Exhibit 4.2
Execution Copy
================================================================================
GUARANTEE AGREEMENT
by and between
CASTLEPOINT BERMUDA HOLDINGS, LTD.
and
WILMINGTON TRUST COMPANY
Dated as of September 27, 2007
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S>
<C>
<C>
ARTICLE I
DEFINITIONS AND
INTERPRETATION.................................................................1
Section
1.1
Definitions and
Interpretation..............................................................1
ARTICLE II
POWERS, DUTIES AND RIGHTS OF THE GUARANTEE
TRUSTEE.............................................5
Section
2.1
Powers and Duties of the Guarantee
Trustee..................................................5
Section 2.2
Certain Rights of the Guarantee
Trustee.....................................................6
Section
2.3 Not
Responsible for Recitals or Issuance of
Guarantee.......................................8
Section
2.4
Events of Default;
Waiver...................................................................8
Section
2.5
Events of Default;
Notice...................................................................8
ARTICLE III
GUARANTEE
TRUSTEE..............................................................................9
Section
3.1
Guarantee Trustee;
Eligibility..............................................................9
Section
3.2
Appointment, Removal and Resignation of the Guarantee
Trustee...............................9
ARTICLE IV
GUARANTEE.....................................................................................10
Section
4.1
Guarantee..................................................................................10
Section
4.2
Waiver of Notice and
Demand................................................................10
Section
4.3
Obligations Not
Affected...................................................................10
Section 4.4
Rights of
Holders..........................................................................11
Section
4.5
Guarantee of
Payment.......................................................................12
Section
4.6
Subrogation................................................................................12
Section
4.7
Independent
Obligations....................................................................12
Section
4.8
Enforcement by a
Beneficiary...............................................................12
ARTICLE V
LIMITATION OF TRANSACTIONS;
SUBORDINATION.....................................................13
Section
5.1
Limitation of
Transactions.................................................................13
Section
5.2
Ranking....................................................................................14
ARTICLE VI
TERMINATION...................................................................................14
Section
6.1
Termination................................................................................14
ARTICLE VII
INDEMNIFICATION...............................................................................14
Section
7.1
Exculpation................................................................................14
Section
7.2
Indemnification............................................................................15
Section
7.3
Compensation; Reimbursement of
Expenses....................................................16
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
<S>
<C>
<C>
ARTICLE VIII
MISCELLANEOUS.................................................................................16
Section
8.1
Successors and
Assigns.....................................................................16
Section
8.2
Amendments.................................................................................17
Section
8.3
Notices....................................................................................17
Section
8.4
Benefit....................................................................................17
Section
8.5
Governing
Law..............................................................................18
Section
8.6
Counterparts...............................................................................18
Section
8.7
Separability...............................................................................18
</TABLE>
ii
<PAGE>
GUARANTEE AGREEMENT
This GUARANTEE AGREEMENT (this "Guarantee"), dated as of
September 27, 2007, is executed and delivered by CastlePoint
Bermuda Holdings,
Ltd., a Bermuda company limited by shares (the "Guarantor"), and
Wilmington
Trust Company, a Delaware banking corporation, as trustee (the
"Guarantee
Trustee"), for the benefit of the Holders (as defined herein) from
time to time
of the Capital Securities (as defined herein) of CastlePoint
Bermuda Holdings
Statutory Trust I, a Delaware statutory trust (the "Issuer").
WHEREAS, pursuant to an Amended and Restated Declaration of Trust
(the
"Declaration"), dated as of the date hereof among Wilmington Trust
Company, not
in its individual capacity but solely as institutional trustee,
the
administrators of the Issuer named therein, the Guarantor, as
sponsor, and the
holders from time to time of undivided beneficial interests in the
assets of the
Issuer, the Issuer is issuing on the date hereof those undivided
beneficial
interests, having an aggregate liquidation amount of $30,000,000.00
(the
"Capital Securities"); and
WHEREAS, as incentive for the Holders to purchase the Capital
Securities, the Guarantor desires irrevocably and unconditionally
to agree, to
the extent set forth in this Guarantee, to pay to the Holders of
Capital
Securities the Guarantee Payments (as defined herein) and to make
certain other
payments on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the purchase by each Holder of
the
Capital Securities, which purchase the Guarantor hereby agrees
shall benefit the
Guarantor, the Guarantor executes and delivers this Guarantee for
the benefit of
the Holders.
ARTICLE I
DEFINITIONS AND INTERPRETATION
Section 1.1 Definitions and
Interpretation.
