EXHIBIT 10.1

 

$8,000,000

 

InCapSSM

 

AMERICAN SAFETY CAPITAL TRUST

 

PLACEMENT AGREEMENT

 

New York, New York

May 13, 2003

 

SANDLER O’NEILL & PARTNERS, L.P.

919 Third Avenue

6th Floor

New York, New York 10022

 

Ladies and Gentlemen:

 

American Safety Capital Trust (the “Trust”), a statutory trust organized under
the Delaware Statutory Trust Act, 12 Del. C. § 3801 et seq. (the “Delaware
Act”), American Safety Holdings Corp., a Georgia corporation (the “Company”) and
American Safety Insurance Group, Ltd., a Bermuda corporation (the “Guarantor”
and together with the Trust and the Company, the “Offerors”) confirm their
agreement (the “Agreement”) with Sandler O’Neill & Partners, L.P., as agent of
the Offerors (the “Placement Agent”), with respect to the issue and sale by the
Trust and the placement by the Placement Agent of 8,000 InCapSSM (liquidation
amount of $1,000 per security) of the Trust (the “Capital Securities”). The
Capital Securities will be guaranteed by the Guarantor to the extent provided in
the Guarantee Agreement, to be dated as of the Closing Date (as defined in
Section 2(a) hereof) (the “Guarantee Agreement”), between the Guarantor and
Wilmington Trust Company, as guarantee trustee (the “Guarantee Trustee”), with
respect to distributions and payments upon liquidation, redemption and
otherwise.

 

The entire proceeds from the sale of the Capital Securities will be combined
with the entire proceeds from the sale by the Trust to the Company of its common
securities (the “Common Securities”), and will be used by the Trust to purchase
$8,248,000 aggregate principal amount of Floating Rate Junior Subordinated Debt
Securities due 2033 (the “Subordinated Debt Securities”) issued by the Company.
The Capital Securities and the Common Securities will be issued pursuant to the
Amended and Restated Declaration of Trust, to be dated as of the Closing Date
(the “Declaration”), among the Company, as sponsor, the Administrators named
therein (the “Administrators”), Wilmington Trust Company, as institutional
trustee (the “Institutional Trustee”), Wilmington Trust Company, as Delaware
trustee (the “Delaware Trustee”), and the holders, from time to time, of
undivided beneficial interests in the assets of the Trust. The Subordinated Debt
Securities will be issued pursuant to the Indenture, to be dated as of the
Closing Date (the “Indenture”), among the Company, the Guarantor and Wilmington
Trust Company, as indenture trustee (the “Indenture Trustee”), and will have the
benefit of the guarantee of the Guarantor specified in the Indenture (the
“Indenture Guarantee”). The Indenture, the Guarantee Agreement, the Declaration,
this Agreement and the Subscription

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Agreement (as defined in Section 2(a) hereof) are hereinafter referred to
collectively as the “Operative Documents.”

 

SECTION 1. Representations and Warranties.

 

(a) The Trust, the Company and the Guarantor, jointly and severally, represent
and warrant to the Placement Agent and the Purchaser (as defined in Section 2(a)
hereof) of Capital Securities as of the date hereof and as of the Closing Date,
and agree with the Placement Agent and the Purchaser, as follows:

 

(i) Similar Offerings. Within a period of six months before or after the date
hereof, the Offerors have not, directly or indirectly, solicited any offer to
buy or offered to sell, and will not, directly or indirectly, solicit any offer
to buy or offer to sell, in the United States or to any United States citizen or
resident, any security which is or would be integrated with the sale of the
Capital Securities (including any securities of the same or a similar class as
the Capital Securities, other than the Capital Securities) in a manner that
would require the Capital Securities to be registered under the Securities Act
of 1933, as amended (the “1933 Act”).

 

(ii) Incorporated Documents. The documents of the Guarantor filed with the
Securities and Exchange Commission (the “Commission”) in accordance with the
Securities Exchange Act of 1934, as amended (the “1934 Act”), from and including
the commencement of the fiscal year covered by the Guarantor’s most recent
Annual Report on Form 10-K, at the time they were or hereafter are filed by the
Guarantor with the Commission (collectively, the “1934 Act Reports”), complied
and will comply in all material respects with the requirements of the 1934 Act
and the rules and regulations of the Commission thereunder (the “1934 Act
Regulations”), and, at the date of this Agreement and on the Closing Date, do
not and will not include an untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; and other than such instruments, agreements, contracts and
other documents as are filed as exhibits to the Guarantor’s 1934 Act Reports
there are no instruments, agreements, contracts or documents of a character
described in Item 601 of Regulation S-K promulgated by the Commission to which
the Guarantor or any of its subsidiaries is a party.

 

(iii) Independent Accountants. The accountants of the Company and the Guarantor
who certified the financial statements included in the 1934 Act Reports (the
“Independent Accountants”) are independent public accountants of the Company and
the Guarantor and their respective subsidiaries within the meaning of the 1933
Act and the rules and regulations of the Commission thereunder (the “1933 Act
Regulations”).

 

(iv) Financial Statements and Information. The consolidated balance sheets,
income statements and statements of changes in stockholders’ equity of the
Company and its consolidated subsidiaries as of and for the last three fiscal
years and each interim period subsequent to the end of its most recent fiscal
year, copies of each of which have been provided to the Placement Agent (the
“Company Financial Statements”), have been prepared in conformity with generally
accepted accounting principles in the United States applied on a

 

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consistent basis throughout the periods involved, except as disclosed in the
notes to such Company Financial Statements, and, together with the related
schedules and notes, present fairly, in all material respects, the respective
consolidated financial positions, results of operations and changes in
stockholders’ equity of the Company and its subsidiaries as of the respective
dates and for the periods indicated (subject, in the case of interim financial
statements, to normal recurring year-end adjustments, none of which are or are
expected to be material); the books and records of the Company and its
subsidiaries have been, and are being, maintained in all material respects in
accordance with such generally accepted accounting principles and any other
applicable legal and accounting requirements; the consolidated historical
financial statements of the Guarantor, together with the related schedules and
notes, included in the 1934 Act Reports present fairly, in all material
respects, the respective consolidated financial positions of the Guarantor and
its consolidated subsidiaries at the respective dates indicated, and the
consolidated statements of income, changes in stockholders’ equity and cash
flows of the Guarantor and its consolidated subsidiaries for the respective
periods specified; the consolidated financial statements of the Guarantor have
been prepared in conformity with generally accepted accounting principles in the
United States, applied on a consistent basis throughout the periods involved,
except as disclosed in the notes to such financial statements; schedules, if
any, included in the 1934 Act Reports present fairly, in all material respects,
the information required to be stated therein and any pro forma financial
statements and the related notes thereto included in the 1934 Act Reports
present fairly the information shown therein, have been prepared in accordance
with the Commission’s rules and guidelines with respect to pro forma financial
statements and have been properly compiled on the bases described therein, and
the assumptions used in the preparation thereof are reasonable and the
adjustments used therein are appropriate to give effect to the transactions and
circumstances referred to therein; the statutory financial statements of each of
its insurance subsidiaries (the “Insurance Subsidiaries”) as filed with the
applicable insurance regulatory authorities in the jurisdiction in which each
such Insurance Subsidiary is organized (each such regulatory authority, a
“Regulatory Authority”) for the years ended December 31, 2002, 2001 and 2000 and
for any quarters ended subsequent to December 31, 2002, including all supporting
documents filed therewith (collectively, the “Insurance Subsidiary Financial
Statements”): (i) have been prepared in accordance with statutory accounting
principles promulgated by the National Association of Insurance Commissioners,
as applied, with respect to each Insurance Subsidiary, by the applicable
Regulatory Authority of such entity, in the case of Insurance Subsidiaries
organized in the United States, or promulgated by the applicable Regulatory
Authority, in the case of Insurance Subsidiaries organized outside of the United
States, as the case may be, consistently applied for the periods covered thereby
and present fairly the statutory financial position of such Insurance
Subsidiaries as at the respective dates thereof and the results of operations of
such Insurance Subsidiaries for the respective periods then ended; and (ii)
complied in all material respects with all applicable laws, rules and
regulations when filed, and, to the knowledge of the Company and the Guarantor,
no material deficiency has been asserted with respect to any Insurance
Subsidiary Financial Statements by any applicable Regulatory Agency. As used
herein, the term “Regulatory Agency” means any court, administrative agency or
commission or other governmental agency, authority or instrumentality having
supervisory or regulatory authority with respect to the Company, the Guarantor
or any of their respective subsidiaries.

 

(v) No Material Adverse Change. Since the respective dates of which information
is given in the consolidated financial statements of the Company referred to in

 

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Section 1(a)(iv) above or the Guarantor’s 1934 Act Reports, there has not been
(A) any material adverse change in the condition, financial, regulatory or
otherwise, or in the earnings, business affairs or business prospects of the
Trust, the Company and its subsidiaries considered as one enterprise, or the
Guarantor and its subsidiaries considered as one enterprise, as the case may be,
whether or not arising in the ordinary course of business (a “Material Adverse
Effect”) or (B) any dividend or distribution of any kind declared, paid or made
by the Company or the Guarantor on any class of its capital stock other than
regular dividends declared and paid consistent with past practice.

 

(vi) Internal Controls. Each of the Guarantor and its subsidiaries maintain a
system of internal accounting controls sufficient to provide reasonable
assurance that (i) transactions are executed in accordance with the management’s
general or specific authorizations, (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability, (iii)
access to assets is permitted only in accordance with the management’s general
or specific authorization, (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences, (v) material information relating to
the Guarantor and its subsidiaries is made known to management, (vi) management
has evaluated the effectiveness of such internal accounting controls and (vii)
management has disclosed to the Independent Accountants and the audit committee
(A) all significant deficiencies in the design or operation of internal controls
which could adversely affect the ability of the Guarantor and its subsidiaries
to record, process, summarize, and report financial data, and have identified
for the Independent Accountants any material weaknesses in internal controls and
(B) any fraud, whether or not material, that involves management or other
employees who have a significant role in the internal controls of the Guarantor
and its subsidiaries, and any such deficiencies or fraud would not, singularly
or in the aggregate, be expected to result in a Material Adverse Effect.

 

(vii) Regulatory Matters. None of the Company, the Guarantor or any of their
respective subsidiaries is subject or is party to, or has received any notice or
advice that any of them may become subject or party to any investigation with
respect to, any corrective, suspension or cease-and-desist order, agreement,
consent agreement or other regulatory enforcement action, proceeding or order
with or by, or is a party to any commitment letter or similar undertaking to, or
is subject to any directive by, or has been a recipient of any supervisory
letter from, or has adopted any board resolutions at the request of, any
Regulatory Agency that currently relates to or restricts in any material respect
their business or that in any manner relates to their capital and surplus
adequacy or their management (each, a “Regulatory Agreement”), nor has the
Company, the Guarantor or any of their respective subsidiaries been advised by
any Regulatory Agency that it is considering issuing or requesting any such
Regulatory Agreement; there is no unresolved violation, criticism or exception
by any Regulatory Agency with respect to any report or statement relating to any
examinations of the Company, the Guarantor or any of their respective
subsidiaries which, in the reasonable judgment of the Company or the Guarantor,
is expected to result in a Material Adverse Effect; and without limiting the
generality of the foregoing, there are no restrictions or limitations on the
authority of any Insurance Subsidiary to pay dividends, other than general
restrictions and limitations applicable to all insurance companies domiciled in
the state of organization of such Insurance Subsidiary pursuant to applicable
law.

