Washington, a public water and electric utility. Mr. Romney began his financial career with the Seattle office of KPMG LLP. Mr. Romney holds B.S. and MAcc. degrees from Brigham Young University, is a licensed Certified Public Accountant in the State of Washington and is a member of the American Institute of Certified Public Accountants and of the Washington Society of Certified Public Accountants.

Set forth below is information concerning our key employees.

James L. Borland, IIIhas served as our Vice President and Chief Information Officer since November 2003. He served in the same capacity with the Eagle Entities, which he joined in 2000. From January 1998 until the time he joined the Eagle Entities, Mr. Borland served as the principal network analyst for PacifiCare Health Systems. From December 1991 until January 1998, Mr. Borland held several positions with Great States Insurance Company. Mr. Borland holds a B.S. in Business Management from Pepperdine University.

Chris A. Engstromhas served as the President of PointSure Insurance Services, Inc., one of our wholly-owned subsidiaries, since February 2004. From May 2003 until joining PointSure, Mr. Engstrom served as the Northwest Regional Executive Officer for Willis Group Holdings, a global insurance broker, and from January 2001 until May 2003, Mr. Engstrom served as the President and Chief Executive Officer of Willis Seattle. Prior to his tenure at Willis, Mr. Engstrom spent 15 years with the Eagle Entities, most recently as Senior Vice President. Mr. Engstrom holds a B.A. from City University.

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EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

This section provides information regarding the compensation program in place for our Principal Executive Officer, Principal Financial Officer and the three most highly-compensated executive officers other than the Principal Executive Officer and Principal Financial Officer for 2006. We refer to these five executive officers as Named Executive Officers (“NEOs”). It includes information regarding, among other things, the overall objectives of our compensation program and each element of compensation that we provide.

Objectives of Our Compensation Program

The Compensation Committee of our Board of Directors, which we refer to in this section as the “Committee,” has responsibility for overseeing and approving the compensation program of our Chief Executive Officer and our other NEOs. The Committee acts pursuant to a charter that has been approved by our Board.

The compensation program for our NEOs is designed to attract, retain and reward talented executives in a manner which aligns their short- and long-term interests with those of our stockholders. We believe that the compensation program should offer compensation that is competitive and equitable and provides an effective balance between fixed components and variable short-term and long-term components. An NEO’s total compensation consists of a base salary, which is fixed, and incentive compensation, which is variable. We set base salaries at levels that are competitive with salaries for comparable positions within similar companies. We establish a total compensation package for each NEO based upon several considerations and inputs, including advice and information we receive from Pearl Meyer & Partners (“Pearl Meyer”), a nationally-known executive compensation consulting firm. The total compensation package is designed to reward each NEO for the achievement of company and individual performance goals and objectives. Each year, the Committee receives from our Chief Executive Officer recommendations on NEO compensation other than for the Chief Executive Officer, but the Committee retains full discretion in determining NEO compensation. The Committee intends to evaluate regularly the compensation packages for our NEOs. SeaBright is a rapidly growing company that operates in a dynamic competitive environment. In developing compensation programs for our NEOs, we plan to maintain an emphasis on goal alignment with our stockholders, a balance of short- and long-term incentives, and flexibility in the structure of the programs so that they may evolve with our continued development.

Our compensation program is organized around three fundamental principles and utilizes components that have a clearly determinable value — base salary, cash bonuses and restricted stock and stock option grants:

Our Compensation Program is Performance-Based.  Our compensation program is designed to create incentives for our NEOs to build long-term stockholder value. We create incentives by providing variable compensation that is linked to company and individual performance. One of the principal components of performance, as we view it, is the achievement of results that we believe will lead to increased long-term stockholder value. Variable compensation places a meaningful percentage of the NEO’s compensation at risk, with future payoutsand/or realization of value dependent upon performance. If weand/or the individual fails to meet minimum levels of performance, he or she will not earn any variable compensation. Our variable compensation includes short-term compensation under the 2006 Bonus Plan and long-term compensation under our 2005 Long-Term Equity Incentive Plan (the “2005 Equity Plan”). The Committee set target cash bonuses under our 2006 Bonus Plan at a level that put 39% of our Chief Executive Officer’s annual cash compensation package at risk and approximately 31%, on average, of our other NEOs’ annual cash compensation packages at risk. In the view of the Committee, at-risk variable compensation should consistently represent the majority of any year’s total compensation plan for the Chief Executive and the NEOs. While actual proportions will vary from year to year, our approach will generally over the long-term produce variable compensation greater than 50% of total compensation.

Equity Awards Should Represent A Meaningful Portion of NEO Compensation.  The Committee believes that a meaningful portion of total compensation should be delivered in the form of equity awards in order to align the NEO’s incentives with those of our stockholders and to reinforce the ownership culture within our leadership. These equity awards are intended to focus the NEOs on the achievement of both the

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annual and long-term financial performance objectives of SeaBright by linking the ultimate compensation realized by the NEOs directly to the price of our common stock over a period of time. In 2006, NEOs received equity compensation in the form of restricted stock and stock option grants. We do not currently maintain specific stock ownership guidelines for our executive officers.

Our Compensation Program for NEOs Should Enable Us to Attract and Retain the Most Talented Executives in our Industry.  We believe our stockholders’ long-term interests are addressed in part by our ability to attract and retain the most talented executives in the workers’ compensation insurance industry and related fields. In furtherance of this belief, the Committee seeks to create a compensation package for each NEO that delivers total compensation that is better than the average of the total compensation for the same role delivered by comparable companies with which we compete for executive talent. To assist in making this comparison, we retained Pearl Meyer to provide information regarding compensation levels and programs for executives and directors of comparable companies. The Committee believes that offering competitive compensation packages with long-term compensation components enhances our ability to retain existing executive talent, and, when necessary, to attract new executive talent from the external marketplace.

The Elements of Our Compensation Program

Our executive compensation for 2006 consists of the following components:

•  Base salary

•  Cash bonuses under our 2006 Bonus Plan

•  Restricted stock grants and stock option grants under our 2005 Equity Plan

Base Salary.  The first element of our cash compensation program for NEOs in 2006 was an annual base salary. The Committee believes it is appropriate for some portion of the compensation provided to NEOs to be in a form that is fixed and liquid to compensate them for their services during the year. The Committee reviews and determines base salary for NEOs in the first fiscal quarter of each year. In each case, the Committee takes into account the individual executive’s skills, performance level, contribution to the business and responsibilities. The determination of base salaries, and any adjustment thereto, is discretionary and is not based on set formulas. Any adjustments to base salaries normally take effect on April 1st of each year. In March 2006, we increased base salaries of all of our NEOs, including our Chief Executive Officer, whose base salary was increased by approximately $60,000. It was the Committee’s judgment that such increases were deserved in recognition of our financial and strategic performance in 2005.

On March 28, 2007, the Committee approved increases in the annual base salaries and equity incentive grants for our executive officers, including our Chief Executive Officer. The following table sets forth the new annual base salaries to be paid to the NEOs, effective as of April 1, 2007, as approved by the Committee on March 28, 2007.

Name	Base Salary
John G. Pasqualetto	$	500,000
Richard J. Gergasko	$	322,000
Joseph S. De Vita	$	295,000
D. Drue Wax	$	268,000
Richard W. Seelinger	$	236,250

The Committee determined adjustments to base salaries based on a number of factors, including the salary for each NEO as compared to the salary levels for comparable positions in similar companies.

Cash bonuses under our 2006 Bonus Plan.  The second element of our cash compensation program for NEOs in 2006 was a cash bonus awarded under our 2006 Bonus Plan. The 2006 Bonus Plan rewarded NEOs for achievement of pre-determined companywide performance goals and individual objectives. We believe these cash bonuses motivate our NEOs to pursue specific objectives the Committee and Board believe are consistent with the overall goals and strategic direction of our company. The 2006 Bonus Plan rewarded NEOs for achieving

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companywide performance by linking cash bonuses primarily to GAAP net income (adjusted to exclude capital gains and losses) and return on equity. The Committee recommends to the Board for approval the companywide goals and the individual goals for each NEO.

Under the terms of the 2006 Bonus Plan, no payments would have been made unless we achieved a threshold level of GAAP net income (excluding capital gains and losses), and bonuses were capped at a maximum percentage of base salary. In determining the GAAP net income achievement measure, the Committee included the impact of the bonus pool on earnings. The target cash bonus opportunities provided to each NEO under our 2006 Bonus Plan were set as a fixed percentage of that person’s base salary for 2006, with the percentages for the NEOs ranging from 40% to 65% of base salary.

On March 9, 2007, the Committee approved the payment of annual bonus awards under the 2006 Bonus Plan to the NEOs as follows:

	2006
Name	Bonus Award
John G. Pasqualetto	$	502,198
Richard J. Gergasko	$	293,807
Joseph S. De Vita	$	268,794
D. Drue Wax	$	190,000
Richard W. Seelinger	$	175,007

The Committee made this determination based on a number of factors, including our net income that exceeded both our 2006 budget and our results in 2005.

Restricted Stock Grants and Stock Option Grants under our 2005 Equity Plan.  Grants of restricted stock and stock options under the 2005 Equity Plan reward NEOs for long-term increases in stockholder value. As described above, the Committee believes that a meaningful portion of each NEO’s compensation should be in the form of equity awards. In 2006, such equity awards, delivered in the form of time-vesting restricted stock and stock options, represented a significant and meaningful percentage of NEO compensation. Equity awards to our NEOs are made pursuant to the 2005 Equity Plan. Shares of restricted stock granted to NEOs vest on the third anniversary of the grant date. We began to grant shares of restricted stock in 2006 because Statement of Financial Accounting Standards No. 123R made the accounting treatment of stock options less attractive, and we recognized a trend among public companies towards the use of restricted stock awards as part of their equity compensation packages. The Board awarded stock options to NEOs with an exercise price equal to the fair market value of our common stock on the date of grant. These stock options will vest in equal annual installments over four years. Most of the stock options granted were incentive stock options under Section 422 of the Internal Revenue Code.

The Committee based the level of equity awards granted to our NEOs primarily upon our financial performance as measured by our calendar year GAAP net income, return on equity and our growth in earned premium. The Committee further considers several additional quantitative and qualitative factors in determining equity awards, including the performance of our operating subsidiaries and the performance of the departments supervised by each of our NEOs. The Committee then selects, in its judgment, the best balance between restricted stock awards and stock option awards. Because one of the goals of the compensation package is to retain executive talent, we grant equity awards that vest over a period of several years. We believe that this feature of our equity awards creates an incentive for an NEO to remain with our company by deferring a significant amount of compensation over the vesting period.

The Committee believes that its current compensation program for NEOs is appropriately balanced between short-term cash and long-term equity awards. The Committee’s determinations of applicable ranges are assisted by research and guidance provided by Pearl Meyer. The Committee may engage other qualified external compensation experts in its discretion.