In this Guarantee, unless the context otherwise requires:
(a) capitalized
terms used in this
Guarantee but not defined in the
preamble
above have the respective meanings assigned to them in this Section
1.1;
(b) a term defined
anywhere in this Guarantee has the same meaning throughout;
(c) all references to
"the Guarantee" or "this Guarantee" are to this Guarantee
as modified,
supplemented or amended from time to time;
(d) all references in this Guarantee to "Articles" or "Sections" are to
Articles or Sections of this Guarantee, unless otherwise
specified;
(e) terms defined in the Declaration as at the date of execution of this
Guarantee have the
same meanings when used in this Guarantee, unless
otherwise defined
in this Guarantee or unless the context otherwise
requires; and
<PAGE>
(f) a reference to the singular includes the plural and vice
versa.
"Affiliate" has the same meaning as given to that term in Rule 405
of
the Securities Act of 1933, as amended, or any successor rule
thereunder.
"Beneficiaries" means any Person to whom the Issuer is or
hereafter
becomes indebted or liable.
"Capital Securities" has the meaning set forth in the recitals to
this
Guarantee.
"Common Securities" means the common securities issued by the
Issuer to
the Guarantor pursuant to the Declaration.
"Corporate Trust Office" means the office of the Guarantee Trustee
at
which the corporate trust business of the Guarantee Trustee shall,
at any
particular time, be principally administered, which office at the
date of
execution of this Guarantee is located at 1100 North Market Street,
Wilmington,
Delaware 19890-1600, Attention: Corporate Trust Administration.
"Covered Person" means any Holder of Capital Securities.
"Debentures" means the debt securities of the Guarantor designated
the
Fixed/Floating Rate Junior Subordinated Deferrable Interest
Debentures due 2037
held by the Institutional Trustee (as defined in the Declaration)
of the Issuer.
"Declaration Event of Default" means an "Event of Default" as
defined
in the Declaration.
"Event of Default" has the meaning set forth in Section 2.4(a).
"Guarantee Payments" means the following payments or
distributions,
without duplication, with respect to the Capital Securities, to the
extent not
paid or made by the Issuer: (i) any accrued and unpaid
Distributions (as defined
in the Declaration) which are required to be paid on such Capital
Securities to
the extent the Issuer shall have funds available therefor, (ii) the
Optional
Redemption Price to the extent the Issuer has funds available
therefor, with
respect to any Capital Securities called for redemption by the
Issuer, (iii) the
Special Redemption Price to the extent the Issuer has funds
available therefor,
with respect to Capital Securities redeemed upon the occurrence of
a Special
Event, and (iv) upon a voluntary or involuntary liquidation,
dissolution,
winding-up or termination of the Issuer (other than in connection
with the
distribution of Debentures to the Holders of the Capital Securities
in exchange
therefor as provided in the Declaration), the lesser of (a) the
aggregate of the
liquidation amount and all accrued and unpaid Distributions on the
Capital
Securities to the date of payment, to the extent the Issuer shall
have funds
available therefor, and (b) the amount of assets of the Issuer
remaining
available for distribution to Holders in liquidation of the Issuer
(in either
case, the "Liquidation Distribution").
"Guarantee Trustee" means Wilmington Trust Company, until a
Successor
Guarantee Trustee has been appointed and has accepted such
appointment pursuant
to the terms of this Guarantee and thereafter means each such
Successor
Guarantee Trustee.
2
<PAGE>
"Guarantor" means CastlePoint Bermuda Holdings, Ltd. and each of
its
successors and assigns.
"Holder" means any holder, as registered on the books and records
of
the Issuer, of any Capital Securities; provided, however, that, in
determining
whether the Holders of the requisite percentage of Capital
Securities have given
any request, notice, consent or waiver hereunder, "Holder" shall
not include the
Guarantor or any Affiliate of the Guarantor.
"Indemnified Person" means the Guarantee Trustee, any Affiliate of
the
Guarantee Trustee, or any officers, directors, shareholders,
members, partners,
employees, representatives, nominees, custodians or agents of the
Guarantee
Trustee.
"Indenture" means the Indenture dated as of the date hereof between
the
Guarantor and Wilmington Trust Company, not in its individual
capacity but
solely as trustee, and any indenture supplemental thereto pursuant
to which the
Debentures are to be issued to the institutional trustee of the
Issuer.
"Issuer" has the meaning set forth in the opening paragraph to
this
Guarantee.
"Liquidation Distribution" has the meaning set forth in the
definition
of "Guarantee Payments" herein.
"Majority in liquidation amount of the Capital Securities"
means
Holder(s) of outstanding Capital Securities, voting together as a
class, but
separately from the holders of Common Securities, of more than 50%
of the
aggregate liquidation amount (including the stated amount that
would be paid on
redemption, liquidation or otherwise, plus accrued and unpaid
Distributions to
the date upon which the voting percentages are determined) of all
Capital
Securities then outstanding.
