Exhibit 4.6


    Exhibit
      4.6

     

    


     

     

    PMA
      CAPITAL CORPORATION 

     

    TO
      

     

    U.S.
      BANK NATIONAL ASSOCIATION, TRUSTEE 

     

    


     

     

    THIRD
      SUPPLEMENTAL INDENTURE 

     

    DATED
      AS OF NOVEMBER 15, 2004 

     

     

    


     

    $57,500,000
      

     

    


    


     

    8.50%
      MONTHLY INCOME SENIOR NOTES

     

    DUE
      JUNE 15, 2018

     

     

    



    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    



    TABLE
      OF CONTENTS1 

    


    Page

     

    
      	
              ARTICLE
                I Definitions

            	
              1

            
	
              Section
                1.01

            	
              Definitions.

            	
              1

            
	
              Section
                1.02

            	
              Certain
                Terms Defined in the Indenture.

            	
              2

            
	
              Section
                1.03

            	
              Grant
                of Security Interest in Collateral and Additional
                Collateral.

            	
              3

            
	
              Section
                1.04

            	
              Release
                of Security Interest in Collateral and Additional
                Collateral.

            	
              5

            
	
              Section
                1.05

            	
              Authorization
                of Actions to be Taken by Collateral Agent Under the Collateral Agent
                Agreement.

            	
              6

            
	
              Section
                1.06

            	
              Authorization
                of Receipt of Funds by the Trustee Under the Collateral Agent
                Agreement.

            	
              7

            
	
              Section
                1.07

            	
              Authorization
                of Trustee to Enter into the Collateral Agent Agreement

            	
              7

            
	
              ARTICLE
                II MISCELLANEOUS PROVISIONS

            	
              7

            
	
              Section
                2.01

            	
              Recitals
                by Company.

            	
              7

            
	
              Section
                2.02

            	
              Ratification
                and Incorporation of Original Indenture.

            	
              7

            
	
              Section
                2.03

            	
              Executed
                in Counterparts.

            	
              7

            


    

     

    1 This
      Table of Contents does not constitute part of the Indenture or have any bearing
      upon the interpretation of any of its terms and provisions.

    


    
      
        
        

      

      
        i

        
          

        

      

      
        
        

      

    


    THIS
      THIRD SUPPLEMENTAL INDENTURE (the “Third Supplemental Indenture”) is made as of
      the 15th day of November, 2004, by and between PMA CAPITAL CORPORATION, a
      company duly organized and existing under the laws of the Commonwealth of
      Pennsylvania (hereinafter called the “Company”), having its principal executive
      office located at 380 Sentry Parkway, Blue Bell, Pennsylvania 19422, and U.S.
      BANK NATIONAL ASSOCIATION, a national banking association duly organized and
      existing under the laws of the United States (hereinafter called the “Trustee”),
      having its Corporate Trust Office located at 225 Asylum Street, Hartford,
      Connecticut 06103. 

     

    WITNESSETH:
      

     

    WHEREAS,
      the Company has heretofore entered into an Indenture, dated as of October 21,
      2002 (the “Original Indenture”), and the Second Supplemental Indenture, dated
      June 5, 2003 (the “Second Supplemental Indenture”) establishing the terms of the
      Company’s 8.50% Monthly Income Senior Notes due 2018 (the “Senior Notes”), with
      U.S. Bank National Association; 

     

    WHEREAS,
      the Original Indenture as amended and supplemented by the Second Supplemental
      Indenture and this Third Supplemental Indenture, is herein called the
“Indenture”; 

     

    WHEREAS,
      the Second Supplemental Indenture provides that the Company will not create
      any
      Indebtedness secured by a pledge, lien or other encumbrance on the capital
      stock
      of any of the Company’s Significant Subsidiaries without making effective
      provision for equal and ratable security for the Senior Notes;

     

    WHEREAS,
      the Company desires to provide equal and ratable security for the Senior Notes
      and the Indenture provides that the Company and the Trustee may enter into
      a
      supplemental indenture to provide security for the Senior Notes;

     

    WHEREAS,
      all conditions necessary to authorize the execution and delivery of this Third
      Supplemental Indenture and to make it a valid and binding obligation of the
      Company have been done or performed. 

