EXHIBIT 10.36


 


EXECUTION COPY


 




 





PARENT GUARANTEE AGREEMENT


 


by and between


 


CASTLEPOINT HOLDINGS, LTD.


 


and


 


WILMINGTON TRUST
COMPANY


 


Dated as of December 14, 2006




 





 

















 


TABLE OF CONTENTS


 


	
   

  	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE I

  	
   

  	
  DEFINITIONS
  AND INTERPRETATION

  	
   

  	
  2

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 1.1

  	
   

  	
  Definitions and Interpretation

  	
   

  	
  2

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE II

  	
   

  	
  POWERS,
  DUTIES AND RIGHTS OF THE GUARANTEE TRUSTEE

  	
   

  	
  6

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 2.1

  	
   

  	
  Powers and Duties of the Guarantee Trustee

  	
   

  	
  6

  
	
  Section 2.2

  	
   

  	
  Certain Rights of the Guarantee Trustee

  	
   

  	
  8

  
	
  Section 2.3

  	
   

  	
  Not Responsible for Recitals or Issuance of
  Guarantee

  	
   

  	
  9

  
	
  Section 2.4

  	
   

  	
  Events of Default; Waiver

  	
   

  	
  9

  
	
  Section 2.5

  	
   

  	
  Events of Default; Notice

  	
   

  	
  10

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE III

  	
   

  	
  GUARANTEE
  TRUSTEE

  	
   

  	
  10

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 3.1

  	
   

  	
  Guarantee Trustee; Eligibility

  	
   

  	
  10

  
	
  Section 3.2

  	
   

  	
  Appointment, Removal and
  Resignation of the Guarantee Trustee

  	
   

  	
  11

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IV

  	
   

  	
  GUARANTEE

  	
   

  	
  11

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 4.1

  	
   

  	
  Guarantee

  	
   

  	
  11

  
	
  Section 4.2

  	
   

  	
  Waiver of Notice and Demand

  	
   

  	
  12

  
	
  Section 4.3

  	
   

  	
  Obligations Not Affected

  	
   

  	
  13

  
	
  Section 4.4

  	
   

  	
  Rights of Holders

  	
   

  	
  14

  
	
  Section 4.5

  	
   

  	
  Guarantee of Payment

  	
   

  	
  14

  
	
  Section 4.6

  	
   

  	
  Subrogation

  	
   

  	
  14

  
	
  Section 4.7

  	
   

  	
  Independent Obligations

  	
   

  	
  14

  
	
  Section 4.8

  	
   

  	
  Enforcement by a Beneficiary

  	
   

  	
  15

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE V

  	
   

  	
  LIMITATION
  OF TRANSACTIONS; RANKING

  	
   

  	
  15

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 5.1

  	
   

  	
  Limitation of Transactions

  	
   

  	
  15

  
	
  Section 5.2

  	
   

  	
  Ranking

  	
   

  	
  16

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VI

  	
   

  	
  TERMINATION

  	
   

  	
  17

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 6.1

  	
   

  	
  Termination

  	
   

  	
  17

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VII

  	
   

  	
  INDEMNIFICATION

  	
   

  	
  17

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 7.1

  	
   

  	
  Exculpation

  	
   

  	
  17

  
	
  Section 7.2

  	
   

  	
  Indemnification

  	
   

  	
  17

  
	
  Section 7.3

  	
   

  	
  Compensation;
  Reimbursement of Expenses

  	
   

  	
  18

  



 


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  ARTICLE VIII

  	
   

  	
  MISCELLANEOUS

  	
   

  	
  19

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 8.1

  	
   

  	
  Successors and
  Assigns

  	
   

  	
  19

  
	
  Section 8.2

  	
   

  	
  Company May
  Consolidate, etc., on Certain Terms

  	
   

  	
  19

  
	
  Section 8.3

  	
   

  	
  Amendments

  	
   

  	
  19

  
	
  Section 8.4

  	
   

  	
  Notices

  	
   

  	
  20

  
	
  Section 8.5

  	
   

  	
  Benefit

  	
   

  	
  20

  
	
  Section 8.6

  	
   