The relative amounts of cash and equity compensation are determined based upon market-level ranges and are also influenced by the results accomplished in a given calendar year. The Committee believes that a combination of cash and equity compensation serves to align the incentives of our NEOs with those of our stockholders, while also permitting the Committee to provide incentives to the NEOs to pursue specific short- and long-term performance

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goals. The Committee believes that the performance measures established for performance-based awards, both cash and equity, are significantly challenging but fully achievable.

On March 28, 2007, the Committee approved grants of restricted stock and stock options to the NEOs pursuant to the 2005 Equity Plan as follows:

	Restricted		Stock Option
Name	Stock Grants (#)		Grants (#)
John G. Pasqualetto		60,000		20,000
Richard J. Gergasko		30,000		10,000
Joseph S. De Vita		27,000		9,000
D. Drue Wax		12,000		4,000
Richard W. Seelinger		18,000		6,000

In keeping with the variable portion of our total compensation program, the Committee made this determination based on a number of factors, including our net income that exceeded both our 2006 budget and our results in 2005.

Practices Regarding the Grant of Options

The Committee has generally followed a practice of making annual option grants to its NEOs on a single date each year. For the last three years, the Committee has granted these annual awards at its regularly-scheduled meeting in March. The March meeting date historically occurred within four weeks following the issuance of a press release announcing our results for the previous quarter and fiscal year. The Committee believes that it is appropriate that annual awards be made at a time when all material information regarding our financial results has been disclosed. We do not otherwise have any program, plan or practice to time annual option grants to our executives in coordination with the release of material non-public information.

While the majority of our option awards to NEOs have historically been made pursuant to our annual grant program, the Committee retains the discretion to make additional awards to NEOs at other times in connection with the initial hiring of a new officer, for promotions, for retention purposes or otherwise. We have not made any such awards to date.

All option awards made to our NEOs, or any of our other employees or directors, are made pursuant to our 2005 Equity Plan. All options under the 2005 Equity Plan are granted with an exercise price that is greater than or equal to the fair market value of our common stock on the date of grant. Fair market value is defined under the 2005 Equity Plan to be, on the date of grant, the officially-quoted closing selling price of a share of our common stock (or if no selling price is quoted, the bid price) on the principal securities exchange on which our common stock is then listed for trading for the applicable trading day. We do not have any program, plan or practice of awarding options and setting the exercise price based on the stock’s price on a date other than the grant date or by using average prices (or lowest prices) of our common stock in a period preceding, surrounding or following the grant date. While the Charter of the Committee permits delegation of the Committee’s authority to subcommittees, all grants to NEOs have been made by the Committee itself and not pursuant to delegated authority.

Perquisites

Our Chief Executive Officer receives a $750 car allowance each month. No other NEOs currently receive car allowances, but it is the Committee’s judgment that perquisites represent viable forms of compensation both to retain and attract executive talent.

Post-Termination Compensation Severance Arrangements

We have entered into employment agreements containing severance provisions with certain members of our senior management team, including the NEOs, as described under “— Potential Payments Upon Termination or Change in Control.” The agreement with our Chief Executive Officer provides for payments and other benefits if his employment terminates for a qualifying event or circumstance, such as being terminated without “Cause” or leaving employment for “Good Reason,” as these terms are defined in his employment agreement. The employment

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agreements with other members of our senior management provide for payments and other benefits if their employment terminates for a qualifying event or circumstance, such as being terminated without “Cause,” but do not provide for severance for “Good Reason.” The Committee believes that these severance compensation arrangements are an important part of overall compensation for our NEOs and help to secure the continued employment and dedication of our NEOs, notwithstanding any concern that they might have at such time regarding their own continued employment prior to or following a change in control. The Committee also believes that these agreements are important as a recruitment and retention device, as all or nearly all of the companies with which we compete for executive talent have similar agreements in place for their senior management.

Compensation Committee Report

The Compensation Committee of the Board of Directors of SeaBright Insurance Holdings, Inc. oversees SeaBright Insurance Holdings, Inc.’s compensation program on behalf of the Board. In fulfilling its oversight responsibilities, the Compensation Committee reviewed and discussed with management the Compensation Discussion and Analysis set forth in this Proxy Statement.

In reliance on the review and discussions referred to above, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in the Company’s Annual Report onForm 10-K for the fiscal year ended December 31, 2006 and the Company’s Proxy Statement to be filed in connection with the Company’s 2007 Annual Meeting of Stockholders, each of which will be filed with the Securities and Exchange Commission.

The Compensation Committee

Peter Y. Chung, Chairman
William M. Feldman
Mural R. Josephson

Summary Compensation Table

The following table sets forth information regarding compensation earned by NEOs in 2006:

									Non-Equity
					Stock		Option		Incentive Plan		All Other
			Salary		Awards		Awards		Compensation		Compensation		Total
Name and Principal Position	Year		($)		($)(1)		($)(2)		($)(3)		($)(4)		($)
John G. Pasqualetto		2006	$	387,914	$	348,532	$	134,455	$	502,198	$	23,370	$	1,396,469
Chairman, President and Chief Executive Officer
Richard J. Gergasko		2006		295,415		174,266		73,117		293,807		14,259		850,864
Executive Vice President — Operations
Joseph S. De Vita		2006		270,402		174,266		76,761		268,794		14,169		804,392
Senior Vice President, Chief Financial Officer and Assistant Secretary
D. Drue Wax		2006		239,059		52,280		10,959		190,000		11,542		503,840
Senior Vice President, General Counsel and Secretary
Richard W. Seelinger		2006		220,263		55,765		33,499		175,007		12,610		497,144
Senior Vice President — Policyholder Services

(1) Includes compensation cost recognized in 2006 related to shares of restricted stock granted to our NEOs on March 17, 2006 under our 2005 Equity Plan. These amounts are calculated in accordance with SFAS 123R,

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	except that no estimate of forfeitures is made. Amounts include compensation cost recognized in 2006 related to restricted stock granted in March 2006. For the grant date fair value of restricted stock awards made in 2006, please see “— Grants of Plan-Based Awards.” For a discussion of restricted stock awards made in 2007 related to 2006 performance, please see “— Compensation Discussion and Analysis — The Elements of Our Compensation Program.”
	No shares of restricted stock were forfeited by our NEOs during 2006. See Note 20 to the Consolidated Financial Statements included in our Annual Report onForm 10-K for the year ended December 31, 2006, filed with the SEC on March 16, 2007, for a discussion of the relevant assumptions used in calculating compensation cost recognized pursuant to SFAS 123R.
(2)	Includes compensation cost recognized in 2006 related to incentive stock options granted to our NEOs during the years from 2003 to 2006, including stock options granted on March 17, 2006. These amounts are calculated in accordance with SFAS 123R, except that no estimate of forfeitures is made. These amounts include compensation cost recognized in 2006 related to stock options granted on March 17, 2006. For the grant date fair value of stock option awards made in 2006, please see “— Grants of Plan-Based Awards.” For a discussion of stock option awards made in 2007 related to 2006 performance, please see “— Compensation Discussion and Analysis — The Elements of Our Compensation Program.”
	No stock options were forfeited by our NEOs during 2006. See Note 20 to the Consolidated Financial Statements included in our Annual Report onForm 10-K for the year ended December 31, 2006, filed with the SEC on March 16, 2007, for a discussion of the relevant assumptions used in calculating compensation cost recognized pursuant to SFAS 123R.
(3)	Includes payments awarded to our NEOs under our 2006 Bonus Plan. These amounts were earned in 2006 and paid in March 2007. For additional information on our 2006 Bonus Plan, see the discussion entitled “Cash bonuses under our 2006 Bonus Plan” on page 14 of this Proxy Statement.
(4)	Includes the value of the following perquisites paid to or on behalf of our NEOs in 2006 (valued at actual amounts paid).

	Automobile		Life Insurance		401(k) Matching		Profit Sharing
Named Executive Officer	Allowance		Premiums		Contributions		Contributions		Total
John G. Pasqualetto	$	9,000	$	1,170	$	11,000	$	2,200	$	23,370
Richard J. Gergasko		—		1,059		11,000		2,200		14,259
Joseph S. De Vita		—		969		11,000		2,200		14,169
Richard W. Seelinger		—		789		9,633		2,188		12,610
D. Drue Wax		—		856		8,486		2,200		11,542

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Grants of Plan Based Awards

The following table summarizes grants of incentive stock options and shares of restricted common stock in 2006 by our Compensation Committee to our NEOs:

										All Other		All Other
										Stock Awards:		Option Awards:
										Number of		Number of		Exercise or		Grant Date
										Shares of		Securities		Base Price		Fair Value
				Estimated Possible Payouts Under Non-Equity Incentive Plan Awards(1)						Stock or		Underlying		of Option		of Stock
	Grant			Threshhold		Target		Maximum		Units		Options		Awards		and Option
Name	Date			($)		($)		($)		(#)(2)		(#)(3)		($/Sh)		Awards(4)
John G. Pasqualetto		3/10/06	(5)	$	—	$	251,099	$	502,198		—		—	$	—	$	—
		3/17/06			—		—		—		75,000		—		—		1,323,000
		3/17/06			—		—		—		—		25,000		17.64		163,250
Richard J. Gergasko		3/10/06	(5)		—		146,903		293,807		—		—		—		—
		3/17/06			—		—		—		37,500		—		—		661,500
		3/17/06			—		—		—		—		12,500		17.64		81,625
Joseph S. De Vita		3/10/06	(5)		—		134,397		268,794		—		—		—		—
		3/17/06			—		—		—		37,500		—		—		661,500
		3/17/06			—		—		—		—		12,500		17.64		81,625
D. Drue Wax		3/10/06	(5)		—		95,000		190,000		—		—		—		—
		3/17/06			—		—		—		11,250		—		—		198,450
		3/17/06			—		—		—		—		3,725		17.64		24,324
Richard W. Seelinger		3/10/06	(5)		—		87,504		175,007		—		—		—		—
		3/17/06			—		—		—		12,000		—		—		211,680
		3/17/06			—		—		—		—		4,000		17.64		26,120

(1)	Amounts were calculated according to the terms of our 2006 Bonus Plan. For additional information on our 2006 Bonus Plan, see the discussion entitled “Cash bonuses under our 2006 Bonus Plan” on page 14 of this Proxy Statement.
(2)	Consists of shares of restricted common stock awarded under our 2005 Equity Plan. The awards fully vest on March 17, 2009, the third anniversary of the grant date. For additional information on our 2005 Equity Plan, see “— 2005 Long-Term Equity Incentive Plan” on page 21 of this Proxy Statement.
(3)	Consists of incentive stock options to purchase shares of our common stock awarded under our 2005 Equity Plan. The awards vest 25% on each of the first four anniversaries of the March 17, 2006 grant date. For additional information on our 2005 Equity Plan, see the “— 2005 Long-Term Equity Incentive Plan” on page 21 of this Proxy Statement.
(4)	For shares of restricted common stock, consists of the number of shares of stock awarded multiplied by $17.64, the closing price of our common stock on the grant date. For incentive stock options, consists of the number of options granted multiplied by $6.53, the grant date fair value of each option. The grant date fair value is calculated according to the provisions of SFAS 123R, except that no estimate of forfeitures is made.
(5)	Reflects each NEO’s participation in our 2006 Bonus Plan. Amounts shown indicate each NEO’s potential bonus assuming achievement of the threshold, target and maximum operating results, defined as net income determined in accordance with generally accepted accounting principles (“GAAP”) excluding capital gains and losses, and successful completion of the NEO’s individual goals and objectives. Actual amounts paid in March 2007 are included in the Summary Compensation Table on page 17 of this Proxy Statement.

