PARENT GUARANTEE AGREEMENT

by and between

AMERICAN SAFETY INSURANCE HOLDINGS, LTD.

and

WILMINGTON TRUST COMPANY

Dated as of November 17, 2005

 

 

 

PARENT GUARANTEE AGREEMENT

This PARENT GUARANTEE AGREEMENT (this "Guarantee"), dated as of November 17,
2005, is executed and delivered by American Safety Insurance Holdings, Ltd., a
Bermuda corporation (the "Guarantor"), and Wilmington Trust Company, a banking
corporation, organized under the laws of the State of Delaware, (the "Guarantee
Trustee"), for the benefit of the Holders (as defined herein) from time to time
of the Debentures (as defined herein) of American Safety Holdings Corp., a
Georgia corporation and a wholly owned subsidiary of the Guarantor (the
"Company"), and the Capital Securities (as defined herein) of American Safety
Capital Trust III, a Delaware statutory trust (the "Issuer").

WHEREAS, pursuant to an Amended and Restated Declaration of Trust (the
"Declaration"), dated as of the date hereof among Wilmington Trust Company, not
in its individual capacity but solely as institutional trustee and Delaware
Trustee, the administrators of the Issuer named therein, the Company, as sponsor
of the Issuer, and the holders from time to time of undivided beneficial
interests in the assets of the Issuer, the Issuer is issuing on the date hereof
those undivided beneficial interests, having an aggregate liquidation amount of
$25,000,000 (the "Capital Securities");

WHEREAS, pursuant to a guarantee (the "Company Guarantee") dated the date hereof
executed and delivered by the Company and the guarantee trustee named therein
for the benefit of the holders from time to time of the Capital Securities, the
Company has agreed to make certain payments with respect to the Capital
Securities and to make certain other payments with respect to obligations and
liabilities of the Issuer;

WHEREAS, pursuant to an indenture of trust (the "Indenture") dated as of the
date hereof between the Company and Wilmington Trust Company, not in its
individual capacity but solely as trustee, the Company is issuing on the date
hereof $25,774,000 aggregate principal amount of Floating Rate Junior
Subordinated Deferrable Interest Debentures (the "Debentures");

WHEREAS, the Issuer desires to issue the Capital Securities and to use the
proceeds thereof to purchase the Debentures; and

WHEREAS, as incentive for the Holders of the Debentures to purchase the
Debentures from the Company and for the Holders of the Capital Securities to
purchase the Capital Securities from the Issuer, the Guarantor desires
irrevocably and unconditionally to agree, to the extent set forth in this
Guarantee, to pay to the Holders of Capital Securities the Guarantee Payments
(as defined herein).

NOW, THEREFORE, in consideration of the purchase of the Debentures by each
Debenture Holder and of the Capital Securities by each Holder of Capital
Securities, which purchase the Guarantor hereby agrees shall benefit the
Guarantor, the Guarantor executes and delivers this Guarantee for the benefit of
the Holders.

 

 

ARTICLE I

 

DEFINITIONS AND INTERPRETATION

Section 1.1

Definitions and Interpretation.

In this Guarantee, unless the context otherwise requires:

(a)               capitalized terms used in this Guarantee but not defined in
the preamble above have the respective meanings assigned to them in this Section
1.1;

(b)

a term defined anywhere in this Guarantee has the same meaning throughout;

(c)               all references to "the Guarantee" or "this Guarantee" are to
this Guarantee as modified, supplemented or amended from time to time;

(d)               all references in this Guarantee to "Articles" or "Sections"
are to Articles or Sections of this Guarantee, unless otherwise specified;

(e)               terms defined in the Declaration as at the date of execution
of this Guarantee have the same meanings when used in this Guarantee, unless
otherwise defined in this Guarantee or unless the context otherwise requires;
and

(f)

a reference to the singular includes the plural and vice versa.

"Additional Amount" has the meaning set forth in Section 4.1(b).

"Additional Junior Indebtedness" means, without duplication and other than the
Guarantee Payments, (a) any indebtedness, liabilities or obligations of the
Guarantor, or any Subsidiary of the Guarantor, under debt securities (or
guarantees in respect of debt securities) initially issued on or after the date
of this Guarantee to any trust, or a trustee of a trust, partnership or other
entity affiliated with the Guarantor that is, directly or indirectly, a finance
subsidiary (as such term is defined in Rule 3a-5 under the Investment Company
Act of 1940) or other financing vehicle of the Guarantor or any Subsidiary of
the Guarantor in connection with the issuance by that entity of preferred
securities, (b) other securities that are issued either junior and subordinate
to or on a pari passu basis with the Guarantee Payments or (c) any guarantees of
the Guarantor in respect of the equity or other securities of any entity
referred to in clause (a).

"Affiliate" has the same meaning as given to that term in Rule 405 of the
Securities Act of 1933, as amended, or any successor rule thereunder.

"Authorized Agent" has the meaning set forth in Section 8.6.

"Beneficiaries" means any Person to whom the Company, under the terms of this
Guarantee, is obligated to pay any sum or hereafter becomes indebted or liable.

"Capital Securities" has the meaning set forth in the recitals to this
Guarantee.

 

 

"Common Securities" means the common securities issued by the Issuer to the
Company pursuant to the Declaration.

"Company" means American Safety Holdings Corp. and each of its successors and
assigns.

"Company Guarantee" means the guarantee dated the date hereof executed and
delivered by the Company and the guarantee trustee named therein for the benefit
of the holders from time to time of the Capital Securities.

"Corporate Trust Office" means the office of the Guarantee Trustee at which the
corporate trust business of the Guarantee Trustee shall, at any particular time,
be principally administered, which office at the date of execution of this
Guarantee is located at Rodney Square North, 1100 North Market Street,
Wilmington, Delaware 19890.

"Covered Person" means any Holder of Debentures or Capital Securities.

"Debentures" means the debt securities of the Company designated the Floating
Rate Junior Subordinated Deferrable Interest Debentures due 2035 held by the
Institutional Trustee (as defined in the Declaration) of the Issuer.

"Declaration Event of Default" means an "Event of Default" as defined in the
Declaration.

"Event of Default" has the meaning set forth in Section 2.4(a).

"Foreign Jurisdiction" has the meaning set forth in Section 4.1(b).

"Foreign Taxes" has the meaning set forth in Section 4.1(b).

"Guarantee Payments" means the following payments or distributions, without
duplication, to the extent not paid or made by the Company: (i) with respect to
the Debentures, any payment that the Company is obligated to make under the
Debentures and/or the Indenture; and (ii) with respect to the Capital
Securities, any payments that the Company is obligated to make with respect to
the Company Guarantee.