 

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(viii) No Undisclosed Liabilities. None of the Company, the Guarantor or any of
their respective subsidiaries has any material liability, whether known or
unknown, whether asserted or unasserted, whether absolute or contingent, whether
accrued or unaccrued, whether liquidated or unliquidated, and whether due or to
become due, including any liability for taxes (and there is no past or present
fact, situation, circumstance, condition or other basis for any present or
future action, suit, proceeding, hearing, charge, complaint, claim or demand
against the Company, the Guarantor or any of their respective subsidiaries
giving rise to any such liability) of a nature required to be reflected in the
financial statements in accordance with generally accepted accounting principles
in the United States, except (i) for liabilities set forth in the financial
statements referred to in Section 1(a)(iv) above and (ii) normal fluctuations in
the amount of the liabilities referred to in clause (i) above occurring in the
ordinary course of business of the Company, the Guarantor and all of their
respective subsidiaries since the date of the most recent balance sheet included
in such financial statements.

 

(ix) Insurance Reserving Practices. The Company, the Guarantor and their
respective Insurance Subsidiaries have made no material change in their
insurance reserving practices since the respective dates as of which information
is given in the 1934 Act Reports.

 

(x) Reinsurance Treaties. All reinsurance and retrocessional treaties,
contracts, agreements and arrangements to which any Insurance Subsidiary is a
party are in full force and effect and no Insurance Subsidiary is in violation
of, or in default in the performance, observance or fulfillment of, any
obligation, agreement, covenant or condition contained therein, with such
exceptions that would not, singularly or in the aggregate, have a Material
Adverse Effect; and no Insurance Subsidiary has received any notice from any of
the other parties to such treaties, contracts, agreements or arrangements that
such other party intends not to perform thereunder and, to the best knowledge of
the Company, the Guarantor and the Insurance Subsidiaries, none of the other
parties to such treaties, contracts, agreements or arrangements will be unable
to perform thereunder except to the extent adequately and properly reserved for
in the consolidated financial statements of the Company and the Guarantor, with
such exceptions that would not, singularly or in the aggregate, have a Material
Adverse Effect.

 

(xi) Good Standing of the Company and the Guarantor. Each of the Company and the
Guarantor has been duly organized and is validly existing as a corporation in
good standing under the laws of the jurisdiction of its incorporation and has
full power and authority under such laws to own, lease and operate its
properties and to conduct its business, to enter into and perform its
obligations under each of the Operative Documents to which it is a party and to
issue the Subordinated Debt Securities, in the case of the Company, and the
Indenture Guarantee, in the case of the Guarantor.

 

(xii) Good Standing of the Subsidiaries. Each “significant subsidiary” (as
defined in Rule 1-02 of Regulation S-X) of the Company and the Guarantor
(respectively, a “Significant Subsidiary”) and each Insurance Subsidiary has
been duly organized and is validly existing as an entity in good standing under
the laws of the jurisdiction in which it is chartered and has full power and
authority under such laws to own, lease and operate its properties and to
conduct its current and contemplated business.

 

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(xiii) Foreign Qualifications. Each of the Company, the Guarantor and their
respective subsidiaries is duly qualified as a foreign entity to transact
business and is each in good standing in each jurisdiction in which such
qualification is required, whether by reason of the ownership or leasing of
property or the conduct of business, except where the failure to be so qualified
would not singularly, or in the aggregate, in the reasonable judgment of the
Company and the Guarantor, be expected to result in a Material Adverse Effect.

 

(xiv) Capital Stock Duly Authorized and Validly Issued. All of the issued and
outstanding capital stock of the Company and the Guarantor has been duly
authorized and validly issued and is fully paid and nonassessable; all of the
issued and outstanding capital stock of each subsidiary of the Company and the
Guarantor has been duly authorized and validly issued, is fully paid and
nonassessable and is owned by the Company or the Guarantor, as the case may be,
directly or through subsidiaries, free and clear of any security interest,
mortgage, pledge, lien, encumbrance, claim or equitable right; and none of the
issued and outstanding capital stock of the Company, the Guarantor or their
Significant Subsidiaries was issued in violation of any preemptive or similar
rights arising by operation of law, under the charter, by-laws or code of
regulations of the Company, the Guarantor or any of their Significant
Subsidiaries or under any agreement to which the Company, the Guarantor or any
of their Significant Subsidiaries is a party.

 

(xv) Good Standing of the Trust. The Trust has been duly created and is validly
existing in good standing as a statutory trust under the Delaware Act with the
power and authority to own property and to conduct its business as provided in
the Declaration, to enter into and perform its obligations under the Operative
Documents to which it is a party, and to issue the Capital Securities and the
Common Securities; the Trust is not a party to or otherwise bound by any
agreement other than the Operative Documents to which it is a party; and the
Trust is, and will be, under current law, classified for United States federal
income tax purposes as a grantor trust and not as an association taxable as a
corporation.

 

(xvi) Authorization of Common Securities. On the Closing Date, the Common
Securities will have been duly authorized for issuance by the Trust pursuant to
the Declaration and, when duly issued and executed in accordance with the
Declaration and delivered by the Trust to the Company against payment therefor
in accordance with the subscription agreement therefor, will be validly issued
and fully paid and nonassessable undivided common beneficial ownership interests
in the assets of the Trust; the issuance of the Common Securities is not subject
to preemptive or other similar rights; and on the Closing Date, all of the
issued and outstanding Common Securities of the Trust will be owned directly by
the Company, free and clear of any security interest, mortgage, pledge, lien,
encumbrance, claim or equitable right.

 

(xvii) Authorization of Capital Securities. On the Closing Date, the Capital
Securities will have been duly authorized for issuance by the Trust pursuant to
the Declaration and, when duly issued, executed and authenticated in accordance
with the Declaration and delivered by the Trust against payment therefor as
provided herein and in the Subscription Agreement, will be validly issued and
fully paid and nonassessable undivided preferred beneficial ownership interests
in the assets of the Trust; the issuance of the Capital

 

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Securities will not be subject to preemptive or other similar rights; and the
Capital Securities will be in the form contemplated by, and entitled to the
benefits of, the Declaration.

 

(xviii) Authorization of this Agreement. This Agreement has been duly
authorized, executed and delivered by each of the Offerors.

 

(xix) Authorization of Declaration. The Declaration has been duly authorized by
the Company and the Guarantor and, on the Closing Date, will have been duly
executed and delivered by the Company, the Guarantor and the Administrators, and
assuming due authorization, execution and delivery of the Declaration by the
Institutional Trustee and the Delaware Trustee, the Declaration will constitute
a valid, legal and binding agreement of the Company and the Guarantor,
enforceable against the Company and the Guarantor in accordance with its terms,
except to the extent that enforceability may be limited by (a) bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance or other similar
laws now or hereafter in effect relating to creditors’ rights generally and (b)
general principles of equity (regardless of whether enforceability is considered
in a proceeding at law or in equity) (collectively, the “Enforceability
Exceptions”).

 

(xx) Authorization of Guarantee Agreement. The Guarantee Agreement has been duly
authorized by the Guarantor and, on the Closing Date, will have been duly
executed and delivered by the Guarantor, and assuming due authorization,
execution and delivery of the Guarantee Agreement by the Guarantee Trustee, the
Guarantee Agreement will constitute a valid, legal and binding agreement of the
Guarantor, enforceable against the Guarantor in accordance with its terms,
except to the extent that enforceability may be limited by the Enforceability
Exceptions.

 

(xxi) Authorization of Indenture. The Indenture has been duly authorized by the
Company and the Guarantor and, on the Closing Date, will have been duly executed
and delivered by the Company and the Guarantor, and assuming due authorization,
execution and delivery of the Indenture by the Indenture Trustee, the Indenture
will constitute a valid, legal and binding agreement of the Company and the
Guarantor, enforceable against the Company and the Guarantor in accordance with
its terms, except to the extent that enforceability may be limited by the
Enforceability Exceptions.

 

(xxii) Authorization of Subordinated Debt Securities and Indenture Guarantee.
The Subordinated Debt Securities and the Indenture Guarantee have been duly
authorized by the Company and the Guarantor, respectively; on the Closing Date,
the Subordinated Debt Securities and the Indenture will have been duly executed
by the Company and, when the Subordinated Debt Securities have been
authenticated in the manner provided for in the Indenture and delivered by the
Company to the Trust against payment therefor as contemplated in the
subscription agreement therefor, the Subordinated Debt Securities and the
Indenture Guarantee will constitute valid, legal and binding obligations of the
Company and the Guarantor, respectively, enforceable against the Company and the
Guarantor in accordance with their respective terms, except to the extent that
enforceability may be limited by the Enforceability Exceptions; the Subordinated
Debt Securities will be in the form contemplated by, and entitled to the
benefits of, the Indenture and Indenture Guarantee; and the Company has no

 

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present intention to exercise its option to defer payments of interest on the
Subordinated Debt Securities as provided in the Indenture.

 

(xxiii) Authorization of Administrators. Each of the Administrators of the Trust
is an officer or employee of the Company and has been duly authorized by the
Company to execute and deliver the Declaration.

 

(xxiv) Not an Investment Company. None of the Trust, the Company or the
Guarantor is, and immediately following consummation of the transactions
contemplated hereby and the application of the net proceeds therefrom none of
the Trust, the Company or the Guarantor will be, an “investment company” or an
entity “controlled” by an “investment company,” in each case within the meaning
of Section 3(a) of the Investment Company Act of 1940, as amended (the “1940
Act”), without regard to Section 3(c) of the 1940 Act.