     

    NOW,
      THEREFORE, in consideration of the agreements and obligations set forth herein
      and for other good and valuable consideration, the sufficiency of which is
      hereby acknowledged, the parties hereto hereby agree as follows: 

     

    ARTICLE
      I

     

    Definitions

    Section
      1.01  Definitions. 

     

    The
      following defined terms used herein shall, unless the context otherwise
      requires, have the meanings specified below. Capitalized terms used herein
      for
      which no definition is provided herein shall have the meanings set forth in
      the
      Original Indenture. 

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

    “Collateral
      Agent” means, U.S. Bank National Association, in its capacity as collateral
      agent under the Collateral Agent Agreement and its permitted successors and
      assigns. 

     

    “Collateral
      Agent Agreement” means the Collateral Agent Agreement dated as of November 15,
      2004 by and among the Company, U.S. Bank National Association, as Collateral
      Agent, the Trustee for the Senior Notes, the trustee for the New Debentures,
      the
      trustee for the 144A Debentures and the trustee or other authorized
      representative for other secured Indebtedness in accordance with the terms
      of
      the Original Indenture, as such may be amended from time to time in accordance
      with the terms of the Original Indenture and the Collateral Agent
      Agreement.

     

    “Net
      Cash
      Proceeds” means with respect to any sale of Capital Stock, cash proceeds of such
      sale net of attorneys’ fees, accountants’ fees, underwriting or placement
      agents’ fees, discounts or commissions and brokerage, consultant and other fees
      actually incurred in connection with such sale and net of taxes paid or payable
      as a result thereof, as and where received.

     

    “Pooled
      Companies” means (Pennsylvania Manufacturers’ Association Insurance Company,
      Pennsylvania Manufacturers Indemnity Company and Manufacturers Alliance
      Insurance Company). 

     

    “Securities”
      means, for the purpose of this Third Supplemental Indenture only, the Senior
      Notes. 

     

    Section
      1.02  Certain
      Terms Defined in the Indenture. 

     

    (a)  Definitions
      of the following terms in this Third Supplemental Indenture may be found in
      the
      Sections of this Third Supplemental Indenture where indicated as follows:


     

    
      	
              Term

               

            	
              Defined
                in Section

               

            
	 	 
	
              “144A
                Debentures”

               

            	
              Section
                1.03(a) of this Third Supplemental Indenture

               

            
	 	 
	
              “Additional
                Collateral”

               

            	
              Section
                1.03(a) of this Third Supplemental Indenture

               

            
	
              “A.M.
                Best”

               

            	
              Section
                1.03(a) of this Third Supplemental Indenture

               

            
	
              “Collateral”

               

            	
              Section
                1.03(a) of this Third Supplemental Indenture

               

            


    


    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    


    


    
      	
              “Collateral
                Companies”

               

            	
              Section
                1.03(a) of this Third Supplemental Indenture

               

            
	
              “Indenture”

               

            	
              Recitals
                of this Third Supplemental Indenture

               

            
	
              “Original
                Indenture”

               

            	
              Recitals
                of this Third Supplemental Indenture

               

            
	
              “New
                Debenture”

               

            	
              Section
                1.03(a) of this Third Supplemental Indenture

               

            
	 	 
	
              “Released
                Interest”

               

            	
              Section
                1.04 of the Third Supplemental Indenture

               

            
	 	 
	
              “Third
                Supplemental Indenture”

               

            	
              Recitals
                of this Third Supplemental Indenture

               

            
	 	 


    

    Section
      1.03   Grant
      of Security Interest in Collateral and Additional Collateral. 

     