"Guarantee Trustee" means Wilmington Trust Company, until a Successor Guarantee
Trustee has been appointed and has accepted such appointment pursuant to the
terms of this Guarantee and thereafter means each such Successor Guarantee
Trustee.

"Guarantor" means American Safety Insurance Holdings, Ltd. and each of its
successors and assigns.

"Holder" means (i) any holder, as registered on the books and records of the
Indenture Trustee, of any Debenture or (ii) any holder, as registered on the
books and records of the Issuer, of any Capital Securities; provided, however,
that, in determining whether the Holders of the requisite percentage of
Debentures and Capital Securities have given any request, notice,

 

consent or waiver hereunder, "Holder" shall not include the Guarantor or any
Affiliate of the Guarantor.

"Indemnified Person" means the Guarantee Trustee, any Affiliate of the Guarantee
Trustee, or any officers, directors, shareholders, members, partners, employees,
representatives, nominees, custodians or agents of the Guarantee Trustee.

"Indenture" means the Indenture dated as of the date hereof between the Company
and Wilmington Trust Company, not in its individual capacity but solely as
trustee, and any indenture supplemental thereto pursuant to which the Debentures
are to be issued to the institutional trustee of the Issuer.

"Indenture Trustee" means Wilmington Trust Company, in its capacity as trustee
under the Indenture, and its permitted successors and assigns.

"Issuer" has the meaning set forth in the opening paragraph to this Guarantee.

"Liquidation Distribution" has the meaning set forth in the definition of
"Guarantee Payments" herein.

"Majority in liquidation amount of the Capital Securities" means Holder(s) of
outstanding Capital Securities, voting together as a class, but separately from
the holders of Common Securities, of more than 50% of the aggregate liquidation
amount (including the stated amount that would be paid on redemption,
liquidation or otherwise, plus accrued and unpaid Distributions to the date upon
which the voting percentages are determined) of all Capital Securities then
outstanding.

"Majority of principal amount of the Debentures" means Holder(s) of outstanding
Debentures, voting together as a class, of more than 50% of the aggregate
principal amount of all Debentures then outstanding.

"Majority of the Holders of Debentures and Capital Securities" means Majority in
liquidation amount of the Capital Securities and Majority of principal amount of
the Debentures.

"New York Court" has the meaning set forth in Section 8.6.

"Officer's Certificate" means, with respect to any Person, a certificate signed
by one Authorized Officer of such Person. Any Officer's Certificate delivered
with respect to compliance with a condition or covenant provided for in this
Guarantee shall include:

(a)               a statement that the officer signing the Officer's Certificate
has read the covenant or condition and the definitions relating thereto;

(b)               a brief statement of the nature and scope of the examination
or investigation undertaken by the officer in rendering the Officer's
Certificate;

 

 

(c)               a statement that the officer has made such examination or
investigation as, in such officer's opinion, is necessary to enable such officer
to express an informed opinion as to whether or not such covenant or condition
has been complied with; and

(d)               a statement as to whether, in the opinion of the officer, such
condition or covenant has been complied with.

"Optional Redemption Price" has the meaning set forth in the Indenture.

"Person" means a legal person, including any individual, corporation, estate,
partnership, joint venture, association, joint stock company, limited liability
company, trust, unincorporated association, or government or any agency or
political subdivision thereof, or any other entity of whatever nature.

"Responsible Officer" means, with respect to the Guarantee Trustee, any officer
within the Corporate Trust Office of the Guarantee Trustee including any Vice
President, Assistant Vice President, Secretary, Assistant Secretary or any other
officer of the Guarantee Trustee customarily performing functions similar to
those performed by any of the above designated officers and also, with respect
to a particular corporate trust matter, any other officer to whom such matter is
referred because of that officer's knowledge of and familiarity with the
particular subject.

"Senior Indebtedness" means, with respect to the Guarantor, (i) the principal,
premium, if any, and interest in respect of (A) indebtedness of the Guarantor
for money borrowed and (B) indebtedness evidenced by securities, debentures,
notes, bonds or other similar instruments issued by the Guarantor; (ii) all
capital lease obligations of the Guarantor; (iii) all obligations of the
Guarantor issued or assumed as the deferred purchase price of property, all
conditional sale obligations of the Guarantor and all obligations of the
Guarantor under any title retention agreement; (iv) all obligations of the
Guarantor for the reimbursement of any letter of credit, any banker's
acceptance, any security purchase facility, any repurchase agreement or similar
arrangement, any interest rate swap, any other hedging arrangement, any
obligation under options or any similar credit or other transaction; (v) all
obligations of the type referred to in clauses (i) through (iv) above of other
Persons for the payment of which the Guarantor is responsible or liable as
obligor, guarantor or otherwise; and (vi) all obligations of the type referred
to in clauses (i) through (v) above of other Persons secured by any lien on any
property or asset of the Guarantor (whether or not such obligation is assumed by
the Guarantor), whether incurred on or prior to the date of this Indenture or
thereafter incurred. Notwithstanding the foregoing, "Senior Indebtedness" shall
not include (1) any Additional Junior Indebtedness, (2) trade accounts payable
of the Guarantor arising in the ordinary course of business (such trade accounts
payable being pari passu in right of payment to the Guarantee Payments), or (3)
obligations with respect to which (a) in the instrument creating or evidencing
the same or pursuant to which the same is outstanding, it is provided that such
obligations are pari passu, junior or otherwise not superior in right of payment
to the Guarantee Payments and (b) the Guarantor, prior to the issuance thereof,
has, if required, notified the relevant state insurance regulatory agency.
Senior Indebtedness shall continue to be Senior Indebtedness and be entitled to
the subordination provisions irrespective of any amendment, modification or
waiver of any term of such Senior Indebtedness.

 

 

"Special Event" has the meaning set forth in the Indenture.

"Special Redemption Price" has the meaning set forth in the Indenture.

"Subsidiary" means with respect to any Person, (i) any corporation at least a
majority of the outstanding voting stock of which is owned, directly or
indirectly, by such Person or by one or more of its Subsidiaries, or by such
Person and one or more of its Subsidiaries, (ii) any general partnership, joint
venture or similar entity, at least a majority of the outstanding partnership or
similar interests of which shall at the time be owned by such Person, or by one
or more of its Subsidiaries, or by such Person and one or more of its
Subsidiaries and (iii) any limited partnership of which such Person or any of
its Subsidiaries is a general partner. For the purposes of this definition,
"voting stock" means shares, interests, participations or other equivalents in
the equity interest (however designated) in such Person having ordinary voting
power for the election of a majority of the directors (or the equivalent) of
such Person, other than shares, interests, participations or other equivalents
having such power only by reason of the occurrence of a contingency.

"Successor Guarantee Trustee" means a successor Guarantee Trustee possessing the
qualifications to act as Guarantee Trustee under Section 3.1.

