Document:

Exhibit 10.1

                                 AMENDMENT NO. 5
                          TO REVOLVING CREDIT AGREEMENT

                  This  AMENDMENT  NO. 5 TO  REVOLVING  CREDIT  AGREEMENT  (this
"AMENDMENT")  is dated as of December  17,  2004,  by and among (a) FRIENDLY ICE
CREAM CORPORATION, a Massachusetts corporation (the "BORROWER"), (b) the Lenders
and (c) FLEET  NATIONAL BANK, as  administrative  agent for the Lenders party to
the Revolving Credit Agreement (as hereinafter  defined) (in such capacity,  the
"ADMINISTRATIVE AGENT").  Capitalized terms as used and not otherwise defined in
this Amendment  shall have the meanings  assigned to such terms in the Revolving
Credit Agreement.

                  WHEREAS,  the  Borrower,  the Lenders  and the  Administrative
Agent are  parties  to that  certain  Revolving  Credit  Agreement,  dated as of
December 17, 2001 (as  heretofore  amended or otherwise  amended,  modified,  or
amended and restated  and in effect  immediately  prior to the date hereof,  the
"REVOLVING CREDIT AGREEMENT";  the Revolving Credit Agreement as further amended
by this Amendment, the "AMENDED REVOLVING CREDIT AGREEMENT");

                  WHEREAS, the Borrower has requested that the Lenders (a) amend
certain  financial  covenants under the Revolving Credit Agreement and (b) agree
to certain other amendments and modifications to the Revolving Credit Agreement,
in each case as set forth herein; and

                  WHEREAS,  pursuant to the terms, subject to the conditions and
in reliance on the representations  and warranties  contained in this Amendment,
the undersigned  Lenders are prepared to (a) amend certain  financial  covenants
under the Revolving  Credit  Agreement and (b) agree to certain other amendments
and modifications to the Revolving Credit  Agreement,  in each case as set forth
herein.

                  NOW THEREFORE, in consideration of the premises and the mutual
covenants contained in this Amendment,  the Borrower,  the Administrative  Agent
and the Lenders hereby agree as follows:

                  SECTION 1. AMENDMENT TO REVOLVING CREDIT AGREEMENT.

                  1.1. CERTAIN DEFINED TERMS. Section 1.1 of the Revolving
Credit Agreement is hereby amended as follows:

                  (a)  by  inserting  the  following  new  defined  term  in the
appropriate alphabetical sequence in such Section 1.1:

                  "ASSET SALE CAPITAL EXPENDITURE PROCEEDS.  See ss.3(b)(i)."

                  "FIFTH  AMENDMENT.  The  Amendment  No. 5 to Revolving  Credit
Agreement, dated as of December 17, 2004, among the

Borrower, the Lenders and the Administrative Agent."

                  "FIFTH  AMENDMENT  EFFECTIVE  DATE.  The  date  on  which  all
conditions  precedent to the Fifth Amendment hereto shall have been satisfied or
waived by the Lenders."
<PAGE>

                  "MAINTENANCE CAPITAL  EXPENDITURES.  Capital Expenditures that
are not Growth Capital  Expenditures.  For purposes of calculating the financial
covenants in Section 10 hereof,  Maintenance  Capital  Expenditures shall be the
greater of (i) Maintenance  Capital  Expenditures  for such fiscal year and (ii)
$15,000,000."

                  (b) by deleting each reference to "0.50%" in the definition of
"Applicable  Margin" under the column labeled  "Commitment Fee" and substituting
in lieu thereof in each instance the percentage "0.75%".

                  (c)  by  amending  and   restating   in  their   entirety  the
definitions of "Fixed Charge Coverage  Ratio" and "Growth Capital  Expenditures"
as follows:

                  "FIXED CHARGE COVERAGE RATIO. As of any date of determination,
the ratio of (a)  Consolidated  EBITDAR,  minus,  the sum of (b)(i)  Maintenance
Capital  Expenditures less Asset Sale Capital Expenditure Proceeds not to exceed
$2,000,000  in the  aggregate  in any  fiscal  year,  and (ii) cash  income  tax
expense, to, the sum of (w) Consolidated Total Interest Expense payable in cash,
(x) actual and accrued  scheduled  principal  repayments of Indebtedness made or
accrued  during  such  period,   (y)  Rental  Expense  and  (z)  mandatory  cash
contributions made by the Borrower to any of its pension plans due to changes in
fair market value of pension plan assets (to the extent not already  deducted in
the calculation of Consolidated EBITDA)."

                  "GROWTH CAPITAL EXPENDITURES.  Capital Expenditures related to
(i) the  construction,  acquisition or opening of any new  restaurant  locations
during  any  fiscal  year,  PLUS (ii) the  expansion  and/or  conversion  of any
existing manufacturing and distribution  facilities during any fiscal year, PLUS
(iii) the opening of any new  manufacturing  and distribution  facilities during
any fiscal  year,  PLUS (iv) the Impact  Remodeling  Program as in effect on the
date of the Fifth Amendment Effective Date during any fiscal year."

                  1.2.  Section  3.2(b)(i) of the Revolving  Credit Agreement is
hereby  amended by deleting  clause (i) of Section  3.2(b) in its  entirety  and
substituting in lieu thereof the following new clause (i):

                  "(i) Net Cash Sale  Proceeds  from Asset Sales (other than (A)
the sale, lease,  license or other dispositions of assets in the ordinary course
of business  consistent with past practices,  (B) Asset Sales made in connection
with the Sale-Leaseback  Transaction and the FFCA Mortgage Financing, (C) Excess
Properties  Sales,  or (D) Permitted Unit Sales),  the Borrower shall pay to the
Administrative  Agent for the respective accounts of the Lenders an amount equal
to one hundred percent (100%) of such Net Cash Sale Proceeds; PROVIDED, HOWEVER,
that the  Borrower  may, at its option (as elected by the Borrower in writing to
the  Administrative  Agent on or prior to the event giving rise to such Net Cash
Sale Proceeds),  so long as in each fiscal year (commencing with the 2005 fiscal
year) the  aggregate  amount of such Net Cash Sale  Proceeds  reinvested  by the
Borrower  pursuant to this clause (i) shall not exceed $2,000,000 and so long as
no  Default  shall  have  occurred  and be  continuing,  reinvest  (or commit to
reinvest  as  evidence  by a binding  written  contract  upon  terms  reasonably
acceptable to the  Administrative  Agent) such Net Cash Sale Proceeds in Capital
Expenditures  to be used in the  business  of the  Borrower  and its  Restricted
Subsidiaries  within  180 days of  receipt  thereof  (the  "ASSET  SALE  CAPITAL
EXPENDITURE  PROCEEDS");  PROVIDED,  FURTHER,  HOWEVER  that any Net  Cash  Sale
Proceeds not so reinvested (or committed to be reinvested upon terms  reasonably
acceptable to the Administrative Agent) within 180 days of receipt thereof shall
be immediately applied to the prepayment of Loans as set forth in ss.3.4."

                                       2

<PAGE>

                  1.3.  Section  3.2(c) of the  Revolving  Credit  Agreement  is
hereby  amended by amending and  restating  such  subsection  in its entirety as
follows:

                  "(c) The Borrower shall repay in full to the Revolving  Credit
Lenders  all  principal,  interest  and  other  amounts  outstanding  under  the
Revolving  Credit  Loans (i) on or after May 1 and on or before  June 15 of each
calendar year during the term hereof,  commencing  with the 2006 calendar  year,
such that as of June 15 of each such  calendar  year (or the next  Business Day,
if, in any  year,  June 15 is not a  Business  Day) and for a period of not less
than 15 consecutive days immediately  following the date of such repayment,  the
amount  of  all  outstanding   Revolving  Credit  Loans  (excluding  all  Unpaid
Reimbursement Obligations) shall be zero; and (ii) on or after June 15 and on or
before  September 30 for the 2005 calendar  year,  such that as of September 30,
2005 (or the next Business Day, if,  September 30 is not a Business Day) and for
a period of not less than 30 consecutive days immediately  following the date of
such  repayment,  the amount of all outstanding  Revolving  Credit Loans and all
Unpaid Reimbursement  Obligations shall be zero. Such payments shall not be made
from  the  proceeds  of  the  Loans  or  any  other  Indebtedness   unless  such
Indebtedness is permitted pursuant to ss.9.1."

                  1.4. INTEREST  COVERAGE.  Section 10.1 of the Revolving Credit
Agreement is hereby  amended by amending and restating in its entirety the table
set forth at the end of such Section 10.1 as follows:

<TABLE>
<CAPTION>

                                     "PERIOD                                                RATIO
<S>                                                                                       <C>
   Fourth Fiscal Quarter of 2004 and First and Second Fiscal Quarters of 2005             2.00:1.00
                    Third and Fourth Fiscal Quarters of 2005                              2.15:1.00
                    First and Second Fiscal Quarters of 2006                              2.25:1.00
   Third and Fourth Fiscal Quarters of 2006 and each fiscal quarter thereafter            2.50:1.00
</TABLE>

                  1.5.  CAPITAL  EXPENDITURES.  Section  10.2  of the  Revolving
Credit  Agreement is hereby  amended by amending  and  restating in its entirety
such Section as follows:

                  "10.2.  CAPITAL  EXPENDITURES.  The Borrower will not make, or
         permit  any  Subsidiary  of the  Borrower  to make (a)  Growth  Capital
         Expenditures that exceed, in the aggregate, $7,000,000 per fiscal year,
         or (b)  Capital  Expenditures  in any fiscal year that  exceed,  in the
         aggregate,  the amount set forth  below  opposite  such fiscal year and
         such amount shall include any Growth Capital  Expenditures  during such
         fiscal year:

                                       3
<PAGE>

                             FISCAL YEAR            CAPITAL EXPENDITURES
                             -----------            --------------------
                                 2004                   $23,500,000
                                 2005                   $23,500,000
                                 2006                   $24,000,000
                                 2007                   $26,000,000

         PROVIDED,  HOWEVER,  THAT  (a)  if  the  Consolidated  EBITDA  for  any
Reference  Period ending during any period  described in the table below exceeds
the amount set forth  opposite such period in such table,  then the Borrower and
its  Subsidiaries  shall be permitted to make an  additional  $2,000,000  in the
aggregate in Capital Expenditures for each Fiscal Year identified above; and (b)
the Borrower and its Subsidiaries  shall be permitted to make additional Capital
Expenditures in any Fiscal Year identified above equal to the Asset Sale Capital
Expenditure   Proceeds   received  and   reinvested  in  the  Borrower  and  its
Subsidiaries  during such Fiscal Year (such additional Capital  Expenditures not
to exceed $2,000,000 in the aggregate):

                             FISCAL YEAR          CONSOLIDATED EBITDA
                             -----------          -------------------
                                 2005                 $52,000,000
                                 2006                 $55,000,000
                                 2007                 $57,000,000

                  1.6.  MINIMUM EBITDA.  Section 10.3(a) of the Revolving Credit
Agreement is hereby  amended by amending and restating in its entirety the table
set forth at the end of such Section 10.3(a) as follows:

<TABLE>
<CAPTION>

                                     "PERIOD                                               AMOUNT
                                      ------                                               ------
<S>                                                                                     <C>
                          Fourth Fiscal Quarter of 2004                                  $46,500,000
                          First Fiscal Quarter of 2005                                   $42,000,000
                          Second Fiscal Quarter of 2005                                  $45,000,000
                    Third and Fourth Fiscal Quarters of 2005                             $48,000,000
                          First Fiscal Quarter of 2006                                   $49,000,000
                          Second Fiscal Quarter of 2006                                  $50,000,000
                          Third Fiscal Quarter of 2006                                   $52,000,000
        Fourth Fiscal Quarter of 2006 and each fiscal quarter thereafter                $53,000,000"
</TABLE>

                                       4
<PAGE>

                  1.7.  MINIMUM  (QUARTERLY)  EBITDA.  Section 10.3(b) is hereby
amended  by  deleting  such  subsection  in  its  entirety  and  replacing  such
subsection with the following phrase: "[Intentionally Omitted]".

                  1.8.  LEVERAGE  RATIO.  Section 10.4 of the  Revolving  Credit
Agreement is hereby  amended by amending and restating in its entirety the table
set forth at the end of Section 10.4 as follows:

<TABLE>
<CAPTION>

                                     "PERIOD                                                RATIO
                                      ------                                                -----
<S>                                                                                      <C>
                          Fourth Fiscal Quarter of 2004                                   5.50:1.00
                          First Fiscal Quarter of 2005                                    5.75:1.00
                          Second Fiscal Quarter of 2005                                   5.50:1.00
                    Third and Fourth Fiscal Quarters of 2005                              5.00:1.00
                    First and Second Fiscal Quarters of 2006                              4.75:1.00
                    Third and Fourth Fiscal Quarters of 2006                              4.25:1.00
                         Each fiscal quarter thereafter                                  4.00:1.00"
</TABLE>

                  1.9.  FIXED  CHARGE  COVERAGE  RATIO.   Section  10.6  of  the
Revolving  Credit  Agreement is hereby  amended by amending and restating in its
entirety the table set forth at the end of Section 10.6 as follows:

<TABLE>
<CAPTION>

                                     "PERIOD                                                RATIO
<S>                                                                                       <C>  <C>
         Fourth Fiscal Quarter of 2004 and First Fiscal Quarter of 2005                   1.00:1.00
        Second Fiscal Quarter of 2005 and each fiscal quarter thereafter                 1.05:1.00"
</TABLE>

                  SECTION 2. REPRESENTATIONS AND WARRANTIES. The Borrower hereby
represents and warrants to the  Administrative  Agent and each Lender, on and as
of the date hereof, as follows:

                  (a) This Amendment has been duly executed and delivered by the
Borrower.  The execution and delivery by the Borrower of this  Amendment and the
performance by the Borrower of this Amendment and the Amended  Revolving  Credit
Agreement have been duly authorized by proper corporate or other  proceedings by
the Borrower,  and this  Amendment and the Amended  Revolving  Credit  Agreement
constitute the legal, valid and binding obligations of the Borrower, enforceable
against the Borrower in accordance with the terms hereof and thereof,  except as
enforceability is limited by bankruptcy, insolvency, reorganization,  moratorium
or other laws relating to or affecting  generally the  enforcement of creditors'
rights  and  general  principles  of  equity  and  except  to  the  extent  that
availability  of the remedy of  specific  performance  or  injunctive  relief is
subject to the discretion of the court before which any proceeding  therefor may
be brought.

                                       5
<PAGE>

                  (b) No Default or Event of Default  exists on the date  hereof
after giving effect to the amendments to the Revolving Credit Agreement effected
hereby.

                  SECTION 3. EFFECTIVENESS. This Amendment shall be deemed to be
effective as of the Fifth  Amendment  Effective Date only upon  satisfaction  of
each  of  the  following  conditions  precedent  to the  Administrative  Agent's
reasonable satisfaction, in each case on or prior to (or contemporaneously with)
the Fifth Amendment Effective Date:

                  (a)   AMENDMENT   TO   REVOLVING   CREDIT    AGREEMENT.    The
Administrative  Agent shall have received duly  executed  counterpart  signature
pages to this Amendment from each of the Borrower and the Lenders. The Amendment
Documents  shall be in full force and effect and shall be in form and  substance
reasonably satisfactory to the Administrative Agent.

                  (b) COSTS AND EXPENSES.  The Borrower shall pay, in accordance
with  Section  16.2  of  the  Revolving   Credit   Agreement,   all   reasonable
out-of-pocket  costs  and  expenses  incurred  by the  Administrative  Agent  in
connection  with  the   preparation,   negotiation,   execution,   delivery  and
enforcement  of this  Amendment,  including,  but not limited to, the reasonable
fees, expenses and disbursements of Bingham McCutchen LLP.

                  (c) FEES.  The  Administrative  Agent shall have received from
the Borrower the fee (the "AMENDMENT FEE") in the amount of $175,000 for the pro
rata account of the Lenders based upon their  Commitments  immediately  prior to
the Fifth Amendment Effective Date.

                  (d)  CORPORATE  OR  OTHER  ACTION;  CORPORATE  STRUCTURE.  All
corporate (or other)  action  necessary  for the valid  execution,  delivery and
performance by the Borrower of the Amendment  Documents shall have been duly and
effectively  taken, and evidence thereof  satisfactory to the Lenders shall have
been provided to each of the Lenders.