 

(xxv) Absence of Defaults and Conflicts. The Trust is not in violation of the
trust certificate of the Trust filed with the State of Delaware (the “Trust
Certificate”) or the Declaration, and none of the Company, the Guarantor or any
of their respective Significant Subsidiaries or Insurance Subsidiaries is in
violation of its charter, by-laws or code of regulations; none of the Trust, the
Company, the Guarantor or any subsidiary of the Company or the Guarantor is in
default in the performance or observance of any obligation, agreement, covenant
or condition contained in any contract, indenture, mortgage, deed of trust, loan
or credit agreement, note, lease or other agreement or instrument to which it is
a party or by which it or any of them may be bound or to which any of its
properties or assets is subject (collectively, “Agreements and Instruments”),
except for such defaults under Agreements and Instruments that, in the
reasonable judgment of the Company or the Guarantor, are not expected to result
in a Material Adverse Effect; and the execution, delivery and performance of the
Operative Documents by the Trust, the Company or the Guarantor, as the case may
be, the issuance, sale and delivery of the Capital Securities and the
Subordinated Debt Securities, the consummation of the transactions contemplated
by the Operative Documents, and compliance by the Offerors with the terms of the
Operative Documents to which they are a party have been duly authorized by all
necessary corporate action on the part of the Company and the Guarantor, as the
case may be, and, on the Closing Date, will have been duly authorized by all
necessary action on the part of the Trust, and do not and will not, whether with
or without the giving of notice or passage of time or both, violate, conflict
with or constitute a breach of, or default or Repayment Event (as defined below)
under, or result in the creation or imposition of any, security interest,
mortgage, pledge, lien, charge, encumbrance, claim or equitable right upon any
properties or assets of the Trust or the Company or the Guarantor or any of
their respective Significant Subsidiaries or Insurance Subsidiaries pursuant to
any of the Agreements and Instruments, nor will such action result in any
violation of the provisions of the charter, by-laws or code of regulations of
the Company or the Guarantor or any of their respective Significant Subsidiaries
or Insurance Subsidiaries or the Declaration or the Trust Certificate, or
violation by the Company or the Guarantor or any of their respective Significant
Subsidiaries or Insurance Subsidiaries of any applicable law, statute, rule,
regulation, judgment, order, writ or decree of any government, government
authority, agency (including, without limitation, each applicable Regulatory
Agency) or instrumentality or court, domestic or foreign, having jurisdiction
over the Trust or the Company or the Guarantor or any of their respective
Significant Subsidiaries or Insurance Subsidiaries or their respective
properties or assets (collectively, “Governmental Entities”). As

 

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used herein, a “Repayment Event” means any event or condition which gives the
holder of any note, debenture or other evidence of indebtedness (or any person
acting on such holder’s behalf) the right to require the repurchase, redemption
or repayment of all or a portion of such indebtedness by the Trust or the
Company or the Guarantor or any of their respective Significant Subsidiaries or
Insurance Subsidiaries prior to its scheduled maturity.

 

(xxvi) Absence of Labor Dispute. No labor dispute with the employees of the
Company or the Guarantor or any of their respective subsidiaries exists or, to
the knowledge of the executive officers of the Company or the Guarantor, is
imminent, which, in the reasonable judgment of the Company or the Guarantor, is
expected to result in a Material Adverse Effect.

 

(xxvii) Absence of Proceedings. There is no action, suit, proceeding, inquiry or
investigation (including, without limitation, any action to revoke or deny
renewal of any Insurance License (as defined in paragraph xxix below)) before or
brought by any Governmental Entity, now pending, or, to the knowledge of the
Trust, the Company or the Guarantor, threatened, against or affecting the Trust,
the Company or the Guarantor or any of their respective subsidiaries, which, in
the reasonable judgment of the Trust, the Company or the Guarantor is expected
to result in a Material Adverse Effect or materially and adversely affect the
consummation of the transactions contemplated by the Operative Documents or the
performance by the Trust, the Company or the Guarantor of their respective
obligations hereunder or thereunder; and the aggregate of all pending legal or
governmental proceedings to which the Trust or the Company or the Guarantor or
any of their respective subsidiaries is a party or of which any of their
respective properties or assets is the subject, including ordinary routine
litigation incidental to the business, are not, in the reasonable judgment of
the Company, the Guarantor or the Trust, expected to result in a Material
Adverse Effect.

 

(xxviii) Absence of Further Requirements. No filing with, or authorization,
approval, consent, license, order, registration, qualification or decree of, any
Governmental Entity, other than those that have been made or obtained, is
necessary or required for the authorization, execution, delivery or performance
by the Trust, the Company or the Guarantor of their respective obligations under
the Operative Documents, the Subordinated Debt Securities, the Capital
Securities or the Indenture Guarantee, as applicable, or the consummation by the
Trust, the Company or the Guarantor of the transactions contemplated by the
Operative Documents.

 

(xxix) Possession of Licenses and Permits. Each of the Trust, the Company, the
Guarantor and the subsidiaries of the Company and the Guarantor, other than any
Insurance Subsidiary, possesses such permits, orders, certificates, licenses,
approvals, consents and other authorizations (collectively, “Governmental
Licenses”) issued by the appropriate Governmental Entities necessary to conduct
the business now operated by it, with such exceptions that would not, in the
reasonable judgment of the Company or the Guarantor, be expected to, singularly
or in the aggregate, have a Material Adverse Effect; each Insurance Subsidiary
is duly licensed or authorized (including, without limitation, from its
applicable Regulatory Authority) as an insurer in each jurisdiction where it is
required to be so licensed or authorized to conduct its business (collectively
“Insurance Licenses”), with such exceptions that would not, in the reasonable
judgment of the Company or the Guarantor, be expected to,

 

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singularly or in the aggregate, have a Material Adverse Effect; each of the
Trust, the Company, the Guarantor and the subsidiaries of the Company and the
Guarantor is in compliance with the terms and conditions of all of its
Governmental Licenses and Insurance Licenses, as applicable, except where the
failure so to comply, in the reasonable judgment of the Company, is not expected
to, singularly or in the aggregate, have a Material Adverse Effect; all of the
Governmental Licenses and Insurance Licenses are valid and in full force and
effect, except when the invalidity of such Governmental Licenses or Insurance
Licenses or the failure of such Governmental Licenses or Insurance Licenses to
be in full force and effect, in the reasonable judgment of the Company or the
Guarantor, is not expected to have a Material Adverse Effect; and none of the
Trust, the Company, the Guarantor or any subsidiary of the Company and the
Guarantor has received any notice of proceedings, and to the knowledge of the
Trust, the Company, the Guarantor or any subsidiary of the Company and the
Guarantor, there has been no threatened action, suit, proceeding or
investigation, relating to the revocation, termination, suspension or
modification of any such Governmental Licenses or Insurance Licenses which,
singularly or in the aggregate, in the reasonable judgment of the Company, the
Guarantor or the Trust, is expected to result in a Material Adverse Effect.

 

(xxx) Title to Property. Each of the Trust, the Company, the Guarantor and the
subsidiaries of the Company and the Guarantor has good and marketable title to
all of its respective real and personal properties, in each case free and clear
of all liens, encumbrances and defects, except such as, in the reasonable
judgment of the Trust, the Company or the Guarantor, singularly or in the
aggregate, are not expected to result in a Material Adverse Effect; and all of
the leases and subleases under which the Trust, the Company, the Guarantor or
any subsidiary of the Company or the Guarantor holds properties are in full
force and effect, except when the failure of such leases and subleases to be in
full force and effect, in the reasonable judgment of the Company or the
Guarantor, singularly or in the aggregate, is not expected to have a Material
Adverse Effect, and none of the Trust, the Company, the Guarantor or any
subsidiary of the Company or the Guarantor has any notice of any claim of any
sort that has been asserted by anyone adverse to the rights of the Trust, the
Company, the Guarantor or any subsidiary of the Company or the Guarantor under
any of the leases or subleases under which the Trust, the Company, the Guarantor
or any subsidiary of the Company or the Guarantor holds properties, or affecting
or questioning the rights of such entity to the continued possession of the
leased or subleased premises under any such lease or sublease, except when such
claim, in the reasonable judgment of the Company or the Guarantor, singularly or
in the aggregate, is not expected to have a Material Adverse Effect.

 

(xxxi) Stabilization. The Company has not taken and will not take, directly or
indirectly, any action designed to, or that might be reasonably expected to,
cause or result in stabilization or manipulation of the price of the Capital
Securities.

 

(xxxii) No General Solicitation. None of the Trust, the Company, the Guarantor
or any of their Affiliates (as defined in Rule 501(b) under the 1933 Act) or any
person acting on its or any of their behalf (other than the Placement Agent, as
to whom the Offerors make no representation) has engaged or will engage, in
connection with the offering of the Capital Securities, in any form of general
solicitation or general advertising within the meaning of Rule 502(c) under the
1933 Act.

 

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(xxxiii) No Directed Selling Efforts. None of the Trust, the Company, the
Guarantor or any of their Affiliates or any person acting on its or any of their
behalf (other than the Placement Agent, as to whom the Offerors make no
representation) has engaged or will engage in any directed selling efforts
within the meaning of Regulation S under the 1933 Act (“Regulation S”) with
respect to the offering of the Capital Securities.

 

(xxxiv) No Registration. Subject to compliance by the Placement Agent with the
relevant provisions of Section 6 hereof, it is not necessary in connection with
the offer, sale and delivery of the Capital Securities by the Trust in the
manner contemplated by this Agreement to register the Capital Securities, the
guarantee as described in the Guarantee Agreement, the Indenture Guarantee or
the Subordinated Debt Securities under the 1933 Act or to qualify the
Declaration, the Guarantee Agreement or the Indenture under the Trust Indenture
Act of 1939, as amended.

 

(xxxv) Authorization of Subscription Agreement. The Subscription Agreement has
been duly authorized, executed and delivered by each of the Offerors, and
assuming due authorization, execution and delivery of the Subscription Agreement
by the Purchaser, the Subscription Agreement will constitute a valid, legal and
binding agreement of each of the Offerors, enforceable against each of the
Offerors in accordance with its terms, except to the extent that enforceability
may be limited by the Enforceability Exceptions.

 

(xxxvi) Withholding Taxes. Under current law, any and all payments of principal,
premium, if any, interest and other amounts payable in respect of the
Subordinated Debt Securities, the Capital Securities, the Indenture Guarantee or
the Guarantee Agreement will be made free and clear of, and without deduction or
withholding for or on account of, all taxes, duties, assessments or other
governmental charges of whatever nature imposed or levied by or on behalf of the
United States or any political subdivision or taxing authority thereof or
therein or Bermuda or any political subdivision or taxing authority thereof or
therein.

 

(xxxvii) Stamp Duty. Except as has already been paid or authorized for payment,
no stamp duty or similar tax or duty is payable under any applicable law or
regulation in connection with the creation, issuance, delivery and performance
of the Subordinated Debt Securities, the Capital Securities, the Indenture
Guarantee or the Guarantee Agreement, the transfer of the Subordinated Debt
Securities or the Capital Securities or the execution, delivery and performance
by the Trust, the Company, the Guarantor or any Insurance Subsidiary of this
Agreement or any other Operative Document.