ARTICLE II

 

POWERS, DUTIES AND RIGHTS OF THE

GUARANTEE TRUSTEE

Section 2.1

Powers and Duties of the Guarantee Trustee.

(a)               This Guarantee shall be held by the Guarantee Trustee for the
benefit of the Holders of the Debentures and the Holders of the Capital
Securities, and the Guarantee Trustee shall not transfer this Guarantee to any
Person except a Holder of Debentures or Capital Securities exercising his or her
rights pursuant to Section 4.4(b) or to a Successor Guarantee Trustee on
acceptance by such Successor Guarantee Trustee of its appointment to act as
Successor Guarantee Trustee. The right, title and interest of the Guarantee
Trustee shall automatically vest in any Successor Guarantee Trustee, and such
vesting and cessation of title shall be effective whether or not conveyancing
documents have been executed and delivered pursuant to the appointment of such
Successor Guarantee Trustee.

(b)               If an Event of Default actually known to a Responsible Officer
of the Guarantee Trustee has occurred and is continuing, the Guarantee Trustee
shall enforce this Guarantee for the benefit of the Holders of the Debentures
and/or the Holders of the Capital Securities.

(c)               The Guarantee Trustee, before the occurrence of any Event of
Default and after the curing or waiving of all Events of Default that may have
occurred, shall undertake to perform only such duties as are specifically set
forth in this Guarantee, and no implied covenants shall be read into this
Guarantee against the Guarantee Trustee. In case an Event of Default has
occurred (that has not been cured or waived pursuant to Section 2.4) and is
actually known to a Responsible Officer of the Guarantee Trustee, the Guarantee
Trustee shall exercise such of the rights and powers vested in it by this
Guarantee, and use the same degree of care and skill in its

 

exercise thereof, as a prudent person would exercise or use under the
circumstances in the conduct of his or her own affairs.

(d)               No provision of this Guarantee shall be construed to relieve
the Guarantee Trustee from liability for its own negligent action, its own
negligent failure to act, or its own willful misconduct, except that:

(i)                prior to the occurrence of any Event of Default and after the
curing or waiving of all such Events of Default that may have occurred:

(A)              the duties and obligations of the Guarantee Trustee shall be
determined solely by the express provisions of this Guarantee, and the Guarantee
Trustee shall not be liable except for the performance of such duties and
obligations as are specifically set forth in this Guarantee, and no implied
covenants or obligations shall be read into this Guarantee against the Guarantee
Trustee; and

(B)              in the absence of bad faith on the part of the Guarantee
Trustee, the Guarantee Trustee may conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed therein, upon any
certificates or opinions furnished to the Guarantee Trustee and conforming to
the requirements of this Guarantee; but in the case of any such certificates or
opinions that by any provision hereof are specifically required to be furnished
to the Guarantee Trustee, the Guarantee Trustee shall be under a duty to examine
the same to determine whether or not they conform to the requirements of this
Guarantee;

(ii)               the Guarantee Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer of the Guarantee Trustee,
unless it shall be proved that such Responsible Officer of the Guarantee Trustee
or the Guarantee Trustee was negligent in ascertaining the pertinent facts upon
which such judgment was made;

(iii)              the Guarantee Trustee shall not be liable with respect to any
action taken or omitted to be taken by it in good faith in accordance with the
written direction of the Holders of not less than a Majority in liquidation
amount of the Capital Securities relating to the time, method and place of
conducting any proceeding for any remedy available to the Guarantee Trustee, or
relating to the exercise of any trust or power conferred upon the Guarantee
Trustee under this Guarantee; and

(iv)              no provision of this Guarantee shall require the Guarantee
Trustee to expend or risk its own funds or otherwise incur personal financial
liability in the performance of any of its duties or in the exercise of any of
its rights or powers, if the Guarantee Trustee shall have reasonable grounds for
believing that the repayment of such funds is not reasonably assured to it under
the terms of this Guarantee or security and indemnity, reasonably satisfactory
to the Guarantee Trustee, against such risk or liability is not reasonably
assured to it.

 

 

Section 2.2

Certain Rights of the Guarantee Trustee.

(a)

Subject to the provisions of Section 2.1:

 

(i)                The Guarantee Trustee may conclusively rely, and shall be
fully protected in acting or refraining from acting upon, any resolution,
certificate, statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture, note, other evidence of indebtedness or other
paper or document believed by it to be genuine and to have been signed, sent or
presented by the proper party or parties.

(ii)               Any direction or act of the Guarantor contemplated by this
Guarantee shall be sufficiently evidenced by an Officer's Certificate.

(iii)              Whenever, in the administration of this Guarantee, the
Guarantee Trustee shall deem it desirable that a matter be proved or established
before taking, suffering or omitting any action hereunder, the Guarantee Trustee
(unless other evidence is herein specifically prescribed) may, in the absence of
bad faith on its part, request and conclusively rely upon an Officer's
Certificate of the Guarantor which, upon receipt of such request, shall be
promptly delivered by the Guarantor.

(iv)              The Guarantee Trustee shall have no duty to see to any
recording, filing or registration of any instrument (or any re-recording,
refiling or re-registration thereof).

(v)               The Guarantee Trustee may consult with counsel of its
selection, and the advice or opinion of such counsel with respect to legal
matters shall be full and complete authorization and protection in respect of
any action taken, suffered or omitted by it hereunder in good faith and in
accordance with such advice or opinion. Such counsel may be counsel to the
Guarantor or any of its Affiliates and may include any of its employees. The
Guarantee Trustee shall have the right at any time to seek instructions
concerning the administration of this Guarantee from any court of competent
jurisdiction.

(vi)              The Guarantee Trustee shall be under no obligation to exercise
any of the rights or powers vested in it by this Guarantee at the request or
direction of any Holder, unless such Holder shall have provided to the Guarantee
Trustee such security and indemnity, reasonably satisfactory to the Guarantee
Trustee, against the costs, expenses (including attorneys' fees and expenses and
the expenses of the Guarantee Trustee's agents, nominees or custodians) and
liabilities that might be incurred by it in complying with such request or
direction, including such reasonable advances as may be requested by the
Guarantee Trustee; provided, however, that nothing contained in this Section
2.2(a)(vi) shall relieve the Guarantee Trustee, upon the occurrence of an Event
of Default, of its obligation to exercise the rights and powers vested in it by
this Guarantee.

(vii)             The Guarantee Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction, consent,
order, bond, debenture, note, other evidence of indebtedness or other paper or
document, but the Guarantee Trustee, in its discretion, may make such further
inquiry or investigation into such facts or matters as it may see fit.

 

 

(viii)            The Guarantee Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through
agents, nominees, custodians or attorneys, and the Guarantee Trustee shall not
be responsible for any misconduct or negligence on the part of any agent or
attorney appointed with due care by it hereunder.