"Obligations" means any costs, expenses or liabilities (but not
including liabilities related to taxes) of the Issuer other than
obligations of
the Issuer to pay to holders of any Trust Securities the amounts
due such
holders pursuant to the terms of the Trust Securities.
"Officer's Certificate" means, with respect to any Person, a
certificate signed by one Authorized Officer of such Person. Any
Officer's
Certificate delivered with respect to compliance with a condition
or covenant
provided for in this Guarantee shall include:
(a)
a statement
that the officer
signing the Officer's
Certificate
has
read the covenant or condition and the definitions relating
thereto;
(b)
a brief statement of the nature and scope of the examination or
investigation
undertaken by the
officer in rendering
the Officer's
Certificate;
(c)
a statement that the officer has made such examination or
investigation as, in
such officer's
opinion, is necessary
to enable
such officer to express an informed opinion as to whether or not
such
covenant or condition has been complied with; and
3
<PAGE>
(d)
a statement as to whether, in the opinion of the officer, such
condition or covenant has been complied with.
"Optional Redemption Price" has the meaning set forth in the
Indenture.
"Person" means a legal person, including any individual,
corporation,
estate, partnership, joint venture, association, joint stock
company, limited
liability company, trust, unincorporated association, or government
or any
agency or political subdivision thereof, or any other entity of
whatever nature.
"Responsible Officer" means, with respect to the Guarantee Trustee,
any
officer within the Corporate Trust Office of the Guarantee Trustee
including any
Vice President, Assistant Vice President, Secretary, Assistant
Secretary or any
other officer of the Guarantee Trustee customarily performing
functions similar
to those performed by any of the above designated officers and
also, with
respect to a particular corporate trust matter, any other officer
to whom such
matter is referred because of that officer's knowledge of and
familiarity with
the particular subject.
"Special Event" has the meaning set forth in the Indenture.
"Special Redemption Price" has the meaning set forth in the
Indenture.
"Subsidiary" means with respect to any Person, (i) any corporation
at
least a majority of the outstanding voting stock of which is owned,
directly or
indirectly, by such Person or by one or more of its Subsidiaries,
or by such
Person and one or more of its Subsidiaries, (ii) any general
partnership, joint
venture or similar entity, at least a majority of the outstanding
partnership or
similar interests of which shall at the time be owned by such
Person, or by one
or more of its Subsidiaries, or by such Person and one or more of
its
Subsidiaries and (iii) any limited partnership of which such Person
or any of
its Subsidiaries is a general partner. For the purposes of this
definition,
"voting stock" means shares, interests, participations or other
equivalents in
the equity interest (however designated) in such Person having
ordinary voting
power for the election of a majority of the directors (or the
equivalent) of
such Person, other than shares, interests, participations or other
equivalents
having such power only by reason of the occurrence of a
contingency.
"Successor Guarantee Trustee" means a successor Guarantee
Trustee
possessing the qualifications to act as Guarantee Trustee under
Section 3.1.
"Trust Securities" means the Common Securities and the Capital
Securities.
4
<PAGE>
ARTICLE II
POWERS, DUTIES AND RIGHTS OF THE
GUARANTEE TRUSTEE
Section 2.1
Powers and Duties of the Guarantee Trustee.
(a) This
Guarantee shall be held by the Guarantee Trustee for the
benefit
of the Holders of the Capital Securities, and the Guarantee
Trustee
shall not transfer this Guarantee to any Person except a Holder
of
Capital Securities exercising his or her rights pursuant to
Section
4.4(b) or to a Successor Guarantee Trustee on acceptance by
such
Successor Guarantee Trustee of its appointment to act as
Successor
Guarantee Trustee. The right, title and interest of the
Guarantee
Trustee shall automatically vest in any Successor Guarantee
Trustee,
and such vesting and cessation of title shall be effective whether
or
not conveyancing documents have been executed and delivered
pursuant to
the appointment of such Successor Guarantee Trustee.
(b) If an
Event of Default actually known to a Responsible Officer of the
Guarantee Trustee has occurred and is continuing, the Guarantee
Trustee
shall enforce this Guarantee for the benefit of the Holders of
the
Capital Securities.
(c) The
Guarantee Trustee, before the occurrence of any Event of
Default
and after the curing or waiving of all Events of Default that may
have
occurred, shall undertake to perform only such duties as are
specifically set forth in this Guarantee, and no implied
covenants
shall be read into this Guarantee against the Guarantee Trustee.
In
case an Event of Default has occurred (that has not been cured
or
waived pursuant to Section 2.4) and is actually known to a
Responsible
Officer of the Guarantee Trustee, the Guarantee Trustee shall
exercise
such of the rights and powers vested in it by this Guarantee, and
use
the same degree of care and skill in its exercise thereof, as a
prudent
person would exercise or use under the circumstances in the conduct
of
his or her own affairs.