Employment Agreements

The following information summarizes the employment agreements for our Chief Executive Officer and each of the named executive officers.

John G. Pasqualetto.  Mr. Pasqualetto’s employment agreement, as amended, provides for an annual base salary of $313,793 and an annual incentive bonus in a target amount of 65% of his base salary. Mr. Pasqualetto’s salary and target bonus amount are subject to review by the Board for market and performance adjustments at the beginning of each calendar year and may be adjusted after such review in the Board’s sole discretion. On March 28,

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2007, the Compensation Committee approved an increase in Mr. Pasqualetto’s annual base salary to $500,000. Mr. Pasqualetto may participate in present and future benefit plans that are generally made available to employees from time to time. If we terminate Mr. Pasqualetto’s employment without cause or if Mr. Pasqualetto terminates his employment for good reason, each as defined in his employment agreement, he will be entitled to receive his base salary and bonus (prorated to the date of termination) payable in regular installments from the date of termination for a period of 18 months thereafter. Mr. Pasqualetto’s employment agreement provides that he will be restricted from engaging in specified competitive activities and from soliciting SeaBright’s employees, customers, suppliers or other business relations for 18 months following the date of his termination.

Richard J. Gergasko.  Mr. Gergasko’s employment agreement provides for an annual base salary of $258,832 and an annual incentive bonus in a target amount of 50% of his base salary. Mr. Gergasko’s salary and target bonus amount are subject to review by the Board for market and performance adjustments at the beginning of each calendar year and may be adjusted after such review in the Board’s sole discretion. On March 28, 2007, the Compensation Committee approved an increase in Mr. Gergasko’s annual base salary to $322,000. Mr. Gergasko may participate in present and future benefit plans that are generally made available to employees from time to time. If we terminate Mr. Gergasko’s employment without cause, as defined in his employment agreement, he will be entitled to receive his base salary payable in regular installments from the date of termination for a period of 12 months thereafter. Mr. Gergasko’s employment agreement provides that he will be restricted from engaging in specified competitive activities and from soliciting our employees, customers, suppliers or other business relations for 12 months following the date of his termination.

Joseph S. De Vita.  Mr. De Vita’s employment agreement provides for an annual base salary of $216,000 and an annual incentive bonus in a target amount of 50% of his base salary. Mr. De Vita’s salary and target bonus amount are subject to review by the Board for market and performance adjustments at the beginning of each calendar year and may be adjusted after such review in the Board’s sole discretion. On March 28, 2007, the Compensation Committee approved an increase in Mr. De Vita’s annual base salary to $295,000. Mr. De Vita may participate in present and future benefit plans that are generally made available to employees from time to time. If we terminate Mr. De Vita’s employment without cause, as defined in his employment agreement, he will be entitled to receive his base salary payable in regular installments from the date of termination for a period of 12 months thereafter. Mr. De Vita’s employment agreement provides that he will be restricted from engaging in specified competitive activities and from soliciting our employees, customers, suppliers or other business relations for 12 months following the date of his termination.

D. Drue Wax.  Ms. Wax’s employment agreement provides for an annual base salary of $200,000 and an annual incentive bonus in a target amount of 40% of her base salary. Ms. Wax’s salary and target bonus amount are subject to review by the Board for market and performance adjustments at the beginning of each calendar year and may be adjusted after such review in the Board’s sole discretion. On March 28, 2007, the Compensation Committee approved an increase in Ms. Wax’s annual base salary to $268,000. Ms. Wax may participate in present and future benefit plans that are generally made available to employees from time to time. If we terminate Ms. Wax’s employment without cause, as defined in her employment agreement, she will be entitled to receive her base salary payable in regular installments from the date of termination for a period of 12 months thereafter. Ms. Wax’s employment agreement provides that she will be restricted from engaging in specified competitive activities and soliciting our employees, customers, suppliers or other business relations for 12 months following the date of her termination.

Richard W. Seelinger.  Mr. Seelinger’s employment agreement provides for an annual base salary of $187,113 and an annual incentive bonus in a target amount of 40% of his base salary. Mr. Seelinger’s salary and target bonus amount are subject to review by the Board for market and performance adjustments at the beginning of each calendar year and may be adjusted after such review in the Board’s sole discretion. On March 28, 2007, the Compensation Committee approved an increase in Mr. Seelinger’s annual base salary to $236,250. Mr. Seelinger may participate in present and future benefit plans that are generally made available to employees from time to time. If we terminate Mr. Seelinger’s employment without cause, as defined in his employment agreement, he will be entitled to receive his base salary payable in regular installments from the date of termination for a period of 12 months thereafter. Mr. Seelinger’s employment agreement provides that he will be restricted from engaging in

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specified competitive activities and from soliciting our employees, customers, suppliers or other business relations for 12 months following the date of his termination.

Employee Benefit Plans

2003 Stock Option Plan

In 2003, our Board of Directors adopted the SeaBright Insurance Holdings Inc. 2003 Stock Option Plan. The 2003 Stock Option Plan was amended and restated in February 2004, and on April 3, 2007, the Committee amended and restated the plan as the Second Amended and Restated 2003 Stock Option Plan (the “2003 Stock Option Plan”). The purpose of this plan was to create an incentive for directors, consultants, advisors, officers and other employees to remain in our employ and to contribute to our success by granting to them a favorable opportunity to acquire our common stock. The 2003 Stock Option Plan was also intended to help us attract and retain individuals of exceptional managerial talent upon whom, in large measure, our sustained growth and profitability depend. As our Compensation Committee has terminated the ability to grant future stock option awards under the 2003 Stock Option Plan, we anticipate that all future stock option grants will be made under our 2005 Equity Plan, discussed below.

Types of Awards and Eligibility.  The 2003 Stock Option Plan provides for the grant of either “incentive stock options,” within the meaning of Section 422 of the Internal Revenue Code, or nonqualified stock options to our directors, consultants, advisors, executive officers or other key employees selected by our Board of Directors to participate in this plan.

Share Reserve/Limitation.  The number of shares of common stock with respect to which options may be granted under the 2003 Stock Option Plan and which may be issued upon exercise thereof may not exceed 776,458, subject to the Board’s authority to adjust this amount in the event of a reorganization, recapitalization, merger, consolidation, share exchange, stock dividend, stock split or similar transactions affecting our common stock. We have granted options to purchase 491,508 shares of common stock under the 2003 Stock Option Plan.

Administration.  Our Board of Directors, or committee designated by the Board, administers the 2003 Stock Option Plan. Under the 2003 Stock Option Plan, the Board or the Committee has sole and complete authority to: select participants; grant options to participants in forms and amounts it determines; impose limitations, restrictions and conditions upon options as it deems appropriate; interpret the plan and adopt, amend and rescind administrative guidelines and other rules relating to the plan; correct any defect or omission or reconcile any inconsistency in the plan or an option granted under the plan; and make all other determinations on and take all other actions necessary or advisable for the implementation and administration of the plan.

Terms of Awards.  The exercise price of an option granted under the 2003 Stock Option Plan may not be less than 100% of the fair market value of our common stock on the date the option is granted. Our Board of Directors determines, in connection with each option grant under the plan, when options become exercisable and when they expire, provided that the expiration may not exceed ten years from the date of grant.

Change of Control.  For a description of termination and change in control provisions applicable to options issued under the 2003 Stock Option Plan, please see “— Potential Payments Upon Termination or Change in Control — Stock Options Under the 2003 Stock Option Plan.” On April 3, 2007, the Committee amended the 2003 Stock Option Plan to extend the “protection period” following a Sale of the Company to four years following a Sale of the Company during which a participant’s stock options would accelerate and become fully vested and exercisable if the participant were subject to an “Involuntary Termination.”

2005 Long-Term Equity Incentive Plan

On December 22, 2004, we adopted the SeaBright Insurance Holdings, Inc. 2005 Long-Term Equity Incentive Plan, and we amended and restated the plan as the SeaBright Insurance Holdings, Inc. Amended and Restated 2005 Long-Term Equity Incentive Plan on April 3, 2007 (the “2005 Equity Plan”). The 2005 Equity Plan provides for grants of stock options, restricted stock, restricted stock units, deferred stock units and other equity-based awards. Directors, officers and other employees of SeaBright and its subsidiaries, as well as others performing services for us, may be eligible for grants under the plan. The purpose of the 2005 Equity Plan is to provide these individuals

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with incentives to maximize stockholder value and otherwise contribute to our success and to enable us to attract, retain and reward the best available persons for positions of responsibility.

A total of 1,047,755 shares of our common stock were initially available for issuance under the 2005 Equity Plan. This amount will automatically increase on the first day of each fiscal year through 2015 by the lesser of: (i) 2% of the shares of common stock outstanding on the last day of the immediately preceding fiscal year or (ii) such lesser number of shares as determined by the Compensation Committee. Accordingly, on January 1, 2006, the total number of shares of our common stock available for issuance under the 2005 Equity Plan increased by 328,223 shares and on January 1, 2007, the total number of shares of our common stock available for issuance under the 2005 Equity Plan increased by 411,068 shares. The number of shares available for issuance under the 2005 Equity Plan is subject to adjustment in the event of a reorganization, stock split, merger or similar change in the corporate structure or the outstanding shares of common stock. In the event of any of these occurrences, we may make any adjustments we consider appropriate to, among other things, the number and kind of shares, options or other property available for issuance under the 2005 Equity Plan or covered by grants previously made under the plan. The shares available for issuance under the 2005 Equity Plan may be, in whole or in part, authorized and unissued or held as treasury shares.

The Compensation Committee of our Board of Directors administers the 2005 Equity Plan. Our Board also has the authority to administer the 2005 Equity Plan and to take all actions that the Compensation Committee is otherwise authorized to take under the plan.