(ix)              Any action taken by the Guarantee Trustee or its agents
hereunder shall bind the Holders of the Debentures and the Holders of the
Capital Securities, and the signature of the Guarantee Trustee or its agents
alone shall be sufficient and effective to perform any such action. No third
party shall be required to inquire as to the authority of the Guarantee Trustee
to so act or as to its compliance with any of the terms and provisions of this
Guarantee, both of which shall be conclusively evidenced by the Guarantee
Trustee's or its agent's taking such action.

(x)               Whenever in the administration of this Guarantee the Guarantee
Trustee shall deem it desirable to receive instructions with respect to
enforcing any remedy or right or taking any other action hereunder, the
Guarantee Trustee (i) may request instructions from a Majority of the Holders of
Debentures and Capital Securities, (ii) may refrain from enforcing such remedy
or right or taking such other action until such instructions are received, and
(iii) shall be protected in conclusively relying on or acting in accordance with
such instructions.

(xi)              The Guarantee Trustee shall not be liable for any action
taken, suffered, or omitted to be taken by it in good faith, without negligence,
and reasonably believed by it to be authorized or within the discretion or
rights or powers conferred upon it by this Guarantee.

(b)               No provision of this Guarantee shall be deemed to impose any
duty or obligation on the Guarantee Trustee to perform any act or acts or
exercise any right, power, duty or obligation conferred or imposed on it, in any
jurisdiction in which it shall be illegal or in which the Guarantee Trustee
shall be unqualified or incompetent in accordance with applicable law to perform
any such act or acts or to exercise any such right, power, duty or obligation.
No permissive power or authority available to the Guarantee Trustee shall be
construed to be a duty.

Section 2.3

Not Responsible for Recitals or Issuance of Guarantee.

The recitals contained in this Guarantee shall be taken as the statements of the
Guarantor, and the Guarantee Trustee does not assume any responsibility for
their correctness. The Guarantee Trustee makes no representation as to the
validity or sufficiency of this Guarantee.

Section 2.4

Events of Default; Waiver.

(a)               An Event of Default under this Guarantee will occur upon the
failure of the Guarantor to perform any of its payment or other obligations
hereunder.

(b)               A Majority of the Holders of Debentures and Capital Securities
may, voting or consenting as a class, on behalf of the Holders of all of the
Debentures and the Capital Securities,

 

waive any past Event of Default and its consequences. Upon such waiver, any such
Event of Default shall cease to exist, and shall be deemed to have been cured,
for every purpose of this Guarantee, but no such waiver shall extend to any
subsequent or other default or Event of Default or impair any right consequent
thereon.

Section 2.5

Events of Default; Notice.

(a)               The Guarantee Trustee shall, within 90 days after the
occurrence of an Event of Default, transmit by mail, first class postage
prepaid, to the Holders of the Debentures and the Capital Securities and the
Guarantor, notices of all Events of Default actually known to a Responsible
Officer of the Guarantee Trustee, unless such defaults have been cured before
the giving of such notice, provided, however, that the Guarantee Trustee shall
be protected in withholding such notice if and so long as a Responsible Officer
of the Guarantee Trustee in good faith determines that the withholding of such
notice is in the interests of the Holders of the Debentures and the Holders of
the Capital Securities.

(b)               The Guarantee Trustee shall not be deemed to have knowledge of
any Event of Default unless the Guarantee Trustee shall have received written
notice from the Guarantor or a Holder of the Capital Securities (except in the
case of a payment default), or a Responsible Officer of the Guarantee Trustee
charged with the administration of this Guarantee shall have obtained actual
knowledge thereof.

ARTICLE III

 

GUARANTEE TRUSTEE

Section 3.1

Guarantee Trustee; Eligibility.

 

(a)

There shall at all times be a Guarantee Trustee which shall:

 

(i)

not be an Affiliate of the Guarantor, and

 

(ii)               be a banking corporation or national association organized
and doing business under the laws of the United States of America or any State
or Territory thereof or of the District of Columbia, or Person authorized under
such laws to exercise corporate trust powers, having a combined capital and
surplus of at least fifty million U.S. dollars ($50,000,000), and subject to
supervision or examination by Federal, State, Territorial or District of
Columbia authority. If such corporation or national association publishes
reports of condition at least annually, pursuant to law or to the requirements
of the supervising or examining authority referred to above, then, for the
purposes of this Section 3.1(a)(ii), the combined capital and surplus of such
corporation or national association shall be deemed to be its combined capital
and surplus as set forth in its most recent report of condition so published.

(b)               If at any time the Guarantee Trustee shall cease to be
eligible to so act under Section 3.1(a), the Guarantee Trustee shall immediately
resign in the manner and with the effect set forth in Section 3.2(c).

 

 

(c)               If the Guarantee Trustee has or shall acquire any "conflicting
interest" within the meaning of Section 310(b) of the Trust Indenture Act, the
Guarantee Trustee shall either eliminate such interest or resign to the extent
and in the manner provided by, and subject to this Guarantee.

Section 3.2

Appointment, Removal and Resignation of the Guarantee Trustee.

(a)               Subject to Section 3.2(b), the Guarantee Trustee may be
appointed or removed without cause at any time by the Guarantor except during an
Event of Default.

(b)               The Guarantee Trustee shall not be removed in accordance with
Section 3.2(a) until a Successor Guarantee Trustee has been appointed and has
accepted such appointment by written instrument executed by such Successor
Guarantee Trustee and delivered to the Guarantor.

(c)               The Guarantee Trustee appointed to office shall hold office
until a Successor Guarantee Trustee shall have been appointed or until its
removal or resignation. The Guarantee Trustee may resign from office (without
need for prior or subsequent accounting) by an instrument in writing executed by
the Guarantee Trustee and delivered to the Guarantor, which resignation shall
not take effect until a Successor Guarantee Trustee has been appointed and has
accepted such appointment by an instrument in writing executed by such Successor
Guarantee Trustee and delivered to the Guarantor and the resigning Guarantee
Trustee.

(d)               If no Successor Guarantee Trustee shall have been appointed
and accepted appointment as provided in this Section 3.2 within 60 days after
delivery of an instrument of removal or resignation, the Guarantee Trustee
resigning or being removed may petition any court of competent jurisdiction for
appointment of a Successor Guarantee Trustee. Such court may thereupon, after
prescribing such notice, if any, as it may deem proper, appoint a Successor
Guarantee Trustee.

(e)               No Guarantee Trustee shall be liable for the acts or omissions
to act of any Successor Guarantee Trustee.