 

(xxxviii) Choice of Law; Consent to Jurisdiction; Appointment of Agent to Accept
Service of Process. The choice of the laws of the State of New York as the
governing law of the Operative Documents (other than the Declaration), the
Subordinated Debt Securities and the Indenture Guarantee and the choice of the
laws of the State of Delaware as the governing law of the Declaration and the
Capital Securities is a valid choice of law under the laws of Bermuda and the
respective jurisdictions in which the Insurance Subsidiaries are organized and
any political subdivision thereof and courts of such jurisdiction should honor
this choice of law; each of the Guarantor and Insurance Subsidiaries that are
not organized in the United States has the power to submit and has legally,
validly, effectively and irrevocably submitted to the exclusive personal
jurisdiction of the U.S. federal and New York state courts located in The City

 

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of New York (including, in each case, any appellate courts therefrom) in any
suit, action or proceeding against it with respect to its obligations or
liabilities under, or any other matter arising out of or in connection with,
this Agreement, any other Operative Document, the Subordinated Debt Securities,
the Capital Securities or the Indenture Guarantee and has legally, validly,
effectively and irrevocably waived any objection to the venue of a proceeding in
any such court; and each of the Guarantor and Insurance Subsidiaries that are
not organized in the United States has the power to designate, appoint and
empower and has legally, validly, effectively and irrevocably designated,
appointed and empowered an agent for service of process in any suit, action or
proceeding against it with respect to its obligations or liabilities under, or
any other matter arising out of or in connection with, this Agreement, any other
Operative Document, the Subordinated Debt Securities, the Capital Securities or
the Indenture Guarantee in any U.S. federal or state court in the State of New
York.

 

(xxxix) Waiver of Immunities. The Guarantor and all Insurance Subsidiaries that
are not organized in the United States, and their respective obligations under
the Operative Documents, the Subordinated Debt Securities, the Capital
Securities and the Indenture Guarantee, are subject to civil and commercial law
and to suit and none of the Guarantor, such Insurance Subsidiaries or any of
their respective properties, assets or revenues have any right of immunity, on
the grounds of sovereignty or otherwise, from any action, suit or proceeding,
from the giving of any relief in any such action, suit or proceeding, from
setoff or counterclaim, from the jurisdiction of any court, from service of
process, attachment upon or prior to judgment, or attachment in aid of execution
of judgment, or from execution of judgment, or other legal process or proceeding
for the giving of any relief or for the enforcement of a judgment, in any
jurisdiction in which proceedings may at any time be commenced, with respect to
their respective obligations or liabilities under, or any other matter under or
arising out of or in connection with, this Agreement, any other Operative
Document, the Subordinated Debt Securities, the Capital Securities or the
Indenture Guarantee; and, to the extent that the Guarantor, any such Insurance
Subsidiary or any of their respective properties, assets or revenues may have or
may hereafter become entitled to any such right of immunity in any such
proceedings, each of the Guarantor and such Insurance Subsidiaries has waived
and agreed not to plead or claim any such right and has consented to such relief
and enforcement.

 

(xl) Enforceability of New York Judgment. Any final judgment for a fixed or
readily calculable sum of money rendered by any court of the State of New York
or of the United States located in the State of New York having jurisdiction
under its own domestic laws in respect of any suit, action or proceeding against
the Guarantor or the Insurance Subsidiaries based upon this Agreement, any other
Operative Document, the Subordinated Debt Securities, the Capital Securities or
the Indenture Guarantee would be declared enforceable against the Guarantor or
the Insurance Subsidiaries, as the case may be, by the courts of Bermuda and the
respective jurisdictions in which the Insurance Subsidiaries are organized
without reexamination, review of the merits of the cause of action in respect of
which the original judgment was given or relitigation of the matters adjudicated
upon or payment of any stamp, registration or similar tax or duty.

 

(xli) Validity under the Laws of Bermuda. It is not necessary under the laws of
Bermuda or the respective jurisdictions in which the Insurance Subsidiaries are
organized or any political subdivision thereof or authority or agency therein in
order to enable

 

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the Trust or the Purchaser to enforce any rights under the Subordinated Debt
Securities, the Capital Securities, the Indenture Guarantee, this Agreement or
any other Operative Document that it should, as a result solely of its holding
of the Subordinated Debt Securities or the Capital Securities, respectively, be
licensed, qualified, or otherwise entitled to carry on business in such
jurisdictions or any political subdivision thereof or authority or agency
therein; each of the Subordinated Debt Securities, the Capital Securities, the
Indenture Guarantee, this Agreement and any other Operative Document is in
proper legal form under the laws of such jurisdictions and any political
subdivision thereof or authority or agency therein for the enforcement thereof
against the Guarantor and the Insurance Subsidiaries therein; and it is not
necessary to ensure the legality, validity, enforceability or admissibility in
evidence of the Subordinated Debt Securities, the Capital Securities, the
Indenture Guarantee, this Agreement or any other Operative Document in any such
jurisdiction or any political subdivision thereof or agency therein that any of
them be filed or recorded with any court, authority or agency in, or that any
stamp, registration or similar taxes or duties be paid to any court, authority
or agency of any such jurisdiction or any political subdivision thereof.

 

(b) Any certificate signed by any Trustee of the Trust or any duly authorized
officer of the Company or the Guarantor or any of their respective subsidiaries
and delivered to the Placement Agent or to counsel for the Placement Agent shall
be deemed a representation and warranty by the Trust, the Company or the
Guarantor, as the case may be, to the Placement Agent as to the matters covered
thereby.

 

SECTION 2. Sale and Delivery through Placement Agent; Closing.

 

(a) The Offerors propose to issue and sell the Capital Securities on May 22,
2003 (or such other date mutually agreed to by the Offerors and the Placement
Agent) (the “Closing Date”) to InCapS Funding I, Ltd., a newly formed company
with limited liability incorporated under the laws of the Cayman Islands (the
“Purchaser”), pursuant to the terms of the Capital Securities Subscription
Agreement, entered into on the date hereof (the “Subscription Agreement”),
between the Offerors and the Purchaser. In addition, the Offerors agree that the
Purchaser shall be entitled to the benefit of, and to rely on, the provisions of
this Agreement to the extent such provisions address or relate to the Purchaser
or the Capital Securities to be purchased by the Purchaser.

 

(b) The Offerors hereby grant to the Placement Agent the exclusive right to
arrange the placement of the Capital Securities with the Purchaser on their
behalf. The Placement Agent accepts such right and agrees to use its best
efforts, on and prior to the Closing Date, to effect such placement.

 

(c) Deliveries of certificates for the Capital Securities shall be made by the
Trust to or on behalf of the Purchaser at the offices of Sidley Austin Brown &
Wood LLP in The City of New York, and payment of the purchase price for the
Capital Securities shall be made by the Purchaser to the Trust by wire transfer
of immediately available funds to a bank designated by the Company
contemporaneous with closing on the Closing Date.

 

Certificates for the Capital Securities in the aggregate liquidation amount
thereof shall be registered in the name of the Purchaser.

 

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(d) As compensation to the Placement Agent for its placement of the Capital
Securities and in view of the fact that the proceeds of the sale of the Capital
Securities will be used to purchase the Subordinated Debt Securities of the
Company, the Company hereby agrees to pay on the Closing Date to the Placement
Agent in immediately available funds a commission of $30.00 per Capital Security
to be delivered by the Trust hereunder on the Closing Date.

 

(e) In performing its duties under this Agreement, the Placement Agent shall be
entitled to rely upon any notice, signature or writing which the Placement Agent
shall in good faith believe to be genuine and to be signed or presented by a
proper party or parties. The Placement Agent may rely upon any opinions or
certificates or other documents delivered by the Offerors or their counsel or
designees either to it or the Purchaser. In addition, in connection with the
performance of its duties under this Agreement, the Placement Agent shall not be
liable for any error of judgment or any action taken or omitted to be taken
unless it was grossly negligent or engaged in willful misconduct in connection
with such performance or non-performance. No provision of this Agreement shall
require the Placement Agent to expend or risk its own funds or otherwise incur
any financial liability on behalf of the Purchaser in connection with the
performance of any of its duties hereunder. The Placement Agent shall be under
no obligation to exercise any of the rights or powers vested in it by this
Agreement.

 

SECTION 3. Notice of Material Events. The Offerors covenant with the Placement
Agent and the Purchaser that, prior to the completion of the initial placement
of the Capital Securities through the Placement Agent, the Offerors will
immediately notify the Placement Agent, and confirm such notice in writing, of
any event or development that, in the reasonable judgment of the Company and the
Guarantor, is expected to result in a Material Adverse Effect.

 

SECTION 4. Payment of Expenses. Whether or not this Agreement or the
Subscription Agreement is terminated or the sale of the Capital Securities is
consummated, the Company and Guarantor (without duplication) will pay all
expenses incident to the performance of its obligations under this Agreement,
including (i) the preparation, issuance and delivery of the certificates for the
Capital Securities and Subordinated Debt Securities, (ii) the fees and
disbursements of counsel to the Trust, the Company and the Guarantor,
accountants and other advisors, and (iii) the fees and disbursements of counsel
for any trustee appointed under any of the Operative Documents incurred on or
prior to the Closing Date.

 

SECTION 5. Conditions of Placement Agent’s Obligations. The obligations of the
Placement Agent and the Purchaser on the Closing Date are subject to the
accuracy of the representations and warranties of the Offerors contained in
Section 1 hereof or in certificates of any Administrator of the Trust or any
officer of the Company, the Guarantor or any of their respective subsidiaries
delivered pursuant to the provisions hereof, to the performance by the Offerors
of their obligations hereunder, and to the following further conditions:

 

(a) Opinion of U.S. Counsel for the Offerors. On the Closing Date, the Placement
Agent and the Purchaser shall have received the favorable opinion, dated as of
the Closing Date, of Troutman Sanders LLP, special U.S. counsel for the
Offerors, in substantially the form set out in Annex A hereto, in form and
substance reasonably satisfactory to counsel for the Placement Agent. Such
counsel may state that, insofar as such opinion involves factual

 

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matters, they have relied, to the extent they deem proper, upon certificates of
Administrators of the Trust, officers of the Company, the Guarantor or any of
their respective subsidiaries and public officials.

 

(b) Opinion of Bermuda Counsel for the Guarantor. On the Closing Date, the
Placement Agent and the Purchaser shall have received the favorable opinion,
dated as of the Closing Date, of Conyers Dill & Pearman, special Bermuda counsel
for the Guarantor, in substantially the form set out in Annex B hereto, in form
and substance reasonably satisfactory to counsel for the Placement Agent. Such
counsel may state that, insofar as such opinion involves factual matters, they
have relied, to the extent they deem proper, upon certificates of officers of
the Guarantor or any of its subsidiaries and public officials.

 

(c) Opinion of Special U.S. Tax Counsel for the Trust and the Company. On the
Closing Date, the Placement Agent and the Purchaser shall have received an
opinion, dated as of the Closing Date, of Troutman Sanders LLP, special U.S. tax
counsel for the Trust and the Company, that (i) the Trust will be classified for
United States federal income tax purposes as a grantor trust and not as an
association taxable as a corporation and (ii) the Subordinated Debt Securities
will constitute indebtedness of the Company for United States federal income tax
purposes, in substantially the form set out in Annex C hereto. Such opinion may
be conditioned on, among other things, the initial and continuing accuracy of
the facts, financial and other information, covenants and representations set
forth in certificates of officers of the Company and other documents deemed
necessary for such opinion.