The following is a summary of the material terms of the 2005 Equity Plan, but does not include all of the provisions of the plan. For further information about the plan, we refer you to the 2005 Equity Plan.

Terms of the 2005 Equity Plan

Eligibility.  Directors, officers and employees of SeaBright and its subsidiaries, as well as other individuals performing services for us, or to whom we have extended an offer of employment, are eligible to receive grants under the 2005 Equity Plan. However, only employees may receive grants of incentive stock options. In each case, the Compensation Committee will select the actual grantees.

Stock Options.  Under the 2005 Equity Plan, the Compensation Committee or the Board may award grants of incentive stock options conforming to the provisions of Section 422 of the Internal Revenue Code, and other, non-qualified stock options. The Compensation Committee may not, however, award to any one person in any one calendar year options to purchase common stock equal to more than 300,000 shares, and it may not award incentive options first exercisable during any calendar year whose underlying shares have a fair market value greater than $100,000, determined at the time of grant.

The exercise price of an option granted under the 2005 Equity Plan may not be less than 100% of the fair market value of a share of common stock on the date of grant, and the exercise price of an incentive option awarded to a person who owns stock constituting more than 10% of SeaBright’s voting power may not be less than 110% of such fair market value on such date.

Unless the Compensation Committee determines otherwise, the exercise price of any option may be paid in any of the following ways:

•  in cash;

•  by delivery of shares of common stock with a fair market value equal to the exercise price; and/or

•  by simultaneous sale through a broker of shares of common stock acquired upon exercise.

If a participant elects to deliver shares of common stock in payment of any part of an option’s exercise price, the Compensation Committee may, in its discretion, grant the participant a “reload option.” The reload option entitles its holder to purchase a number of shares of common stock equal to the number so delivered. The reload option may also include, if the Compensation Committee chooses, the right to purchase a number of shares of common stock equal to the number delivered or withheld in satisfaction of any of our tax withholding requirements in connection with the exercise of the original option. The terms of each reload option will be the same as those of

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the original exercised option, except that the grant date will be the date of exercise of the original option, and the exercise price will be the fair market value of the common stock on the date of exercise.

The Compensation Committee will determine the term of each option in its discretion. However, no term may exceed ten years from the date of grant or, in the case of an incentive option granted to a person who owns stock constituting more than 10% of the voting power of SeaBright or any of its subsidiaries, five years from the date of grant. In addition, all options under the 2005 Equity Plan, whether or not then exercisable, generally cease vesting when a grantee ceases to be a director, officer or employee of, or to otherwise perform services for, us or our subsidiaries. Options generally expire 30 days after the date of cessation of service, so long as the grantee does not compete with us during the30-day period.

For a description of termination and change in control provisions applicable to options issued under the 2005 Equity Plan, please see “— Potential Payments Upon Termination or Change in Control — Stock Options and Restricted Stock Awards Under the 2005 Equity Plan.”

Restricted Stock.  Under the 2005 Equity Plan, the Compensation Committee may award restricted stock subject to the conditions and restrictions, and for the duration, which will generally be at least six months, that it determines in its discretion. For a description of termination and change in control provisions applicable to restricted stock issued under the 2005 Equity Plan, please see “— Potential Payments Upon Termination or Change in Control — Stock Options and Restricted Stock Awards Under the 2005 Equity Plan.”

Restricted Stock Units; Deferred Stock Units.  Under the 2005 Equity Plan, the Compensation Committee may award restricted stock units subject to the conditions and restrictions, and for the duration, which will generally be at least six months, that it determines in its discretion. Each restricted stock unit is equivalent in value to one share of common stock and entitles the grantee to receive one share of common stock for each restricted stock unit at the end of the vesting period applicable to such restricted stock unit. Unless the Compensation Committee determines otherwise, all restrictions on a grantee’s restricted stock units will lapse when the grantee ceases to be a director, officer or employee of, or to otherwise perform services for, SeaBright and its subsidiaries, if the cessation occurs due to death, disability or, in the discretion of the Compensation Committee, retirement. If we undergo a “Change in Control” and a participant is terminated from service through an “Involuntary Termination” within four years thereafter, all restrictions on restricted stock units granted to the participant shall lapse. In addition, the Compensation Committee has the authority to award restricted stock units with respect to which all restrictions shall lapse automatically upon a change in control of SeaBright, whether or not the grantee is subsequently terminated. If termination of employment or service occurs for any other reason, all of a grantee’s restricted stock units as to which the applicable restrictions have not lapsed will be forfeited immediately. Prior to the later of (i) the close of the tax year preceding the year in which restricted stock units are granted or (ii) 30 days of first becoming eligible to participate in the 2005 Equity Plan (or, if earlier, the last day of the tax year in which the participant first becomes eligible to participate in the plan) and on or prior to the date the restricted stock units are granted, a grantee may elect to defer the receipt of all or a portion of the shares due with respect to the restricted stock units and convert such restricted stock units into deferred stock units. Subject to specified exceptions, the grantee will receive shares in respect of such deferred stock units at the end of the deferral period.

Performance Awards.  Under the 2005 Equity Plan, the Compensation Committee may grant performance awards contingent upon achievement by the grantee, SeaBrightand/or its subsidiaries or divisions of set goals and objectives regarding specified performance criteria, such as, for example, return on equity, over a specified performance cycle, as designated by the Compensation Committee. Performance awards may include specific dollar-value target awards, performance units, the value of which is established by the Compensation Committee at the time of grant,and/or performance shares, the value of which is equal to the fair market value of a share of common stock on the date of grant. The value of a performance award may be fixed or fluctuate on the basis of specified performance criteria. A performance award may be paid out in cashand/or shares of our common stock or other securities.

Unless the Compensation Committee determines otherwise, if a grantee ceases to be a director, officer or employee of, or to otherwise perform services for, SeaBright and its subsidiaries prior to completion of a performance cycle, due to death, disability or retirement, the grantee will receive the portion of the performance award payable to him or her based on achievement of the applicable performance criteria over the elapsed portion of the performance cycle. If termination of employment or service occurs for any other reason prior to completion of a

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performance cycle, the grantee will become ineligible to receive any portion of a performance award. If we undergo a change in control, a grantee will earn no less than the portion of the performance award that he or she would have earned if the applicable performance cycle had terminated as of the date of the change of control.

Vesting, Withholding Taxes and Transferability of All Awards.  The terms and conditions of each award made under the 2005 Equity Plan, including vesting requirements, will be set forth consistent with the plan in a written agreement with the grantee. Except in limited circumstances, no award under the 2005 Equity Plan may vest and become exercisable within six months of the date of grant, unless the Compensation Committee determines otherwise.

Unless the Compensation Committee determines otherwise, a participant may elect to deliver shares of common stock, or to have us withhold shares of common stock otherwise issuable upon exercise of an option or upon grant or vesting of restricted stock or a restricted stock unit, in order to satisfy our withholding obligations in connection with any such exercise, grant or vesting.

Unless the Compensation Committee determines otherwise, no award made under the 2005 Equity Plan will be transferable other than by will or the laws of descent and distribution or to a grantee’s family member by gift or a qualified domestic relations order, and each award may be exercised only by the grantee, his or her qualified family member transferee, or any of their respective executors, administrators, guardians, or legal representatives.

Amendment and Termination of the 2005 Equity Plan.  The Board may amend or terminate the 2005 Equity Plan in its discretion, except that no amendment will become effective without prior approval of our stockholders if such approval is necessary for continued compliance with applicable stock exchange listing requirements. Furthermore, any termination may not materially and adversely affect any outstanding rights or obligations under the 2005 Equity Plan without the affected participant’s consent. If not previously terminated by the Board, the 2005 Equity Plan will terminate on the tenth anniversary of its adoption.

On April 3, 2007, the Committee amended the 2005 Equity Plan to extend the “protection period” following a Change in Control from one year to four years following a Change in Control, during which a participant’s equity awards would accelerate and become fully vested and exercisable and all restrictions on shares of restricted stock units would automatically lapse if the participant were subject to an “Involuntary Termination.”

Outstanding Equity Awards

The following table summarizes the outstanding equity award holdings of our NEOs as of December 31, 2006:

	Option Awards								Stock Awards
	Number of		Number of						Number of		Market Value
	Securities		Securities						Shares or		of Shares
	Underlying		Underlying						Units of		or Units
	Unexercised		Unexercised		Option		Option		Stock that		of Stock that
	Options (#)		Options (#)		Exercise		Expiration		Have Not		Have Not
Name	Exercisable		Unexercisable(1)		Price ($)		Date		Vested (#)(2)		Vested ($)
John G. Pasqualetto		116,469		38,823	$	6.54		9/30/13		75,000	$	1,350,750
		19,125		57,374		10.50		1/20/15		—		—
		—		25,000		17.64		3/17/16		—		—
Richard J. Gergasko		58,235		19,411		6.54		9/30/13		37,500		675,375
		11,475		34,424		10.50		1/20/15		—		—
		—		12,500		17.64		3/17/16		—		—
Joseph S. De Vita		43,676		14,559		6.54		9/3013		37,500		675,375
		14,344		43,030		10.50		1/20/15		—		—
		—		12,500		17.64		3/17/16		—		—
D. Drue Wax		1,913		5,737		10.50		1/20/15		11,250		202,613
		—		3,725		17.64		3/17/16		—		—
Richard W. Seelinger		29,117		9,706		6.54		9/30/13		12,000		216,120
		5,738		17,212		10.50		1/20/15		—		—
		—		4,000		17.64		3/17/16		—		—

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(1) Stock options granted to NEOs vest 25% on each of the first four anniversaries of the date of grant. The following table provides information with respect to the vesting of each NEO’s stock options that were unexercisable at December 31, 2006:

			Year in Which Options Vest
Name	Grant Date		2007		2008		2009		2010		Total
John G. Pasqualetto		9/30/03		38,823		—		—		—		38,323
		1/20/05		19,125		19,124		19,125		—		57,374
		3/17/06		6,250		6,250		6,250		6,250		25,000
Richard J. Gergasko		9/30/03		19,411		—		—		—		19,411
		1/20/05		11,475		11,474		11,475		—		34,424
		3/17/06		3,125		3,125		3,125		3,125		12,500
Joseph S. De Vita		9/30/03		14,559		—		—		—		14,559
		1/20/05		14,343		14,344		14,343		—		43,030
		3/17/06		3,125		3,125		3,125		3,125		12,500
D. Drue Wax		1/20/05		1,912		1,913		1,912		—		5,737
		3/17/06		931		932		931		931		3,725
Richard W. Seelinger		9/30/03		9,706		—		—		—		9,706
		1/20/05		5,737		5,738		5,737		—		17,212
		3/17/06		1,000		1,000		1,000		1,000		4,000

(2) Shares of restricted common stock granted to our NEOs vest on March 17, 2009, the third anniversary of the date of grant.