                  SECTION 4.  APPLICABLE  LAW. THIS AMENDMENT SHALL BE CONSTRUED
AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE  COMMONWEALTH  OF  MASSACHUSETTS
WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAW.

                  SECTION 5.  RATIFICATION  BY GUARANTORS.  By their  signatures
below, Friendly's Restaurants Franchise, Inc. and Friendly's International, Inc.
(collectively,  the  "Guarantors")  (a) ratify and confirm that certain Guaranty
dated as of the Initial  Closing Date delivered by Guarantors in connection with
the Revolving Credit Agreement (the  "Guaranty"),  (b) represent the Guaranty is
in full force and effect and (c) acknowledge  that the obligations and liability
of the Guarantors  thereunder have not been affected,  diminished or impaired in
any manner.

                                       6
<PAGE>

                  SECTION 6. MISCELLANEOUS.

                  6.1. From and after the date hereof,  this Amendment  shall be
deemed a Loan  Document for all purposes of the Revolving  Credit  Agreement and
the other Loan  Documents and each  reference to Loan Documents in the Revolving
Credit  Agreement and the other Loan  Documents  shall be deemed to include this
Amendment. This Amendment may be executed in any number of counterparts, each of
which shall  constitute an original but all of which when taken  together  shall
constitute but one agreement. Delivery of an executed counterpart of a signature
page by  facsimile  transmission  shall be  effective  as delivery of a manually
executed counterpart of this Amendment.

                  6.2. Except as expressly  provided herein,  (a) this Amendment
shall not limit the rights of or otherwise  adversely  affect the Lenders  under
the Revolving Credit  Agreement or any other Loan Document,  and (b) the Lenders
reserve the right to insist on strict compliance with the terms of the Revolving
Credit  Agreement  and the other  Loan  Documents,  and the  Borrower  expressly
acknowledges  such  reservation  of rights.  The grant of the consent and waiver
herein will not,  either alone or taken with other  waivers of provisions of the
Revolving  Credit  Agreement or any other Loan Document or consents with respect
thereto,  be deemed to create or be evidence of a course of conduct.  Any future
or additional waiver of any provision of the Revolving Credit  Agreement,  or of
any other Loan Document to which the Lenders are a party or have  consented,  or
consent with respect  thereto shall be effective  only if set forth in a writing
separate and distinct  from this  Amendment and duly executed by such parties as
are required by Section 16.12 of the Revolving Credit Agreement.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                       7
<PAGE>

                  IN WITNESS  WHEREOF,  each of the  undersigned has caused this
Amendment  to be executed  and  delivered  as an  agreement as of the date first
written above.

                      FRIENDLY ICE CREAM CORPORATION

                      By:    /s/ Paul V. Hoagland
                      --------------------------------------------------
                      Name:  Paul V. Hoagland
                      Title: Exec. VP of Administration & CFO

                      FLEET NATIONAL BANK,
                      individually and as Administrative Agent and as Lender

                      By:   /s/ Alexandra Burke
                      --------------------------------------------------
                      Name:  Alexandra Burke
                      Title: Director

                      CITIZENS BANK OF
                      MASSACHUSETTS,
                      individually and as Lender

                      By:  /s/ Cindy Chen
                      --------------------------------------------------
                      Name:   Cindy Chen
                      Title:  Vice President

                      BANKNORTH, N.A.,
                      individually and as Lender

                      By:   /s/ Maria P. Goncalves
                      --------------------------------------------------
                      Name:    Maria P. Goncalves
                      Title:   Vice President

                                       8
<PAGE>

SECTION 6 AGREED TO AND ACCEPTED:

FRIENDLY'S RESTAURANTS FRANCHISE, INC.,
     as Guarantor

By:  /s/ Paul V. Hoagland
   -----------------------------------------------------
     Name:  Paul V. Hoagland
     Title: Exec. VP of Administration & CFO

FRIENDLY'S INTERNATIONAL, INC.,
     as Guarantor

By: /s/ Paul V. Hoagland
   -----------------------------------------------------
     Name:   Paul V. Hoagland
     Title:  Exec. VP of Administration & CFO

                                       9EXHIBIT 10.01

                                TOWER GROUP, INC.

                            13,000 CAPITAL SECURITIES

                        FLOATING RATE CAPITAL SECURITIES

               (LIQUIDATION AMOUNT $1,000.00 PER CAPITAL SECURITY)

                               PLACEMENT AGREEMENT

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

                                                               December 17, 2004

Cohen Bros. & Co.
1818 Market Street
Philadelphia, Pennsylvania 19103

Ladies and Gentlemen:

         Tower Group, Inc., incorporated and existing under the laws of Delaware
(the "Company"), and its financing subsidiary, Tower Group Statutory Trust IV, a
Delaware  statutory  trust  (the  "Trust,"  and  hereinafter  together  with the
Company, the "Offerors"), hereby confirm their agreement (this "Agreement") with
Cohen Bros. & Company as placement agent (the "Placement Agent"), as follows:

     SECTION 1. ISSUANCE AND SALE OF SECURITIES.

          1.1  INTRODUCTION.  The  Offerors  propose  to  issue  and sell at the
     Closing (as defined in Section 2.3.1 hereof) 13,000 of the Trust's Floating
     Rate Capital Securities, with a liquidation amount of $1,000.00 per capital
     security (the "Capital  Securities"),  to Merrill Lynch  International (the
     "Purchaser")  pursuant  to the terms of a  Subscription  Agreement  entered
     into,  or to be entered into on or prior to the Closing Date (as defined in
     Section  2.3.1  hereof),  between  the  Offerors  and  the  Purchaser  (the
     "Subscription Agreement"),  the form of which is attached hereto as Exhibit
     A and incorporated herein by this reference.

          1.2 OPERATIVE  AGREEMENTS.  The Capital  Securities shall be fully and
     unconditionally  guaranteed  on a  subordinated  basis by the Company  with
     respect to distributions and amounts payable upon  liquidation,  redemption
     or  repayment  (the  "Guarantee")  pursuant  and  subject to the  Guarantee
     Agreement (the "Guarantee  Agreement"),  to be dated as of the Closing Date
     and executed and delivered by the Company and JPMorgan Chase Bank, National
     Association  ("Chase"),  as  trustee  (the  "Guarantee  Trustee"),  for the
     benefit  from time to time of the  holders of the Capital  Securities.  The
     entire  proceeds from the sale by the Trust to the Purchaser of the Capital
     Securities  shall be combined with the entire  proceeds from the concurrent

<PAGE>

     sale by the Trust to the  Company of its  common  securities  (the  "Common
     Securities"),  and shall be used by the Trust to  purchase  $13,403,000  in
     principal  amount  of the  Floating  Rate  Junior  Subordinated  Deferrable
     Interest  Debentures  (the  "Debentures")  of  the  Company.   The  Capital
     Securities and the Common Securities for the Trust shall be issued pursuant
     to an Amended and Restated  Declaration  of Trust among Chase,  as Delaware
     Trustee (the "Delaware  Trustee"),  Chase,  as  institutional  trustee (the
     "Institutional  Trustee"),  the  administrators of the Trust named therein,
     and the Company,  to be dated as of the Closing  Date and in  substantially
     the  form   heretofore   delivered  to  the  Placement  Agent  (the  "Trust
     Agreement").  The Debentures  shall be issued pursuant to an Indenture (the
     "Indenture"),  to be dated as of the Closing Date,  between the Company and
     Chase, as indenture trustee (the "Indenture  Trustee").  This Agreement and
     the  documents  identified  in  this  Section  1.2 and in  Section  1.1 are
     referred to herein as the "Operative Documents."

          1.3 RIGHTS OF PURCHASER.  The Capital  Securities shall be offered and
     sold by the Trust directly to the Purchaser without  registration of any of
     the  Capital  Securities,   the  Debentures  or  the  Guarantee  under  the
     Securities  Act of 1933, as amended (the  "Securities  Act"),  or any other
     applicable   securities   laws  in  reliance  upon   exemptions   from  the
     registration  requirements  of the  Securities  Act  and  other  applicable
     securities   laws.  The  Offerors  agree  that  this  Agreement   shall  be
     incorporated by reference into the Subscription Agreement and the Purchaser
     shall be entitled to each of the  benefits of the  Placement  Agent and the
     Purchaser under this Agreement and shall be entitled to enforce obligations
     of the Offerors  under this  Agreement as fully as if the Purchaser  were a
     party to this Agreement.  The Offerors and the Placement Agent have entered
     into  this  Agreement  to  set  forth  their   understanding  as  to  their
     relationship and their respective rights, duties and obligations.

          1.4 LEGENDS.  Upon original issuance  thereof,  and until such time as
     the same is no longer  required  under the applicable  requirements  of the
     Securities Act, the Capital  Securities and Debentures  certificates  shall
     each  contain  a  legend  as  required  pursuant  to any  of the  Operative
     Documents.

     SECTION 2. PURCHASE OF CAPITAL SECURITIES.

          2.1 EXCLUSIVE  RIGHTS;  PURCHASE PRICE. From the date hereof until the
     Closing  Date  (which  date may be  extended  by  mutual  agreement  of the
     Offerors  and the  Placement  Agent),  the  Offerors  hereby  grant  to the
     Placement  Agent the exclusive right to arrange for the sale of the Capital
     Securities  to the  Purchaser at a purchase  price of $1,000.00 per Capital
     Security.

          2.2  SUBSCRIPTION  AGREEMENT.  The  Offerors  hereby agree to evidence
     their  acceptance  of the  subscription  by  countersigning  a copy  of the
     Subscription Agreement and returning the same to the Placement Agent.

          2.3 CLOSING AND DELIVERY OF PAYMENT.

                 2.3.1  CLOSING;  CLOSING  DATE.  The sale and  purchase  of the
     Capital  Securities by the Offerors to the Purchaser  shall take place at a
     closing (the "Closing") at the offices of Bracewell & Patterson, L.L.P., at
     10:00  a.m.  (New York City  time) on  December  21,  2004,  or such  other
     business day as may be agreed upon by the Offerors and the Placement  Agent
     (the "Closing Date"); provided, however, that in no event shall the Closing
     Date  occur  later  than  December  29,  2004  unless  consented  to by the
     Purchaser.  Payment  by the  Purchaser  shall be  payable in the manner set
     forth in the  Subscription  Agreement  and shall be made prior to or on the
     Closing Date.

                                       2
<PAGE>

                 2.3.2 DELIVERY. The  certificate  for  the  Capital  Securities
     shall be in definitive form, registered in the name of the Purchaser or its
     nominee and in the aggregate amount of the Capital Securities  purchased by
     the Purchaser.

                 2.3.3   TRANSFER   AGENT.   The  Offerors   shall  deposit  the
     certificate  representing the Capital Securities with, or as instructed by,
     the Institutional Trustee on the Closing Date.

                 2.4 PLACEMENT AGENT FEES AND EXPENSES.

                 2.4.1 PLACEMENT AGENT  COMPENSATION.  Because the proceeds from
     the sale of the Capital Securities shall be used to purchase the Debentures
     from the  Company,  the Company  shall pay an  aggregate of $17.50 for each
     $1,000.00 of principal  amount of Debentures  sold to the Trust  (excluding
     the Debentures related to the Common Securities  purchased by the Company).
     Such amount shall be delivered to the  Institutional  Trustee or such other
     person designated by the Placement Agent on the Closing Date.

                 2.4.2  COSTS AND  EXPENSES.  Whether or not this  Agreement  is
     terminated  or the  sale of the  Capital  Securities  is  consummated,  the
     Company  hereby  covenants and agrees that it shall pay or cause to be paid
     (directly or by  reimbursement)  all reasonable costs and expenses incident
     to the performance of the obligations of the Offerors under this Agreement,
     including all fees,  expenses and  disbursements of counsel and accountants
     for the Offerors; the reasonable costs and charges of any trustee, transfer
     agent or  registrar  and the  fees  and  disbursements  of  counsel  to any
     trustee,  transfer  agent or  registrar  in each  case  only to the  extent
     attributable to the Debentures and the Capital  Securities;  all reasonable
     expenses  incurred by the Offerors  incident to the preparation,  execution
     and delivery of the Trust Agreement,  the Indenture, and the Guarantee; and
     all other reasonable costs and expenses  incident to the performance of the
     obligations of the Company hereunder and under the Trust Agreement.

          2.5  FAILURE  TO  CLOSE.  If  any  of the  conditions  to the  Closing
     specified  in  this  Agreement   shall  not  have  been  fulfilled  to  the
     satisfaction  of the  Placement  Agent  or if the  Closing  shall  not have
     occurred on or before 10:00 a.m.  (New York City time) on December 29, 2004
     or such later  Closing  Date  consented  to by the  Purchaser  pursuant  to
     Section  2.3.1,  then each party  hereto,  notwithstanding  anything to the
     contrary in this  Agreement,  shall be relieved of all further  obligations
     under this  Agreement  without  thereby  waiving  any rights it may have by
     reason of such  nonfulfillment  or  failure;  PROVIDED,  HOWEVER,  that the
     obligations of the parties under Sections 2.4.2,  7.5 and 9 shall not be so
     relieved and shall continue in full force and effect.

                                       3
<PAGE>

     SECTION 3. CLOSING  CONDITIONS.  The  obligations  of the Purchaser and the
     Placement  Agent on the Closing Date shall be subject to the  accuracy,  at
     and as of the Closing Date, of the  representations  and  warranties of the
     Offerors  contained in this  Agreement,  to the accuracy,  at and as of the
     Closing  Date, of the  statements of the Offerors made in any  certificates
     pursuant to this  Agreement,  to the  performance  by the Offerors of their
     respective  obligations under this Agreement,  to compliance,  at and as of
     the Closing Date, by the Offerors with their respective  agreements  herein
     contained, and to the following further conditions:

          3.1 OPINIONS OF COUNSEL.  On the Closing  Date,  the  Placement  Agent
     shall have received the following favorable opinions,  each dated as of the
     Closing Date: (a) from  McLaughlin & Stern,  LLP,  counsel for the Offerors
     and addressed to the Purchaser and the Placement Agent in substantially the
     form set forth on EXHIBIT B-1 attached  hereto and  incorporated  herein by
     this reference, (b) from Richards,  Layton & Finger, P.A., special Delaware
     counsel to the Offerors and addressed to the Purchaser, the Placement Agent
     and the  Offerors,  in  substantially  the form set  forth on  EXHIBIT  B-2
     attached hereto and  incorporated  herein by this  reference,  and (c) from
     Bracewell & Patterson,  L.L.P.,  special tax counsel to the  Offerors,  and
     addressed to the Placement  Agent and the Offerors,  in  substantially  the
     form set forth on EXHIBIT B-3 attached  hereto and  incorporated  herein by
     this reference,  subject to the receipt by Bracewell & Patterson, L.L.P. of
     a  representation  letter from the Company in the form set forth in EXHIBIT
     B-3 completed in a manner reasonably satisfactory to Bracewell & Patterson,
     L.L.P.  (collectively,  the "Offerors' Counsel Opinions"). In rendering the
     Offerors' Counsel Opinions,  counsel to the Offerors may rely as to factual
     matters  upon  certificates  or  other  documents  furnished  by  officers,
     directors and trustees of the Offerors  (copies of which shall be delivered
     to the Placement Agent and the Purchaser) and by government officials,  and
     upon  such  other  documents  as  counsel  to the  Offerors  may,  in their
     reasonable  opinion,  deem appropriate as a basis for the Offerors' Counsel
     Opinions.  Counsel to the Offerors may specify the  jurisdictions  in which
     they are admitted to practice and that they are not admitted to practice in
     any  other  jurisdiction  and  are  not  experts  in the  law of any  other
     jurisdiction.  If the Offerors'  counsel is not admitted to practice in the
     State of New York,  the  opinion  of  Offerors'  counsel  may  assume,  for
     purposes  of the  opinion,  that  the  laws of the  State  of New  York are
     substantively  identical,  in all respects material to the opinion,  to the
     internal  laws of the state in which such  counsel is admitted to practice.
     Such  Offerors'  Counsel  Opinions  shall  not  state  that  they are to be
     governed  or  qualified  by, or that they are  otherwise  subject  to,  any
     treatise,  written  policy or other  document  relating to legal  opinions,
     including,  without limitation, the Legal Opinion Accord of the ABA Section
     of Business Law (1991).