  	
  Governing Law

  	
   

  	
  21

  
	
  Section 8.7

  	
   

  	
  Counterparts

  	
   

  	
  21

  
	
  Section 8.8

  	
   

  	
  Separability

  	
   

  	
  22

  



 


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PARENT GUARANTEE AGREEMENT


 


This PARENT
GUARANTEE AGREEMENT (this “Guarantee”), dated as of December 14, 2006, is
executed and delivered by CastlePoint Holdings, Ltd., a Bermuda corporation
(the “Guarantor”), and Wilmington Trust Company, a banking corporation,
organized under the laws of the State of Delaware, (the “Guarantee Trustee”),
for the benefit of the Holders (as defined herein) from time to time of the
Debentures (as defined herein) of CastlePoint Management Corp., a Delaware
corporation and a wholly owned subsidiary of the Guarantor (the “Company”), and
the Capital Securities (as defined herein) of CastlePoint Management Statutory
Trust II, a Delaware statutory trust (the “Issuer”).


 


WHEREAS,
pursuant to an Amended and Restated Declaration of Trust (the “Declaration”),
dated as of the date hereof among Wilmington Trust Company, not in its
individual capacity but solely as institutional trustee, the administrators of
the Issuer named therein, the Company, as sponsor of the Issuer, and the
holders from time to time of undivided beneficial interests in the assets of
the Issuer, the Issuer is issuing on the date hereof those undivided beneficial
interests, having an aggregate liquidation amount of $50,000,000 (the “Capital
Securities”);


 


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


 


WHEREAS,
pursuant to an indenture of trust (the “Indenture”) dated as of the date hereof
between the Company and Wilmington Trust Company, not in its individual
capacity but solely as trustee, the Company is issuing on the date hereof
$51,547,000 aggregate principal amount of Floating Rate Junior Subordinated
Deferrable Interest Debentures (the “Debentures”);


 


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


 


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


 


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


 

















 


ARTICLE I



DEFINITIONS AND INTERPRETATION


 


Section 1.1            Definitions
and Interpretation.


 


In this
Guarantee, unless the context otherwise requires:


 


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


 


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


 


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


 


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


 


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


 


(f)            a reference to the
singular includes the plural and vice versa.


 


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


 


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


 


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


 


“Authorized
Agent” has the meaning set forth in Section 8.6.


 


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


 


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


 


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


 


“Company”
means CastlePoint Management Corp. and each of its successors and assigns.


 


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


 


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


 


“Covered
Person” means any Holder of Debentures or Capital Securities.


 


“Debentures”
means the debt securities of the Company designated the Floating Rate Junior
Subordinated Deferrable Interest Debentures due 2034 held by the Institutional
Trustee (as defined in the Declaration) of the Issuer.


 


“Declaration”
has the meaning set forth in the recitals.


 


“Declaration
Event of Default” means an “Event of Default” as defined in the
Declaration.


 


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


 


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


 


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


 


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


 


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


 


“Guarantor”
means CastlePoint Holdings, Ltd. and each of its successors and assigns.


 


“Holder”
means (i) any holder, as registered on the books and records of the Indenture
Trustee, of any Debenture or (ii) any holder, as registered on the books and
records of the Issuer, of any Capital Securities; provided, however,
that, in determining whether the Holders


 


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of the
requisite percentage of Debentures and Capital Securities have given any
request, notice, consent or waiver hereunder, “Holder” shall not include the
Guarantor or any Affiliate of the Guarantor.


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


“Optional
Redemption Price” has the meaning set forth in the Indenture.


 


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


 


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


 


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


 


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“Special
Event” has the meaning set forth in the Indenture.


 


“Special Redemption
Price” has the meaning set forth in the Indenture.


 


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


 


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


 


ARTICLE II



POWERS, DUTIES AND RIGHTS OF THE

GUARANTEE TRUSTEE


 


Section 2.1            Powers
and Duties of the Guarantee Trustee.


 


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


 


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


 


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


 


6

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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Section 2.2            Certain
Rights of the Guarantee Trustee.