Options Exercised and Vested Stock

None of our NEOs exercised stock options in 2006, and no shares of restricted stock vested during 2006.

Potential Payments Upon Termination or Change of Control

The table below reflects the amount of compensation to each of the NEOs assuming each NEO’s employment was terminated under each of the circumstances set forth below, or a change in control occurred, on December 31, 2006. The amounts shown in the table are estimates, and the actual amounts to be paid can only be determined at the time of the NEO’s separation from the SeaBright or upon a change in control.

John G. Pasqualetto, Chairman, President and Chief Executive Officer

													Involuntary
	Termination												Termination
	Without Cause or												Following
	Resignation for		Voluntary		Termination				Death or		Change in		Change
Benefit	Good Reason		Resignation		for Cause		Retirement		Disability		Control		in Control
Cash Severance	$	600,000	$	—	$	—	$	—	$	—	$	—	$	600,000
Accrued Vacation		40,872		40,872		40,872		40,872		40,872		—		40,872
Payment under 2006 Bonus Plan		502,198		—		—		—		—		—		502,198
Health and Welfare Benefits		5,050		—		—		—		—		—		5,050
Value of Restricted Stock Awards under 2005 Equity Plan		—		—		—		1,350,750		1,350,750		—		1,350,750
Value of Stock Options under 2005 Equity Plan		—		—		—		—		440,129		—		440,129
Value of Stock Options under 2003 Stock Option Plan		—		—		—		—		—		—		445,300

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Richard J. Gergasko, Executive Vice President — Operations

													Involuntary
													Termination
	Termination												Following
	Without		Voluntary		Termination				Death or		Change in		Change in
Benefit	Cause		Resignation		for Cause		Retirement		Disability		Control		Control
Cash Severance	$	300,000	$	—	$	—	$	—	$	—	$	—		300,000
Accrued Vacation		29,385		29,385		29,385		29,385		29,385		—		29,385
Payment under 2006 Bonus Plan		293,807		—		—		—		—		—		293,807
Value of Restricted Stock Awards under 2005 Equity Plan		—		—		—		675,375		675,375		—		675,375
Value of Stock Options under 2005 Equity Plan		—		—		—		—		263,149		—		263,149
Value of Stock Options under 2003 Stock Option Plan		—		—		—		—		—		—		222,644

Joseph S. De Vita, Senior Vice President, Chief Financial Officer and Assistant Secretary

													Involuntary
													Termination
	Termination												Following
	Without		Voluntary		Termination				Death or		Change in		Change in
Benefit	Cause		Resignation		for Cause		Retirement		Disability		Control		Control
Cash Severance	$	275,000	$	—	$	—	$	—	$	—	$	—	$	275,000
Accrued Vacation		19,567		19,567		19,567		19,567		19,567		—		19,567
Payment under 2006 Bonus Plan		268,794		—		—		—		—		—		268,794
Value of Restricted Stock Awards under 2005 Equity Plan		—		—		—		675,375		675,375		—		675,375
Value of Stock Options under 2005 Equity Plan		—		—		—		—		327,780		—		327,780
Value of Stock Options under 2003 Stock Option Plan		—		—		—		—		—		—		166,992

  D.  Drue Wax, Senior Vice President, General Counsel and Secretary

													Involuntary
													Termination
	Termination												Following
	Without		Voluntary		Termination				Death or		Change in		Change in
Benefit	Cause		Resignation		for Cause		Retirement		Disability		Control		Control
Cash Severance	$	250,000	$	—	$	—	$	—	$	—	$	—	$	250,000
Accrued Vacation		26,122		26,122		26,122		26,122		26,122		—		26,122
Payment under 2006 Bonus Plan		190,000		—		—		—		—		—		190,000
Value of Restricted Stock Awards under 2005 Equity Plan		—		—		—		202,613		202,613		—		202,613
Value of Stock Options under 2005 Equity Plan		—		—		—		—		44,463		—		44,463

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Richard W. Seelinger, Senior Vice President — Policyholder Services

													Involuntary
													Termination
	Termination												Following
	Without		Voluntary		Termination				Death or		Change in		Change in
Benefit	Cause		Resignation		for Cause		Retirement		Disability		Control		Control
Cash Severance	$	225,000	$	—	$	—	$	—	$	—	$	—	$	225,000
Accrued Vacation		12,577		12,577		12,577		12,577		12,577		—		12,577
Payment under 2006 Bonus Plan		175,007		—		—		—		—		—		175,007
Value of Restricted Stock Awards under 2005 Equity Plan		—		—		—		216,120		216,120		—		216,120
Value of Stock Options under 2005 Equity Plan		—		—		—		—		130,742		—		130,742
Value of Stock Options under 2003 Stock Option Plan		—		—		—		—		—		—		111,328

Cash Severance and Payments under 2006 Bonus Plan

The employment agreements with our NEOs provide that upon termination, the executives are generally entitled to receive amounts earned during their term of employment. In addition, if an executive’s employment is terminated without “Cause,” the executive will be entitled to receive his or her base salary payable in regular installments from the date of termination for a severance period set forth in the employment agreement, or until the executive obtains other employment, whichever occurs first. If the Chief Executive Officer’s employment is terminated without “Cause,” he will be entitled to receive his bonus (prorated to the date of termination) payable in regular installments from the date of termination for a severance period set forth in his employment agreement, or until he obtains other employment, whichever occurs first. However, the executive is under no duty to seek alternative employment during the severance period. The severance period for Mr. Pasqualetto, our Chief Executive Officer, is 18 months from the date of termination, and the severance period for the other NEOs is 12 months from the date of termination. The employment agreements also provide that the executives will be restricted from engaging in specified competitive activities and from soliciting SeaBright’s employees, customers, suppliers or other business relations for the applicable severance period.

Under the employment agreements, termination shall be for “Cause” if the executive:

(i) is continuously inattentive to his or her lawful duties after at least one written notice has been provided and the executive has failed to cure the same within a30-day period thereafter;

(ii) reports to work under the influence of alcohol or illegal drugs, or uses illegal drugs (whether or not at the workplace) or engages in other conduct causing us substantial public disgrace or disrepute or economic harm;

(iii) breaches his or her duty of loyalty to us or engages in any acts of dishonesty or fraud with respect to us or any of our business relations;

(iv) is convicted of a felony or any crime involving dishonesty, breach of trust, or physical or emotional harm to any person (or enters a plea of guilty or nolo contendere with respect thereto); or

(v) breaches any material term of his or her employment agreement or any other agreement between the executive and us or any of our affiliates and the breach (if capable of cure) is not cured within thirty (30) days following written notice thereof from us.

In addition, if Mr. Pasqualetto terminates his employment for “Good Reason,” Mr. Pasqualetto will be entitled to receive his base salary and bonus (prorated to the dated of termination) payable in regular installments from the date of termination for a period of 18 months, or until Mr. Pasqualetto obtains other employment, whichever occurs first. “Good Reason” means the executive’s voluntary resignation within 90 days after the occurrence of any of the following: (i) without the express written consent of the executive, a reduction in the executive’s annualized base salary; (ii) without the express written consent of the executive, a material diminution in his or her supervisory responsibilities; (iii) the relocation of the executive in connection with any relocation of our principal place of

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business to a facility or a location more than fifty (50) miles outside of the greater Seattle, Washington metropolitan area without the executive’s written consent; or (iv) our failure to obtain the assumption of the executive’s employment agreement by any successors for the remainder of its term.

If Mr. Pasqualetto’s employment is terminated without “Cause,” or if he terminates his employment for “Good Reason,” we have also agreed to pay Mr. Pasqualetto’s COBRA health insurance premiums from the date of termination through the date that is 18 months after the date of termination. For additional information on our Employment Agreements see the discussion entitled Employment Agreements on page 19 of this Proxy Statement.

Stock Options and Restricted Stock Awards under the 2005 Equity Plan

Stock Options.  Under the 2005 Equity Plan, options that are exercisable on the date of termination of a participant’s employment with SeaBright generally expire 30 days after the date of termination, so long as the participant does not compete with us during the30-day period, and options that are not exercisable on the date of termination are forfeited immediately. There are, however, exceptions depending upon the circumstances of termination. In the event of retirement, a participant’s exercisable options will remain so for up to 90 days after the date of retirement, so long as the participant does not compete with us during the90-day period. The participant’s options that are not exercisable on the date of retirement will be forfeited, unless the Compensation Committee determines in its discretion that the options shall become fully vested and exercisable. In the case of a participant’s death or disability, all options will become fully vested and exercisable and remain so for up to 180 days after the date of death or disability, so long as the participant does not compete with us during the180-day period. In each of the foregoing circumstances, the Board or Compensation Committee may elect to further extend the applicable exercise period in its discretion. Upon termination for “Cause,” all options will terminate immediately, whether or not exercisable. If we undergo a “Change in Control” and a participant is terminated from service through an “Involuntary Termination” within four years thereafter, all of the participant’s options will become fully vested and exercisable and remain so for up to one year after the date of termination. In addition, the Compensation Committee has the authority to grant options that will become fully vested and exercisable automatically upon a “Change in Control” of SeaBright, whether or not the participant is subsequently terminated. The option award agreements pursuant to which options have been awarded to the NEOs under the 2005 Equity Plan do not provide that the options will become fully vested and exercisable automatically upon a “Change in Control.”

Restricted Stock Awards.  Under the 2005 Equity Plan, generally, if a participant’s employment with us terminates, all shares of restricted stock granted to the participant on which the restrictions have not lapsed shall be immediately forfeited to SeaBright. However, upon a participant’s death, disability or retirement, all restrictions on shares of restricted stock granted to the participant shall lapse. If we undergo a “Change in Control” and a participant is terminated from service through an “Involuntary Termination” within four years thereafter, all restrictions on shares of restricted stock granted to the participant shall lapse. In addition, the Compensation Committee has the authority to grant shares of restricted stock with respect to which all restrictions lapse automatically upon a “Change in Control,” whether or not the participant is subsequently terminated. The restricted stock grant agreements pursuant to which shares of restricted stock have been awarded to the NEOs under the 2005 Equity Plan do not provide that the restrictions on shares of restricted stock lapse automatically upon a “Change in Control.”

Under the 2005 Equity Plan, “Cause” means the occurrence of one or more of the following events:

(i) conviction of a felony or any crime or offense lesser than a felony involving our property;

(ii) conduct that has caused demonstrable and serious injury to us, monetary or otherwise;

(iii) willful refusal to perform or substantial disregard of duties properly assigned, as determined by us; or

(iv) breach of duty of loyalty to us or other act of fraud or dishonesty with respect to us.