          3.2 OFFICER'S CERTIFICATE.  At the Closing Date, the Purchaser and the
     Placement Agent shall have received  certificates  from the Chief Executive
     Officer of the Company,  dated as of the Closing Date, stating that (a) the
     representations  and  warranties  of the  Offerors  set forth in  Section 5
     hereof are true and  correct as of the Closing  Date and that the  Offerors
     have complied  with all  agreements  and satisfied all  conditions on their
     part to be  performed or  satisfied  at or prior to the Closing  Date,  (b)
     since  the  date of this  Agreement  the  Offerors  have not  incurred  any
     liability or obligation, direct or contingent, or entered into any material
     transactions,  other  than in the  ordinary  course of  business,  which is
     material  to the  Offerors,  and (c)  covering  such  other  matters as the
     Placement Agent may reasonably request.

                                       4
<PAGE>

          3.3  ADMINISTRATOR'S  CERTIFICATE.  At the Closing Date, the Purchaser
     and the Placement  Agent shall have  received a certificate  of one or more
     administrators of the Trust, dated as of the Closing Date, stating that the
     representations and warranties of the Trust set forth in Section 5 are true
     and correct as of the Closing Date and that the Trust has complied with all
     agreements  and  satisfied  all  conditions  on its part to be performed or
     satisfied at or prior to the Closing Date.

          3.4 PURCHASE  PERMITTED BY  APPLICABLE  LAWS;  LEGAL  INVESTMENT.  The
     purchase of and payment for the Capital  Securities  as  described  in this
     Agreement  and  pursuant  to the  Subscription  Agreement  shall (a) not be
     prohibited  by any  applicable  law or  governmental  regulation,  (b)  not
     subject  the  Purchaser  or the  Placement  Agent to any penalty or, in the
     reasonable judgment of the Purchaser and the Placement Agent, other onerous
     conditions  under  or  pursuant  to  any  applicable  law  or  governmental
     regulation,  and  (c) be  permitted  by the  laws  and  regulations  of the
     jurisdictions to which the Purchaser and the Placement Agent are subject.

          3.5  CONSENTS  AND  PERMITS.  The  Company  and the Trust  shall  have
     received all consents, permits and other authorizations,  and made all such
     filings  and  declarations,  as may be  required  from any person or entity
     pursuant to any law, statute, regulation or rule (federal, state, local and
     foreign),  or  pursuant  to any  agreement,  order or  decree  to which the
     Company  or the  Trust  is a  party  or to  which  either  is  subject,  in
     connection with the transactions contemplated by this Agreement.

          3.6 SALE OF  PURCHASER  SECURITIES.  The  Purchaser  shall  have  sold
     securities  issued by the Purchaser in an amount such that the net proceeds
     of such sale  shall be (i)  available  on the  Closing  Date and (ii) in an
     amount sufficient to purchase the Capital  Securities and all other capital
     or similar securities  contemplated in agreements similar to this Agreement
     and the Subscription Agreement.

          3.7  INFORMATION.  Prior to or on the Closing Date, the Offerors shall
     have   furnished  to  the   Placement   Agent  such  further   information,
     certificates,  opinions and  documents  addressed to the  Purchaser and the
     Placement  Agent,  which  the  Placement  Agent  may  reasonably   request,
     including, without limitation, a complete set of the Operative Documents or
     any other  documents  or  certificates  required by this Section 3; and all
     proceedings  taken by the Offerors in connection  with the issuance,  offer
     and  sale  of the  Capital  Securities  as  herein  contemplated  shall  be
     reasonably satisfactory in form and substance to the Placement Agent.

          If any  condition  specified  in this  Section  3 shall  not have been
     fulfilled when and as required in this Agreement, or if any of the opinions
     or certificates mentioned above or elsewhere in this Agreement shall not be
     reasonably  satisfactory in form and substance to the Placement Agent, this
     Agreement  may be  terminated  by the  Placement  Agent  by  notice  to the
     Offerors  at any time at or  prior  to the  Closing  Date.  Notice  of such
     termination  shall be given to the  Offerors in writing or by  telephone or
     facsimile confirmed in writing.

                                       5
<PAGE>

     SECTION 4. CONDITIONS TO THE OFFERORS' OBLIGATIONS.  The obligations of the
     Offerors to sell the Capital Securities to the Purchaser and consummate the
     transactions  contemplated  by  this  Agreement  shall  be  subject  to the
     accuracy,  at and as of  the  Closing  Date,  of  the  representations  and
     warranties of the Placement  Agent  contained in this  Agreement and to the
     following further conditions:

          4.1 EXECUTED  AGREEMENT.  The Offerors  shall have  received  from the
     Placement Agent an executed copy of this Agreement.

          4.2 FULFILLMENT OF OTHER  OBLIGATIONS.  The Placement Agent shall have
     fulfilled  all  of  their  other  obligations  and  duties  required  to be
     fulfilled under this Agreement prior to or at the Closing.

     SECTION 5.  REPRESENTATIONS  AND WARRANTIES OF THE OFFERORS.  Except as set
     forth on the  Disclosure  Schedule  (as defined in Section  11.1)  attached
     hereto, if any, the Offerors jointly and severally represent and warrant to
     the  Placement  Agent and the Purchaser as of the date hereof and as of the
     Closing Date as follows:

          5.1 SECURITIES LAW MATTERS; AUTHORIZATIONS.

               (a)  Neither  the  Company  nor  the  Trust,  nor  any  of  their
     "Affiliates"  (as  defined  in  Rule  501(b)  of  Regulation  D  under  the
     Securities  Act  ("Regulation  D")),  nor any person acting on any of their
     behalf has,  directly or indirectly,  made offers or sales of any security,
     or solicited  offers to buy any security,  under  circumstances  that would
     require the  registration  under the  Securities  Act of any of the Capital
     Securities,   the   Guarantee   or  the   Debentures   (collectively,   the
     "Securities") or any other securities to be issued, or which may be issued,
     by the Purchaser.

               (b)  Neither  the  Company  nor  the  Trust,  nor  any  of  their
     Affiliates, nor any person acting on its or their behalf has (i) other than
     the Placement  Agent,  offered for sale or solicited offers to purchase the
     Securities,  (ii) engaged or will engage, in any "directed selling efforts"
     within the meaning of Regulation S under the  Securities  Act  ("Regulation
     S")  with  respect  to the  Securities,  or  (iii)  engaged  in any form of
     offering,  general  solicitation or general advertising (within the meaning
     of  Regulation  D) in  connection  with  any  offer  or  sale of any of the
     Securities.

               (c) The Securities  satisfy the eligibility  requirements of Rule
     144A(d)(3) under the Securities Act.

               (d) Neither the Company nor the Trust is or, after giving  effect
     to the offering and sale of the Capital  Securities and the consummation of
     the  transactions  described  in this  Agreement,  will  be an  "investment
     company" or an entity "controlled" by an "investment company," in each case
     within the meaning of Section 3(a) of the  Investment  Company Act of 1940,
     as amended (the "Investment  Company Act"),  without regard to Section 3(c)
     of the Investment Company Act.

                                       6
<PAGE>

               (e)  Neither  the Company nor the Trust has paid or agreed to pay
     to any person or entity (other than the Placement  Agent) any  compensation
     for soliciting another to purchase any of the Securities.

               (f) No authorization,  approval,  consent, order, registration or
     qualification  of or with any  court or  governmental  authority  or agency
     (including, without limitation, any insurance regulatory agency or body) is
     required in connection  with the offering and sale of the Securities or the
     Guarantee hereunder, or the consummation by the Company or the Trust of any
     other transaction  contemplated  hereby,  except such as have been obtained
     and made under the federal securities laws or state insurance laws and such
     as may be required under state or foreign securities or Blue Sky laws.

          5.2  INCORPORATED  DOCUMENTS.  The documents of the Company filed with
     the Securities and Exchange  Commission  (the  "Commission")  in accordance
     with the Securities  Exchange Act of 1934, as amended (the "Exchange Act"),
     from and  including  the  commencement  of the fiscal  year  covered by the
     Company's  most recent Annual Report on Form 10-K, at the time they were or
     hereafter are filed by the Company with the  Commission,  complied and will
     comply in all material  respects with the  requirements of the Exchange Act
     and the rules and  regulations  of the Commission  thereunder,  and, at the
     date of this Agreement and on the Closing Date, do not and will not include
     an untrue  statement  of a material  fact or omit to state a material  fact
     required to be stated therein or necessary to make the statements  therein,
     in the  light  of  the  circumstances  under  which  they  were  made,  not
     misleading;  and other than such  instruments,  agreements,  contracts  and
     other documents as are filed as exhibits to the Company's  Annual Report on
     Form 10-K,  Quarterly  Reports on Form 10-Q or Current Reports on Form 8-K,
     and  Registration   Statement  on  Form  S-1,  there  are  no  instruments,
     agreements,  contracts or documents of a character described in Item 601 of
     Regulation S-K promulgated by the Commission to which the Company or any of
     its subsidiaries is a party.

          5.3  ORGANIZATION,  STANDING AND QUALIFICATION OF THE TRUST. The Trust
     has been  duly  created  and is  validly  existing  in good  standing  as a
     statutory  trust under the  Delaware  Statutory  Trust Act (the  "Statutory
     Trust Act") with the power and authority to own property and to conduct the
     business  it  transacts  and  proposes  to  transact  and to enter into and
     perform its obligations  under the Operative  Documents.  The Trust is duly
     qualified to transact  business as a foreign entity and is in good standing
     in each jurisdiction in which such qualification is necessary, except where
     the failure to so qualify or be in good standing  would not have a material
     adverse effect on the Trust. The Trust is not a party to or otherwise bound
     by any agreement other than the Operative Documents. The Trust is and will,
     under  current  law, be  classified  for federal  income tax  purposes as a
     grantor trust and not as an association taxable as a corporation.

          5.4 TRUST  AGREEMENT.  The Trust Agreement has been duly authorized by
     the Company  and, on the Closing  Date,  will have been duly  executed  and
     delivered by the Company and the administrators of the Trust, and, assuming
     due  authorization,  execution and delivery by the Delaware Trustee and the
     Institutional  Trustee,  will  be a valid  and  binding  obligation  of the
     Company and such  administrators,  enforceable  against them in  accordance
     with  its  terms,  subject  to  (a)  applicable   bankruptcy,   insolvency,
     moratorium,  receivership,   reorganization,  liquidation  and  other  laws
     relating  to or  affecting  creditors'  rights  generally,  and (b) general
     principles of equity  (regardless  of whether  considered  and applied in a
     proceeding  in equity or at law)  ("Bankruptcy  and  Equity").  Each of the
     administrators  of the Trust is an employee or a director of the Company or
     of a subsidiary of the Company and has been duly  authorized by the Company
     to execute and deliver the Trust Agreement.

                                       7
<PAGE>

          5.5 GUARANTEE  AGREEMENT AND THE INDENTURE.  Each of the Guarantee and
     the Indenture  has been duly  authorized by the Company and, on the Closing
     Date will have  been duly  executed  and  delivered  by the  Company,  and,
     assuming  due  authorization,  execution  and  delivery  by  the  Guarantee
     Trustee, in the case of the Guarantee, and by the Indenture Trustee, in the
     case of the  Indenture,  will  be a valid  and  binding  obligation  of the
     Company  enforceable  against it in accordance  with its terms,  subject to
     Bankruptcy and Equity.

          5.6 CAPITAL SECURITIES AND COMMON  SECURITIES.  The Capital Securities
     and the Common  Securities have been duly authorized by the Trust Agreement
     and, when issued and delivered against payment therefor on the Closing Date
     to  the  Purchaser,  in the  case  of the  Capital  Securities,  and to the
     Company,  in the case of the Common Securities,  will be validly issued and
     represent undivided  beneficial  interests in the assets of the Trust. None
     of the Capital Securities or the Common Securities is subject to preemptive
     or other  similar  rights.  On the  Closing  Date,  all of the  issued  and
     outstanding  Common  Securities  will be directly owned by the Company free
     and  clear  of  any  pledge,  security  interest,   claim,  lien  or  other
     encumbrance.

          5.7  DEBENTURES.  The  Debentures  have  been duly  authorized  by the
     Company  and,  at the  Closing  Date,  will  have been  duly  executed  and
     delivered to the Indenture  Trustee for  authentication  in accordance with
     the Indenture,  and, when  authenticated  in the manner provided for in the
     Indenture  and  delivered  against  payment  therefor  by the  Trust,  will
     constitute  valid and binding  obligations  of the Company  entitled to the
     benefits of the  Indenture  enforceable  against the Company in  accordance
     with their terms, subject to Bankruptcy and Equity.

          5.8 POWER AND  AUTHORITY.  This  Agreement  has been duly  authorized,
     executed  and  delivered by the Company and the Trust and  constitutes  the
     valid and binding  obligation  of the  Company  and the Trust,  enforceable
     against the Company and the Trust in accordance with its terms,  subject to
     Bankruptcy and Equity.

          5.9 NO DEFAULTS.  The Trust is not in violation of the Trust Agreement
     or, to the knowledge of the  administrators  of the Trust, any provision of
     the Statutory  Trust Act. The  execution,  delivery and  performance by the
     Company or the Trust of this Agreement or the Operative  Documents to which
     it is a party, and the consummation of the transactions contemplated herein
     or therein and the use of the proceeds therefrom, will not conflict with or
     constitute  a breach of, or a default  under,  or result in the creation or
     imposition of any lien,  charge or other  encumbrance  upon any property or
     assets  of the  Trust,  the  Company  or any of the  Company's  Significant
     Subsidiaries  (as defined in Section 5.11 hereof) pursuant to any contract,
     indenture,  mortgage,  loan agreement,  note,  lease or other instrument to
     which the Trust,  the Company or any of its  Significant  Subsidiaries is a
     party or by which it or any of them may be  bound,  or to which  any of the
     property  or  assets  of any of them is  subject,  except  for a  conflict,
     breach,  default, lien, charge or encumbrance which could not, singly or in
     the aggregate, reasonably be expected to have a Material Adverse Effect nor
     will such action  result in any  violation  of the Trust  Agreement  or the
     Statutory  Trust Act or require the  consent,  approval,  authorization  or
     order of any  court  or  governmental  agency  or body,  except  for  those
     consents,  approvals,  authorizations and orders that have been obtained or
     made. As used herein,  the term "Material  Adverse Effect" means any one or
     more effects that individually or in the aggregate are material and adverse
     to the Offerors' ability to consummate the transactions contemplated herein
     or in the Operative  Documents or any one or more effects that individually
     or in the aggregate are material and adverse to the condition (financial or
     otherwise),  earnings, affairs, business prospects or results of operations
     of the Company and its Significant  Subsidiaries taken as whole, whether or
     not occurring in the ordinary course of business.

                                       8
<PAGE>

          5.10  ORGANIZATION,  STANDING AND  QUALIFICATION  OF THE COMPANY.  The
     Company has been duly incorporated and is validly existing as a corporation
     in good standing under the laws of Delaware,  with all requisite  corporate
     power and  authority  to own its  properties  and conduct  the  business it
     transacts  and  proposes to  transact,  and is duly  qualified  to transact
     business  and  is  in  good  standing  as a  foreign  corporation  in  each
     jurisdiction   where  the   nature   of  its   activities   requires   such
     qualification,  except  where the failure of the Company to be so qualified
     would not, singly or in the aggregate, have a Material Adverse Effect.

          5.11  SUBSIDIARIES OF THE COMPANY.  Each of the Company's  significant
     subsidiaries  (as  defined in  Section  1-02(w)  of  Regulation  S-X to the
     Securities  Act (the  "Significant  Subsidiaries"))  is listed in EXHIBIT C
     attached hereto and incorporated herein by this reference. Each Significant
     Subsidiary  has been duly  organized  and is validly  existing  and in good
     standing  under the laws of the  jurisdiction  in which it is  chartered or
     organized, with all requisite power and authority to own its properties and
     conduct the  business it transacts  and  proposes to transact,  and is duly
     qualified to transact  business and is in good standing as a foreign entity
     in each  jurisdiction  where the  nature of its  activities  requires  such
     qualification,   except   where  the   failure  of  any  such   Significant
     Subsidiaries to be so qualified would not, singly or in the aggregate, have
     a Material  Adverse  Effect.  All of the issued and  outstanding  shares of
     capital stock of the Significant Subsidiaries (a) have been duly authorized
     and are validly issued, (b) are fully paid and  nonassessable,  and (c) are
     wholly owned, directly or indirectly,  by the Company free and clear of any
     security interest,  mortgage,  pledge, lien, encumbrance,  restriction upon
     voting or transfer, preemptive rights, claim, equity or other defect.