 

(d) Opinion of Special Bermuda Counsel for the Guarantor. On the Closing Date,
the Placement Agent and the Purchaser shall have received the favorable opinion,
dated as of the Closing Date, of Conyers Dill & Pearman, Bermuda tax counsel for
the Guarantor, that all amounts payable in respect of the Indenture Guarantee or
the Guarantee Agreement may be made free and clear of, and without deduction or
withholding for or on account of, all taxes, duties, assessments or other
governmental charges of whatever nature imposed or levied by or on behalf of
Bermuda or any political subdivision or taxing authority thereof or therein, in
substantially the form set out in Annex D hereto. Such opinion may be
conditioned on, among other things, the initial and continuing accuracy of the
facts, financial and other information, covenants and representations set forth
in certificates of officers of the Guarantor and other documents deemed
necessary for such opinion.

 

(e) Opinion of Special Delaware Counsel for the Trust. On the Closing Date, the
Placement Agent and the Purchaser shall have received the favorable opinion,
dated as of the Closing Date, of Morris, James, Hitchens & Williams LLP, special
Delaware counsel for the Trust, in substantially the form set out in Annex E
hereto, in form and substance reasonably satisfactory to counsel for the
Placement Agent.

 

(f) Opinion of Counsel to the Guarantee Trustee, the Institutional Trustee, the
Delaware Trustee and the Indenture Trustee. On the Closing Date, the Placement
Agent and the Purchaser shall have received the favorable opinion, dated as of
the Closing Date, of Morris, James, Hitchens & Williams LLP, counsel for the
Guarantee Trustee, the Institutional Trustee, the Delaware Trustee and the
Indenture Trustee, in substantially the form set out in Annex F hereto, in form
and substance reasonably satisfactory to counsel for the Placement Agent.

 

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(g) Certificates. On the Closing Date, there shall not have been, since the date
hereof or since the respective dates as of which information is given in the
consolidated financial statements of the Company referred to in Section 1(a)(iv)
above or the Guarantor’s 1934 Act Reports, any Material Adverse Effect, and the
Placement Agent shall have received a certificate of the Chairman, the Chief
Executive Officer, the President, any Executive Vice President or any Vice
President of each of the Company and the Guarantor, as the case may be, and of
the Chief Financial Officer or Chief Accounting Officer of each of the Company
and the Guarantor, as the case may be, and a certificate of an Administrator of
the Trust, dated as of the Closing Date, to the effect that (i) there has been
no such Material Adverse Effect, (ii) the representations and warranties in
Section 1 hereof were true and correct when made and are true and correct with
the same force and effect as though expressly made on and as of the Closing
Date, and (iii) the Offerors have complied with all agreements and satisfied all
conditions on their respective parts to be performed or satisfied on or prior to
the Closing Date.

 

(h) Maintenance of Ratings. From the date of this Agreement through the Closing
Date, (i) there shall not have occurred a downgrading in or withdrawal of the
rating assigned to the debt securities or preferred stock of the Trust, the
Company, the Guarantor or any Insurance Subsidiary or the financial strength or
claims paying ability of the Trust, the Company, the Guarantor or any Insurance
Subsidiary, in each case by A.M. Best & Co. or any “nationally recognized
statistical rating organization,” as that term is defined by the Commission for
the purposes of Rule 436(g)(2) under the 1933 Act, and (ii) neither A.M. Best &
Co. nor any such organization shall have publicly announced that it has under
surveillance or review its rating of any debt security, preferred stock or the
financial strength or the claims paying ability of the Trust, the Company, the
Guarantor or any Insurance Subsidiary.

 

(i) Purchaser’s Sale of Securities. The Purchaser shall have sold securities
issued by it in such an amount that the net proceeds therefrom shall be
available on the Closing Date and shall be sufficient to purchase the Capital
Securities and all other capital securities, surplus notes and senior notes
contemplated in agreements similar to this Agreement and the Subscription
Agreement.

 

(j) Additional Documents. On the Closing Date, the Placement Agent and the
Purchaser shall have been furnished such documents and opinions as they may
reasonably request in connection with the issue, sale and placement of the
Capital Securities; and all proceedings taken by the Offerors in connection with
the issuance, sale and placement of the Capital Securities shall be satisfactory
in form and substance to the Placement Agent and the Purchaser.

 

(k) Termination of Agreement. If any condition specified in this Section shall
not have been fulfilled when and as required to be fulfilled, this Agreement may
be terminated by the Placement Agent by notice to the Offerors at any time on or
prior to the Closing Date. If the sale of the Capital Securities provided for
herein is not consummated because any condition set forth in Section 5(a), (b),
(c), (d), (e), (f), (g), (h) or (j) is not satisfied, because of any termination
pursuant to Section 10(a) hereof or because of any refusal, inability or failure
on the part of the Offerors to perform any agreement herein or comply with any
provision hereof, the Company and the Guarantor (without duplication) will
reimburse the Placement Agent upon demand for all documented out-of-pocket
expenses (including reasonable fees and disbursements

 

16

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of counsel) that shall have been incurred by the Placement Agent in connection
with the proposed offering of the Capital Securities. In addition, such
termination shall be subject to Section 4 hereof, and Sections 7 and 8 hereof
shall survive any such termination and remain in full force and effect.

 

SECTION 6. Offers and Sales of the Capital Securities.

 

(a) Offer and Sale Procedures. The Placement Agent and the Offerors hereby
establish and agree to observe the following provisions with respect to the
offer, issue, sale and placement of the Capital Securities:

 

(i) Offers and Sales only to the Purchaser. Offers and sales of the Capital
Securities will be made only to the Purchaser in a transaction not requiring
registration under the 1933 Act.

 

(ii) No General Solicitation. No general solicitation or general advertising
(within the meaning of Rule 502(c) under the 1933 Act) has been or will be used
in connection with the offering of the Capital Securities.

 

(iii) No Directed Selling Efforts. No directed selling efforts (within the
meaning of Regulation S) has been or will be used with respect to the offering
of the Capital Securities.

 

(iv) Purchaser Notification. Prior to or contemporaneously with the purchase of
the Capital Securities by the Purchaser, the Placement Agent will take
reasonable steps to inform the Purchaser that the Capital Securities (A) have
not been and will not be registered under the 1933 Act, (B) are being sold to
them without registration under the 1933 Act in accordance with an exemption
from registration under the 1933 Act and (C) may not be offered, sold or
otherwise transferred except in accordance with the legend set forth in the
Declaration.

 

(b) Covenants of the Offerors. Each of the Offerors, jointly and severally,
covenant with the Placement Agent and the Purchaser as follows:

 

(i) Due Diligence. In connection with the initial placement of the Capital
Securities, the Offerors agree that, prior to any offer or sale of the Capital
Securities through the Placement Agent, the Placement Agent and the Purchaser
shall have the right to make reasonable inquiries into the business of the
Trust, the Company, the Guarantor and the subsidiaries of the Company and the
Guarantor. The Offerors also agree to provide answers to the Placement Agent and
the Purchaser, if requested, concerning the Trust, the Company, the Guarantor
and the subsidiaries of the Company and the Guarantor (to the extent that such
information is available or can be acquired and made available without
unreasonable effort or expense and to the extent the provision thereof is not
prohibited by applicable law) and the terms and conditions of the offering of
the Capital Securities and the Subordinated Debt Securities.

 

(ii) Integration. The Offerors agree that they will not, and will cause their
Affiliates not to, make any offer or sale of securities of the Offerors of any
class if, as a result of the doctrine of “integration” referred to in Rule 502
under the 1933 Act, such offer or

 

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sale would render invalid the exemption from the registration requirements of
the 1933 Act provided by Section 4(2) thereof or by Rule 144A or otherwise.

 

(iii) Restriction on Repurchases. Until the expiration of two (2) years (or such
shorter period as may hereafter be referred to in Rule 144(k) (or similar
successor rule)) after the original issuance of the Capital Securities, the
Offerors will not, and will cause their Affiliates not to, purchase or agree to
purchase or otherwise acquire any Capital Securities which are “restricted
securities” (as such term is defined under Rule 144(a)(3) under the 1933 Act),
whether as beneficial owner or otherwise, unless, immediately upon any such
purchase, the Offerors or any Affiliate shall submit such Capital Securities to
the Institutional Trustee for cancellation.

 

SECTION 7. Indemnification.

 

(a) Indemnification of the Placement Agent and the Purchaser. Each of the
Offerors agrees, jointly and severally, to indemnify and hold harmless: (x) the
Placement Agent and the Purchaser, (y) each person, if any, who controls (within
the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act) the
Placement Agent or the Purchaser (each such person, a “controlling person”) and
(z) the respective partners, directors, officers, employees and agents of the
Placement Agent and the Purchaser or any such controlling person, as follows:

 

(i) against any and all loss, liability, claim, damage and expense whatsoever,
as incurred, relating to or arising out of, or based upon, in whole or in part,
(A) any untrue statement or alleged untrue statement of a material fact included
in the 1934 Act Reports, or the omission or alleged omission therefrom of a
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading; (B) any untrue
statement or alleged untrue statement of a material fact contained in any
information (whether written or oral) or documents executed in favor of or
furnished or made available to the Placement Agent or the Purchaser by the
Offerors; (C) any omission or alleged omission to state in any information
(whether written or oral) or documents executed in favor of or furnished or made
available to the Placement Agent or the Purchaser by the Offerors a material
fact necessary to make the statements therein not misleading; or (D) the breach
or alleged breach of any representation, warranty and agreement of any Offeror
contained herein or in the Subscription Agreement;

 

(ii) against any and all loss, liability, claim, damage and expense whatsoever,
as incurred, to the extent of the aggregate amount paid in settlement of any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or of any claim whatsoever based upon any such
untrue statement or omission, or any such alleged untrue statement or omission,
or breach or alleged breach of any such representation, warranty or agreement;
provided, that (subject to Section 7(c) hereof) any such settlement is effected
with the written consent of the Offerors; and

 

(iii) against any and all expense whatsoever, as incurred (including the fees
and disbursements of counsel chosen by the Placement Agent), reasonably incurred
in investigating, preparing or defending against any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based

 

18

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upon any such untrue statement or omission, or any such alleged untrue statement
or omission, or breach or alleged breach of any such representation, warranty or
agreement, to the extent that any such expense is not paid under (i) or (ii)
above;

 

provided, however, that the Offerors agree, jointly and severally, to indemnify
and hold harmless the Trust against any and all loss, liability, claim, damage
and expense whatsoever, as incurred, which is due from the Trust pursuant to the
foregoing.