“Change in Control” for purposes of the 2005 Equity Plan means the occurrence of one of the following events:

(i) if any “person” or “group” as those terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), other than affiliates of Summit Partners and certain other exempt persons, acquires 50% or more of our voting securities;

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(ii) during any period of two consecutive years, a majority of our Directors are replaced (other than any new Directors whose election or nomination was approved by at least two-thirds of the Directors then still in office who either were Directors at the beginning of the two-year period or whose election was previously so approved);

(iii) consummation of a merger or consolidation of SeaBright with any other corporation, other than a merger or consolidation (a) which would result in our voting securities outstanding immediately prior to the merger or consolidation continuing to represent more than 50% of the combined voting power of the surviving entity or (b) by which our corporate existence is not affected and following which our Chief Executive Officer and Directors retain their positions with us (and constitute at least a majority of the Board); or

(iv) consummation of a plan of complete liquidation of SeaBright or a sale or disposition of all or substantially all of our assets, other than a sale to affiliates of Summit Partners and certain other exempt persons.

“Involuntary Termination” means (i) the participant’s involuntary dismissal or discharge by us or one of our subsidiaries or a successor for reasons other than Cause or (ii) such individual’s voluntary resignation following (A) a change in his or her position with SeaBright which materially reduces his or her level of responsibility, (B) a reduction in his or her level of compensation (base salary or any target incentive compensation) by more than ten percent or (C) a relocation of such individual’s place of employment by more than fifty (50) miles, provided and only if such change, reduction or relocation is effected by us or one of our subsidiaries or a successor without the participant’s written consent.

For additional information on our 2005 Equity Plan, see the discussion entitled “— 2005 Long-Term Equity Incentive Plan” on page 21 of this Proxy Statement.

Stock Options Under the 2003 Stock Option Plan

Under the 2003 Stock Option Plan, if a participant is terminated other than for “Cause,” the participant’s vested and exercisable options remain so for 30 days after the date of termination. If a participant retires, the participant’s vested and exercisable options remain so for 45 days after the date of retirement. Upon death or disability of a participant, the participant’s vested and exercisable options remain so for 90 days after the date of death or disability. All options that are not vested and exercisable on the date of termination of the participant’s employment will be forfeited as of the date of termination. In the event of a “Sale of the Company” and a participant is terminated from service through an “Involuntary Termination” within four years thereafter, all of the participant’s options will become fully vested and exercisable and remain so for up to one year after the date of termination. In addition, the Compensation Committee or the Board may provide, in its discretion, that the options shall become immediately exercisable by any participants who are employed by us at the time of the “Sale of the Company”and/or that all options shall terminate if not exercised as of the date of the “Sale of the Company.”

Under the 2003 Stock Option Plan, “Cause” means if a participant:

(i) acts in bad faith and to the detriment of SeaBright;

(ii) refuses or fails to act in accordance with any specific direction or order of SeaBright or the Board;

(iii) exhibits in regard to his employment unfitness or unavailability for service, unsatisfactory performance, misconduct, dishonesty, habitual neglect, or incompetence;

(iv) is convicted of a crime involving dishonesty, breach of trust, or physical or emotional harm to any person (or enters a plea of guilty or nolo contendere with respect thereto); or

(v) breaches any material term of the 2003 Stock Option Plan or breaches any other agreement (including, without limitation, any employment agreement) between or among the participant and us.

“Cause” can also have any other meaning that may be set forth in a participant’s option award agreement.

“Sale of the Company” under the 2003 Stock Option Plan means the sale of SeaBright pursuant to which any party or parties (other than Summit Partners, L.P.and/or any of its affiliated investment funds) acquire (i) our capital

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stock possessing the voting power under normal circumstances to elect a majority of our Board of Directors (whether by merger, consolidation or sale or transfer of our capital stock) or (ii) all or substantially all of our assets determined on a consolidated basis.

“Involuntary Termination” has the same meaning under the 2003 Stock Option Plan as under the 2005 Stock Option Plan. Please see “— Stock Options and Restricted Stock Awards Under the 2005 Stock Option Plan.”

For additional information on our 2003 Stock Option Plan, see the discussion entitled “— 2003 Stock Option Plan” on page 21 of this Proxy Statement.

Equity Compensation Plan Information

The following table shows the total number of outstanding options and shares available for future issuances under our equity compensation plans as of December 31, 2006.

						Number of Securities
	Number of					Remaining Available
	Securities to be					for Future Issuance
	Issued Upon			Weighted-Average		Under Equity
	Exercise of			Exercise Price of		Compensation Plan
	Outstanding			Outstanding		(Excluding Securities
	Options, Warrants			Options, Warrants		Reflected in Column
Plan Category	and Rights			and Rights		(a))
	(a)			(b)		(c)
Equity compensation plans approved by stockholders		918,154	(1)	$	9.39		1,115,983	(2)
Equity compensation plans not approved by stockholders		—			—		—
Total		918,154			9.39		1,115,983

(1)	Includes options granted under our 2003 Stock Option Plan and options granted under our 2005 Equity Plan. Does not include 452,875 shares of restricted stock granted between March 2005 and March 2007 pursuant to our 2005 Equity Plan.
(2)	Includes only options eligible for grant under the 2005 Equity Plan. In January 2006, the Compensation Committee terminated the ability to grant future stock option awards under the 2003 Stock Option Plan.

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DIRECTOR COMPENSATION

Summary of Director Compensation

On March 28, 2007, the Board approved a new compensation program for non-employee directors. The new compensation program was structured based on a number of factors, including an analysis by an independent compensation consultant retained by the Compensation Committee. The consultant’s analysis included a comparison of our director compensation practices to those of our peers. Under the director compensation program, new non-employee directors elected to the Board will receive an initial restricted stock grant in the amount of $75,000, which will be subject to three-year cliff vesting. In the event of a change in control of us or upon the death, disability or retirement of the participant, all restrictions relating to all outstanding restricted stock grants will lapse. Following this initial grant, no additional equity incentive compensation will be granted to such new directors until the next annual meeting of stockholders.

In addition, non-employee directors receive an annual retainer of $20,000 and an additional $2,500 for each in-person Board meeting attended and $1,000 for each telephonic Board meeting. Certain members of committees of the Board also receive annual retainers. Audit Committee members receive an additional annual retainer of $4,000, except the chair of the Audit Committee who receives an additional annual retainer of $12,000. The chairs of the Compensation Committee, the Nominating and Corporate Governance Committee and the Finance Committee, a committee of the board of directors of our wholly-owned subsidiary, SeaBright Insurance Company, each receive an additional annual retainer of $5,000.

Our directors are also eligible to receive stock options and other equity-based awards when, as and if determined by the Compensation Committee pursuant to the terms of the 2005 Equity Plan. Under our director compensation program, non-employee directors will receive annual equity incentive grants on the date of each annual meeting of stockholders, unless the Compensation Committee determines otherwise. These equity incentive grants will consist of restricted stock grants valued at $60,000 and stock options valued at $20,000. The restricted stock grants will be subject to three-year cliff vesting, and the stock option grants will vest over a four-year period with one-fourth of the options vesting on the first anniversary of the grant date and the remaining three-fourths vesting equally on a monthly basis over the following 36 months. The stock options have an exercise price equal to the closing price of our common stock on the date of grant, as reported on the Nasdaq Global Select Market. In the event of a change in control of us or upon the death or disability of the participant, all restrictions relating to all outstanding restricted stock grants will lapse and all stock option grants will become fully vested and exercisable. Our Compensation Committee may, in its discretion, determine to exclude one or more non-employee directors from receiving these equity grants in any given year.

Our director compensation program also includes an ownership guideline providing that non-employee directors will own shares and options with a value equal to five times the annual retainer for serving as a member of the Board of Directors, excluding retainers for serving on a committee of the Board, after five years of service as a director. The value for this purpose is based on the greater of the price of the shares (if the shares are in the form of restricted stock) or the fair market value.

We also reimburse all directors for reasonableout-of-pocket expenses they incur in connection with their service as directors. Directors who are also our employees receive no compensation for serving as directors.

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Director Compensation

The following table summarizes compensation paid to or earned by members of our Board of Directors in 2006:

	Fees Earned
	or Paid		Stock		Option
	in Cash		Awards		Awards		Total
Name	($)		($)(1)		($)(2)		($)
J. Scott Carter(3)	$	30,000	$	—	$	—	$	30,000
Peter Y. Chung		36,000		—		—		36,000
Joseph A. Edwards(4)		—		2,736		—		2,736
William M. Feldman(5)		51,000		13,857		14,465		79,322
Mural R. Josephson		47,750		13,857		10,620		72,227
George M. Morvis		44,250		13,857		10,620		68,727

(1)

Includes compensation cost recognized in 2006 related to shares of restricted stock granted to our directors under our 2005 Equity Plan. These amounts are calculated in accordance with SFAS 123R, except that no estimate of forfeitures is made. No shares of restricted stock were forfeited by our directors during 2006. See Note 20 to the Consolidated Financial Statements included in our Annual Report onForm 10-K for the year ended December 31, 2006, filed with the SEC on March 16, 2007, for a discussion of the relevant assumptions used in calculating compensation cost recognized pursuant to SFAS 123R.

The following table reflects the aggregate grant date fair value, calculated in accordance with SFAS 123R except that no estimate of forfeitures is made, of restricted stock granted to our directors and the number of shares outstanding at December 31, 2006:

							# of Shares
					Aggregate		Outstanding at
			# of Shares		Grant Date		December 31,
Name	Grant Date		Granted		Fair Value		2006
Joseph A. Edwards		11/14/06		4,000	$	62,920		4,000
William M. Feldman		3/24/05		2,000		22,800		2,000
		5/25/06		2,000		31,200		2,000
Mural R. Josephson		3/24/05		2,000		22,800		2,000
		5/25/06		2,000		31,200		2,000
George M. Morvis		3/24/05		2,000		22,800		2,000
		5/25/06		2,000		31,200		2,000

(2) Includes compensation cost recognized in 2006 related to incentive stock options granted to our directors. These amounts are calculated in accordance with SFAS 123R, except that no estimate of forfeitures is made. No stock options were forfeited by our directors during 2006. See Note 20 to the Consolidated Financial Statements included in our Annual Report onForm 10-K for the year ended December 31, 2006, filed with the SEC on March 16, 2007, for a discussion of the relevant assumptions used in calculating compensation cost recognized pursuant to SFAS 123R.