          5.12  PERMITS.  The Company and each of its  Significant  Subsidiaries
     have all requisite power and authority,  and all necessary  authorizations,
     approvals,  orders,  licenses  (including,  without  limitation,  insurance
     licenses from the  insurance  departments  of the various  states where the
     Significant   Subsidiaries   write   insurance   business  (the  "Insurance
     Licenses")),  certificates and permits,  including those that are necessary
     to own or lease their respective properties  (collectively,  "Permits"), of
     and from  regulatory or governmental  officials,  bodies and tribunals that
     are  material to the Company and its  Significant  Subsidiaries  taken as a
     whole and are  necessary to conduct the business now operated by them;  the
     Company and its Significant  Subsidiaries  are in compliance with the terms
     and conditions of all such Insurance Licenses and Permits, except where the
     failure so to comply  would not,  singly or in the  aggregate,  result in a
     Material  Adverse  Effect;  all of the  Insurance  Licenses and Permits are
     valid and in full force and effect,  except  where the  invalidity  of such
     Insurance  Licenses and Permits or the failure of such  Insurance  Licenses
     and  Permits to be in full force and effect  would not result in a Material
     Adverse  Effect;  and  neither  the  Company  nor  any of  its  Significant
     Subsidiaries  has  received  any  notice  of  proceedings  relating  to the
     revocation  or  modification  of any such  Insurance  Licenses  and Permits
     which, singly or in the aggregate,  may reasonably be expected to result in
     a Material Adverse Effect.

                                       9
<PAGE>

          5.13 CONFLICTS,  AUTHORIZATIONS AND APPROVALS. Neither the Company nor
     any of its  Significant  Subsidiaries  is in  violation  of its  respective
     articles or  certificate  of  incorporation,  charter or by-laws or similar
     organizational  documents or in default in the performance or observance of
     any obligation, agreement, covenant or condition contained in any contract,
     indenture,  mortgage,  loan  agreement,  note,  lease or other agreement or
     instrument  to  which  either  the  Company  or  any  of  its   Significant
     Subsidiaries  is a party,  or by which it or any of them may be bound or to
     which  any  of  the  property  or  assets  of  the  Company  or  any of its
     Significant  Subsidiaries  is  subject,  the effect of which  violation  or
     default  in  performance  or  observance  would  have,  singly  or  in  the
     aggregate, a Material Adverse Effect.

          5.14 FINANCIAL STATEMENTS.

               (a) The consolidated balance sheets of the Company and all of its
     Significant Subsidiaries as of December 31, 2002 and December 31, 2003, and
     related  consolidated  income  statements  and  statements  of  changes  in
     shareholders'  equity for the 3 years ended December 31, 2003 together with
     the notes thereto,  and the consolidated  balance sheets of the Company and
     all of its  Significant  Subsidiaries  as of  September  30,  2004  and the
     related  consolidated  income  statements  and  statements  of  changes  in
     shareholders'   equity  for  the  9  months  then  ended  (the   "Financial
     Statements"),  copies of each of which have been  provided to the Placement
     Agent, have been prepared in accordance with generally accepted  accounting
     principles  ("GAAP")  applied  on a  consistent  basis  (except  as  may be
     disclosed  therein)  and  fairly  present  in  all  material  respects  the
     financial   position  and  the  results  of   operations   and  changes  in
     shareholders' equity of the Company and all of its Significant Subsidiaries
     as of the  dates and for the  periods  indicated  (subject,  in the case of
     interim financial  statements,  to normal recurring  year-end  adjustments,
     none of which shall be material).  The books and records of the Company and
     all of its Significant Subsidiaries have been, and are being, maintained in
     all material  respects in accordance  with  generally  accepted  accounting
     principles and any other applicable  legal and accounting  requirements and
     reflect only actual transactions.

               (b) The audited statutory financial statements as of December 31,
     2002,  and  December  31,  2003  and  the  unaudited   statutory  financial
     statements as of September 30, 2004 (collectively, the "Statutory Financial
     Statements") of each of the Company's  insurance company  subsidiaries have
     for each  relevant  period  been  prepared  in  accordance  with  statutory
     accounting  practices  ("SAP")  prescribed  or  permitted  by the  National
     Association of Insurance Commissioners,  and with respect to each insurance
     subsidiary,  the appropriate  Insurance Department of the state of domicile
     of such  insurance  subsidiary,  and SAP has been  applied on a  consistent
     basis throughout the periods involved.

                                       10
<PAGE>

               (c)  Since  the  respective  dates of the most  recent  Financial
     Statements  and the  Statutory  Financial  Statements,  there  has  been no
     material  adverse  change or  development  with  respect  to the  financial
     condition   or  earnings  of  the  Company  and  all  of  its   Significant
     Subsidiaries, taken as a whole.

               (d) The  accountants  of the Company who  certified the Financial
     Statements  are  independent  public  accountants  of the  Company  and its
     Significant  Subsidiaries  within the meaning of the Securities Act and the
     rules and regulations thereunder.

          5.15  INTERNAL  CONTROLS.  Each of the  Company  and its  subsidiaries
     maintain a system of internal  accounting  controls  sufficient  to provide
     reasonable  assurance that (i) transactions are executed in accordance with
     the management's general or specific authorizations,  (ii) transactions are
     recorded as necessary to permit  preparation  of  financial  statements  in
     conformity  with GAAP  and/or  SAP, as  applicable  and to  maintain  asset
     accountability, (iii) access to assets is permitted only in accordance with
     the  management's  general or  specific  authorization,  (iv) the  recorded
     accountability   for  assets  is  compared  with  the  existing  assets  at
     reasonable  intervals and  appropriate  action is taken with respect to any
     differences  and (v) material  information  relating to the Company and its
     subsidiaries is made known to management.  Management has (a) evaluated the
     effectiveness  of the internal  accounting  controls of each of the Company
     and its subsidiaries and (b) disclosed to the accountants who certified the
     Financial  Statements  and the Statutory  Financial  Statements  and to the
     audit committee (1) all significant deficiencies in the design or operation
     of  internal  controls  which  could  adversely  affect the  ability of the
     Company and its  subsidiaries  to record,  process,  summarize,  and report
     financial  data,  and have  identified  for such  accountants  any material
     weaknesses in internal controls and (2) any fraud, whether or not material,
     that involves  management or other employees who have a significant role in
     the  internal  controls of the Company and its  subsidiaries,  and any such
     deficiencies  or  fraud  would  not,  singularly  or in the  aggregate,  be
     expected to result in a Material Adverse Effect.

          5.16 REGULATORY  ENFORCEMENT  MATTERS.  Neither the Company nor any of
     its Significant Subsidiaries is subject or is party to, or has received any
     notice or  advice  that any of them may  become  subject  or party to,  any
     investigation  with  respect  to, any  cease-and-desist  order,  agreement,
     consent   agreement,   memorandum  of  understanding  or  other  regulatory
     enforcement  action,  proceeding  or order with or by, or is a party to any
     commitment letter or similar undertaking to, or is subject to any directive
     by, or has been since  January  1, 2001,  a  recipient  of any  supervisory
     letter from, or since January 1, 2001, has adopted any board resolutions at
     the request of, any agency  charged with the  supervision  or regulation of
     insurance companies (a "Regulatory Agency") that currently restricts in any
     material  respect  the conduct of their  business  or that in any  material
     manner relates to their capital adequacy, their ability or authority to pay
     dividends or make  distributions to their  shareholders or make payments of
     principal or interest on their debt obligations,  their management or their
     business  (each, a "Regulatory  Agreement"),  nor has the Company or any of
     its  Significant  Subsidiaries  been advised  since January 1, 2001, by any
     Regulatory  Agency that it is  considering  issuing or requesting  any such
     Regulatory Agreement. There is no material unresolved violation,  criticism
     or  exception  by any  Regulatory  Agency  with  respect  to any  report or
     statement  relating  to  any  examinations  of  the  Company  or any of its
     Significant Subsidiaries.

                                       11
<PAGE>

          5.17 NO MATERIAL CHANGE. Since the respective dates of the most recent
     Financial Statements and Statutory Financial Statements,  there has been no
     material  adverse  change or  development  with  respect  to the  condition
     (financial or otherwise),  earnings, affairs, business prospects or results
     of  operations  of  the  Company  or  its  Significant  Subsidiaries  on  a
     consolidated  basis,  whether  or not  arising  in the  ordinary  course of
     business.

          5.18 INSURANCE  RESERVING  PRACTICES.  The Company and its Significant
     Subsidiaries  have made no  material  change in their  insurance  reserving
     practices  since the respective  dates as of which  information is given in
     the most recent Financial Statements and Statutory Financial Statements.

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

          5.20 NO  UNDISCLOSED  LIABILITIES.  Neither the Company nor any of its
     Significant  Subsidiaries  has any  material  liability,  whether  known or
     unknown,  whether  asserted or unasserted,  whether absolute or contingent,
     whether  accrued or  unaccrued,  whether  liquidated or  unliquidated,  and
     whether due or to become due,  including any liability for taxes (and there
     is no past or present  fact,  situation,  circumstance,  condition or other
     basis for any present or future action, suit, proceeding,  hearing, charge,
     complaint,   claim  or  demand  against  the  Company  or  its  Significant
     Subsidiaries giving rise to any such liability), except (i) for liabilities
     set forth in the Financial  Statements and Statutory Financial  Statements,
     respectively,  (ii)  normal  fluctuation  in the amount of the  liabilities
     referred  to in  clause  (i)  above  occurring  in the  ordinary  course of
     business of the Company and all of its Significant  Subsidiaries  since the
     date of the most recent balance sheet included in the Financial  Statements
     and  Statutory  Financial  Statements,  respectively,  and  (iii) as may be
     specifically disclosed in writing to the Placement Agent.

                                       12
<PAGE>

          5.21 LITIGATION.  No inquiry, charge,  investigation,  action, suit or
     proceeding (including, without limitation, any proceeding to revoke or deny
     renewal of any  Insurance  Licenses) is pending or, to the knowledge of the
     Offerors,  threatened,  against or affecting the Company or its Significant
     Subsidiaries  or any of their  respective  properties  before or by (i) any
     court wherein an unfavorable  decision,  ruling or finding could reasonably
     be expected to have, singly or in the aggregate, a Material Adverse Effect,
     or  (ii)  any  regulatory,   administrative   or   governmental   official,
     commission,  board,  agency or other  authority or body, or any arbitrator,
     wherein an unfavorable decision, ruling or finding could have, singly or in
     the aggregate, a Material Adverse Effect.

          5.22 DEFERRAL OF INTEREST  PAYMENTS ON DEBENTURES.  The Company has no
     present  intention to exercise its option to defer  payments of interest on
     the Debentures as provided in the Indenture.  The Company believes that the
     likelihood  that it would  exercise its right to defer payments of interest
     on the Debentures as provided in the Indenture at any time during which the
     Debentures are outstanding is remote because of the restrictions that would
     be  imposed  on the  Company's  ability  to  declare  or pay  dividends  or
     distributions  on, or to redeem,  purchase,  acquire or make a  liquidation
     payment  with  respect to, any of the  Company's  capital  stock and on the
     Company's  ability to make any payments of  principal,  interest or premium
     on, or repay,  repurchase or redeem,  any of its debt  securities that rank
     PARI PASSU in all respects with, or junior in interest to, the Debentures.

     SECTION 6.  REPRESENTATIONS  AND  WARRANTIES OF THE PLACEMENT  AGENT.  Each
     Placement  Agent  represents and warrants to the Offerors as to itself (but
     not as to the other Placement Agent) as follows:

          6.1 ORGANIZATION, STANDING AND QUALIFICATION.

               (a) The Placement Agent is duly organized,  validly  existing and
     in good standing under the laws of the United  States,  with full power and
     authority to own, lease and operate its properties and conduct its business
     as currently  being  conducted.  The Placement  Agent is duly  qualified to
     transact business as a foreign  corporation and is in good standing in each
     other  jurisdiction  in which it owns or leases  property or  conducts  its
     business so as to require such qualification and in which the failure to so
     qualify would,  individually or in the aggregate,  have a material  adverse
     effect on the  condition  (financial  or  otherwise),  earnings,  business,
     prospects or results of operations of The Placement Agent.

               6.2 POWER AND  AUTHORITY.  The Placement  Agent has all requisite
     power and authority to enter into this  Agreement,  and this  Agreement has
     been duly and validly  authorized,  executed and delivered by the Placement
     Agent and  constitutes  the  legal,  valid  and  binding  agreement  of the
     Placement Agent, enforceable against the Placement Agent in accordance with
     its   terms,   subject  to   Bankruptcy   and  Equity  and  except  as  any
     indemnification  or  contribution  provisions  thereof may be limited under
     applicable securities laws.

                                       13
<PAGE>

               6.3  GENERAL  SOLICITATION.  In the case of the offer and sale of
     the  Capital  Securities,  no  form  of  general  solicitation  or  general
     advertising  was  used  by  the  Placement  Agent  or  its  representatives
     including, but not limited to, advertisements,  articles,  notices or other
     communications  published in any  newspaper,  magazine or similar medium or
     broadcast  over  television  or  radio  or any  seminar  or  meeting  whose
     attendees  have  been  invited  by  any  general  solicitation  or  general
     advertising.  Neither  the  Placement  Agent nor its  representatives  have
     engaged or will engage in any "directed selling efforts" within the meaning
     of Regulation S with respect to the Capital Securities.

               6.4  PURCHASER.  The  Placement  Agent has made  such  reasonable
     inquiry as is necessary to determine  that the  Purchaser is acquiring  the
     Capital Securities for its own account,  that the Purchaser does not intend
     to distribute the Capital Securities in contravention of the Securities Act
     or any other  applicable  securities  laws, and that the Purchaser is not a
     "U.S. person" as that term is defined under Rule 902 of the Securities Act.

               6.5 QUALIFIED PURCHASERS.  The Placement Agent has not offered or
     sold and will not arrange  for the offer or sale of the Capital  Securities
     except (i) in an offshore transaction complying with Rule 903 of Regulation
     S, or (ii) to those the Placement Agent reasonably believes are "accredited
     investors"  (as defined in Rule 501 of Regulation D), or (iii) in any other
     manner that does not require  registration of the Capital  Securities under
     the Securities  Act. In connection with each such sale, the Placement Agent
     has taken or will take  reasonable  steps to ensure that the  Purchaser  is
     aware that (a) such sale is being made in  reliance on an  exemption  under
     the Securities Act, and (b) future transfers of the Capital Securities will
     not be made except in compliance with applicable securities laws.

               6.6  OFFERING  CIRCULARS.  Neither  the  Placement  Agent nor its
     representatives will include any non-public  information about the Company,
     the  Trust  or any of  their  affiliates  in  any  registration  statement,
     prospectus,  offering  circular  or private  placement  memorandum  used in
     connection  with any  purchase  of  Capital  Securities  without  the prior
     written consent of the Trust and the Company.

     SECTION 7. COVENANTS OF THE OFFERORS.  The Offerors covenant and agree with
     the Placement Agent and the Purchaser as follows:

               7.1 COMPLIANCE WITH  REPRESENTATIONS  AND WARRANTIES.  During the
     period from the date of this  Agreement to the Closing  Date,  the Offerors
     shall use their best efforts and take all action  necessary or  appropriate
     to cause their representations and warranties contained in Section 5 hereof
     to be true as of the Closing Date,  after giving effect to the transactions
     contemplated by this Agreement, as if made on and as of the Closing Date.

                                       14
<PAGE>

          7.2 SALE AND  REGISTRATION  OF  SECURITIES.  The  Offerors  and  their
     Affiliates  shall not nor shall any of them  permit  any  person  acting on
     their behalf  (other than the Placement  Agent),  to directly or indirectly
     (a) sell, offer for sale or solicit offers to buy or otherwise negotiate in
     respect of any  security (as defined in the  Securities  Act) that would or
     could be  integrated  with the sale of the Capital  Securities  in a manner
     that  would  require  the  registration  under  the  Securities  Act of the
     Securities,  or (b) make offers or sales of any such  Security,  or solicit
     offers to buy any such Security, under circumstances that would require the
     registration of any of such Securities under the Securities Act.