 

(b) Actions against Parties; Notification. Each indemnified party shall give
notice as promptly as reasonably practicable to each indemnifying party of any
action commenced against it in respect of which indemnity may be sought
hereunder, but failure to so notify an indemnifying party shall not relieve such
indemnifying party from any liability hereunder to the extent it is not
materially prejudiced as a result thereof, and in any event shall not relieve it
from any liability which it may have otherwise than on account of this indemnity
agreement. Counsel to the indemnified parties shall be selected by the Placement
Agent. An indemnifying party may participate at its own expense in the defense
of any such action; provided, however, that counsel to the indemnifying party
shall not (except with the consent of the indemnified party) also be counsel to
the indemnified party. In no event shall the indemnifying parties be liable for
fees and expenses of more than one counsel (in addition to any local counsel)
separate from their own counsel for all indemnified parties in connection with
any one action or separate but similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances. No
indemnifying party shall, without the prior written consent of the indemnified
parties, settle or compromise or consent to the entry of any judgment with
respect to any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or any claim whatsoever in
respect of which indemnification or contribution could be sought under this
Section 7 or Section 8 hereof (whether or not the indemnified parties are actual
or potential parties thereto), unless such settlement, compromise or consent (i)
includes an unconditional release of each indemnified party from all liability
arising out of such litigation, investigation, proceeding or claim and (ii) does
not include a statement as to or an admission of fault, culpability or a failure
to act by or on behalf of any indemnified party.

 

(c) Settlement without Consent if Failure to Reimburse. If at any time an
indemnified party shall have validly requested an indemnifying party to
reimburse the indemnified party for fees and expenses of counsel, such
indemnifying party agrees that it shall be liable for any settlement of the
nature contemplated by Section 7(a)(ii) effected without its written consent if
(i) such settlement is entered into more than 45 days after receipt by such
indemnifying party of the aforesaid request, (ii) such indemnifying party shall
have received notice of the terms of such settlement at least 30 days prior to
such settlement being entered into and (iii) such indemnifying party shall not
have reimbursed such indemnified party in accordance with such request prior to
the date of such settlement, provided, however, that an indemnifying party shall
not be liable for any such settlement effected without its consent if such
indemnifying party (1) reimburses such indemnified party with respect to those
fees and expenses of counsel that it determines in good faith are reasonable and
(2) provides written notice within 10 days after receipt of the request for
reimbursement to the indemnified party substantiating the unpaid balance as
unreasonable, in each case prior to the date of such settlement.

 

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SECTION 8. Contribution. In order to provide for just and equitable contribution
in circumstances under which the indemnification provided for in Section 7
hereof is for any reason held to be unenforceable for the benefit of an
indemnified party in respect of any losses, liabilities, claims, damages or
expenses referred to therein, then each indemnifying party shall contribute to
the aggregate amount of such losses, liabilities, claims, damages and expenses
incurred by such indemnified party, as incurred, (i) in such proportion as is
appropriate to reflect the relative benefits received by the Offerors, on the
one hand, and the Placement Agent, on the other hand, from the offering of the
Capital Securities pursuant to this Agreement or (ii) if the allocation provided
by clause (i) is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Offerors, on the one hand, and the
Placement Agent, on the other hand, in connection with the statements, omissions
or breaches which resulted in such losses, liabilities, claims, damages or
expenses, as well as any other relevant equitable considerations.

 

The relative benefits received by the Offerors, on the one hand, and the
Placement Agent, on the other hand, in connection with the offering of the
Capital Securities pursuant to this Agreement shall be deemed to be in the same
respective proportions as the total net proceeds from the offering of the
Capital Securities pursuant to this Agreement (before deducting expenses)
received by the Offerors and the total commission received by the Placement
Agent bear to the aggregate of such net proceeds and commissions.

 

The Offerors and the Placement Agent agree that it would not be just and
equitable if contribution pursuant to this Section 8 were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to above in this Section 8. The aggregate
amount of losses, liabilities, claims, damages and expenses incurred by an
indemnified party and referred to above in this Section 8 shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in investigating, preparing or defending against any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue or alleged untrue
statement, omission or alleged omission or breach or alleged breach.

 

Notwithstanding the provisions of this Section 8, the Placement Agent shall not
be required to contribute any amount in excess of the total commissions received
by it.

 

No person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the 1933 Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation.

 

For purposes of this Section 8, the Purchaser, each person, if any, who controls
the Placement Agent or the Purchaser within the meaning of Section 15 of the
1933 Act or Section 20 of the 1934 Act and the respective partners, directors,
officers, employees and agents of the Placement Agent, the Purchaser or any such
controlling person shall have the same rights to contribution as the Placement
Agent, while each officer and director of the Company or the Guarantor, each
Trustee of the Trust and each person, if any, who controls the Company or the
Guarantor within the meaning of Section 15 of the 1933 Act or Section 20 of the
1934 Act shall have the same rights to contribution as the Offerors.

 

20

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SECTION 9. Representations, Warranties and Agreements to Survive Delivery. All
representations, warranties and agreements contained in this Agreement or in
certificates of officers of the Company, the Guarantor or Trustees of the Trust
submitted pursuant hereto shall remain operative and in full force and effect,
and shall survive delivery of the Capital Securities by the Trust.

 

SECTION 10. Termination of Agreement.

 

(a) Termination; General. The Placement Agent may terminate this Agreement, by
notice to the Offerors, at any time on or prior to the Closing Date if, since
the time of execution of this Agreement or, in the case of (i) below, since the
respective dates as of which information is given in the consolidated financial
statements of the Company referred to in Section 1(a)(iv) above or the
Guarantor’s 1934 Act Reports, (i) there has occurred any Material Adverse
Effect, or (ii) there has occurred any material adverse change in the financial
markets in the United States, any outbreak of hostilities or escalation thereof
or any other calamity or crisis, or any change or development involving
political, financial or economic conditions, in each case the effect of which is
such as to make it, in the judgment of the Placement Agent, impracticable to
market the Capital Securities or to enforce contracts for the sale of the
Capital Securities, or (iii) trading in any securities of the Company or the
Guarantor has been suspended or limited by the Commission or any stock exchange
or market on or in which such securities are traded or quoted, or if trading
generally on the American Stock Exchange, the New York Stock Exchange, the
Nasdaq National Market or any stock exchange on which any of the securities of
the Company or the Guarantor are traded has been suspended or limited, or
minimum or maximum prices for trading have been fixed, or maximum ranges for
prices have been required, by any of said exchanges or by such system or by
order of the Commission, the National Association of Securities Dealers or any
other governmental authority, or (iv) a banking moratorium has been declared by
United States federal, Delaware, New York or Bermuda authorities.

 

(b) Liabilities. If this Agreement is terminated pursuant to this Section, such
termination shall be without liability of any party to any other party except as
provided in Section 4 and Section 5 hereof, and provided further that Sections
1, 7 and 8 hereof shall survive such termination and remain in full force and
effect.

 

SECTION 11. Notices. All notices and other communications hereunder shall be in
writing and shall be deemed to have been duly given if mailed or transmitted by
any standard form of telecommunication. Notices to the Placement Agent shall be
directed to Sandler O’Neill & Partners, L.P., as follows: 919 Third Avenue, 6th
Floor, New York, New York 10022, Attention: Thomas W. Killian, Principal, with a
copy to Sidley Austin Brown & Wood LLP, 787 Seventh Avenue, New York, New York
10019, Attention: Edward F. Petrosky; notices to the Trust and the Company shall
be directed to American Safety Holdings Corp., 1845 The Exchange, Suite 200,
Atlanta, Georgia 30339, Attention: Steven B. Mathis, Chief Financial Officer,
with a copy to Troutman Sanders LLP, 600 Peachtree Street N.E., Suite 5200,
Atlanta, Georgia 30308, Attention: W. Brinkley Dickerson, Esq.; and notices to
the Guarantor shall be directed to American Safety Insurance Group, Ltd., c/o
American Safety Holdings Corp., 1845 The Exchange, Suite 200, Atlanta, Georgia
30339, Attention: Steven B. Mathis, Chief Financial Officer, with a copy to
Conyers Dill & Pearman, Clarendon House, 2 Church Street, P.O. Box HM 666,
Hamilton HM CX, Bermuda, Attention: David J. Doyle.

 

21

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SECTION 12. Parties. This Agreement shall inure to the benefit of and be binding
upon each of the Placement Agent and the Offerors and their respective
successors. Nothing expressed or mentioned in this Agreement is intended or
shall be construed to give any person, firm or corporation, other than the
Placement Agent, the Purchaser and the Offerors, and their respective successors
and the controlling persons and other persons referred to in Sections 1, 7 and 8
hereof and their heirs and legal representatives, any legal or equitable right,
remedy or claim under or in respect of this Agreement or any provision herein
contained. This Agreement and all conditions and provisions hereof are intended
to be for the sole and exclusive benefit of the Placement Agent, the Purchaser
and the Offerors and their respective successors, and said controlling persons
and other persons and their heirs and legal representatives, and for the benefit
of no other person, firm or corporation.

 

SECTION 13. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICT
OF LAWS PRINCIPLES OF SAID STATE OTHER THAN SECTION 5-1401 OF THE NEW YORK
GENERAL OBLIGATIONS LAW.

 

EACH OF THE TRUST AND THE COMPANY, ON BEHALF OF ITSELF AND ITS SUBSIDIARIES
(INCLUDING, WITHOUT LIMITATION, THE TRUST), HEREBY IRREVOCABLY SUBMITS TO THE
EXCLUSIVE JURISDICTION OF THE FEDERAL AND NEW YORK STATE COURTS LOCATED IN THE
CITY OF NEW YORK IN CONNECTION WITH ANY SUIT, ACTION OR PROCEEDING RELATED TO
THIS AGREEMENT OR ANY OF THE MATTERS CONTEMPLATED HEREBY, IRREVOCABLY WAIVES ANY
DEFENSE OF LACK OF PERSONAL JURISDICTION AND IRREVOCABLY AGREES THAT ALL CLAIMS
IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY
SUCH COURT. EACH OF THE TRUST AND THE COMPANY, ON BEHALF OF ITSELF AND ITS
SUBSIDIARIES (INCLUDING, WITHOUT LIMITATION, THE TRUST), IRREVOCABLY WAIVES, TO
THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW, ANY OBJECTION
WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH SUIT,
ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT AND ANY CLAIM THAT ANY SUCH SUIT,
ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM.

 

SECTION 14. [Intentionally Reserved].

 

SECTION 15. Waiver of Immunities. To the extent that the Guarantor or any of the
Insurance Subsidiaries that are not organized in the United States or any of
their respective properties, assets or revenues may have or may hereafter become
entitled to, or have attributed to them, any right of immunity, on the grounds
of sovereignty or otherwise, from any action, suit or proceeding, from the
giving of any relief in any action, suit or proceeding, from set-off or
counterclaim, from the jurisdiction of any court, from service of process, from
attachment upon or prior to judgment, or from attachment in aid of execution of
judgment, or from execution of judgment, or other legal process or proceeding
for the giving of any relief or for the enforcement of any judgment, in any
jurisdiction in which proceedings may at any time be commenced, with

 

22

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respect to its obligations or liabilities under, or any other matter arising out
of or in connection with, this Agreement, each of the Guarantor and such
Insurance Subsidiaries hereby irrevocably and unconditionally, to the extent
permitted by applicable law, waives, and agrees not to plead or claim, any such
immunity and consents to such relief and enforcement.