(f)                Upon termination of this Guarantee or removal or resignation
of the Guarantee Trustee pursuant to this Section 3.2, the Guarantor shall pay
to the Guarantee Trustee all amounts owing to the Guarantee Trustee under
Sections 7.2 and 7.3 accrued to the date of such termination, removal or
resignation.

ARTICLE IV

 

GUARANTEE

Section 4.1

Guarantee.

(a)               The Guarantor irrevocably and unconditionally agrees to pay in
full to the Holders of the Debentures or the Capital Securities, as the case may
be, the Guarantee Payments (without duplication of amounts theretofore paid by
the Company), as and when due, regardless of any defense (except the defense of
payment by the Company), right of set-off or counterclaim that

 

the Company may have or assert. The Guarantor's obligation to make a Guarantee
Payment may be satisfied by direct payment of the required amounts by the
Guarantor to the Holders of the Debentures or the Capital Securities, as the
case may be, or by causing the Company to pay such amounts to the Holders of the
Debentures or the Capital Securities, as the case may be.

(b)               All Guarantee Payments made from time to time with respect to
this Guarantee shall be in U.S. dollars and shall be payable free and clear of,
and without deduction or withholding for, or on account of, any and all present
or future taxes, duties, assessments, levies and other governmental charges of
any nature whatsoever now or hereafter imposed, levied, collected, withheld or
assessed by or on behalf of Bermuda or any other jurisdiction from which such
payments are made, or any territory or political subdivision thereof, unless
such deduction or withholding is required by law ("Foreign Taxes"). If by
operation of law or otherwise, Foreign Taxes are required to be deducted or
withheld from any amounts payable to a Holder, the Guarantor agrees to pay such
additional amounts to each Holder (the "Additional Amounts") as may be necessary
to ensure that the net amount actually received by the Holder, after deduction
of any Foreign Taxes imposed with respect to the payment of such Additional
Amounts, shall equal the amount the Holder would have received if Foreign Taxes
had been deducted or withheld from such payment; provided, however, that no
Additional Amounts shall be so payable for or on account of:

(i)                any Foreign Taxes which would not have been imposed but for
the fact that any Holder:

(A)              had a present or former personal or business connection with
Bermuda or any other jurisdiction from which payments are made, or any territory
or political subdivision thereof (a "Foreign Jurisdiction") other than the mere
ownership of, or receipt of payment under, the Debentures or Capital Securities;

(B)              presented such Debentures or Capital Securities for payment in
any Foreign Jurisdiction unless such Debentures or Capital Securities could not
have been presented for payment elsewhere; or

(C)              presented a Debenture or Capital Security for payment more than
fifteen (15) days after the date on which such payment became due and payable or
the date on which payment thereof is duly provided for, whichever occurs later;

(ii)               any estate, inheritance, gift, sale, transfer, personal
property or similar tax, assessment or other governmental charge; or

(iii)              any Foreign Taxes which are payable otherwise than by
withholding or deduction.

Section 4.2

Waiver of Notice and Demand.

The Guarantor hereby waives notice of acceptance of this Guarantee and of any
liability to which it applies or may apply, presentment, demand for payment, any
right to require a proceeding first against the Company or any other Person
before proceeding against the

 

Guarantor, protest, notice of nonpayment, notice of dishonor, notice of
redemption and all other notices and demands.

Section 4.3

Obligations Not Affected.

The obligations, covenants, agreements and duties of the Guarantor under this
Guarantee shall in no way be affected or impaired by reason of the happening
from time to time of any of the following:

(a)               the release or waiver, by operation of law or otherwise, of
the performance or observance by the Company of any express or implied
agreement, covenant, term or condition relating to the Debentures or the Capital
Securities to be performed or observed by the Company;

(b)               the extension of time for the payment by the Company of all or
any portion of the interest (or Additional Interest (as defined in the
Indenture)), principal (or premium), Optional Redemption Price, Special
Redemption Price or any other sums payable under the terms of the Debentures or
the extension of time for the performance of any other obligation under, arising
out of or in connection with, the Debentures (other than an extension of time
for payment of interest (or Additional Interest), principal (or premium),
Optional Redemption Price, Special Redemption Price or other sum payable that
results from the extension of any interest payment period on the Debentures or
any extension of the maturity date of the Debentures permitted by the
Indenture);

(c)               the extension of time for the payment by the Issuer of all or
any portion of the Distributions, Optional Redemption Price, Special Redemption
Price, Liquidation Distribution or any other sums payable under the terms of the
Capital Securities or the extension of time for the performance of any other
obligation under, arising out of or in connection with, the Capital Securities
(other than an extension of time for payment of Distributions, Optional
Redemption Price, Special Redemption Price, Liquidation Distribution or other
sum payable that results from the extension of any interest payment period on
the Debentures or any extension of the maturity date of the Debentures permitted
by the Indenture);

(d)               any failure, omission, delay or lack of diligence on the part
of the Holders to enforce, assert or exercise any right, privilege, power or
remedy conferred on the Holders pursuant to the terms of the Debentures or the
Capital Securities, or any action on the part of the Company or Issuer granting
indulgence or extension of any kind;

(e)               the voluntary or involuntary liquidation, dissolution, sale of
any collateral, receivership, insolvency, bankruptcy, assignment for the benefit
of creditors, reorganization, arrangement, composition or readjustment of debt
of, or other similar proceedings affecting, the Company or the Issuer or any of
the assets of the Company or the Issuer;

(f)                any invalidity of, or defect or deficiency in, the Debentures
or the Capital Securities;

(g)               the settlement or compromise of any obligation guaranteed
hereby or hereby incurred; or

 

 

(h)               any other circumstance whatsoever that might otherwise
constitute a legal or equitable discharge or defense of a guarantor, it being
the intent of this Section 4.3 that the obligations of the Guarantor hereunder
shall be absolute and unconditional under any and all circumstances.

There shall be no obligation of the Holders to give notice to, or obtain consent
of, the Guarantor with respect to the happening of any of the foregoing.

Section 4.4

Rights of Holders.

(a)               The Majority of the Holders of Debentures and Capital
Securities have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Guarantee Trustee in respect of this
Guarantee or to direct the exercise of any trust or power conferred upon the
Guarantee Trustee under this Guarantee; provided, however, that (subject to
Section 2.1) the Guarantee Trustee shall have the right to decline to follow any
such direction if the Guarantee Trustee being advised by counsel determines that
the action or proceeding so directed may not lawfully be taken or if the
Guarantee Trustee in good faith by its board of directors or trustees, executive
committees or a trust committee of directors or trustees and/or Responsible
Officers shall determine that the action or proceedings so directed would
involve the Guarantee Trustee in personal liability.