          7.3 USE OF PROCEEDS. The Trust shall use the proceeds from the sale of
     the Capital Securities to purchase the Debentures from the Company.

          7.4 INVESTMENT  COMPANY.  The Offerors shall not engage, or permit any
     subsidiary  to  engage,  in  any  activity  which  would  cause  it or  any
     subsidiary  to be an  "investment  company"  under  the  provisions  of the
     Investment Company Act.

          7.5 REIMBURSEMENT OF EXPENSES.  If the sale of the Capital  Securities
     provided for herein is not  consummated (a) because any condition set forth
     in  Section 3 hereof  is not  satisfied,  or (b)  because  of any  refusal,
     inability or failure on the part of the Company or the Trust to perform any
     agreement  herein or comply with any provision  hereof other than by reason
     of a breach  by the  Placement  Agent,  the  Company  shall  reimburse  the
     Placement   Agent  upon   demand  for  all  of  their  pro  rata  share  of
     out-of-pocket  expenses  (including  reasonable fees and  disbursements  of
     counsel)  in an  amount  not to  exceed  $25,000.00  that  shall  have been
     incurred by them in connection  with the proposed  purchase and sale of the
     Capital Securities.  Notwithstanding the foregoing,  the Company shall have
     no  obligation to reimburse  the  Placement  Agent for their  out-of-pocket
     expenses if the sale of the Capital  Securities  fails to occur because the
     condition  set forth in Section 3.6 is not  satisfied or because  either of
     the  Placement  Agent fails to fulfill a condition  set forth in Section 4.
     7.6 DIRECTED SELLING EFFORTS,  SOLICITATION AND ADVERTISING.  In connection
     with any offer or sale of any of the  Securities,  the Offerors  shall not,
     nor shall  either of them  permit  any of their  Affiliates  or any  person
     acting on their behalf,  other than the Placement  Agent, to, (a) engage in
     any "directed  selling  efforts" within the meaning of Regulation S, or (b)
     engage in any form of  general  solicitation  or  general  advertising  (as
     defined in Regulation D).

          7.7 COMPLIANCE WITH RULE 144A(D)(4)  UNDER THE SECURITIES ACT. So long
     as any of the Securities are outstanding  and are  "restricted  securities"
     within the meaning of Rule 144(a)(3) under the Securities Act, the Offerors
     will,  during any period in which they are not subject to and in compliance
     with  Section 13 or 15(d) of the  Exchange  Act,  or the  Offerors  are not
     exempt from such reporting  requirements pursuant to and in compliance with
     Rule  12g3-2(b)  under the  Exchange  Act,  provide to each  holder of such
     restricted  securities and to each prospective  purchaser (as designated by
     such holder) of such restricted securities, upon the request of such holder
     or  prospective  purchaser in connection  with any proposed  transfer,  any
     information required to be provided by Rule 144A(d)(4) under the Securities
     Act, if applicable.  This covenant is intended to be for the benefit of the
     holders, and the prospective  purchasers  designated by such holders,  from
     time to time of such restricted securities. The information provided by the
     Offerors  pursuant  to this  Section  7.7 will  not,  at the date  thereof,
     contain  any  untrue  statement  of a  material  fact or omit to state  any
     material fact  necessary to make the  statements  therein,  in light of the
     circumstances under which they were made, not misleading.

                                       15
<PAGE>

          7.8 QUARTERLY REPORTS.  Within 50 days of the end of each of the first
     three calendar year quarters and within 75 days of the end of each calendar
     year during which the Debentures are issued and  outstanding,  the Offerors
     shall  submit to JPMorgan  Chase Bank,  National  Association,  a completed
     quarterly  report in the form  attached  hereto as EXHIBIT D. The  Offerors
     acknowledge  and agree that JPMorgan Chase Bank,  National  Association and
     its  successors  and assigns is a third party  beneficiary  of this Section
     7.8.

     SECTION 8. COVENANTS OF THE PLACEMENT  AGENT.  The Placement Agent covenant
     and agree with the Offerors  that,  during the period from the date of this
     Agreement to the Closing  Date,  the  Placement  Agent shall use their best
     efforts  and  take all  action  necessary  or  appropriate  to cause  their
     representations  and  warranties  contained  in  Section 6 to be true as of
     Closing Date, after giving effect to the transactions  contemplated by this
     Agreement,  as if made on and as of the Closing Date.  The Placement  Agent
     further  covenant  and agree not to engage  in  hedging  transactions  with
     respect to the Capital Securities unless such transactions are conducted in
     compliance with the Securities Act.

     SECTION 9. INDEMNIFICATION.

          9.1  INDEMNIFICATION   OBLIGATION.  The  Offerors  shall  jointly  and
     severally indemnify and hold harmless the Placement Agent and the Purchaser
     and each of their respective agents, employees,  officers and directors and
     each person that controls  either of the  Placement  Agent or the Purchaser
     within the meaning of Section 15 of the Securities Act or Section 20 of the
     Exchange  Act, and agents,  employees,  officers and  directors or any such
     controlling  person of either of the Placement Agent or the Purchaser (each
     such person or entity, an "Indemnified Party") from and against any and all
     losses,  claims,  damages,  judgments,  liabilities  or expenses,  joint or
     several,  to which  such  Indemnified  Party may become  subject  under the
     Securities Act, the Exchange Act or other federal or state statutory law or
     regulation,  or at common law or otherwise  (including in settlement of any
     litigation,  if such settlement is effected with the written consent of the
     Offerors), insofar as such losses, claims, damages, judgments,  liabilities
     or  expenses  (or  actions in respect  thereof)  arise out of, or are based
     upon,  or  relate  to, in whole or in part,  (a) any  untrue  statement  or
     alleged untrue  statement of a material fact  contained in any  information
     (whether  written or oral) or documents  executed in favor of, furnished or
     made available to the Placement Agent or the Purchaser by the Offerors,  or
     (b) any omission or alleged  omission to state in any information  (whether
     written  or oral) or  documents  executed  in favor of,  furnished  or made
     available  to the  Placement  Agent  or the  Purchaser  by the  Offerors  a
     material  fact  required  to be stated  therein  or  necessary  to make the
     statements  therein not misleading,  and shall  reimburse each  Indemnified
     Party for any legal and other  expenses  as such  expenses  are  reasonably
     incurred  by such  Indemnified  Party  in  connection  with  investigating,
     defending,  settling,  compromising or paying any such loss, claim, damage,

                                       16
<PAGE>

     judgment,  liability,  expense or action  described in this Section 9.1. In
     addition  to their other  obligations  under this  Section 9, the  Offerors
     hereby agree that, as an interim  measure during the pendency of any claim,
     action, investigation, inquiry or other proceeding arising out of, or based
     upon, or related to the matters  described  above in this Section 9.1, they
     shall  reimburse  each  Indemnified  Party  on a  quarterly  basis  for all
     reasonable   legal  or  other   expenses   incurred  in   connection   with
     investigating or defending any such claim, action,  investigation,  inquiry
     or  other   proceeding,   notwithstanding   the   absence   of  a  judicial
     determination  as to the propriety and  enforceability  of the  possibility
     that such payments  might later be held to have been improper by a court of
     competent  jurisdiction.  To the extent that any such interim reimbursement
     payment is so held to have been  improper,  each  Indemnified  Party  shall
     promptly  return  such  amounts to the  Offerors  together  with  interest,
     determined on the basis of the prime rate (or other commercial lending rate
     for borrowers of the highest credit  standing)  announced from time to time
     by First  Tennessee  Bank,  N.A.  (the  "Prime  Rate").  Any  such  interim
     reimbursement  payments that are not made to an Indemnified Party within 30
     days of a request for  reimbursement  shall bear interest at the Prime Rate
     from the date of such request.

          9.2 CONDUCT OF INDEMNIFICATION PROCEEDINGS.  Promptly after receipt by
     an Indemnified  Party under this Section 9 of notice of the commencement of
     any action,  such Indemnified Party shall, if a claim in respect thereof is
     to be made against the  Offerors  under this Section 9, notify the Offerors
     in writing of the  commencement  thereof;  but, subject to Section 9.4, the
     omission  to so  notify  the  Offerors  shall  not  relieve  them  from any
     liability  pursuant  to  Section  9.1  which the  Offerors  may have to any
     Indemnified  Party  unless  and to the  extent  that the  Offerors  did not
     otherwise  learn of such action and such failure by the  Indemnified  Party
     results  in the  forfeiture  by the  Offerors  of  substantial  rights  and
     defenses.  In case any such action is brought against any Indemnified Party
     and such  Indemnified  Party  seeks or intends to seek  indemnity  from the
     Offerors,  the Offerors  shall be entitled to  participate  in, and, to the
     extent  that they may wish,  to assume the  defense  thereof  with  counsel
     reasonably  satisfactory to such Indemnified Party;  PROVIDED,  HOWEVER, if
     the  defendants in any such action include both the  Indemnified  Party and
     the Offerors and the Indemnified Party shall have reasonably concluded that
     there may be a conflict  between  the  positions  of the  Offerors  and the
     Indemnified  Party in  conducting  the  defense of any such  action or that
     there  may be legal  defenses  available  to it  and/or  other  Indemnified
     Parties  which are different  from or additional to those  available to the
     Offerors,  the  Indemnified  Party shall have the right to select  separate
     counsel to assume such legal  defenses and to otherwise  participate in the
     defense of such action on behalf of such Indemnified Party. Upon receipt of
     notice from the Offerors to such Indemnified  Party of their election to so
     assume the defense of such action and approval by the Indemnified  Party of
     counsel,  the Offerors shall not be liable to such Indemnified  Party under
     this  Section 9 for any legal or other  expenses  subsequently  incurred by
     such  Indemnified  Party in connection  with the defense thereof unless (a)

                                       17
<PAGE>

     the  Indemnified  Party shall have employed such counsel in connection with
     the  assumption  of legal  defenses in  accordance  with the proviso in the
     preceding sentence (it being understood,  however,  that the Offerors shall
     not  be  liable  for  the  expenses  of  more  than  one  separate  counsel
     representing  the Indemnified  Parties who are parties to such action),  or
     (b) the Offerors shall not have employed counsel reasonably satisfactory to
     the  Indemnified   Party  to  represent  the  Indemnified  Party  within  a
     reasonable  time after  notice of  commencement  of the action,  in each of
     which  cases the fees and  expenses  of counsel of such  Indemnified  Party
     shall be at the expense of the Offerors.

          9.3 CONTRIBUTION.  If the indemnification provided for in this Section
     9 is required by its terms, but is for any reason held to be unavailable to
     or  otherwise  insufficient  to hold  harmless an  Indemnified  Party under
     Section  9.1  in  respect  of  any  losses,  claims,  damages,   judgments,
     liabilities  or expenses  referred to herein or therein,  then the Offerors
     shall contribute to the amount paid or payable by such Indemnified Party as
     a result of any losses, claims, damages, judgments, liabilities or expenses
     referred to herein (a) in such  proportion as is appropriate to reflect the
     relative  benefits  received  by the  Offerors,  on the one  hand,  and the
     Indemnified  Party,  on the other hand,  from the  offering of such Capital
     Securities,  or (b) if the  allocation  provided by clause (a) above is not
     permitted  by  applicable  law, in such  proportion  as is  appropriate  to
     reflect not only the relative  benefits referred to in clause (a) above but
     also the relative fault of the Offerors, on the one hand, and the Placement
     Agent, on the other hand, in connection with the statements or omissions or
     inaccuracies in the representations and warranties herein or other breaches
     which resulted in such losses, claims, damages,  judgments,  liabilities or
     expenses,  as well as any  other  relevant  equitable  considerations.  The
     respective relative benefits received by the Offerors, on the one hand, and
     the Placement  Agent, on the other hand,  shall be deemed to be in the same
     proportion,  in the case of the  Offerors,  as the total  price paid to the
     Offerors for the Capital  Securities  sold by the Offerors to the Purchaser
     (net of the compensation paid to the Placement Agent hereunder,  but before
     deducting  expenses),  and  in the  case  of the  Placement  Agent,  as the
     compensation  received by them,  bears to the total of such amounts paid to
     the Offerors  and  received by the  Placement  Agent as  compensation.  The
     relative fault of the Offerors and the Placement  Agent shall be determined
     by  reference  to,  among other  things,  whether the untrue  statement  or
     alleged  untrue  statement  of a material  fact or the  omission or alleged
     omission of a material  fact or the  inaccurate  or the alleged  inaccurate
     representation  and/or  warranty  relates to  information  supplied  by the
     Offerors  or  the  Placement  Agent  and  the  parties'   relative  intent,
     knowledge, access to information and opportunity to correct or prevent such
     statement or omission. The provisions set forth in Section 9.2 with respect
     to  notice  of  commencement  of any  action  shall  apply  if a claim  for
     contribution  is made under this Section 9.3;  PROVIDED,  HOWEVER,  that no
     additional  notice  shall be required  with respect to any action for which
     notice has been given under  Section 9.2 for  purposes of  indemnification.
     The  Offerors and the  Placement  Agent agree that it would not be just and
     equitable if  contribution  pursuant to this Section 9.3 were determined by
     pro rata allocation or by any other method of allocation that does not take
     account of the  equitable  considerations  referred to in this Section 9.3.
     The  amount  paid or  payable  by an  Indemnified  Party as a result of the
     losses, claims, damages, judgments,  liabilities or expenses referred to in
     this Section 9.3 shall be deemed to include, subject to the limitations set
     forth  above,  any  legal or other  expenses  reasonably  incurred  by such
     Indemnified  Party in connection with  investigating  or defending any such
     action or claim.  In no event shall the  liability of the  Placement  Agent
     hereunder be greater in amount than the dollar  amount of the  compensation
     (net of payment of all expenses)  received by the Placement  Agent upon the
     sale of the Capital  Securities  giving rise to such obligation.  No person
     found guilty of fraudulent misrepresentation (within the meaning of Section
     11(f) of the  Securities  Act) shall be entitled to  contribution  from any
     person who was not found guilty of such fraudulent misrepresentation.

                                       18
<PAGE>

          9.4 ADDITIONAL  REMEDIES.  The indemnity and  contribution  agreements
     contained  in this  Section 9 are in  addition  to any  liability  that the
     Offerors may otherwise have to any Indemnified Party.

          9.5 ADDITIONAL  INDEMNIFICATION.  The Company shall indemnify and hold
     harmless the Trust against all loss,  liability,  claim, damage and expense
     whatsoever, as due from the Trust under Sections 9.1 through 9.4 hereof.

     SECTION 10. RIGHTS AND RESPONSIBILITIES OF PLACEMENT AGENT.

          10.1 RELIANCE.  In performing  their duties under this Agreement,  the
     Placement  Agent shall be entitled  to rely upon any notice,  signature  or
     writing  which  they shall in good  faith  believe to be genuine  and to be
     signed or presented by a proper party or parties.  The Placement  Agent may
     rely upon any opinions or certificates or other documents  delivered by the
     Offerors or their counsel or designees to either the Placement Agent or the
     Purchaser.

          10.2 RIGHTS OF PLACEMENT  AGENT. In connection with the performance of
     their duties under this Agreement,  the Placement Agent shall not be liable
     for any error of judgment or any action taken or omitted to be taken unless
     the Placement Agent were grossly negligent or engaged in willful misconduct
     in connection  with such  performance or  non-performance.  No provision of
     this  Agreement  shall require the Placement  Agent to expend or risk their
     own funds or  otherwise  incur  any  financial  liability  on behalf of the
     Purchaser  in  connection  with  the  performance  of any of  their  duties
     hereunder. The Placement Agent shall be under no obligation to exercise any
     of the rights or powers vested in them by this Agreement.

                                       19
<PAGE>

          SECTION 11. MISCELLANEOUS.