    (a)  The
      Company does hereby grant to the Trustee, as trustee for the benefit of the
      Holders of the Senior Notes, a first priority Lien and security interest, equal
      and ratable with a Lien and security interest in favor of the trustee for the
      holders of the Company’s $84,140,000 6.50% Senior Secured Convertible Debentures
      due 2022 (the “New Debentures”) and the trustee for the holders of the Company’s
      $15,000,000 6.50% Senior Secured Convertible Debentures due 2022 (the “144A
      Debentures”), in and to 20% of the outstanding Capital Stock of the Company’s
      Significant Subsidiaries (such companies, collectively, the “Collateral
      Companies”), and all rights and privileges of the Company with respect thereto,
      including all dividends, distributions and other payments with respect thereto
      and in and to all proceeds thereof (the “Collateral”) to have and to hold in
      trust to secure the payment of principal of and premiums, if any, and interest
      on, and any other amounts (including all fees, expenses, counsel fees and other
      amounts, including fees and expenses of the Collateral Agent, due and owing
      to
      the Trustee) owing in respect of the Senior Notes, equally and ratably with
      the
      New Debentures and the 144A Debentures, without prejudice, preference, priority
      or distinction, except as expressly provided in the Indenture (and the indenture
      for the New Debentures and the indenture for the 144A Debentures), and to secure
      performance by the Company of all the Company’s obligations under the Indenture
      (equally and ratably with the Company’s obligations with respect to the New
      Debentures and the 144A Debentures), all as provided for in this Indenture
      (and
      the indenture for the New Debentures and the indenture for the 144A Debentures).
      Additionally, if the financial strength ratings of the Pooled Companies from
      A.M. Best Company, Inc. (“A.M. Best”) are not at least “A-” on December 31,
      2005, or if the financial strength ratings of the Pooled Companies from A.M.
      Best are reduced to below “B++” prior to December 31, 2005, the Company does
      hereby grant to the Trustee, as trustee for the benefit of the Holders of the
      Senior Notes, a first priority Lien and security interest, equal and ratable
      with a Lien and security interest in favor of the trustee for the holders of
      the
      New Debentures and the trustee for the holders of the 144A Debentures, in and
      to
      the remaining outstanding Capital Stock of the 

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    Collateral
      Companies and all rights and privileges of the Company with respect thereto,
      including all dividends, distributions and other payments with respect thereto
      and all proceeds thereof, (“Additional Collateral”) to have and to hold in trust
      to secure the payment of principal of and premiums if any, and interest on,
      and
      any other amounts (including all fees, expenses, counsel fees and other amounts,
      including fees and expenses of the Collateral Agent, due and owing to the
      Trustee) owing in respect of the Senior Notes, equally and ratably with the
      New
      Debentures and the 144A Debentures, without prejudice, preference, priority
      or
      distinction, except as expressly provided in the Indenture (and the indenture
      for the New Debentures and the indenture for the 144A Debentures), and to secure
      performance by the Company of the Company’s obligations under this Indenture
      (equally and ratably with the Company’s obligations with respect to the New
      Debentures and the 144A Debentures) with respect to the Senior Notes, the New
      Debentures and the indenture for the 144A Debentures, all as provided for under
      the Indenture (and the indenture for the New Debentures and the indenture for
      the 144A Debentures). 

     

    The
      Trustee, as trustee on behalf of the Holders of the Senior Notes, acknowledges
      this grant, accepts the trusts hereunder in accordance with the provisions
      hereof and agrees to perform its duties herein required and agrees that, the
      Trustee holds the Collateral and the Additional Collateral in trust for the
      benefit of the Holders of the Senior Notes. 

     

    (b)  The
      Company will file and the Trustee and the Collateral Agent are hereby authorized
      to file such financing statements and continuation statements, and perform
      such
      acts necessary or desirable to perfect and maintain a first priority security
      interests in the Collateral and the Additional Collateral granted in Section
      1.03(a) of this Indenture. In the case of any Additional Collateral, the Company
      shall do all such things within 90 days of December 31, 2005 or such earlier
      date as the financial strength ratings of the Pooled Companies from A.M. Best
      are reduced to below B++. 

     

    (c)  If
      any
      provisions of the Collateral Agent Agreement limit, qualify or conflict with
      the
      duties imposed by the provisions of the Trust Indenture Act, the Trust Indenture
      Act will control.

     

    (d)  As
      more
      fully set forth in, and subject to the provisions of, the Collateral Agent
      Agreement, the Holders, and the Trustee and the Collateral Agent on behalf
      of
      such Holders, will have rights in and to the Collateral and the Additional
      Collateral that are subject to the rights that have been or may be created
      in
      favor of the holders of the New Debentures and the holders of the 144A
      Debentures. 

     

    (e)  As
      among
      the Holders, the Collateral and the Additional Collateral shall be held for
      the
      equal and ratable benefit of the Holders without preference, priority or
      distinction of any thereof over any other. 

     

    (f)  In
      the
      event the Trustee acts as Collateral Agent, the Trustee (i) shall not be deemed
      to have breached its fiduciary duty as Trustee to the Holders as a result of
      the
      performance of its duties as Collateral Agent to the extent it acts in
      compliance with the Collateral Agent Agreement and (ii) shall not be liable
      to
      the Holders for any such action or 

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    inaction.
      The rights and interests created under this Indenture shall be subject to the
      terms of the Collateral Agent Agreement. 