(d) No
provision of this Guarantee shall be construed to relieve the
Guarantee Trustee from liability for its own negligent action, its
own
negligent failure to act, or its own willful misconduct, except
that:
(i)
prior to the
occurrence
of any Event of
Default and after the curing
or waiving of all such Events of Default that may have
occurred:
(A) the duties and
obligations
of the Guarantee Trustee shall be
determined solely by
the express provisions
of this Guarantee,
and the Guarantee
Trustee shall not be liable except for the
performance of such duties and obligations as are specifically
set forth in this Guarantee, and no implied covenants or
obligations shall
be read into this Guarantee against the
Guarantee Trustee; and
(B) in the absence of
bad faith on the part of the Guarantee Trustee,
the Guarantee Trustee
may conclusively rely,
as to the truth of
the statements
and the correctness of the opinions expressed
therein, upon any
certificates
or opinions furnished to the
Guarantee Trustee and
conforming
to the requirements of this
Guarantee; but in the
case of any such
certificates or opinions
that by any provision
hereof are
specifically
required to be
furnished to the Guarantee Trustee, the Guarantee Trustee shall
be under a duty to examine the same to determine whether or not
they conform to the requirements of this Guarantee;
5
<PAGE>
(ii)
the Guarantee
Trustee shall not be liable for any error
of judgment
made in good faith by a Responsible Officer of the Guarantee
Trustee,
unless it shall be proved that such Responsible Officer of the
Guarantee
Trustee or
the Guarantee Trustee was negligent in
ascertaining the pertinent facts upon which such judgment was
made;
(iii) the Guarantee
Trustee shall not be liable with respect to any action
taken or omitted to be taken by it in good faith in accordance with
the written
direction of the Holders of not less than a
Majority in
liquidation amount of
the Capital
Securities
relating to the
time,
method and place of conducting any proceeding for any remedy
available
to the Guarantee Trustee, or relating to the exercise of any
trust or
power conferred upon the Guarantee Trustee under this Guarantee;
and
(iv)
no provision of this Guarantee shall require the Guarantee
Trustee to
expend or risk its own funds or otherwise incur personal financial
liability in the
performance of any of
its duties or in the exercise
of any of its rights or powers, if the Guarantee Trustee shall have
reasonable grounds for
believing that the
repayment of such funds is
not reasonably
assured to it under the terms of this
Guarantee or
security and
indemnity,
reasonably
satisfactory
to the Guarantee
Trustee, against such
risk or liability is not reasonably assured to
it.
Section 2.2
Certain Rights of the Guarantee Trustee.
(a) Subject to
the provisions of Section 2.1:
(i)
The Guarantee Trustee may conclusively rely, and shall be fully
protected in acting or refraining from acting upon, any resolution,
certificate,
statement, instrument, opinion, report, notice, request,
direction, consent,
order, bond,
debenture, note, other
evidence of
indebtedness or other
paper or document
believed by it to be genuine
and to have been
signed, sent or
presented by the proper party or
parties.
(ii)
Any direction or act of the Guarantor contemplated by this Guarantee
shall be sufficiently evidenced by an Officer's Certificate.
(iii) Whenever, in the
administration
of this Guarantee, the Guarantee
Trustee shall deem it desirable that a matter be proved or
established
before taking,
suffering or omitting any action hereunder, the
Guarantee Trustee
(unless other evidence is herein specifically
prescribed) may, in the absence of bad faith on its part,
request and
conclusively rely
upon an Officer's Certificate of the Guarantor
which, upon receipt of
such request, shall be
promptly delivered
by
the Guarantor.
(iv)
The Guarantee
Trustee shall have no duty to see to any
recording,
filing or registration of any instrument (or any re-recording,
refiling or re-registration thereof).
6
<PAGE>
(v)
The Guarantee
Trustee may consult
with counsel of its selection, and
the advice or opinion of such counsel with respect to legal matters
shall be full and complete authorization and protection in
respect of
any
action taken,
suffered or omitted by
it hereunder in good
faith
and in accordance
with such advice or
opinion. Such
counsel may be
counsel to the Guarantor or any of its Affiliates and may include any
of its employees.
The Guarantee
Trustee shall have the
right at any
time to seek instructions concerning the administration of this
Guarantee from any court of competent jurisdiction.
(vi)
The Guarantee Trustee
shall be under no obligation to exercise any of
the rights or powers vested in it by this Guarantee at the request or
direction of any Holder, unless such Holder shall have provided to
the
Guarantee Trustee such security and indemnity, reasonably
satisfactory
to the Guarantee
Trustee, against the costs, expenses (including
attorneys' fees
and expenses and the expenses of the Guarantee
Trustee's agents,
nominees or