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The following table reflects the aggregate grant date fair value, calculated in accordance with SFAS 123R except that no estimate of forfeitures is made, of incentive stock options granted to our directors and the number of options outstanding at December 31, 2006:

									# of Options
					Option		Aggregate		Outstanding at
			# of Options		Exercise		Grant Date		December 31,
Name	Grant Date		Granted		Price		Fair Value		2006
William M. Feldman		1/20/05		7,650	$	10.50	$	23,562		7,650
		3/24/05		4,000		12.54		11,960		4,000
		5/25/06		4,000		17.16		20,640		4,000
Mural R. Josephson		2/28/04		7,650		6.54		8,186		7,650
		3/24/05		4,000		12.54		11,960		4,000
		5/25/06		4,000		17.16		20,640		4,000
George M. Morvis		2/28/04		7,650		6.54		8,186		7,650
		3/24/05		4,000		12.54		11,960		4,000
		5/25/06		4,000		17.16		20,640		4,000

(3)	Mr. Carter resigned his position on our Board of Directors effective October 1, 2006.
(4)	Mr. Edwards was elected to our Board of Directors on November 14, 2006.
(5)	Mr. Feldman’s fees earned include compensation for his services as Chairman of the Finance Committee of our wholly-owned subsidiary, SeaBright Insurance Company.

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BENEFICIAL OWNERSHIP TABLE

The following table provides information concerning beneficial ownership of our common stock as of March 31, 2007, by:

•  each of our directors and nominees;

•  each of our named executive officers as of March 31, 2007;

•  each person known by us to beneficially own 5% or more of our outstanding common stock; and

•  all of our directors and executive officers as a group.

The following table lists the number of shares and percentage of shares beneficially owned based on 20,776,704 shares of common stock outstanding as of March 31, 2007 and a total of 460,353 common stock options currently exercisable or exercisable by our directors and executive officers as a group within 60 days of March 31, 2007. The figures in the table assume the exercise of all stock options currently exercisable or exercisable within 60 days of March 31, 2007.

Beneficial ownership is determined in accordance with the rules of the SEC, and generally includes voting powerand/or investment power with respect to the securities held. Shares of common stock subject to options currently exercisable or exercisable within 60 days of March 31, 2007 are deemed outstanding and beneficially owned by the person holding such options for purposes of computing the number of shares and percentage beneficially owned by such person, but are not deemed outstanding for purposes of computing the percentage beneficially owned by any other person. Except as indicated in the footnotes to this table, and subject to applicable community property laws, the persons or entities named have sole voting and investment power with respect to all shares of our common stock shown as beneficially owned by them.

	Shares of Common Stock
	Beneficially Owned
Name of Beneficial Owner	Number		Percentage
5% or more beneficial owners:
Eubel Brady & Suttman Asset Management, Inc.(1)		1,675,179		8.1	%
Wells Fargo & Company(2)		1,607,553		7.7	%
Skyline Asset Management, LP(3)		1,100,481		5.3	%
Directors and named executive officers:
John G. Pasqualetto(4)		338,683		1.6	%
Joseph S. De Vita(5)		176,557		*
Richard J. Gergasko(6)		175,169		*
Richard W. Seelinger(7)		83,066		*
Peter Y. Chung(8)		46,980		*
D. Drue Wax(9)		29,856		*
Mural R. Josephson(10)		16,960		*
George M. Morvis(11)		15,960		*
William M. Feldman(12)		15,047		*
Joseph A. Edwards(13)		4,000		*
All directors and executive officers as a group (13 persons)		1,070,219		5.0	%

*

Less than 1%.

(1)

Based on a Schedule 13G/A filed on February 14, 2007 by Eubel Brady & Suttman Asset Management, Inc. (“EBS”), Ronald L. Eubel, Mark E. Brady, Robert J. Suttman, William E. Hazel and Bernard J. Holtgreive. Messrs. Eubel, Brady, Suttman, Hazel and HoltGreive may, as a result of their ownership in and positions with EBS, be deemed to be indirect beneficial owners of the equity securities held by EBS. In addition to the shares indicated, Mr. Eubel has sole voting and dispositive authority over 810 shares of common stock. The address of EBS is 7777 Washington Village Drive, Suite 210, Dayton, OH 45459.

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(2)	Based on a Schedule 13G filed on January 29, 2007 by Wells Fargo & Company and its subsidiary Wells Capital Management Incorporated, which is classified as a registered investment advisor in accordance withRule 240.13d-1(b)(1)(ii)(E). The number of shares of common stock reported as beneficially owned by Wells Fargo & Company is 1,607,553 shares, and the number of shares of common stock reported as beneficially owned by Wells Capital Management Incorporated is 1,502,700 shares. The address of Wells Fargo & Company is 420 Montgomery Street, San Francisco, CA 94104.
(3)	Based on a Schedule 13G filed on February 8, 2007 by Skyline Asset Management, LP, which is classified as an investment advisor in accordance withRule 240.13d-1(b)(1)(ii)(E). The address of Skyline Asset Management, LP is 311 South Wacker Drive, Chicago, IL 60606.
(4)	Includes 75,000 shares of restricted stock that vest in March 2009, 60,000 shares of restricted stock that vest in March 2010, and options to purchase 160,969 shares of common stock exercisable within 60 days of March 31, 2007.
(5)	Includes 37,500 shares of restricted stock that vest in March 2009, 27,000 shares of restricted stock that vest in March 2010, and options to purchase 75,488 shares of common stock exercisable within 60 days of March 31, 2007.
(6)	Includes 37,500 shares of restricted stock that vest in March 2009, 30,000 shares of restricted stock that vest in March 2010, and options to purchase 84,310 shares of common stock exercisable within 60 days of March 31, 2007.
(7)	Includes 12,000 shares of restricted stock that vest in March 2009, 18,000 shares of restricted stock that vest in March 2010, and options to purchase 41,592 shares of common stock exercisable within 60 days of March 31, 2007.
(8)	Of the shares indicated, 14,686 are held directly by Mr. Chung. The remaining 32,294 shares represent (a) 8,580 shares of common stock held by Summit Ventures V, L.P.; (b) 1,435 shares of common stock held by Summit V Companion Fund, L.P.; (c) 574 shares of common stock held by Summit V Advisors Fund (QP), L.P.; (d) 175 shares of common stock held by Summit V Advisors Fund, L.P.; (e) 14,562 shares of common stock held by Summit Ventures VI-A, L.P.; (f) 6,073 shares of common stock held by Summit Ventures VI-B, L.P.; (g) 303 shares of common stock held by Summit VI Advisors Fund, L.P.; (h) 465 shares of common stock held by Summit VI Entrepreneurs Fund, L.P.; and (i) 127 shares of common stock held by Summit Investors VI, L.P. (such entities collectively referred to as “Summit Partners”). Mr. Chung is a member of Summit Partners, LLC which is the general partner of Summit Partners V, L.P., which is the general partner of each of Summit Ventures V, L.P., Summit V Companion Fund, L.P., Summit V Advisors Fund (QP), L.P. and Summit V Advisors Fund, L.P. Summit Partners, LLC, through a five-person investment committee composed of certain of its members, has voting and dispositive authority over the shares held by each of these entities and therefore beneficially owns such shares. Decisions of the investment committee are made by a majority vote of its members and, as a result, no single member of the investment committee has voting or dispositive authority over the shares. Mr. Chung is also a member of Summit Partners VI (GP), LLC, which is the general partner of Summit Partners VI (GP), L.P., which is the general partner of each of Summit Ventures VI-A, L.P., Summit Ventures VI-B, L.P., Summit VI Advisors Fund, L.P., Summit VI Entrepreneurs Fund, L.P. and Summit Investors VI, L.P. Summit Partners VI (GP), LLC, through a three-person investment committee composed of certain of its members, has voting and dispositive authority over the shares held by each of these entities and therefore beneficially owns such shares. Decisions of the investment committee are made by a majority vote of its members and, as a result, no single member of the investment committee has voting or dispositive authority over the shares. Based on the description above, Mr. Chung does not have voting or dispositive authority over the shares held by Summit Partners and disclaims beneficial ownership of these shares. The address for each of the Summit Partners entities is 222 Berkeley Street, 18th Floor, Boston, MA 02116.
(9)	Includes 11,250 shares of restricted stock that vest in March 2009, 12,000 shares of restricted stock that vest in March 2010, and options to purchase 4,756 shares of common stock exercisable within 60 days of March 31, 2007.
(10)	Includes 2,000 shares of restricted stock that vest in March 2008, 2,000 shares of restricted stock that vest in May 2009, and options to purchase 9,960 shares of common stock exercisable within 60 days of March 31, 2007.
(11)	Includes 2,000 shares of restricted stock that vest in March 2008, 2,000 shares of restricted stock that vest in May 2009, and options to purchase 9,960 shares of common stock exercisable within 60 days of March 31, 2007.

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(12)	Consists of 2,000 shares of restricted stock that vest in March 2008, 2,000 shares of restricted stock that vest in May 2009, options to purchase 8,047 shares of common stock exercisable within 60 days of March 31, 2007, and 3,000 shares of stock held indirectly by Mr. Feldman as custodian for his minor children under theUTMA/IL.
(13)	Consists of 4,000 shares of restricted stock that vest in November 2009.

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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Exchange Act, requires our directors, executive officers and holders of more than 10% of SeaBright common stock to file reports with the SEC regarding their ownership and changes in ownership of our securities. Based solely on representations and information provided to us by the persons required to make such filings, we believe that, during fiscal year 2006, our directors, executive officers and 10% stockholders complied with all Section 16(a) filing requirements, except for the following:

•  A delinquent Form 4 was filed on behalf of Joseph A. Edwards on November 20, 2006 related to the award of 4,000 shares of restricted common stock on November 14, 2006.

•  A delinquent Form 5 was filed on behalf of M. Philip Romney on February 13, 2007 related to: (i) the purchase of (a) a total of 600 shares of common stock in two separate transactions on February 28, 2006, (b) 400 shares of common stock on March 1, 2006, (c) 450 shares of common stock on March 15, 2006, (d) 300 shares of common stock on May 3, 2006 and (e) a total of 250 shares of common stock in three separate transactions on May 5, 2006; (ii) the award of 5,625 shares of restricted common stock on March 17, 2006; and (iii) the grant of (a) stock options to purchase 7,650 shares of common stock on January 26, 2005 and (b) stock options to purchase 1,875 shares of common stock on March 17, 2006.

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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Under the Nasdaq marketplace rules, we are required to conduct an appropriate review of all related party transactions for potential conflict of interest situations on an ongoing basis, and all such transactions must be approved by our audit committee or another independent body of the board of directors. Our conflict of interest and code of conduct policy provides that no director or executive officer will knowingly place themselves in a position that would have the appearance of being, or could be construed to be, in conflict with our interests.