     

    (g)  The
      Company will do or cause to be done all such acts and things as may be required
      by the provisions of the Collateral Agent Agreement to which it is a party,
      to
      assure and confirm to the Trustee and the Collateral Agent, the Liens on the
      Collateral and the Additional Collateral contemplated by the Indenture and
      the
      Collateral Agent Agreement to which it is a party, as from time to time
      constituted, so as to render the same available for the security and benefit
      of
      this Indenture and of the Senior Notes secured thereby, as applicable, according
      to the intent and purposes herein and therein expressed. The Company will take
      all actions required pursuant to the Indenture and the Collateral Agent
      Agreement to cause the Liens created pursuant to the Indenture to be valid,
      enforceable and perfected (except as expressly provided therein) Liens in and
      on
      all the Collateral and the Additional Collateral in favor of the Collateral
      Agent for the benefit of the Trustee and for the equal and ratable benefit
      of
      the Holders of the Senior Notes, the holders of the Company’s New Debentures and
      the holders of the Company’s 144A Debentures. With respect to any proceeds that
      are cash or cash equivalents, the Company shall deposit such proceeds into
      an
      account under the control of the Collateral Agent in accordance with the
      provisions of the Collateral Agent Agreement. 

     

    Section
      1.04  Release
      of Security Interest in Collateral and Additional Collateral. 

     

    (a)  Additionally,
      in the event of a sale or other disposition of Collateral (or Additional
      Collateral) in compliance with the provisions of Section 3.04 of the indenture
      pursuant to which the New Debentures were issued and the provisions of Section
      3.04 of the indenture pursuant to which the 144A Debentures were issued, the
      Liens securing the Senior Notes, the New Debentures and the 144A Debentures
      will
      automatically terminate as to the assets sold on the date of their sale and
      as
      to the Net Cash Proceeds at the close of business on the Business Day
      immediately prior to any Asset Sale Purchase Date (as defined in the indenture
      under which the New Debentures and the indenture under which the 144A Debentures
      were issued). 

     

    The
      Company shall have the right to obtain automatic release of items of Collateral
      (and Additional Collateral) (the “Released Interest”) securing the Senior Notes,
      the New Debentures and the 144A Debentures upon compliance with the condition
      that the Company deliver to the Trustee and the Collateral Agent the following:
      

     

    (i)  a
      notice
      from the Company requesting the release of the Released Interest describing
      the
      proposed Released Interest and certifying that the conditions to an Asset Sale
      (as defined in the indenture under which the New Debentures and the indenture
      under which the 144A Debentures were issued) in the indenture for the New
      Debentures and the indenture for the 144A Debentures have been met;
      and

     

    (ii)  an
      Officers’ Certificate stating that: 

     

    (1)  (a)
      such
      Asset Sale of Collateral or Additional Collateral does not include the sale
      of
      assets other than the Released Interest and (b) 

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

    such
      Asset Sale complies with the terms and conditions of Section 3.04 of the
      indenture for the New Debentures and Section 3.04 of the indenture for the
      144A
      Debentures with respect to Asset Sales; 

     

    (2)  all
      conditions precedent in the Indenture relating to the release in question have
      been complied with; and 

     

    (3)  no
      Default or Event of Default has occurred or would occur immediately prior to
      or
      immediately after such release; 

     

    (iii)  all
      documentation necessary to evidence the grant to the Trustee (or any collateral
      agent), on behalf of the Holders of the Senior Notes and perfection of a
      security interest in and Lien (of the same priority as the Lien on the assets
      subject to the Asset Sale) on all consideration other than Net Cash Proceeds
      received in such Asset Sale, if any, equal and ratable with a security interest
      in and Lien on such consideration in favor of the trustee for the holders of
      the
      New Debentures and the trustee for 144A Debentures; and 

     

    (iv)  all
      documentation required by the Trust Indenture Act prior to the release of
      Collateral and the Additional Collateral by the Trustee. 

     

    (b)  Any
      automatic release of items of Collateral (and Additional Collateral) securing
      the Senior Notes and the New Debentures and the 144A Debentures made in
      compliance with the provisions of this Section 1.04 shall not be deemed to
      impair the security under this Third Supplemental Indenture in contravention
      of
      the provisions hereof.