          11.1  DISCLOSURE  SCHEDULE.  The term  "Disclosure  Schedule," as used
     herein,  means the schedule,  if any,  attached to this Agreement that sets
     forth items the  disclosure  of which is  necessary  or  appropriate  as an
     exception to one or more representations or warranties contained in Section
     5  hereof.  The  Disclosure   Schedule  shall  be  arranged  in  paragraphs
     corresponding to the section numbers contained in Section 5. Nothing in the
     Disclosure  Schedule shall be deemed adequate to disclose an exception to a
     representation  or warranty  made  herein  unless the  Disclosure  Schedule
     identifies the exception with  reasonable  particularity  and describes the
     relevant facts in reasonable detail. Without limiting the generality of the
     immediately  preceding sentence,  the mere listing (or inclusion of a copy)
     of a document or other item in the Disclosure  Schedule shall not be deemed
     adequate to disclose an  exception  to a  representation  or warranty  made
     herein unless the  representation  or warranty has to do with the existence
     of the document or other item itself.  Information  provided by the Company
     in response to any due diligence  questionnaire shall not be deemed part of
     the  Disclosure  Schedule and shall not be deemed to be an exception to one
     or more  representations or warranties contained in Section 5 hereof unless
     such  information is  specifically  included on the Disclosure  Schedule in
     accordance with the provisions of this Section 11.1.

          11.2 NOTICES.  Prior to the Closing,  and  thereafter  with respect to
     matters   pertaining  to  this  Agreement   only,  all  notices  and  other
     communications provided for or permitted hereunder shall be made in writing
     by  hand-delivery,  first-class  mail,  telex,  telecopier or overnight air
     courier guaranteeing next day delivery:

         if to the Placement Agent, to:

                                   Cohen Bros. & Company
                                   1818 Market Street
                                   Philadelphia, Pennsylvania  19103
                                   Telecopier:  215-861-7818
                                   Telephone:  215-861-7800
                                   Attention:  Asset Back Securities

         with a copy to:

                                    Bracewell & Patterson, L.L.P.
                                    111 Congress Avenue, Suite 2300
                                    Austin, Texas  78701
                                    Telecopier:  512-472-9123
                                    Telephone:  512-472-7800
                                    Attention:  David Bentley Jones, Esq.

                                            and

                                       20
<PAGE>

         if to the Offerors, to:

                                    Tower Group, Inc.
                                    120 Broadway, 14th Floor
                                    New York, New York 10271-1699
                                    Telecopier:  212-271-5492
                                    Telephone:  212-655-2000
                                    Attention:  Francis M. Colalucci

         with a copy to:

                                    McLaughlin & Stern, LLP
                                    260 Madison Avenue
                                    New York, New York 10016
                                    Telecopier:  212-448-1100
                                    Telephone:  212-448-0066
                                    Attention:  Steven W. Schuster

         All such notices and  communications  shall be deemed to have been duly
given (a) at the time  delivered  by hand,  if  personally  delivered,  (b) five
business days after being deposited in the mail, postage prepaid, if mailed, (c)
when  answered  back,  if  telexed,  (d)  the  next  business  day  after  being
telecopied,  or (e) the next business day after timely delivery to a courier, if
sent by overnight air courier guaranteeing next day delivery. From and after the
Closing,  the  foregoing  notice  provisions  shall be  superseded by any notice
provisions of the Operative Documents under which notice is given. The Placement
Agent, the Company,  and their respective  counsel,  may change their respective
notice  addresses  from time to time by written  notice to all of the  foregoing
persons.

          11.3 PARTIES IN INTEREST,  SUCCESSORS AND ASSIGNS. Except as expressly
     set forth  herein,  this  Agreement  is made  solely for the benefit of the
     Placement Agent, the Purchaser and the Offerors and any person  controlling
     the Placement  Agent,  the  Purchaser or the Offerors and their  respective
     successors and assigns; and no other person shall acquire or have any right
     under or by virtue of this  Agreement.  This  Agreement  shall inure to the
     benefit of and be binding  upon the  successors  and assigns of each of the
     parties.

          11.4  COUNTERPARTS.  This  Agreement  may be  executed  by the parties
     hereto in separate  counterparts,  each of which when so executed  shall be
     deemed to be an original and all of which taken together  shall  constitute
     one and the same agreement.

          11.5 HEADINGS.  The headings in this Agreement are for  convenience of
     reference only and shall not limit or otherwise affect the meaning hereof.

          11.6  GOVERNING  LAW.  PURSUANT  TO  SECTION  5-1401  OF  THE  GENERAL
     OBLIGATIONS  LAW OF THE STATE OF NEW YORK, THIS AGREEMENT SHALL BE GOVERNED
     BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

                                       21
<PAGE>

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

          11.7  ENTIRE  AGREEMENT.  This  Agreement,  together  with  the  other
     Operative  Documents and the other  documents  delivered in connection with
     the transactions contemplated by this Agreement, is intended by the parties
     as a final  expression of their agreement and intended to be a complete and
     exclusive  statement  of the  agreement  and  understanding  of the parties
     hereto in respect of the subject matter contained herein and therein. There
     are no restrictions, promises, warranties or undertakings, other than those
     set forth or referred to herein and therein. This Agreement,  together with
     the  other  Operative  Documents  and  the  other  documents  delivered  in
     connection with the transaction contemplated by this Agreement,  supersedes
     all prior agreements and understandings between the parties with respect to
     such subject matter.

          11.8 SEVERABILITY. In the event that any one or more of the provisions
     contained herein, or the application thereof in any circumstances,  is held
     invalid,  illegal or  unenforceable  in any  respect  for any  reason,  the
     validity,  legality and enforceability of any such provision in every other
     respect  and of the  remaining  provisions  hereof  shall not be in any way
     impaired or affected, it being intended that all of the Placement Agent and
     the Purchaser's  rights and privileges  shall be enforceable to the fullest
     extent permitted by law.

          11.9  DISCLOSURE OF TAX TREATMENT AND TAX  STRUCTURE.  Notwithstanding
     anything  herein to the  contrary,  any party to this  Agreement  (and each
     employee, representative or other agent of any party to this Agreement) may
     disclose to any and all persons,  without  limitation of any kind,  the tax
     treatment  and tax structure of the offering and all materials of any kind,
     the tax  treatment and tax structure of the  transactions  contemplated  by
     this Agreement and all materials of any kind  (including  opinions or other
     tax  analyses)  that are provided to it relating to such tax  treatment and
     tax structure.  However,  such information relating to the tax treatment or
     tax structure is required to be kept  confidential to the extent  necessary
     to comply with any applicable  federal or state  securities  laws. For this
     purpose, "tax structure" means any facts relevant to the federal income tax
     treatment  of the  offering  contemplated  by this  Agreement  but does not
     include information relating to the identity of the Offerors.

                                       22
<PAGE>

          11.10 SURVIVAL.  The Placement  Agent and the Offerors,  respectively,
     agree that the  representations,  warranties and agreements made by each of
     them in this Agreement and in any certificate or other instrument delivered
     pursuant hereto shall remain in full force and effect and shall survive the
     delivery of, and payment for, the Capital Securities.

                     SIGNATURES APPEAR ON THE FOLLOWING PAGE

                                       23
<PAGE>

         If this Agreement is satisfactory to you, please so indicate by signing
the  acceptance of this  Agreement and deliver such  counterpart to the Offerors
whereupon this Agreement will become binding  between us in accordance  with its
terms.

Very truly yours,

Tower Group, Inc.

By: /s/ Michael H. Lee
---------------------------------------------
Name:  Michael H. Lee
Title: President and Chief Executive Officer

TOWER GROUP STATUTORY TRUST IV

By: /s/ Francis M. Colalucci
---------------------------------------------
Name:   Francis M. Colalucci
Title:  Administrator

      CONFIRMED AND ACCEPTED,
as of the date first set forth above

COHEN BROS. & COMPANY

By: /s/ Michael Shenkman
---------------------------------------------
Name:   Michael Shenkman
Title:  Chief Financial Officer

                                       24
<PAGE>

                                    EXHIBIT A

                         FORM OF SUBSCRIPTION AGREEMENT

                         TOWER GROUP STATUTORY TRUST IV

                                TOWER GROUP, INC.

                             SUBSCRIPTION AGREEMENT

                                DECEMBER 21, 2004

         THIS SUBSCRIPTION  AGREEMENT (this  "Agreement") made among Tower Group
Statutory  Trust IV (the "Trust"),  a statutory trust created under the Delaware
Statutory  Trust Act  (Chapter 38 of Title 12 of the Delaware  Code,  12 Del. C.
ss.ss.  3801,  ET SEQ.),  Tower Group,  Inc., a Delaware  corporation,  with its
principal  offices  located at 120  Broadway,  14th  Floor,  New York,  New York
10271-1699 (the "Company," and collectively with the Trust, the "Offerors"), and
Merrill Lynch International (the "Purchaser").

                                    RECITALS:

     A.   The  Trust  desires  to issue  13,000  of its  Floating  Rate  Capital
          Securities (the "Capital  Securities"),  liquidation  amount $1,000.00
          per Capital Security, representing an undivided beneficial interest in
          the assets of the Trust (the "Offering"),  to be issued pursuant to an
          Amended and Restated  Declaration of Trust (the  "Declaration") by and
          among the  Company,  JPMorgan  Chase Bank,  as  Institutional  Trustee
          National   Association   and  Chase   Manhattan  Bank  USA,   National
          Association,  as a Delaware Trustee,  ("Trustees") the  administrators
          named  therein,  and the holders (as defined  therein),  which Capital
          Securities  are  to be  guaranteed  by the  Company  with  respect  to
          distributions and payments upon liquidation,  redemption and otherwise
          pursuant to the terms of a Guarantee Agreement between the Company and
          the Trustees, as trustee (the "Guarantee"); and

     B.   The proceeds from the sale of the Capital  Securities will be combined
          with the  proceeds  from the sale by the Trust to the  Company  of its
          common  securities,  and  will be used by the  Trust  to  purchase  an
          equivalent  amount of  Floating  Rate Junior  Subordinated  Deferrable
          Interest  Debentures of the Company (the "Debentures") to be issued by
          the Company pursuant to an indenture to be executed by the Company and
          the Trustees (the "Indenture"); and

     C.   In  consideration of the premises and the mutual  representations  and
          covenants hereinafter set forth, the parties hereto agree as follows:

<PAGE>

                                   ARTICLE I
                     PURCHASE AND SALE OF CAPITAL SECURITIES

     1.1. Upon the execution of this Agreement,  the Purchaser hereby subscribes
for and agrees to purchase from the Trust 13,000  Capital  Securities at a price
equal to $1,000.00  per Capital  Security (the  "Purchase  Price") and the Trust
agrees to sell such Capital Securities to the Purchaser for said Purchase Price.
The  rights  and  preferences  of the  Capital  Securities  are set forth in the
Declaration.  The Purchase  Price is payable in immediately  available  funds on
December  21,  2004,  or such other  business  day as may be  designated  by the
Purchaser,  but in no event later than December 29, 2004 (the  "Closing  Date").
The Offerors  shall provide the Purchaser  wire transfer  instructions  no later
than 1 day following the date hereof.

     1.2. The certificate for the Capital  Securities  shall be delivered by the
Trust on the Closing Date to the Purchaser or its designee.

     1.3. The  Placement  Agreement,  dated  December  17, 2004 (the  "Placement
Agreement"),  among the  Offerors and the  Placement  Agent  identified  therein
includes  certain  representations  and warranties,  covenants and conditions to
closing  and  certain  other  matters  governing  the  Offering.  The  Placement
Agreement  is hereby  incorporated  by  reference  into this  Agreement  and the
Purchaser  shall be entitled to each of the benefits of the Placement  Agent and
the Purchaser under the Placement Agreement and shall be entitled to enforce the
obligations of the Offerors  under such  Placement  Agreement as fully as if the
Purchaser were a party to such Placement Agreement.

                                   ARTICLE II
                   REPRESENTATIONS AND WARRANTIES OF PURCHASER

     2.1. The Purchaser  understands and  acknowledges  that neither the Capital
Securities,  the  Debentures nor the Guarantee  have been  registered  under the
Securities  Act of  1933,  as  amended  (the  "Securities  Act"),  or any  other
applicable  securities  law,  are  being  offered  for  sale  by  the  Trust  in
transactions not requiring registration under the Securities Act, and may not be
offered,  sold,  pledged or otherwise  transferred  by the  Purchaser  except in
compliance with the registration requirements of the Securities Act or any other
applicable  securities  laws,  pursuant  to  an  exemption  therefrom  or  in  a
transaction not subject thereto.

     2.2. The Purchaser represents,  warrants and certifies that (i) it is not a
"U.S. person" as such term is defined in Rule 902 under the Securities Act, (ii)
it is not  acquiring  the Capital  Securities  for the account or benefit of any
such  U.S.  person,  (iii)  the  offer  and sale of  Capital  Securities  to the
Purchaser  constitutes  an  "offshore  transaction"  under  Regulation  S of the
Securities Act, and (iv) it will not engage in hedging  transactions with regard
to the Capital  Securities  unless such transactions are conducted in compliance
with the  Securities  Act and the  Purchaser  agrees to the legends and transfer
restrictions set forth on the Capital Securities certificate.

                                       A-2
<PAGE>

     2.3. The  Purchaser  represents  and  warrants  that it is  purchasing  the
Capital Securities for its own account, for investment,  and not with a view to,
or for offer or sale in connection with, any  distribution  thereof in violation
of the  Securities  Act or other  applicable  securities  laws,  subject  to any
requirement  of law that the  disposition of its property be at all times within
its  control  and  subject to its  ability  to resell  such  Capital  Securities
pursuant to an effective  registration  statement  under the  Securities  Act or
under Rule 144A or any other  exemption from  registration  available  under the
Securities Act or any other applicable securities law.

     2.4.  The  Purchaser  represents  and  warrants  that it has full power and
authority to execute and deliver this Agreement, to make the representations and
warranties  specified  herein,  and to consummate the transactions  contemplated
herein and it has full right and power to subscribe for Capital  Securities  and
perform its obligations pursuant to this Agreement.

     2.5. The  Purchaser,  a Cayman  Islands  company  whose  business  includes
issuance of certain notes and acquiring the Capital Securities and other similar
securities, represents and warrants that it has such knowledge and experience in
financial and business  matters that it is capable of evaluating  the merits and
risks of  purchasing  the Capital  Securities,  has had the  opportunity  to ask
questions of, and receive answers and request  additional  information from, the
Offerors  and is aware that it may be required to bear the  economic  risk of an
investment in the Capital Securities.

     2.6.  The  Purchaser  represents  and  warrants  that no  filing  with,  or
authorization, approval, consent, license, order, registration, qualification or
decree of, any governmental  body, agency or court having  jurisdiction over the
Purchaser,  other than those that have been made or  obtained,  is  necessary or
required for the  performance  by the  Purchaser of its  obligations  under this
Agreement or to consummate the transactions contemplated herein.

     2.7. The Purchaser  represents  and warrants  that this  Agreement has been
duly authorized, executed and delivered by the Purchaser.

     2.8. The Purchaser represents and warrants that (i) the Purchaser is not in
violation or default of any term of its Memorandum of Association or Articles of
Association, of any provision of any mortgage, indenture,  agreement, instrument
or contract  to which it is a party or by which it is bound or of any  judgment,
decree,  order,  writ or, to its  knowledge,  any  statute,  rule or  regulation
applicable to the Purchaser  which would prevent the Purchaser  from  performing
any material  obligation  set forth in this  Agreement;  and (ii) the execution,
delivery  and  performance  of and  compliance  with  this  Agreement,  and  the
consummation of the transactions  contemplated herein, will not, with or without
the passage of time or giving of notice,  result in any such material violation,
or be in  conflict  with or  constitute  a default  under any such term,  or the
suspension,  revocation,  impairment,  forfeiture or  non-renewal of any permit,
license,  authorization or approval applicable to the Purchaser, its business or
operations or any of its assets or properties  which would prevent the Purchaser
from performing any material obligations set forth in this Agreement.

     2.9.  The  Purchaser  represents  and  warrants  that the  Purchaser  is an
exempted company with limited liability duly incorporated,  validly existing and
in good  standing  under the laws of the  Cayman  Islands,  with full  power and
authority to perform its obligations under this Agreement.

                                      A-3
<PAGE>

     2.10. The Purchaser understands and acknowledges that the Company will rely
upon the truth and accuracy of the foregoing  acknowledgments,  representations,
warranties  and  agreements  and  agrees  that,  if any of the  acknowledgments,
representations,  warranties or agreements deemed to have been made by it by its
purchase of the Capital  Securities  are no longer  accurate,  it shall promptly
notify the Company.