 


(a)           Subject
to the provisions of Section 2.1:


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


Section 2.3            Not
Responsible for Recitals or Issuance of Guarantee.


 


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


 


Section 2.4            Events
of Default; Waiver.


 


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


 


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


 


9

















 


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


 


Section 2.5            Events
of Default; Notice.


 


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


 


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


 


ARTICLE III



GUARANTEE TRUSTEE


 


Section 3.1            Guarantee
Trustee; Eligibility.


 


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


 


(i)            not be an Affiliate of
the Guarantor, and


 


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


 


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


 


10

















 


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


 


Section 3.2            Appointment,
Removal and Resignation of the Guarantee Trustee.


 


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


 


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


 


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


 


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


 


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


 


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


 


ARTICLE IV



GUARANTEE


 


Section 4.1            Guarantee.


 


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


 


11

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


Section 4.2            Waiver
of Notice and Demand.


 


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


 


12

















 


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


 


Section 4.3            Obligations
Not Affected.


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


13

















 


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


 


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


 


Section 4.4            Rights
of Holders.


 


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


 


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


 


Section 4.5            Guarantee
of Payment.


 


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


 


Section 4.6            Subrogation.


 


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


 


Section 4.7            Independent
Obligations.


 


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


 


14

















 


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


 


Section 4.8            Enforcement
by a Beneficiary.


 


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


 


ARTICLE V



LIMITATION OF TRANSACTIONS; RANKING


 


Section 5.1            Limitation
of Transactions.


 


So long as any
Debentures or Capital Securities remain outstanding, if (a) there shall
have occurred and be continuing an Event of Default or a Declaration Event of
Default or (b) the dollar amount of the Guarantor’s and the subsidiaries’ gross
written premiums on a consolidated basis from insurance policies in any
calendar year fails to exceed 51% of the Guarantor’s and the subsidiaries’
gross written premiums on a consolidated basis from insurance policies in the
previous calendar year; (c) the Guarantor and its subsidiaries on a
consolidated basis sell more than 51% of its rights to renew insurance policies
in any single transaction or series of related transactions; (d) any
Significant Subsidiary (as defined in Section 1-02(w) of Regulation S-X to
the Securities Act (the “Significant Subsidiaries”)) of the Guarantor which is
rated by A.M. Best Company, Inc. (x) receives a rating from A.M. Best Company
Inc. of B- or lower; or (y) submits a request to withdraw its rating by A.M
Best Company, Inc.; (e) the Company shall be in default with respect to
its payment of any obligations under the Capital Securities Guarantee; or
(f) the Company shall have selected an Extension Period as provided in the
Declaration and such period, or any extension thereof, shall have commenced and
be continuing, then the Guarantor shall not and shall not permit any Subsidiary
to (x) declare or pay any dividends or distributions on, or redeem,
purchase, acquire, or make a liquidation payment with respect to, any of the
Guarantor’s or such Subsidiary’s capital stock (other than payments of
dividends or distributions to the Company or the Guarantor or any Subsidiary
thereof) or make any guarantee payments with respect to the foregoing;
(y) make any payment of principal of or interest or premium, if any, on or
repay, repurchase or redeem any debt securities of the Company or the Guarantor
or any Subsidiary thereof that rank pari
passu in all respects with or junior in interest to the Debentures;
or (z) enter into, amend or modify any contract with a shareholder owning more
than 10% of the outstanding shares of the common stock of the


 


15

















 