 

SECTION 16. Additional Amounts. All payments required to be made by the
Guarantor or any of the Insurance Subsidiaries that are not organized in the
United States under this Agreement shall be made free and clear of, and without
deduction or withholding for or on account of, any and all present and future
taxes, duties, assessments or other governmental charges of whatever nature
(collectively, “Foreign Taxes”) now or hereinafter imposed or levied by or on
behalf of Bermuda or the respective jurisdictions in which such Insurance
Subsidiaries are organized or any political subdivision or taxing authority
thereof or therein unless required under applicable law. If such a withholding
or deduction is required under applicable law, the Guarantor or such Insurance
Subsidiary, as the case may be, shall pay such additional amounts to the party
entitled to receive the related payment under this Agreement as shall be
required so that the net amounts received and retained by such party, after
paying all Foreign Taxes, will be equal to the amounts that such party would
have received and retained had no Foreign Taxes been imposed.

 

SECTION 17. Disclosure of Tax Treatment and Tax Structure. Notwithstanding
anything herein to the contrary, any party to this Agreement (and each employee,
representative or other agent of any party to this Agreement) may disclose to
any and all persons, without limitation of any kind, the tax treatment and tax
structure of the offering and all materials of any kind (including opinions or
other tax analyses) that are provided to it relating to such tax treatment and
tax structure. However, such information relating to the tax treatment or tax
structure is required to be kept confidential to the extent necessary to comply
with any applicable federal or state securities laws. For this purpose, “tax
structure” means any facts relevant to the federal income tax treatment of the
offering contemplated by this Agreement but does not include information
relating to the identity of the Offeror.

 

SECTION 18. Effect of Headings. The Section headings herein are for convenience
only and shall not affect the construction hereof.

 

SECTION 19. Counterparts. This Agreement may be executed by any one or more of
the parties hereto in any number of counterparts, each of which shall be deemed
to be an original, but all such respective counterparts shall together
constitute one and the same instrument.

 

23

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If the foregoing is in accordance with your understanding of our agreement,
please sign and return to the Company a counterpart hereof, whereupon this
instrument, along with all counterparts, will become a binding agreement among
the Placement Agent and the Offerors in accordance with its terms.

 

Very truly yours,

AMERICAN SAFETY HOLDINGS CORP.

By:

 

 

--------------------------------------------------------------------------------

   

Name:

Title:

AMERICAN SAFETY INSURANCE GROUP, LTD.,

as Guarantor

By:

 

 

--------------------------------------------------------------------------------

   

Name:

Title:

AMERICAN SAFETY CAPITAL TRUST

By:

 

 

--------------------------------------------------------------------------------

   

[ADMINISTRATOR NAME]

Administrator

 

CONFIRMED AND ACCEPTED,

as of the date first above written:

SANDLER O’NEILL & PARTNERS, L.P.

By:

 

Sandler O’Neill & Partners Corp.,
the sole general partner

   

By:

 

 

--------------------------------------------------------------------------------

       

Name:

Title:

 

24

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ANNEX A

 

Pursuant to Section 5(a) of the Placement Agreement, special counsel for the
Offerors shall deliver an opinion in substantially the following form:

 

1. The Company is incorporated and is validly existing as a corporation in good
standing under the laws of the State of Georgia.

 

2. The Company has corporate power and authority to (i) execute and deliver, and
to perform its obligations under, the Operative Documents to which it is a party
and (ii) issue and perform its obligations under the Subordinated Debt
Securities.

 

3. (i) Each Significant Subsidiary and Insurance Subsidiary of the Company is
validly existing and in good standing under the laws of the jurisdiction of its
organization; and (ii) to the best of our knowledge, all of the issued and
outstanding shares of capital stock of each such Significant Subsidiary are
owned of record by the Company, directly or through other subsidiaries.

 

4. To our knowledge, there are no restrictions or limitations on the authority
of any of the Company’s Insurance Subsidiaries to pay dividends, other than
general restrictions and limitations applicable to all insurance companies
domiciled in the state of organization of such Insurance Subsidiary pursuant to
applicable law.

 

5. To our knowledge, no Insurance License of any of the Company’s Insurance
Subsidiaries has been suspended, revoked, withdrawn, surrendered or limited in
anyway.

 

6. No consent, approval, authorization or order of or filing, registration or
qualification with any Governmental Entity is required under any law or
regulation of the United States or the states in which the Company and the
Insurance Subsidiaries of the Company or the Guarantor are organized in
connection with the authorization, execution, delivery and performance by the
Company, the Guarantor or any Insurance Subsidiary of their respective
obligations under the Operative Documents, the Subordinated Debt Securities, the
Capital Securities or the Indenture Guarantee and the consummation of the
transactions contemplated thereby except as have already been obtained or made.

 

7. Each of the Placement Agreement and the Subscription Agreement has been duly
authorized, executed and delivered by the Company; and, assuming due
authorization, execution and delivery by the Placement Agent and the Purchaser,
respectively, each of the Placement Agreement and the Subscription Agreement
constitutes a valid and binding instrument of the Company and the Guarantor,
enforceable against the Company and the Guarantor in accordance with its terms,
except as rights to indemnity and contribution thereunder may be limited under
applicable law or public policy, and subject to the qualifications that (i)
enforcement thereof may be limited by bankruptcy, insolvency, receivership,
reorganization, liquidation, voidable preference, moratorium or other laws
(including the laws of fraudulent conveyance and transfer) or judicial decisions
affecting the enforcement of creditors’ rights generally or the reorganization
of financial institutions and (ii) the enforceability of the obligations of the
Company and the Guarantor thereunder is subject to general principles of

 

A-1

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equity (regardless of whether such enforceability is considered in a proceeding
in equity or at law) and to the effect of certain laws and judicial decisions
upon the availability and enforceability of certain remedies, including the
remedies of specific performance and self-help.

 

8. The Declaration has been duly authorized, executed and delivered by the
Company and the Administrators.

 

9. The Indenture has been duly authorized, executed, and delivered by the
Company; and, assuming due authorization, execution and delivery thereof by the
Guarantee Trustee or the Indenture Trustee, as applicable, each of the Guarantee
Agreement and the Indenture constitutes a valid and binding instrument of the
Guarantor and, in the case of the Indenture only, the Company, enforceable
against the Guarantor and the Company in accordance with its terms, except as
rights to indemnity and contribution thereunder may be limited under applicable
law or public policy, and subject to the qualifications that (i) enforcement
thereof may be limited by bankruptcy, insolvency, receivership, reorganization,
liquidation, voidable preference, moratorium or other laws (including the laws
of fraudulent conveyance and transfer) or judicial decisions affecting the
enforcement of creditors’ rights generally or the reorganization of financial
institutions and (ii) the enforceability of the obligations of the Guarantor and
the Company thereunder is subject to general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law)
and to the effect of certain laws and judicial decisions upon the availability
and enforceability of certain remedies, including the remedies of specific
performance and self-help.

 

10. The Subordinated Debt Securities have been duly authorized for issuance by
the Company pursuant to the Indenture; and, when executed, authenticated and
delivered in the manner provided for in the Indenture and paid for in accordance
with the subscription agreement therefor, the Subordinated Debt Securities and,
assuming due authorization, execution and delivery of the Indenture by the
Indenture Trustee, the Indenture Guarantee, as the case may be, will constitute
valid and binding obligations of the Company and the Guarantor, respectively,
and holders of the Subordinated Debt Securities will be entitled to the benefits
of the Indenture and the Indenture Guarantee, enforceable against the Company
and the Guarantor, respectively, in accordance with their terms, except as
rights to indemnity and contribution thereunder may be limited under applicable
law or public policy, and subject to the qualifications that (i) enforcement
thereof may be limited by bankruptcy, insolvency, receivership, reorganization,
liquidation, voidable preference, moratorium or other laws (including the laws
of fraudulent conveyance and transfer) or judicial decisions affecting the
enforcement of creditors’ rights generally or the reorganization of financial
institutions and (ii) the enforceability of the obligations of the Company and
the Guarantor thereunder is subject to general principles of equity (regardless
of whether such enforceability is considered in a proceeding in equity or at
law) and to the effect of certain laws and judicial decisions upon the
availability and enforceability of certain remedies, including the remedies of
specific performance and self-help.

 

11. The execution, delivery and performance of the Operative Documents, the
Subordinated Debt Securities and the Capital Securities, as applicable, by the
Trust or the Company and the consummation by the Trust and the Company of the
transactions contemplated by the Operative Documents, as applicable, will not
result in any violation of the charter or

 

A-2

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bylaws of the Company or any of its Significant Subsidiaries or Insurance
Subsidiaries, the Declaration or the Trust Certificate.

 

12. Assuming (i) the accuracy of the representations and warranties, and
compliance with the agreements, contained in the Placement Agreement and the
Subscription Agreement and (ii) that the Capital Securities are sold in the
manner contemplated by, and in accordance with, the Placement Agreement, the
Subscription Agreement and the Declaration, it is not necessary in connection
with the offer, sale and delivery of the Capital Securities by the Trust to the
Purchaser to register the Capital Securities, the Guarantee Agreement, the
Subordinated Debt Securities or the Indenture Guarantee under the 1933 Act or to
qualify an indenture under the Trust Indenture Act of 1939, as amended.

 

13. None of the Company, the Guarantor or the Trust is, and, following the
issuance of the Capital Securities and the consummation of the transactions
contemplated by the Operative Documents and the application of the proceeds
therefrom, none of the Company, the Guarantor or the Trust will be, an
“investment company” or entity “controlled” by an “investment company”, in each
case within the meaning of Section 3(a) of the 1940 Act, without regard to
Section 3(c) of such Act.

 

In rendering such opinions, such counsel may (A) state that its opinion is
limited to the laws of New York, the laws of the State of Georgia [State of
Incorporation of each Insurance Subsidiary organized in the United States] and
the Federal laws of the United States and (B) rely as to matters involving the
application of laws of any jurisdiction other than New York and Georgia [State
of Incorporation of each Insurance Subsidiary organized in the United States] or
the United States, to the extent deemed proper and specified in such opinion,
upon the opinion of other counsel of good standing believed to be reliable and
who are satisfactory to you and as to matters of fact, to the extent deemed
proper, on certificates of responsible officers of the Company, the Guarantor
and the Insurance Subsidiaries and public officials.

 

A-3

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ANNEX B

 

Pursuant to Section 5(b) of the Placement Agreement, special Bermuda counsel for
the Guarantor shall deliver an opinion in substantially the following form:

 

1. The Guarantor is incorporated and is validly existing as a corporation in
good standing under the laws of Bermuda.

 

2. The Guarantor has corporate power and authority to execute and deliver, and
perform its obligations under, the Operative Documents to which it is a party
and the Indenture Guarantee.

 

3. (i) Each of the Guarantor’s Significant Subsidiaries and Insurance
Subsidiaries is validly existing and in good standing under the laws of the
jurisdiction of its organization and (ii) to the best of our knowledge, all of
the issued and outstanding shares of capital stock of each such Significant
Subsidiary and Insurance Subsidiary are owned of record by the Guarantor,
directly or through other subsidiaries.