     2.11. The Purchaser understands that no public market exists for any of the
Capital Securities, and that it is unlikely that a public market will ever exist
for the Capital Securities.

                                  ARTICLE III
                                  MISCELLANEOUS

     3.1.  Any notice or other  communication  given  hereunder  shall be deemed
sufficient  if in writing  and sent by  registered  or  certified  mail,  return
receipt  requested,  international  courier or delivered by hand against written
receipt therefor,  or by facsimile  transmission and confirmed by telephone,  to
the following addresses,  or such other address as may be furnished to the other
parties as herein provided:

   To the Offerors:      Tower Group, Inc.
                         120 Broadway, 14th Floor
                         New York, New York 10271-1699
                         Attention:  Francis M. Colalucci
                         Telecopier:  212-271-5492

   To the Purchaser:    Merrill Lynch International
                        c/o Merrill Lynch, Pierce, Fenner & Smith Incorporated
                        250 Vesey Street
                        New York, New York 10080
                        Phone: (212) 449-5113
                        Fax: (212) 449-3695

     Unless otherwise expressly provided herein, notices shall be deemed to have
been given on the date of mailing,  except  notice of change of  address,  which
shall be deemed to have been given when received.

     3.2. This Agreement  shall not be changed,  modified or amended except by a
writing  signed by the  parties to be  charged,  and this  Agreement  may not be
discharged  except by performance  in accordance  with its terms or by a writing
signed by the party to be charged.

     3.3. Upon the execution  and delivery of this  Agreement by the  Purchaser,
this Agreement  shall become a binding  obligation of the Purchaser with respect
to the purchase of Capital Securities as herein provided.

                                      A-4
<PAGE>

     3.4.  Notwithstanding  anything expressed or implied to the contrary,  each
Purchaser of Capital  Securities  (and each employee,  representative,  or other
agent of a Purchaser) may disclose to any and all persons, without limitation of
any kind,  the U.S. tax  treatment  and U.S. tax  structure of the  transactions
contemplated by this Agreement and all materials of any kind (including opinions
or other tax analyses) that are provided to the Purchaser  relating to such U.S.
tax  treatment  and U.S.  tax  structure  as such terms are  defined in Treasury
Regulation Section 1.6011-4;  provided, that any such disclosure of the U.S. tax
treatment and U.S. tax structure and materials  related  thereto may not be made
(i) in a manner that would constitute an offer to sell or the solicitation of an
offer to buy the Capital Securities  offered herein under applicable  securities
laws  or  (ii)  when  nondisclosure  is  reasonably  necessary  to  comply  with
applicable   securities   laws.   This   authorization   of  tax  disclosure  is
retroactively effective to the commencement of the first discussions between the
parties regarding the transactions contemplated herein.

     3.5. PURSUANT TO SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE
OF NEW YORK,  THIS  AGREEMENT  SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH,  THE LAWS OF THE STATE OF NEW YORK.  EACH OF THE TRUST,  THE PURCHASER AND
THE  COMPANY,  ON BEHALF  OF ITSELF  AND ITS  SUBSIDIARIES  (INCLUDING,  WITHOUT
LIMITATION, THE TRUST), HEREBY IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION
OF THE  FEDERAL  AND NEW YORK  STATE  COURTS  LOCATED IN THE CITY OF NEW YORK IN
CONNECTION WITH ANY SUIT, ACTION OR PROCEEDING  RELATED TO THIS AGREEMENT OR ANY
OF THE MATTERS  CONTEMPLATED  HEREBY,  IRREVOCABLY WAIVES ANY DEFENSE OF LACK OF
PERSONAL  JURISDICTION AND IRREVOCABLY  AGREES THAT ALL CLAIMS IN RESPECT OF ANY
SUIT,  ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT.  EACH
OF THE  TRUST,  THE  PURCHASER  AND THE  COMPANY,  ON BEHALF  OF ITSELF  AND ITS
SUBSIDIARIES (INCLUDING,  WITHOUT LIMITATION, THE TRUST), IRREVOCABLY WAIVES, TO
THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER  APPLICABLE LAW, ANY OBJECTION
WHICH IT MAY NOW OR  HEREAFTER  HAVE TO THE  LAYING  OF VENUE OF ANY SUCH  SUIT,
ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT AND ANY CLAIM THAT ANY SUCH SUIT,
ACTION  OR  PROCEEDING  BROUGHT  IN  ANY  SUCH  COURT  HAS  BEEN  BROUGHT  IN AN
INCONVENIENT FORUM.

     3.6. The parties  agree to execute and deliver all such further  documents,
agreements  and  instruments  and take such other and  further  action as may be
necessary or appropriate to carry out the purposes and intent of this Agreement.

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

     3.8. In the event that any one or more of the provisions  contained herein,
or the application  thereof in any  circumstances,  is held invalid,  illegal or
unenforceable  in any  respect  for  any  reason,  the  validity,  legality  and
enforceability of any such provision in every other respect and of the remaining
provisions  hereof  shall  not be in any way  impaired  or  affected,  it  being
intended  that all of the Offerors' and the  Purchaser's  rights and  privileges
shall be enforceable to the fullest extent permitted by law.

                                      A-5
<PAGE>

                     SIGNATURES APPEAR ON THE FOLLOWING PAGE

                                      A-6
<PAGE>

         IN WITNESS  WHEREOF,  the  undersigned  has caused this Agreement to be
duly executed as of the day and year first written above.

MERRILL LYNCH INTERNATIONAL

By:
   --------------------------------------------------
Name:
     ------------------------------------------------
Title:
      -----------------------------------------------

         IN WITNESS WHEREOF,  this Agreement is agreed to and accepted as of the
day and year first written above.

                        TOWER GROUP, INC.

                        By:
                           ---------------------------------------------
                        Name:  Michael H. Lee
                        Title:  President and Chief Executive Officer

                        TOWER GROUP STATUTORY TRUST IV

                        By:
                           ---------------------------------------------
                        Name:  Michael H. Lee
                        Title:  Administrator

                                      A-7

<PAGE>

                                   EXHIBIT B-1

                         FORM OF COMPANY COUNSEL OPINION

                                December 21, 2004

Merrill Lynch International
c/o Merrill Lynch, Pierce, Fenner & Smith Incorporated
250 Vesey Street
New York, New York 10080
Phone:  (212) 449-5113
Fax:    (212) 449-3695

Cohen Bros. & Co.
1818 Market Street
Philadelphia, Pennsylvania 19103

JP Morgan Chase Bank, National Association
600 Travis Street, 50th Floor
Houston, Texas  77002

Ladies and Gentlemen:

         We have  acted as counsel  to Tower  Group,  Inc.  (the  "Company"),  a
Delaware  corporation in connection with a certain  Placement  Agreement,  dated
December 17, 2004,  (the "Placement  Agreement"),  between the Company and Tower
Group Statutory Trust IV (the "Trust"), on one hand, and Cohen Bros. and Company
(the "Placement Agent"), on the other hand. Pursuant to the Placement Agreement,
and subject to the terms and conditions stated therein, the Trust will issue and
sell to Merrill Lynch  International  (the "Purchaser"),  $13,000,000  aggregate
principal  amount  of  Floating  Rate  Capital  Securities  (liquidation  amount
$1,000.00 per capital security) (the "Capital Securities").

         Capitalized  terms used herein and not otherwise defined shall have the
same meanings ascribed to them in the Placement Agreement.

         The law covered by the opinions  expressed herein is limited to the law
of the United States of America and of the State of Delaware and New York.

         We have  made such  investigations  of law as,  in our  judgment,  were
necessary  to render  the  following  opinions.  We have also  reviewed  (a) the
Company's Articles of Incorporation,  as amended,  and its By-Laws,  as amended,
and (b) such corporate documents,  records,  information and certificates of the
Company and its Significant  Subsidiaries,  certificates of public  officials or
government  authorities  and other  documents  as we have  deemed  necessary  or
appropriate  as a basis for the opinions  hereinafter  expressed.  As to certain
facts  material to our  opinions,  we have relied,  with your  permission,  upon
statements,  certificates or representations,  including those delivered or made
in  connection  with the  above-referenced  transaction,  of officers  and other
representatives of the Company and its Significant Subsidiaries and the Trust.

                                     B-1-1
<PAGE>

         As used herein,  the phrase "to our  knowledge"  or "to the best of our
knowledge" or other similar  phrase means the actual  knowledge of the attorneys
who have had active involvement in the transactions  described above or who have
prepared  or  signed  this  opinion  letter,   or  who  otherwise  have  devoted
substantial attention to legal matters for the Company.

         To the extent it may be relevant to the opinions  expressed  herein, we
have assumed that the parties to the Operative  Documents other than the Company
have the power to enter into and perform such  documents and to  consummate  the
transactions  contemplated  thereby  and that  such  documents  have  been  duly
authorized,  executed and delivered by, and constitute legal,  valid and binding
obligations of, such parties.

         Our opinion as to the  enforceability  of the  Operative  Documents  is
subject  to  general   principles   of  equity   (regardless   of  whether  such
enforceability  is  considered  in a  proceeding  in  equity  or at  law or in a
bankruptcy proceeding) and assumes that the parties seeking enforcement will act
with commercial  reasonableness  in exercising each of their rights and remedies
thereunder.  We further  assume  that the  enforcement  of any rights may in all
cases be  subject  to an  implied  duty of good  faith and fair  dealing  and to
general  principles  of equity  (regardless  of whether such  enforceability  is
considered in a proceeding at law or in equity).

         We express no opinion on the validity, binding effect or enforceability
under any  provisions  of the  Operative  Documents  (i) which  waive any rights
afforded to any party  thereto under any statute or  constitutional  provisions,
(ii) which waive  broadly or vaguely  stated rights or future  rights,  or waive
certain  rights or  defenses  to  obligations  where such  waivers  are  against
statutes,  laws or public policy,  or (ii) the breach of which a court concludes
is not material or does not adversely affect the non-breaching party. Insofar as
the   indemnity   provisions   of  the   Operative   Documents   may   encompass
indemnification  with respect to violation of laws,  enforcement  thereof may be
limited by public policies underlying such laws.

         We express no opinion as to the accuracy of factual  matters  contained
in any  exhibits or schedules to the  Operative  Documents.  No opinion is given
herein as to the  choice of law or  internal  substantive  rules of law that any
court or  other  tribunal  may  apply to the  transactions  contemplated  by the
Operative Documents.

         This opinion is issued as of the date hereof and is necessarily limited
to the laws now in effect  and the facts  and  circumstances  known to us on the
date hereof. We are not assuming any obligation to review or update this opinion
should applicable law or the existing fact and circumstances change.

         Based upon and subject to the foregoing and the further  qualifications
set forth below, we are of the opinion as of the date hereof that:

                                     B-1-2
<PAGE>

1. The Company is validly  existing and in good  standing  under the laws of the
State of Delaware. Each of the Significant  Subsidiaries is validly existing and
in good standing under the laws of its jurisdiction of organization. Each of the
Company and the Significant  Subsidiaries has full corporate power and authority
to own or lease its  properties  and to conduct its business as such business is
currently conducted in all material respects. To the best of our knowledge,  all
outstanding  shares of capital stock of the Significant  Subsidiaries  have been
duly authorized and validly  issued,  and are fully paid and  nonassessable  and
owned of record and beneficially, directly or indirectly by the Company.

2. The issuance,  sale and delivery of the  Debentures  in  accordance  with the
terms and conditions of the Placement Agreement and the Operative Documents have
been duly authorized by all necessary actions of the Company. The issuance, sale
and  delivery  of the  Debentures  by the  Company  and the  issuance,  sale and
delivery of the Trust Securities by the Trust do not give rise to any preemptive
or other rights to subscribe  for or to purchase any shares of capital  stock or
equity securities of the Company or the Significant Subsidiaries pursuant to the
corporate  Articles  of  Incorporation  or Charter,  By-Laws or other  governing
documents of the Company or the Significant Subsidiaries, or, to the best of our
knowledge,  any  agreement or other  instrument  to which either  Company or the
Significant  Subsidiaries  is a party or by which the Company or the Significant
Subsidiaries may be bound.

3. The Company has all requisite  corporate  power to enter into and perform its
obligations under the Placement  Agreement and the Subscription  Agreement,  and
the  Placement  Agreement  and the  Subscription  Agreement  have  been duly and
validly  authorized,  executed and delivered by the Company and  constitute  the
legal,  valid and binding  obligations of the Company  enforceable in accordance
with their terms,  except as the  enforcement  thereof may be limited by general
principles of equity and by bankruptcy or other laws affecting creditors' rights
generally, and except as the indemnification and contribution provisions thereof
may be limited under  applicable laws and certain  remedies may not be available
in the case of a non-material breach.

4. Each of the Indenture,  the Trust  Agreement and the Guarantee  Agreement has
been duly authorized,  executed and delivered by the Company, and is a valid and
legally  binding  obligation of the Company  enforceable in accordance  with its
terms,  subject  to  the  effect  of  bankruptcy,  insolvency,   reorganization,
receivership,  moratorium  and other laws  affecting  the rights and remedies of
creditors generally and of general principles of equity.

5. The  Debentures  have been duly  authorized,  executed  and  delivered by the
Company,  are entitled to the benefits of the Indenture and are legal, valid and
binding obligations of the Company enforceable against the Company in accordance
with  their   terms,   subject  to  the   effect  of   bankruptcy,   insolvency,
reorganization, receivership, moratorium and other laws affecting the rights and
remedies of creditors generally and of general principles of equity.

6. To the best of our knowledge,  neither the Company,  the Trust, nor any other
Significant Subsidiaries of the Company is in breach or violation of, or default
under,  with or  without  notice  or  lapse  of time or both,  its  Articles  of
Incorporation  or  Charter,  By-Laws  or other  governing  documents  (including
without  limitation,   the  Trust  Agreement).   The  execution,   delivery  and
performance  of the  Placement  Agreement  and the  Operative  Documents and the
consummation of the transactions contemplated by the Placement Agreement and the
Operative Documents do not and will not (i) result in the creation or imposition
of any  material  lien,  claim,  charge,  encumbrance  or  restriction  upon any
property  or assets of the  Company  or its  Significant  Subsidiaries,  or (ii)
conflict  with,  constitute a material  breach or violation  of, or constitute a
material default under,  with or without notice or lapse of time or both, any of
the terms,  provisions  or conditions  of (A) the Articles of  Incorporation  or
Charter,  By-Laws or other governing documents of the Company or its Significant
Subsidiaries,  or (B) to the  best  of our  knowledge,  any  material  contract,
indenture,  mortgage,  deed of trust,  loan or credit  agreement,  note,  lease,
franchise,  license or any other agreement or instrument to which the Company or
its Significant  Subsidiaries is a party or by which any of them or any of their
respective  properties  may  be  bound  or  (C)  any  order,  decree,  judgment,
franchise,  license,  permit,  rule  or  regulation  of any  court,  arbitrator,
government,  or  governmental  agency or  instrumentality,  domestic or foreign,
known to us having jurisdiction over the Company or its Significant Subsidiaries
or any of their respective  properties which, in the case of each of (i) or (ii)
above,  is  material  to the  Company  and  its  Significant  Subsidiaries  on a
consolidated basis.

                                     B-1-3
<PAGE>

7. Except for filings,  registrations or qualifications  that may be required by
applicable securities laws, no authorization,  approval, consent or order of, or
filing,  registration  or  qualification  with, any person  (including,  without
limitation,  any court,  governmental  body or authority) is required  under the
laws of the State of New York in connection with the  transactions  contemplated
by the Placement  Agreement and the Operative  Documents in connection  with the
offer  and sale of the  Capital  Securities  as  contemplated  by the  Placement
Agreement and the Operative Documents.

8. To the best of our knowledge  (i) no action,  suit or proceeding at law or in
equity is pending  or  threatened  to which the  Offerors  or their  Significant
Subsidiaries  are or may be a party,  and (ii) no action,  suit or proceeding is
pending or  threatened  against or affecting  the Offerors or their  Significant
Subsidiaries or any of their properties,  before or by any court or governmental
official,  commission,  board or other administrative agency, authority or body,
or any  arbitrator,  wherein an  unfavorable  decision,  ruling or finding could
reasonably be expected to have a material  adverse effect on the consummation of
the  transactions  contemplated  by the  Placement  Agreement  and the Operative
Documents  or the issuance and sale of the Capital  Securities  as  contemplated
therein or the condition (financial or otherwise),  earnings, affairs, business,
or results of operations of the Offerors and their Significant Subsidiaries on a
consolidated basis.