(b)               Any Holder of Debentures or Capital Securities may institute a
legal proceeding directly against the Guarantor to enforce the Guarantee
Trustee's rights under this Guarantee, without first instituting a legal
proceeding against the Company, the Issuer, the Guarantee Trustee or any other
Person. The Guarantor waives any right or remedy to require that any such action
be brought first against the Company or the Issuer, the Guarantee Trustee or any
other Person before so proceeding directly against the Guarantor.

Section 4.5

Guarantee of Payment.

This Guarantee creates a guarantee of payment and not of collection.

Section 4.6

Subrogation.

The Guarantor shall be subrogated to all (if any) rights of the Holders of the
Debentures and the Capital Securities against the Company in respect of any
amounts paid to such Holders by the Guarantor under this Guarantee; provided,
however, that the Guarantor shall not (except to the extent required by
applicable provisions of law) be entitled to enforce or exercise any right that
it may acquire by way of subrogation or any indemnity, reimbursement or other
agreement, in all cases as a result of payment under this Guarantee, if, after
giving effect to any such payment, any amounts are due and unpaid under this
Guarantee. If any amount shall be paid to the Guarantor in violation of the
preceding sentence, the Guarantor agrees to hold such amount in trust for the
Holders and to pay over such amount to the Holders.

Section 4.7

Independent Obligations.

The Guarantor acknowledges that its obligations hereunder are independent of the
obligations of the Company with respect to the Debentures and of the obligations
of the Issuer

 

with respect to the Capital Securities and that the Guarantor shall be liable as
principal and as debtor hereunder to make Guarantee Payments pursuant to the
terms of this Guarantee notwithstanding the occurrence of any event referred to
in subsections (a) through (g), inclusive, of Section 4.3 hereof.

Section 4.8

Enforcement by a Beneficiary.

A Beneficiary may enforce the obligations of the Guarantor contained in Section
4.1 directly against the Guarantor and the Guarantor waives any right or remedy
to require that any action be brought against the Issuer or any other Person or
entity before proceeding against the Guarantor. The Guarantor shall be
subrogated to all rights (if any) of any Beneficiary against the Issuer in
respect of any amounts paid to the Beneficiaries by the Guarantor under this
Guarantee; provided, however, that the Guarantor shall not (except to the extent
required by mandatory provisions of law) be entitled to enforce or exercise any
rights that it may acquire by way of subrogation or any indemnity, reimbursement
or other agreement, in all cases as a result of payment under this Guarantee, if
at the time of any such payment, and after giving effect to such payment, any
amounts are due and unpaid under this Guarantee.

ARTICLE V

 

LIMITATION OF TRANSACTIONS; RANKING

Section 5.1

Limitation of Transactions.

So long as any Debentures or Capital Securities remain outstanding, if (a) there
shall have occurred and be continuing an Event of Default or a Declaration Event
of Default or (b) the Company shall have selected an Extension Period as
provided in the Declaration and such period, or any extension thereof, shall
have commenced and be continuing, then the Guarantor shall not and shall not
permit any Subsidiary to (x) declare or pay any dividends or distributions on,
or redeem, purchase, acquire, or make a liquidation payment with respect to, any
of the Guarantor's or such Subsidiary's capital stock (other than payments of
dividends or distributions to the Company or the Guarantor or any Subsidiary
thereof) or make any guarantee payments with respect to the foregoing; or
(y) make any payment of principal of or interest or premium, if any, on or
repay, repurchase or redeem any debt securities of the Company or the Guarantor
or any Subsidiary thereof that rank pari passu in all respects with or junior in
interest to the Debentures (other than, with respect to clauses (x) and (y)
above, (i) repurchases, redemptions or other acquisitions of shares of capital
stock of the Company or the Guarantor or any Subsidiary thereof in connection
with any employment contract, benefit plan or other similar arrangement with or
for the benefit of one or more employees, officers, directors or consultants, in
connection with a dividend reinvestment or stockholder stock purchase plan or in
connection with the issuance of capital stock of the Company or the Guarantor,
or of such Subsidiary, as the case may be (or securities convertible into or
exercisable for such capital stock) as consideration in an acquisition
transaction entered into prior to the occurrence of the Event of Default,
Declaration Event of Default or selection of an Extension Period by the Company,
as applicable, (ii) as a result of any exchange or conversion of any class or
series of the Company's or the Guarantor's capital stock (or any capital stock
of a Subsidiary of the Company or the Guarantor) for any class or series of the
Company's or the Guarantor's capital stock, as the case may be (or in the case
of a

 

Subsidiary of the Company or Guarantor, any class or series of such Subsidiary's
capital stock), or of any class or series of the Company's or the Guarantor's
indebtedness for any class or series of the Company or the Guarantor's capital
stock, as the case may be (or in the case of indebtedness of a Subsidiary of the
Company or Guarantor, of any class or series of such Subsidiary's indebtedness
for any class or series of such Subsidiary's capital stock), (iii) the purchase
of fractional interests in shares of the Company's or the Guarantor's capital
stock (or the capital stock of a Subsidiary of the Guarantor) pursuant to the
conversion or exchange provisions of such capital stock or the security being
converted or exchanged, (iv) any declaration of a dividend in connection with
any stockholders' rights plan, or the issuance of rights, stock or other
property under any stockholders' rights plan, or the redemption or repurchase of
rights pursuant thereto, (v) any dividend in the form of stock, warrants,
options or other rights where the dividend stock or the stock issuable upon
exercise of such warrants, options or other rights is the same stock as that on
which the dividend is being paid or ranks pari passu with or junior to such
stock and any cash payments in lieu of fractional shares issued in connection
therewith, or (vi) payments under this Guarantee).

Section 5.2

Ranking.

This Guarantee will constitute an unsecured obligation of the Guarantor and will
rank subordinate and junior in right of payment to all present and future Senior
Indebtedness of the Guarantor. The right of the Guarantor to participate in any
distribution of assets of any of its Subsidiaries upon any such Subsidiary's
liquidation or reorganization or otherwise is subject to the prior claims of
creditors of that Subsidiary, except to the extent the Guarantor may itself be
recognized as a creditor of that Subsidiary. The Guarantor's obligations in
respect of this Guarantee shall rank pari passu with the Guarantor's obligations
under the Guarantee Agreement by and between the Guarantor and Wilmington Trust
Company, dated as of May 22, 2003, and the Parent Guarantee Agreement by and
between the Guarantor and JPMorgan Chase Bank, dated September 30, 2003.
Accordingly, the Guarantor's obligations under this Guarantee will be
effectively subordinated to all existing and future liabilities of the
Guarantor's Subsidiaries, and claimants should look only to the assets of the
Guarantor for payments hereunder. This Guarantee does not limit the incurrence
or issuance of other secured or unsecured debt of the Guarantor under any
indenture or other instrument that the Guarantor may enter into in the future or
otherwise.

ARTICLE VI

 

TERMINATION

Section 6.1

Termination.