Guarantor that
could require cash payments by the Guarantor to such shareholder, other than
with Tower Group, Inc. or any of its wholly-owned subsidiaries, that could
require cash payments by the Sponsor to such shareholder (other than, with
respect to clauses (x) and (y) above, (i) repurchases, redemptions or
other acquisitions of shares of capital stock of the Company or the Guarantor
or any Subsidiary thereof in connection with any employment contract, benefit
plan or other similar arrangement with or for the benefit of one or more
employees, officers, directors or consultants, in connection with a dividend
reinvestment or stockholder stock purchase plan or in connection with the
issuance of capital stock of the Company or the Guarantor, or of such
Subsidiary, as the case may be (or securities convertible into or exercisable
for such capital stock) as consideration in an acquisition transaction entered
into prior to the occurrence of the Event of Default, Declaration Event of
Default or selection of an Extension Period by the Company, as applicable,
(ii) as a result of any exchange or conversion of any class or series of
the Company’s or the Guarantor’s capital stock (or any capital stock of a
Subsidiary of the Company or the Guarantor) for any class or series of the
Company’s or the Guarantor’s capital stock, as the case may be (or in the case
of a Subsidiary of the Company or Guarantor, any class or series of such
Subsidiary’s capital stock), or of any class or series of the Company’s or the
Guarantor’s indebtedness for any class or series of the Company or the
Guarantor’s capital stock, as the case may be (or in the case of indebtedness
of a Subsidiary of the Company or Guarantor, of any class or series of such
Subsidiary’s indebtedness for any class or series of such Subsidiary’s capital
stock), (iii) the purchase of fractional interests in shares of the
Company’s or the Guarantor’s capital stock (or the capital stock of a
Subsidiary of the Guarantor) pursuant to the conversion or exchange provisions
of such capital stock or the security being converted or exchanged,
(iv) any declaration of a dividend in connection with any stockholders’
rights plan, or the issuance of rights, stock or other property under any
stockholders’ rights plan, or the redemption or repurchase of rights pursuant
thereto, (v) any dividend in the form of stock, warrants, options or other
rights where the dividend stock or the stock issuable upon exercise of such
warrants, options or other rights is the same stock as that on which the dividend
is being paid or ranks pari passu
with or junior to such stock and any cash payments in lieu of fractional shares
issued in connection therewith, or (vi) payments under this Guarantee).


 


Section 5.2            Ranking.


 


This Guarantee
will constitute an unsecured obligation of the Guarantor and will rank
subordinate and junior in right of payment to all present and future Senior
Indebtedness of the Guarantor.  The right
of the Guarantor to participate in any distribution of assets of any of its
Subsidiaries upon any such Subsidiary’s liquidation or reorganization or
otherwise is subject to the prior claims of creditors of that Subsidiary,
except to the extent the Guarantor may itself be recognized as a creditor of
that Subsidiary.  The Guarantor’s
obligations in respect of this Guarantee shall rank pari passu with the
Guarantor’s obligations under the Guarantee Agreement by and between the
Guarantor and Wilmington Trust Company, dated as of December 1, 2006.  Accordingly, the Guarantor’s obligations
under this Guarantee will be effectively subordinated to all existing and
future liabilities of the Guarantor’s Subsidiaries, and claimants should look
only to the assets of the Guarantor for payments hereunder.  This Guarantee does not limit the incurrence
or issuance of other secured or unsecured debt of the Guarantor under any
indenture or other instrument that the Guarantor may enter into in the future
or otherwise.


 


16

















 


ARTICLE VI



TERMINATION


 


Section 6.1            Termination.


 


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


 


ARTICLE VII



INDEMNIFICATION


 


Section 7.1            Exculpation.


 


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


 


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


 


Section 7.2            Indemnification.


 


(a)           The
Guarantor agrees to indemnify each Indemnified Person for, and to hold each
Indemnified Person harmless against, any and all loss, liability, damage, claim
or expense incurred without negligence or willful misconduct on the part of the
Indemnified Person, arising out of or in connection with the acceptance or
administration of the trust or trusts hereunder, including, but not limited to,
the costs and expenses (including reasonable legal fees and


 


17

















 


expenses)
of the Indemnified Person defending itself against, or investigating, any claim
or liability in connection with the exercise or performance of any of the
Indemnified Person’s powers or duties hereunder.  The obligation to indemnify as set forth in
this Section 7.2 shall survive the resignation or removal of the Guarantee
Trustee and the termination of this Guarantee.