9. Assuming the truth and accuracy of the  representations and warranties of the
Placement Agent in the Placement Agreement and the Purchaser in the Subscription
Agreement,  it is not  necessary  in  connection  with  the  offering,  sale and
delivery of the Capital  Securities,  the Debentures and the Guarantee Agreement
(or the  Guarantee)  to register the same under the  Securities  Act of 1933, as
amended, under the circumstances contemplated in the Placement Agreement and the
Subscription Agreement.

10.  Neither the Company nor the Trust is or after giving effect to the offering
and sale of the Capital  Securities  and the  consummation  of the  transactions
described in the  Placement  Agreement  will be, an  "investment  company" or an
entity "controlled" by an "investment  company," in each case within the meaning
of the  Investment  Company Act of 1940, as amended,  without  regard to Section
3(c) of such Act .

                                     B-1-4
<PAGE>

         The opinion expressed in the first two sentences of numbered  paragraph
1 of  this  Opinion  Letter  is  based  solely  upon  certain  certificates  and
confirmations  issued by the applicable  governmental  officer or authority with
respect to each of the Company and the Significant Subsidiaries.

         [With respect to the foregoing  opinions,  since no member of this firm
is actively engaged in the practice of law in the States of Delaware,  we do not
express any  opinions as to the laws of such states and have  relied,  with your
approval,  upon the opinion of Richards,  Layton & Finger,  P.A. with respect to
matters of  Delaware  law.  Except with  respect to the  opinions  expressed  in
paragraphs  2, 6 and 10, we also  express no opinion  with  respect to the Trust
except to the extent such matters are opined upon by Richards,  Layton & Finger,
P.A. in the opinion  dated the date  hereof,  including,  but not limited to the
enforceability  of any Operative  Documents  with respect to the Trust,  without
regard to conflict of law provisions.]

         This  opinion is rendered to you solely  pursuant to Section  3.1(a) of
the Placement Agreement.  As such, it may be relied upon by you only and may not
be used or relied upon by any other  person for any purpose  whatsoever  without
our prior written consent.

                                                              Very truly yours,

                                     B-1-5
<PAGE>

                            EXHIBIT A TO EXHIBIT B-2

                         CERTIFICATE OF LEGAL EXISTENCE

                                  See attached

                                     B-2-1

<PAGE>

                                   EXHIBIT B-2

                           FORM OF TAX COUNSEL OPINION

          1.  The Corresponding Debentures will be classified as indebtedness of
              the Company for United States federal income tax purposes; and

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

         The opinions we express herein are limited  solely to matters  governed
by the  federal  income tax laws of the United  States.  Our opinion is provided
solely to you as a legal opinion only, and not as a guaranty or warranty, and is
limited to the specific transactions, documents, and matters described above. No
opinion may be implied or inferred beyond that which is expressly stated in this
letter.

         We  express  no opinion  with  respect  to any matter not  specifically
addressed by the foregoing opinions,  including state or local tax consequences,
or any federal, state, or local issue not specifically referred to and discussed
above including,  without limitation,  the effect on the matters covered by this
opinion of the laws of any other jurisdiction.

         We are  furnishing  this  opinion  to you  solely  for your  benefit in
connection with the issuance of the Capital  Securities,  the Common  Securities
and the Corresponding Debentures,  and this opinion is not to be relied upon for
any other purpose or by any other person  without our express  written  consent.
Notwithstanding the foregoing, (i) copies of this opinion letter may be provided
for the  benefit of [RATING  AGENCY]  and (ii) you (and each of your  employees,
representatives  and  other  agents)  may  disclose  this  letter to any and all
persons,  without  limitation of any kind, to the extent such  disclosure may be
relevant to understanding  the tax treatment or tax structure of any transaction
contemplated  by the Placement  Agreement.  We disclaim any obligation to update
this opinion  letter for events  occurring or coming to our attention  after the
date hereof.

                                                              Very truly yours,

                                     B-3-1
<PAGE>

                                Tower Group, Inc.

                                                               December 21, 2004

Bracewell & Patterson, L.L.P.
111 Congress Avenue, Suite 2300
Austin, Texas  78701

     Re:  Representations Concerning the Issuance of Floating Rate Junior
          Subordinated Deferrable Interest Debentures (the "Corresponding
          Debentures") to Tower Group Statutory Trust IV (the "Trust") and Sale
          of Trust Securities (THE "TRUST SECURITIES") OF THE TRUST

Dear Sirs:

         In accordance  with your  request,  Tower Group,  Inc. (the  "Company")
hereby makes the following representations in connection with the preparation of
your opinion letter as to the United States federal income tax  consequences  of
the issuance by the Company of the Corresponding Debentures to the Trust and the
sale of the Trust Securities.

         The Company hereby represents that:

     (1) The sole assets of the Trust will be the Corresponding Debentures,  any
     interest   paid  on  the   Corresponding   Debentures  to  the  extent  not
     distributed,  proceeds  of  the  Corresponding  Debentures,  or  any of the
     foregoing.

     (2) The  Company  intends  to use the net  proceeds  from  the  sale of the
     Corresponding Debentures for general corporate purposes.

     (3) The Trust was not formed to conduct  any trade or  business  and is not
     authorized  to  conduct  any trade or  business.  The Trust  exists for the
     exclusive  purposes of (i) issuing and selling the Trust  Securities,  (ii)
     using  the  proceeds  from the  sale of Trust  Securities  to  acquire  the
     Corresponding  Debentures,  and (iii) engaging only in activities necessary
     or incidental thereto.

     (4) The Trust was formed to facilitate  direct  investment in the assets of
     the Trust, and the existence of multiple classes of ownership is incidental
     to that purpose. There is no intent to provide holders of such interests in
     the Trust with diverse interests in the assets of the Trust.

     (5) The Company intends to create a  debtor-creditor  relationship  between
     the Company, as debtor, and the Trust, as a creditor, upon the issuance and
     sale of the  Corresponding  Debentures  to the  Trust by the  Company.  The
     Company  will  (i)  record  and  at  all  times  continue  to  reflect  the
     Corresponding  Debentures as indebtedness on its separate books and records
     for  financial  accounting  purposes,  and  (ii)  treat  the  Corresponding
     Debentures as indebtedness  for all United States federal,  state and local
     income tax purposes.

                                     B-3-2

<PAGE>

     (6) During each year,  the Trust's  income will consist  solely of payments
     made by the Company  with  respect to the  Corresponding  Debentures.  Such
     payments  will  not be  derived  from the  active  conduct  of a  financial
     business by the Trust. Both the Company's  obligation to make such payments
     and the  measurement  of the amounts  payable by the Company are defined by
     the terms of the Corresponding Debentures. Neither the Company's obligation
     to make such  payments nor the  measurement  of the amounts  payable by the
     Company is dependent  on income or profits of the Company or any  affiliate
     of the Company.

     (7) The Company has reviewed  projections of earnings,  cash flow,  capital
     and surplus and other relevant  financial and economic data relating to the
     Company and its  affiliates.  Based on the current and  estimated  net cash
     flow and the projections of earnings, cash flow, capital and surplus of the
     Company and its affiliates,  the Company believes its net cash flow will be
     in excess of the amount of principal  and  interest  required to be paid in
     accordance with the terms of the  Corresponding  Debentures and the Company
     expects  that it will be able to make,  and will  make,  timely  payment of
     principal  and interest in accordance  with the terms of the  Corresponding
     Debentures with available capital or accumulated net cash flow.

     (8)  The  principal  insurance  operating  subsidiary  of the  Company  has
     received  either a financial  strength rating of at least B+ with a neutral
     or positive  outlook from A.M. Best Company,  Inc., or an investment  grade
     financial strength rating from either Standard & Poor's Ratings Services, a
     division of The McGraw-Hill Companies, Inc. or Fitch Ratings.

     (9) The terms and conditions of the Corresponding Debentures, including the
     interest rate, were determined on an arm's length basis.

     (10) The Company  presently has no intention to defer interest  payments on
     the  Corresponding  Debentures,  and it considers the  likelihood of such a
     deferral to be remote  because,  if it were to exercise  its right to defer
     payments of interest with respect to the Corresponding Debentures, it would
     not be permitted to declare or pay any  dividends or  distributions  on, or
     redeem,  purchase,  acquire, or make a liquidation payment with respect to,
     any capital  stock of the Company or any  affiliate  of the Company  (other
     than  payments of  dividends or  distributions  to the Company) or 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 any affiliate
     of the  Company  that rank  PARI  PASSU in all  respects  with or junior in
     interest to the Corresponding  Debentures,  in each case subject to limited
     exceptions  stated in Section  2.11 of the  Indenture to be entered into in
     connection with the issuance of the Corresponding Debentures.

                                     B-3-3

<PAGE>

     (11) Immediately  after the issuance of the Corresponding  Debentures,  the
     debt-to-equity ratio of the Company (as determined for financial accounting
     purposes)  will be no higher  than three to one (3 : 1). The Company has no
     plan or intention to issue debt that would cause such ratio to exceed three
     to one (3 : 1). For purposes of this  paragraph  11, (i) the  Corresponding
     Debentures will be treated as debt and payments  thereon will be treated as
     interest, (ii) other debt (as determined for financial accounting purposes)
     shall include both  short-term and long-term  indebtedness  of the Company,
     and (iii) equity (as determined for financial  accounting  purposes)  shall
     include  capital  stock,  preferred  stock,  if any,  paid in  surplus  and
     retained earnings of the Company.

     (12) To the best of our knowledge, the Company's subsidiaries are currently
     in  compliance  with all  applicable  federal,  state,  and  local  capital
     requirements,  except to the extent  that  failure to comply  with any such
     requirements  would not have a material  adverse  effect on the Company and
     its subsidiaries.

     (13) For purposes hereof, you may rely on the  representations  made by the
     Company in the  Placement  Agreement  dated as of December 17, 2004, by and
     among Cohen Bros. & Company, the Trust and the Company.

     (14) The  Company  will not issue any  class of common  stock or  preferred
     stock senior in rights (such as payment rights and liquidation  preference)
     to the Corresponding Debentures during their term.

     (15) The Internal Revenue Service has not challenged the interest deduction
     on any class of the Company's  subordinated debt in the last ten (10) years
     on the basis  that such debt  constitutes  equity  for  federal  income tax
     purposes.

         The above  representations  are accurate as of the date hereof and will
continue to be accurate through the issuance of the Trust Securities, unless you
are otherwise  notified by us in writing.  The undersigned  understands that you
will rely on the foregoing in connection with rendering  certain legal opinions,
and possesses the authority to make the representations set forth in this letter
on behalf of the Company.

                               Very truly yours,

                               Tower Group, Inc.

                               By:
                                  -----------------------------------------
                                  Name:
                                  Title:

                                     B-3-4

<PAGE>

                                    EXHIBIT C

                            SIGNIFICANT SUBSIDIARIES

Tower Insurance Company of New York

Tower Risk Management Corp.

                                      C-1

<PAGE>

                                    EXHIBIT D

                            FORM OF QUARTERLY REPORT

<TABLE>
<CAPTION>

Merrill Lynch International
c/o Merrill Lynch, Pierce, Fenner & Smith Incorporated
250 Vesey Street
New York, New York 10080
Phone:  (212) 449-5113
Fax:      (212) 449-3695

PLEASE COMPLETE FOR THE PRINCIPAL INSURANCE OPERATING SUBSIDIARY
<S>                                                                                   <C>
AS OF YEAR END _______, 20__

NAIC Risk Based Capital Ratio (authorized control level)                                 ________ %

AS OF [MARCH 31, JUNE 30, SEPTEMBER 30, OR DECEMBER 31,] 20___

Total Policyholders' Surplus                                                             $________

Consolidated Debt to Total Policyholders' Surplus                                        _________%

Total Assets                                                                             $________

NAIC Class 1 & 2 Rated Investments to Total Fixed Income Investments                     _________%

NAIC Class 1 & 2 Rated Investments to Total Investments                                  _________%

Return on Policyholders' Surplus                                                         _________%

FOR PROPERTY & CASUALTY COMPANIES

EXPENSE RATIO                                                                            _________%

LOSS AND LAE RATIO                                                                       _________%

COMBINED RATIO                                                                           _________%

NET PREMIUMS WRITTEN (ANNUALIZED) TO POLICYHOLDERS' SURPLUS                              _________%

</TABLE>
                                      D-1
<PAGE>

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                                               <C>
NAIC RISK BASED CAPITAL RATIO-P&C                                (TOTAL  ADJUSTED   CAPITAL/AUTHORIZED  CONTROL  LEVEL  RISK-BASED
                                                                  CAPITA/)/2
-----------------------------------------------------------------------------------------------------------------------------------
NAIC RISK BASED CAPITAL RATIO-LIFE                               ((TOTAL ADJUSTED CAPITAL-ASSET  VALUATION  RESERVE)/AUTHORIZED
                                                                  CONTROL LEVEL RISK-BASED CAPITA/)/2
---------------------------------------------------------------- ------------------------------------------------------------------
TOTAL CAPITAL AND  SURPLUS-LIFE                                   COMMON  CAPITAL  STOCK +  PREFERRED  CAPITAL  STOCK  +  AGGREGATE
                                                                  WRITE-INS  FOR OTHER THAN SPECIAL  SURPLUS  FUNDS + SURPLUS NOTES
                                                                  +GROSS PAID-IN AND CONTRIBUTED  SURPLUS + AGGREGATE WRITE-INS FOR
                                                                  SPECIAL  SURPLUS  FUNDS + UNASSIGNED  FUNDS  (SURPLUS) - TREASURY
                                                                  STOCK
----------------------------------------------------------------- -----------------------------------------------------------------
TOTAL CAPITAL AND SURPLUS-P&C                                     AGGREGATE  WRITE-INS FOR SPECIAL  SURPLUS FUNDS + COMMON  CAPITAL
                                                                  STOCK + PREFERRED  CAPITAL  STOCK + AGGREGATE  WRI FOR OTHER THAN
                                                                  SPECIAL  SURPLUS FUNDS + SURPLUS  NOTES +GROSS P AND  CONTRIBUTED
                                                                  SURPLUS + UNASSIGNED FUNDS (SURPLUS) - TREASURY STOCK
-----------------------------------------------------------------------------------------------------------------------------------
TOTAL  CLASS 1 & 2  RATED  INVESTMENTS  TO  TOTAL                (TOTAL CLASS 1 + TOTAL CLASS 2 RATED  INVESTMENTS)/TOTAL FIXED
 FIXED  INCOME INVESTMENTS                                        INCOME INVESTMENTS
-----------------------------------------------------------------------------------------------------------------------------------
TOTAL CLASS 1 & 2 RATED INVESTMENTS TO TOTAL INVESTMENTS         (TOTAL  CLASS  1 +  TOTAL  CLASS  2  RATED  INVESTMENTS)/TOTAL
                                                                 INVESTMENTS
-----------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS                                                     TOTAL ASSETS
-----------------------------------------------------------------------------------------------------------------------------------
RETURN ON POLICYHOLDERS' SURPLUS                                 NET INCOME/POLICYHOLDERS' SURPLUS
-----------------------------------------------------------------------------------------------------------------------------------
EXPENSE RATIO                                                    OTHER UNDERWRITING EXPENSES INCURRED/NET PREMIUMS EARNED
-----------------------------------------------------------------------------------------------------------------------------------
LOSS AND LAE RATIO                                               (LOSSES INCURRED + LOSS EXPENSES INCURRED)/NET PREMIUMS EARNED
-----------------------------------------------------------------------------------------------------------------------------------
COMBINED RATIO                                                   EXPENSE RATIO + LOSS AND LAE RATIO
-----------------------------------------------------------------------------------------------------------------------------------
NET PREMIUMS WRITTEN (ANNUALIZED) TO POLICYHOLDERS' SURPLUS      NET PREMIUMS WRITTEN/POLICYHOLDERS' SURPLUS
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                      D-2

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00076-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00076-of-00352.parquet"}]]