Although we have not historically had formal policies and procedures regarding the review and approval of related party transactions, all transactions between us and any of our officers, directors and principal stockholders were approved by our board of directors. We have not entered into any related party transactions with our officers, directors or principal stockholders since January 1, 2006, but we have entered into the following contractual arrangement with our former principal stockholders:

Registration Agreement

We were formed in 2003 by members of our current management and entities affiliated with Summit Partners for the purpose of completing a management-led buy out that closed on September 30, 2003, which we refer to as the “Acquisition.” In connection with the Acquisition on September 30, 2003, we entered into a registration agreement with the Summit Partners investors and a minority investor. Under the registration agreement, the holders of a majority of Registrable Securities (as defined in the registration agreement) have the right to require us to register any or all of their common stock in SeaBright (including any common stock issued or issuable upon conversion of shares of SeaBright’s convertible preferred stock) under the Securities Act at our expense. In addition, all holders of Registrable Securities are entitled to request the inclusion of any of their common stock in any registration statement at our expense whenever we propose to register shares of our common stock under the Securities Act. In connection with these registrations, we have agreed to indemnify all holders of Registrable Securities against certain liabilities, including liabilities under the Securities Act.

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AUDIT COMMITTEE DISCLOSURE

Principal Accounting Fees and Services

The Audit Committee appointed KPMG LLP as SeaBright’s independent auditor for the fiscal year ending December 31, 2006. In connection with that appointment, we entered into an agreement with KPMG LLP that sets forth the terms by which KPMG LLP will perform audit services for us. That agreement provides that the alternative dispute-resolution procedures outlined in the agreement must be followed as the sole means of resolving any difference between the parties and prohibits the award of punitive damages. Stockholders are being asked to ratify the appointment of KPMG LLP at the annual meeting pursuant to Proposal No. 2.

The following table shows the fees paid or accrued by SeaBright for audit and other services provided by KPMG LLP for fiscal years 2006 and 2005.

	2006		2005
Audit Fees(1)	$	795,100	$	482,142	(4)
Audit-Related Fees		—		—
Tax Fees(2)		18,720		15,326
All Other Fees(3)		—		1,500
Other	$	813,820	$	498,968

(1)	Audit fees represent fees for professional services provided in connection with the audit of our financial statements and review of our quarterly financial statements, including services related thereto such as comfort letters, consents and assistance with and review of documents filed with the U.S. Securities and Exchange Commission.
(2)	Tax fees represent fees billed for professional services provided in connection with tax compliance, tax advice and tax planning.
(3)	All other fees represent license fees paid to KPMG for use of KPMG’s proprietary accounting research database.
(4)	Includes fees billed for work performed in connection with a follow-on offering of our common stock, which was completed in February 2006.

The Audit Committee has adopted a policy of pre-approval of audit and permitted non-audit services by our independent auditor. The Chairman of the Audit Committee has been delegated authority to pre-approve such services on behalf of the Audit Committee, provided that such pre-approved services are reported to the full Audit Committee at its next scheduled meeting.

During 2006, all services performed by SeaBright’s independent auditor were pre-approved by the Audit Committee in accordance with this policy.

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Report of the Audit Committee

The members of the Audit Committee are independent under Nasdaq listing standards and SEC rules. The Board of Directors adopted a written Audit Committee charter, which is available in the Investor Relations section of our website at www.sbic.com.

The Audit Committee oversees our financial reporting process on behalf of the Board of Directors. Management, however, has the primary responsibility to establish and maintain a system of internal control over financial reporting, to plan and conduct audits and to prepare consolidated financial statements in accordance with U.S. generally accepted accounting principles. KPMG LLP, our independent auditor, is responsible for performing an independent audit of the Company’s consolidated financial statements in conformity with the auditing standards of the Public Company Accounting Oversight Board (United States) and issuing a report thereon. The Audit Committee is responsible for monitoring and reviewing these procedures. It is not the Audit Committee’s duty or responsibility to conduct auditing or accounting reviews or procedures. The members of the Audit Committee are not employees of SeaBright Insurance Holdings, Inc. and are not necessarily accountants or auditors by profession or experts in the fields of accounting or auditing. Therefore, the Audit Committee has relied, without independent verification, on management’s representation that the Company’s consolidated financial statements have been prepared with integrity and objectivity and in conformity with U.S. generally accepted accounting principles and on the representations of KPMG LLP included in its report on the Company’s consolidated financial statements.

In fulfilling its oversight responsibilities, the Audit Committee met and held discussions, together and separately, with management and KPMG LLP. Management represented to the Audit Committee that the Company’s audited financial statements for the fiscal year ended December 31, 2006 were prepared in accordance with U.S. generally accepted accounting principles. The Audit Committee reviewed and discussed with management and KPMG LLP the audited financial statements for the 2006 fiscal year.

The Audit Committee also discussed with KPMG LLP the matters required to be discussed by Statement on Auditing Standards No. 61,Communications with Audit Committees,including a discussion of the quality, not just the acceptability, of the accounting principles, the reasonableness of significant judgments and the clarity of disclosures in the financial statements. In addition, the Audit Committee has received from KPMG LLP the written disclosures and the letter required by Independence Standards Board Standard No. 1,Independence Discussions with Audit Committees,and discussed with them their independence relating to SeaBright Insurance Holdings, Inc. In accordance with provisions of the Sarbanes-Oxley Act of 2002, the Audit Committee pre-approved all audit and non-audit services performed by KPMG LLP.

Based on the Audit Committee’s review and discussions of the matters referred to above, the Audit Committee recommended to the Board of Directors (and the Board of Directors has approved) that the audited financial statements be included in the Company’s Annual Report onForm 10-K for the fiscal year ended December 31, 2006 for filing with the Securities and Exchange Commission. The Audit Committee has also selected and appointed KPMG LLP as the Company’s independent auditor for the fiscal year ending December 31, 2007, subject to stockholder ratification.

The Audit Committee

Mural R. Josephson, Chairman

William M. Feldman

George M. Morvis

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OTHER MATTERS

Stockholder Proposals and Director Nominations

If you intend to present a proposal at next year’s annual meeting, or if you want to nominate one or more directors, you must give timely notice thereof in writing to the Secretary at the address below. The Secretary must receive this notice no earlier than January 16, 2008 and no later than February 15, 2008.

Notice of a proposal must include, as to each matter, (i) a brief description of the business desired to be brought before the annual meeting, (ii) your name and address, as they appear on SeaBright’s books, (iii) the class and number of shares of SeaBright capital stock which you beneficially own, (iv) any material interest you may have in such business.

Notice of a nomination must include:

(i) as to each person whom you propose to nominate for election as a director (A) the name, age, business address and residence address of the person, (B) the principal occupation or employment of the person, (C) the class or series and number of shares of capital stock of SeaBright which are owned beneficially or of record by the person and (D) any other information relating to the person that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the “Exchange Act”); and

(ii) (A) your name and address, as they appear on SeaBright’s books, (B) the class or series and number of shares of capital stock of SeaBright which you own beneficially or of record, (C) a description of all arrangements or understandings between you and each proposed nominee and any other person or persons pursuant to which your nominations are to be made, (D) a representation that you intend to appear in person or by proxy at the meeting to nominate the persons named in your notice and (E) any other information relating to you that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations or proxies for election of directors pursuant to Regulation 14A under the Exchange Act.

Such notice must be accompanied by a written consent of each proposed nominee to being named as a nominee and to serve as a director if elected.

You may contact our Secretary at our principal executive offices for a copy of the relevant By-Law provisions regarding the requirements for making stockholder proposals and nominating director candidates. Our By-Laws are also available on our website at http://investor.sbic.com/governance/bylaws.cfm.

Proponents must submit notices of proposals and nominations in writing to the following address:

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

The Secretary will forward the notices of proposals and nominations to the Nominating and Corporate Governance Committee for consideration.

Cost of Solicitation

SeaBright pays the cost of the annual meeting and the cost of soliciting proxies. In addition to soliciting proxies by mail, we have made arrangements with banks, brokers and other holders of record to send proxy materials to you, and we will reimburse them for their expenses in doing so.

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6 PLEASE FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.6

2007 Proxy — SEABRIGHT INSURANCE HOLDINGS, INC.

2101 4th Avenue, Suite 1600, Seattle, WA 98121

SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

Proxy for Annual Meeting of Stockholders, Tuesday, May 15, 2007

The undersigned hereby appoints John G. Pasqualetto, Joseph S. De Vita and D. Drue Wax, and each or any of them, proxies of the undersigned with full power of substitution to represent the undersigned and to vote all of the shares of the Common Stock of SeaBright Insurance Holdings, Inc. which the undersigned is entitled to vote at the Annual Meeting of Stockholders of SeaBright Insurance Holdings, Inc. to be held at 9:00 A.M., Pacific time on Tuesday, May 15, 2007 at the Seattle Marriott Waterfront Hotel located at 2100 Alaskan Way, Seattle, WA 98121 and at any and all adjournments thereof, upon the matters set forth on the reverse side and described in the accompanying Proxy Statement and upon such other business as may properly come before the meeting or any adjournment thereof.

A majority of said proxies or substitutes who shall be present at the meeting may exercise all powers hereunder. All proxies will be voted as specified. If no specification is made, the proxy will be voted FOR Proposals 1 and 2.

(Continued and to be voted, signed and dated on reverse side.)

			000004	000000000.000000 ext         000000000.000000 ext
				000000000.000000 ext         000000000.000000 ext
				000000000.000000 ext         000000000.000000 ext
	MR A SAMPLE DESIGNATION (IF ANY) ADD 1 ADD 2 ADD 3 ADD 4 ADD 5 ADD 6
Using ablack ink pen, mark your votes with anXas shown in this example. Please do not write outside the designated areas.		x

    2007 Annual Meeting Proxy Card

6PLEASE FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.6

A	Proposals — The Board of Directors recommends a vote FOR Proposal 1 and FOR Proposal 2.
1. Election of Directors.		For	Withhold		For	Withhold		For	Withhold	+
	01 - John G. Pasqualetto	o	o	02 - Peter Y. Chung	o	o	03 - Joseph A. Edwards	o	o
	04 - William M. Feldman	o	o	05 - Mural R. Josephson	o	o	06 - George M. Morvis	o	o

		For	Against	Abstain
2.	Ratification of the Audit Committee’s appointment of KPMG LLP as independent auditor for the year ending December 31, 2007.	o	o	o
If other matters are properly presented, the persons named as proxies will vote in accordance with their judgement with respect to those matters.

B    Non-Voting Items
Change of Address — Please print new address below.	Meeting Attendance
	Mark box to the right if you plan to attend the Annual Meeting.	o

C    Authorized Signatures — This section must be completed for your vote to be counted. — Date and Sign Below
Please sign exactly as your name(or names) appear hereon. Joint owners should each sign personally. If signing in a fiduciary or representative capacity,give full title as such.
Date (mm/dd/yyyy) — Please print date below.		Signature 1 — Please keep signature within the box.	Signature 2 — Please keep signature within the box.
/	/

n C 1234567890

6 1 C V J N T

0 1 3 4 1 2 1 MR A SAMPLE (THIS AREA IS SET UP TO ACCOMMODATE
140 CHARACTERS) MR A SAMPLE AND MR A SAMPLE AND
MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND
MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND +

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