     

    Section
      1.05  Authorization
      of Actions to be Taken by Collateral Agent Under the Collateral Agent
      Agreement. 

     

    The
      Collateral Agent may (but shall not be obligated to), in its sole discretion
      and
      without the consent of the Holders, on behalf of the Trustee and the Holders,
      take all actions it deems necessary or appropriate in order to (a) enforce
      any
      of the terms of the Collateral Agent Agreement and (b) collect and receive
      any and all amounts payable in respect of the obligations of the Company
      hereunder. The Trustee, directly or through the Collateral Agent, shall have
      the
      power to institute and to maintain such suits and proceedings as it may deem
      expedient to prevent any impairment of the Collateral and the Additional
      Collateral by any acts that may be unlawful or in violation of the Collateral
      Agent Agreement or this Indenture, and such suits and proceedings as the Trustee
      may deem expedient to preserve or protect its interests and the interests of
      the
      Holders in the Collateral and the Additional Collateral (including power to
      institute and maintain suits or proceedings to restrain the enforcement of
      or
      compliance with any legislative or other government enactment, rule or order
      that may be unconstitutional or otherwise invalid if the enforcement of, or
      compliance with, such enactment, rule or order would impair the security
      interest hereunder or be prejudicial to the interests of the Holders or of
      the
      Trustee). 

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

    Section
      1.06  Authorization
      of Receipt of Funds by the Trustee Under the Collateral Agent
      Agreement. 

     

    The
      Trustee, directly or through Collateral Agent, is authorized to receive any
      funds for the benefit of the Holders distributed under the Collateral Agent
      Agreement, and to make further distributions of such funds to the Holders
      according to the provisions of this Indenture and the Collateral Agent
      Agreement. 

     

    Section
      1.07  Authorization
      of Trustee to Enter into the Collateral Agent Agreement.

     

    The
      Trustee, hereby agrees that it shall, upon the written request of the Company,
      enter into the Collateral Agent Agreement appointing a Collateral Agent to
      hold
      and enforce rights against the Collateral and Additional Collateral on behalf
      of
      the Trustee, the trustee for the Company’s New Debentures and the trustee for
      the Company’s 144A Debentures. The Trustee and the Company may enter into
      amendments to the Collateral Agent Agreement without the consent of the Holders;
      provided, however, that the consent of the Holders shall be required for any
      amendment that would adversely affect the Holders’ rights in the Collateral or
      Additional Collateral.

     

    ARTICLE
      II

     

    MISCELLANEOUS
      PROVISIONS

     

    Section
      2.01  Recitals
      by Company. 

     

    The
      recitals in this Third Supplemental Indenture are made by the Company only
      and
      not by the Trustee, and all of the provisions contained in the Original
      Indenture in respect of the rights, privileges, immunities, powers and duties
      of
      the Trustee shall be applicable in respect of the Senior Notes and of this
      Third
      Supplemental Indenture as fully and with like effect as if set forth herein
      in
      full. 

     

    Section
      2.02  Ratification
      and Incorporation of Original Indenture. 

     

    As
      supplemented hereby, the Original Indenture is in all respects ratified and
      confirmed, and the Original Indenture, the Second Supplemental Indenture and
      this Third Supplemental Indenture shall be read, taken and construed as one
      and
      the same instrument. 

     

    Section
      2.03  Executed
      in Counterparts. 

     

    This
      Third Supplemental Indenture may be simultaneously executed in several
      counterparts, each of which shall be deemed to be an original, and such
      counterparts shall together constitute but one and the same instrument.


     

    


     


    
      
        
        

      

      
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    IN
      WITNESS WHEREOF, the parties hereto have caused this Third Supplemental
      Indenture to be duly executed as of the day and year first above written.


     

    


     

    
      	
              PMA
                CAPITAL CORPORATION

            
	 	 
	 	 
	 	 
	
              By:

            	
              /s/William
                E. Hitselberger

            
	 	
              William
                E. Hitselberger

            
	 	
              Senior
                Vice President, Chief Financial Officer and Treasurer

            
	 	 
	 	 
	 	 
	
              U.S.
                BANK NATIONAL ASSOCIATION, as Trustee

            
	 	 
	 	 
	 	 
	
              By:

            	
              /s/
                Michael M. Hopkins

            
	 	
              Michael
                M. Hopkins

            
	 	
              Vice
                President