This Guarantee shall terminate as to the Capital Securities and the Debentures
(i) upon full payment of (A) the Optional Redemption Price or Special Redemption
Price of all Debentures then outstanding and (B) the Optional Redemption Price
or Special Redemption Price of all Capital Securities then outstanding or
(ii) (A) upon full payment of the amounts payable in accordance with the
Declaration upon dissolution of the Issuer and (B) upon discharge of the
Indenture pursuant to Article XII thereof. This Guarantee will continue to be
effective or will be reinstated, as the case may be, if at any time any Holder
of the Debentures or the Capital

 

Securities must restore payment of any sums paid under the Debentures or the
Capital Securities or under this Guarantee.

ARTICLE VII

 

INDEMNIFICATION

Section 7.1

Exculpation.

(a)               No Indemnified Person shall be liable, responsible or
accountable in damages or otherwise to the Guarantor or any Covered Person for
any loss, damage or claim incurred by reason of any act or omission performed or
omitted by such Indemnified Person in good faith in accordance with this
Guarantee and in a manner that such Indemnified Person reasonably believed to be
within the scope of the authority conferred on such Indemnified Person by this
Guarantee or by law, except that an Indemnified Person shall be liable for any
such loss, damage or claim incurred by reason of such Indemnified Person's
negligence or willful misconduct with respect to such acts or omissions.

(b)               An Indemnified Person shall be fully protected in relying in
good faith upon the records of the Company, the Issuer or the Guarantor and upon
such information, opinions, reports or statements presented to the Company, the
Issuer or the Guarantor by any Person as to matters the Indemnified Person
reasonably believes are within such other Person's professional or expert
competence and who, if selected by such Indemnified Person, has been selected
with reasonable care by such Indemnified Person, including information,
opinions, reports or statements as to the value and amount of the assets,
liabilities, profits, losses, or any other facts pertinent to the existence and
amount of assets from which payments to Holders of Debentures or Distributions
to Holders of Capital Securities might properly be paid.

Section 7.2

Indemnification.

(a)               The Guarantor agrees to indemnify each Indemnified Person for,
and to hold each Indemnified Person harmless against, any and all loss,
liability, damage, claim or expense incurred without negligence or willful
misconduct on the part of the Indemnified Person, arising out of or in
connection with the acceptance or administration of the trust or trusts
hereunder, including, but not limited to, the costs and expenses (including
reasonable legal fees and expenses) of the Indemnified Person defending itself
against, or investigating, any claim or liability in connection with the
exercise or performance of any of the Indemnified Person's powers or duties
hereunder. The obligation to indemnify as set forth in this Section 7.2 shall
survive the resignation or removal of the Guarantee Trustee and the termination
of this Guarantee.

(b)               Promptly after receipt by an Indemnified Person under this
Section 7.2 of notice of the commencement of any action, such Indemnified Person
will, if a claim in respect thereof is to be made against the Guarantor under
this Section 7.2, notify the Guarantor in writing of the commencement thereof;
but the failure so to notify the Guarantor (i) will not relieve the Guarantor
from liability under paragraph (a) above unless and to the extent that the
Guarantor did not otherwise learn of such action and such failure results in the
forfeiture by the Guarantor

 

of substantial rights and defenses and (ii) will not, in any event, relieve the
Guarantor from any obligations to any Indemnified Person other than the
indemnification obligation provided in paragraph (a) above. The Guarantor shall
be entitled to appoint counsel of the Guarantor's choice at the Guarantor's
expense to represent the Indemnified Person in any action for which
indemnification is sought (in which case the Guarantor shall not thereafter be
responsible for the fees and expenses of any separate counsel retained by the
Indemnified Person or Persons except as set forth below); provided, however,
that such counsel shall be reasonably satisfactory to the Indemnified Person.
Notwithstanding the Guarantor's election to appoint counsel to represent the
Guarantor in an action, the Indemnified Person shall have the right to employ
separate counsel (including local counsel), and the Guarantor shall bear the
reasonable fees, costs and expenses of such separate counsel if (i) the use of
counsel chosen by the Guarantor to represent the Indemnified Person would
present such counsel with a conflict of interest, (ii) the actual or potential
defendants in, or targets of, any such action include both the Indemnified
Person and the Guarantor and the Indemnified Person shall have reasonably
concluded that there may be legal defenses available to it and/or other
Indemnified Person(s) which are different from or additional to those available
to the Guarantor, (iii) the Guarantor shall not have employed counsel
satisfactory to the Indemnified Person to represent the Indemnified Person
within a reasonable time after notice of the institution of such action or
(iv) the Guarantor shall authorize the Indemnified Person to employ separate
counsel at the expense of the Guarantor. The Guarantor will not, without the
prior written consent of the Indemnified Persons, settle or compromise or
consent to the entry of any judgment with respect to any pending or threatened
claim, action, suit or proceeding in respect of which indemnification or
contribution may be sought hereunder (whether or not the Indemnified Persons are
actual or potential parties to such claim or action) unless such settlement,
compromise or consent includes an unconditional release of each Indemnified
Person from all liability arising out of such claim, action, suit or proceeding.

Section 7.3

Compensation; Reimbursement of Expenses.

The Guarantor agrees:

(a)               to pay to the Guarantee Trustee from time to time such
compensation for all services rendered by it hereunder as the parties shall
agree to from time to time (which compensation shall not be limited by any
provision of law in regard to the compensation of a trustee of an express
trust); and

(b)               except as otherwise expressly provided herein, to reimburse
the Guarantee Trustee upon request for all reasonable expenses, disbursements
and advances incurred or made by it in accordance with any provision of this
Guarantee (including the reasonable compensation and the expenses and
disbursements of its agents and counsel), except any such expense, disbursement
or advance as may be attributable to its negligence or willful misconduct.

The provisions of this Section 7.3 shall survive the resignation or removal of
the Guarantee Trustee and the termination of this Guarantee.

 

 

ARTICLE VIII

 

MISCELLANEOUS

Section 8.1

Successors and Assigns.

All guarantees and agreements contained in this Guarantee shall bind the
successors, assigns, receivers, trustees and representatives of the Guarantor
and shall inure to the benefit of the Holders of the Debentures and the Capital
Securities then outstanding. Except in connection with any merger or
consolidation of the Guarantor with or into another entity or any sale, transfer
or lease of the Guarantor's assets to another entity, in each case, to the
extent permitted under Section 8.2, the Guarantor may not assign its rights or
delegate its obligations under this Guarantee without the prior approval of the
Majority of the Holders of Debentures and Capital Securities.

Section 8.2

Company May Consolidate, etc., on Certain Terms.