 


(b)           Promptly
after receipt by an Indemnified Person under this Section 7.2 of notice of
the commencement of any action, such Indemnified Person will, if a claim in
respect thereof is to be made against the Guarantor under this
Section 7.2, notify the Guarantor in writing of the commencement thereof;
but the failure so to notify the Guarantor (i) will not relieve the
Guarantor from liability under paragraph (a) above unless and to the
extent that the Guarantor did not otherwise learn of such action and such
failure results in the forfeiture by the Guarantor of substantial rights and
defenses and (ii) will not, in any event, relieve the Guarantor from any
obligations to any Indemnified Person other than the indemnification obligation
provided in paragraph (a) above. 
The Guarantor shall be entitled to appoint counsel of the Guarantor’s
choice at the Guarantor’s expense to represent the Indemnified Person in any
action for which indemnification is sought (in which case the Guarantor shall
not thereafter be responsible for the fees and expenses of any separate counsel
retained by the Indemnified Person or Persons except as set forth below); provided,
however, that such counsel shall be reasonably satisfactory to the
Indemnified Person.  Notwithstanding the
Guarantor’s election to appoint counsel to represent the Guarantor in an
action, the Indemnified Person shall have the right to employ separate counsel
(including local counsel), and the Guarantor shall bear the reasonable fees,
costs and expenses of such separate counsel if (i) the use of counsel
chosen by the Guarantor to represent the Indemnified Person would present such
counsel with a conflict of interest, (ii) the actual or potential
defendants in, or targets of, any such action include both the Indemnified
Person and the Guarantor and the Indemnified Person shall have reasonably concluded
that there may be legal defenses available to it and/or other Indemnified
Person(s) which are different from or additional to those available to the
Guarantor, (iii) the Guarantor shall not have employed counsel
satisfactory to the Indemnified Person to represent the Indemnified Person
within a reasonable time after notice of the institution of such action or
(iv) the Guarantor shall authorize the Indemnified Person to employ
separate counsel at the expense of the Guarantor.  The Guarantor will not, without the prior
written consent of the Indemnified Persons, settle or compromise or consent to
the entry of any judgment with respect to any pending or threatened claim,
action, suit or proceeding in respect of which indemnification or contribution
may be sought hereunder (whether or not the Indemnified Persons are actual or
potential parties to such claim or action) unless such settlement, compromise
or consent includes an unconditional release of each Indemnified Person from
all liability arising out of such claim, action, suit or proceeding.


 


Section 7.3            Compensation;
Reimbursement of Expenses.


 


The Guarantor
agrees:


 


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


 


18

















 


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


 


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


 


ARTICLE VIII



MISCELLANEOUS


 


Section 8.1            Successors
and Assigns.


 


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


 


Section 8.2            Company
May Consolidate, etc., on Certain Terms.


 


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


 


Section 8.3            Amendments.


 


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


 


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The provisions
of the Declaration with respect to amendments thereof apply to the giving of
such approval.


 


Section 8.4            Notices.


 


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


 


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


 


Wilmington
Trust Company

1100 North Market Street

Wilmington, Delaware 19890

Attention:  Corporate Trust
Administration

Telecopy:  302-636-4140


 


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


 


CastlePoint
Holdings, Ltd.

Clarendon House

2 Church Street

Hamilton HM

Bermuda

Attention:  Joel Weiner, Chief Financial
Officer

Telecopy:  441-292-4720


 


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


 


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


 


Section 8.5            Benefit.


 


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


 


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Section 8.6            Governing
Law.


 


(a)           PURSUANT
TO SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK, THIS
GUARANTEE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAW PROVISIONS.


 


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


 


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


 


Section 8.7            Counterparts.


 


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


 


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Section 8.8            Separability.


 


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


 


Signatures appear on the following page


 


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


 


	
   

  	
  CASTLEPOINT HOLDINGS, LTD.,
  as

  Guarantor

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ JOEL S. WEINER

  
	
   

  	
   

  	
  Name: Joel S. Weiner

  
	
   

  	
   

  	
  Title: Senior Vice President and Chief
  Financial Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  WILMINGTON TRUST COMPANY,
  as

  Guarantee Trustee

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ CHRISTOPHER J. SLAYBAUGH

  
	
   

  	
   

  	
  Name: Christopher J. Slaybaugh

  
	
   

  	
   

  	
  Title: Senior Financial Services Officer

  
					



 


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