 

4. To our knowledge, there are no restrictions or limitations on the authority
of any of the Guarantor’s Insurance Subsidiaries to pay dividends, other than
general restrictions and limitations applicable to all insurance companies
domiciled in the respective jurisdictions of organization of such Insurance
Subsidiaries pursuant to applicable law.

 

5. To our knowledge, no Insurance License of any of the Guarantor’s Insurance
Subsidiaries has been suspended, revoked, withdrawn, surrendered or limited in
anyway.

 

6. No consent, approval, authorization or order of or filing, registration or
qualification with any Governmental Entity is required under any law or
regulation of Bermuda in connection with the authorization, execution, delivery
or performance by the Guarantor of the Operative Documents or the Indenture
Guarantee and the consummation of the transactions contemplated thereby except
as have already been obtained or made.

 

7. Each Operative Document to which the Guarantor is a party and the Indenture
Guarantee have been duly authorized, executed and delivered by the Guarantor.

 

8. The execution, delivery and performance of the Operative Documents and the
Indenture Guarantee, as applicable, by the Guarantor and the consummation by the
Guarantor of the transactions contemplated by the Operative Documents, as
applicable, will not result in any violation of the charter or bylaws of the
Guarantor or any of its Significant Subsidiaries or Insurance Subsidiaries.

 

9. Except as has already been paid or authorized for payment, no stamp duty or
similar tax or duty is payable under any law or regulation of or in Bermuda in
connection with the creation, issuance, delivery and performance of the
Subordinated Debt Securities, the Capital Securities, the Indenture Guarantee or
the Guarantee Agreement, the transfer of the Subordinated Debt Securities or the
Capital Securities or the execution, delivery and performance by the Trust, the
Company, the Guarantor or any Insurance Subsidiary of any Operative Document.

 

B-1

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10. The choice of the laws of the State of New York as the governing law of the
Operative Documents (other than the Declaration), the Subordinated Debt
Securities and the Indenture Guarantee and the choice of the laws of the State
of Delaware as the governing law of the Declaration and the Capital Securities
is a valid choice of law under the laws of Bermuda and the respective
jurisdictions in which the Guarantor’s Insurance Subsidiaries are organized and
any political subdivision thereof and courts of such jurisdictions should honor
this choice of law, each of the Guarantor and its Insurance Subsidiaries has the
power to submit, and has legally, validly, effectively and irrevocably
submitted, to the exclusive personal jurisdiction of the U.S. federal and New
York state courts located in The City of New York (including, in each case, any
appellate courts therefrom) in any suit, action or proceeding against it with
respect to its obligations or liabilities under, or any other matter arising out
of or in connection with, the Operative Documents, the Subordinated Debt
Securities, the Capital Securities or the Indenture Guarantee and has legally,
validly, effectively and irrevocably waived any objection to the venue of a
proceeding in any such court; and each of the Guarantor and its Insurance
Subsidiaries has the power to designate, appoint and empower, and has legally,
validly, effectively and irrevocably designated, appointed and empowered, an
agent for service of process against it in any suit, action or proceeding with
respect to its obligations or liabilities under, or any other matter arising out
of or in connection with, the Operative Documents, the Subordinated Debt
Securities, the Capital Securities or the Indenture Guarantee in any U.S.
federal or state court in the State of New York.

 

11. Any final judgment for a fixed or readily calculable sum of money rendered
by any court of the State of New York or of the United States located in the
State of New York having jurisdiction under its own domestic laws in respect of
any suit, action or proceeding against the Guarantor or its Insurance
Subsidiaries based on or arising under any Operative Document, the Subordinated
Debt Securities, the Capital Securities or the Indenture Guarantee would be
declared enforceable against the Guarantor or its Insurance Subsidiaries, as the
case may be, by the courts of Bermuda or the respective jurisdictions in which
the Guarantor’s Insurance Subsidiaries are organized without reexamination,
review of the merits of the cause of action in respect of which the original
judgment was given or relitigation of the matters adjudicated upon or payment of
any stamp, registration or similar tax or duty.

 

In rendering such opinions, such counsel may (A) state that its opinion is
limited to the laws of Bermuda and the respective jurisdictions in which the
Guarantor’s Insurance Subsidiaries are organized and (B) rely as to matters
involving the application of laws of any jurisdiction other than the
jurisdictions referred to in clause (A), to the extent deemed proper and
specified in such opinion, upon the opinion of other counsel of good standing
believed to be reliable and who are satisfactory to you and as to matters of
fact, to the extent deemed proper, on certificates of responsible officers of
the Guarantor and its Insurance Subsidiaries and public officials.

 

B-2

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ANNEX C

 

Pursuant to Section 5(c) of the Placement Agreement, special U.S. tax counsel
for the Offerors shall deliver an opinion in substantially the following form:

 

1. Under current law and assuming the performance of the Operative Documents in
accordance with the terms described therein, the Subordinated Debt Securities
will be treated for United States federal income tax purposes as indebtedness of
the Company.

 

2. The Trust will be classified for United States federal income tax purposes as
a grantor trust and not as an association taxable as a corporation.

 

C-1

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ANNEX D

 

Pursuant to Section 5(d) of the Placement Agreement, special Bermuda tax counsel
for the Guarantor shall deliver an opinion in substantially the following form:

 

1. Under current law, all amounts payable in respect of the Indenture Guarantee
or the Guarantee Agreement may be made free and clear of, and without deduction
or withholding for or on account of, all taxes, duties, assessments or other
governmental charges of whatever nature imposed or levied by or on behalf of
Bermuda or any political subdivision or taxing authority thereof or therein.

 

D-1

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ANNEX E

 

Pursuant to Section 5(e) of the Placement Agreement, special Delaware counsel
for the Trust shall deliver an opinion in substantially the following form:

 

1. The Trust has been duly formed and is validly existing in good standing as a
statutory trust under the Delaware Act.

 

2. The Declaration constitutes a valid and binding obligation of the Sponsor and
Trustees party thereto, enforceable against such Sponsor and Trustees in
accordance with its terms.

 

3. Under the Delaware Act and the Declaration, the Trust has the requisite trust
power and authority (i) to own its properties and conduct its business, all as
described in the Declaration, (ii) to execute and deliver, and perform its
obligations under, the Operative Documents to which it is a party, (iii) to
authorize, issue, sell and perform its obligations under its Capital Securities
and Common Securities, and (iv) to purchase and hold the Subordinated Debt
Securities.

 

4. The Capital Securities have been duly authorized for issuance by the Trust
and, when issued, executed and authenticated in accordance with the Declaration
and delivered against payment therefor in accordance with the Declaration and
the Subscription Agreement, will be validly issued and, subject to the
qualifications set forth in paragraph 5 below, fully paid and nonassessable
undivided beneficial interests in the assets of the Trust and the holders of the
Capital Securities will be entitled to the benefits provided by the Declaration.

 

5. Each holder of Capital Securities, in such capacity, will be entitled to the
same limitation of personal liability extended to stockholders of private
corporations for profit organized under the General Corporation Law of the State
of Delaware. We note, however, that the holders of the Capital Securities may be
required to make payment or provide indemnity or security as set forth in the
Declaration.

 

6. Under the Declaration and the Delaware Act, the issuance of the Capital
Securities and Common Securities is not subject to preemptive rights.

 

7. The Common Securities have been duly authorized for issuance by the Trust
and, when issued and executed in accordance with the Declaration and delivered
against payment therefor in accordance with the Declaration and the subscription
agreement therefor, will be validly issued undivided beneficial interests in the
assets of the Trust and the holders of the Common Securities will be entitled to
the benefits provided by the Declaration.

 

8. Under the Declaration and the Delaware Act, the execution and delivery by the
Trust of the Operative Documents to which it is a party, and the performance by
the Trust of its obligations thereunder, have been duly authorized by the
requisite trust action on the part of the Trust.

 

9. The issuance and sale by the Trust of its Capital Securities and Common
Securities, the execution, delivery and performance by the Trust of the
Operative Documents to

 

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which it is a party, the consummation by the Trust of the transactions
contemplated by the Operative Documents to which it is party, and the compliance
by the Trust with its obligations thereunder are not prohibited by (i) the
Declaration or the Trust Certificate, or (ii) any law or administrative
regulation of the State of Delaware applicable to the Trust.

 

10. No authorization, approval, consent or order of any Delaware court or
Delaware governmental authority or Delaware agency is required to be obtained by
the Trust solely in connection with the issuance and sale by the Trust of its
Capital Securities and Common Securities, the due authorization, execution and
delivery by the Trust of the Operative Documents to which it is a party or the
performance by the Trust of its obligations under the Operative Documents to
which it is a party.

 

11. The holders of the Capital Securities (other than those holders who reside
or are domiciled in the State of Delaware) will have no liability for income
taxes imposed by the State of Delaware solely as a result of their participation
in the Trust, and the Trust will not be liable for any income tax imposed by the
State of Delaware.

 

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ANNEX F

 

Pursuant to Section 5(f) of the Placement Agreement, counsel to the Guarantee
Trustee, the Institutional Trustee, the Delaware Trustee and the Indenture
Trustee shall deliver an opinion in substantially the following form:

 

1. Wilmington Trust Company (“WTC”) is a Delaware banking corporation with trust
powers, duly incorporated, validly existing and in good standing under the laws
of the State of Delaware, with requisite corporate power and authority to
execute and deliver, and to perform its obligations under, the Declaration, the
Guarantee Agreement and the Indenture (collectively, the “Transaction
Documents”).

 

2. The execution, delivery, and performance by WTC of the Transaction Documents
have been duly authorized by all necessary corporate action on the part of WTC,
and the Transaction Documents have been duly executed and delivered by WTC.

 

3. The execution, delivery and performance of the Transaction Documents by WTC
and the consummation of any of the transactions by WTC contemplated thereby are
not prohibited by (i) the charter or bylaws of WTC, (ii) any law or
administrative regulation of the State of Delaware or the United States of
America governing the banking and trust powers of WTC, or (iii) to our knowledge
(based and relying solely on the Officer Certificates), any agreements or
instruments to which WTC is a party or by which WTC is bound or any judgments or
order applicable to WTC.

 

4. The Subordinated Debt Securities delivered on the date hereof have been
authenticated by due execution thereof and delivered by WTC, as Indenture
Trustee, in accordance with the Indenture. The Capital Securities delivered on
the date hereof have been authenticated by due execution thereof and delivered
by WTC, as Institutional Trustee, in accordance with the Declaration.

 

5. None of the execution, delivery and performance by WTC of the Transaction
Documents and the consummation of any of the transactions by WTC contemplated
thereby requires the consent, authorization, order or approval of, the
withholding of objection on the part of, the giving of notice to, the
registration with or the taking of any other action in respect of, any
governmental authority or agency, under any law or administrative regulation of
the State of Delaware or the United States of America governing the banking and
trust powers of WTC, except for the filing of the Trust Certificate with the
Office of the Secretary of State of the State of Delaware pursuant to the
Delaware Act (which filing has been duly made).

 

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