Nothing contained in this Guarantee shall prevent any consolidation or merger of
the Guarantor with or into any other Person (whether or not affiliated with the
Guarantor) or successive consolidations or mergers in which the Guarantor or its
successor or successors shall be a party or parties, or shall prevent any sale,
conveyance, transfer or other disposition of the property or capital stock of
the Guarantor or its successor or successors as an entirety, or substantially as
an entirety, to any other Person (whether or not affiliated with the Guarantor,
or its successor or successors) authorized to acquire and operate the same;
provided, however, that the Guarantor hereby covenants and agrees that, upon any
such consolidation, merger (where the Guarantor is not the surviving
corporation), sale, conveyance, transfer or other disposition, the due and
punctual payment of the any and all obligations of the Guarantor under this
Guarantee and the performance and observance of all the covenants and conditions
of this Guarantee to be kept or performed by the Guarantor, shall be expressly
assumed in a guarantee satisfactory in form to the Guarantee Trustee executed
and delivered to the Guarantee Trustee by the entity formed by such
consolidation, or into which the Guarantor shall have been merged, or by the
entity which shall have acquired such property or capital stock.

Section 8.3

Amendments.

Except with respect to any changes that do not adversely affect the rights of
Holders of the Debentures or the Capital Securities in any material respect (in
which case no consent of Holders will be required), this Guarantee may be
amended only with the prior approval of the Majority of the Holders of
Debentures and Capital Securities and the Guarantor. The provisions of the
Declaration with respect to amendments thereof apply to the giving of such
approval.

Section 8.4

Notices.

All notices provided for in this Guarantee shall be in writing, duly signed by
the party giving such notice, and shall be delivered, telecopied or mailed by
first class mail, as follows:

 

 

(a)               If given to the Guarantee Trustee, at the Guarantee Trustee's
mailing address set forth below (or such other address as the Guarantee Trustee
may give notice of to the Holders of Debentures and the Holders of the Capital
Securities and the Guarantor):

Wilmington Trust Company

Rodney Square North

1100 North Market Street

Wilmington, Delaware 19890

Attention: Corporate Trust Administration

Telecopy: 302-636-4140

(b)               If given to the Guarantor, at the Guarantor's mailing address
set forth below (or such other address as the Guarantor may give notice of to
the Holders of the Debentures and the Capital Securities and to the Guarantee
Trustee):

American Safety Insurance Holdings, Ltd.

c/o American Safety Holdings Corp.

1845 The Exchange

Atlanta, Georgia 30339

Attention: Steven B. Mathis

Telecopy: 770-908-0628

 

(c)               If given to any Holder of the Debentures and the Capital
Securities, at the address set forth on the books and records of the Indenture
Trustee and Issuer, respectively.

All such notices shall be deemed to have been given when received in person,
telecopied with receipt confirmed, or mailed by first class mail, postage
prepaid, except that if a notice or other document is refused delivery or cannot
be delivered because of a changed address of which no notice was given, such
notice or other document shall be deemed to have been delivered on the date of
such refusal or inability to deliver.

Section 8.5

Benefit.

This Guarantee is solely for the benefit of the Beneficiaries and, subject to
Section 2.1(a), is not separately transferable from the Debentures and the
Capital Securities.

Section 8.6

Governing Law.

(a)               PURSUANT TO SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF
THE STATE OF NEW YORK, THIS GUARANTEE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS
OF LAW PROVISIONS, EXCEPT WITH RESPECT TO AUTHORIZATION AND EXECUTION BY OR ON
BEHALF OF THE GUARANTOR WHICH ARE REQUIRED TO BE GOVERNED BY THE LAWS OF THE
BERMUDA.

(b)               The Guarantor agrees that any legal action, suit or proceeding
against it arising out of or related to this Guarantee may be brought in the
United States federal courts located in

 

the Borough of Manhattan or the courts of the State of New York located in the
Borough of Manhattan (each a "New York Court") and hereby irrevocably accepts
and submits to the non-exclusive jurisdiction of the aforementioned courts, in
personam, generally and unconditionally, with respect to any suit, action or
proceeding in connection with or arising out of this Guarantee for itself and
its respective properties, assets and revenues. The Guarantor agrees that a
final unappealable judgment in any action or proceeding arising out of or
relating to this Guarantee shall be conclusive and may be enforced in any other
jurisdiction otherwise having jurisdiction over the Guarantor by suit on the
judgment or in any other manner provided by law. The Guarantor irrevocably
waives any immunity to jurisdiction to which it may otherwise be entitled or
become entitled (including immunity to pre-judgment attachment and execution) in
any legal suit, action or proceeding against it arising out of this Agreement or
the transactions contemplated hereby which is instituted in any New York Court
or in any foreign court.

(c)               The Guarantor designates and appoints CT Corporation System in
New York City as its authorized agent (the "Authorized Agent") upon which
process may be served in any such action arising out of or relating to this
Guarantee which may be instituted in any New York Court by the Guarantee Trustee
or the Holders, in accordance with legal procedures prescribed for such courts,
expressly consents to the non-exclusive jurisdiction of any such court in
respect of any such action, and waives any other requirements of or objections
to personal jurisdiction with respect thereto. Such appointment shall be
irrevocable. The Guarantor represents and warrants that its Authorized Agent has
agreed to act as said agent for service of process and the Guarantor agrees to
take any and all action, including the filing of any and all documents and
instruments, that may be necessary to continue such appointment in full force
and effect as aforesaid. Service of process upon the Authorized Agent and
written notice of such service of process to it shall be deemed, in every
respect, effective service of process upon the Guarantor. Nothing herein shall
in any way be deemed to limit the ability of the Guarantee Trustee or the
Holders to serve any such legal process, summons, notices and documents in any
other manner permitted by applicable law or to obtain jurisdiction over the
Guarantor or bring actions, suits or proceedings against the Guarantor in such
other jurisdictions, and in such manner, as may be permitted by applicable law.

Section 8.7

Counterparts.

This Guarantee may be executed in one or more counterparts, each of which shall
be an original, but all of which taken together shall constitute one and the
same instrument.

Section 8.8

Separability.

In case one or more of the provisions contained in this Guarantee shall for any
reason be held to be invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other provisions
of this Guarantee, but this Guarantee shall be construed as if such invalid or
illegal or unenforceable provision had never been contained herein.

Signatures appear on the following page

 

 

THIS GUARANTEE is executed as of the day and year first above written.

AMERICAN SAFETY INSURANCE HOLDINGS LTD., as Guarantor

By:

/s/ Pamela M. Moniz

 

Name:

Pamela M, Moniz

 

Title:

Vice President of Finance

 

 

WILMINGTON TRUST COMPANY, as Guarantee Trustee

By:

/S/Christopher J. Slaybaugh

 

Name:

Christopher J. Slaybaugh

 

Title:

Sr. Financial Services Officer