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The aggregate market value of the common shares held by non-affiliates computed by reference to the price at which the common shares were last sold as of June 30, 2005 (the last business day of the registrant’s most recently completed second quarter), assuming that price was the same as the registrant’s September 23, 2005 initial public offering price of $12.00 per share, was $56.3 million. (For this computation, the registrant has excluded the market value of all shares of its Common Stock beneficially owned by directors of the registrant and certain other shareholders; such exclusion shall not be deemed to constitute an admission that any such person is an “affiliate” of the registrant.)

The following discussion of our business contains various “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements represent our expectations or beliefs concerning future events. We caution that although forward-looking statements reflect our good faith beliefs and best judgment based upon current information, these statements are qualified by important factors that could cause actual results to differ materially from those in the forward-looking statements, including those risks, uncertainties, and factors detailed from time to time in reports filed with the Securities and Exchange Commission, or SEC, and in particular those set forth under the heading “Risk Factors” in this Annual Report on Form 10-K.

Unless otherwise indicated or the context otherwise requires, in this Annual Report on Form 10-K: references to “North Pointe,” “we,” “us” and “our” are to North Pointe Holdings Corporation and its consolidated subsidiaries; references to “our insurance companies” or “our insurance company subsidiaries” are to North Pointe Insurance Company (referred to herein as North Pointe Insurance), North Pointe Casualty Insurance Company (referred to herein as North Pointe Casualty), Home Pointe Insurance Company (referred to herein as Home Pointe Insurance) and Midfield Insurance Company (referred to herein as Midfield), taken together; references to the “Predecessor Companies” are to the companies we purchased on June 26, 2002 from Queensway Holdings, Inc., namely North Pointe Financial Services, Inc. (referred to herein as North Pointe Financial) and its subsidiaries which include North Pointe Insurance, Universal Fire & Casualty Insurance Company, and Alliance Surety Holdings, Inc.

North Pointe Holdings Corporation is a property and casualty insurance holding company. Through our insurance company subsidiaries, we market both specialty commercial and personal insurance products. For the year ended December 31, 2005, 72.1% and 27.9% of our net premiums earned were attributable to commercial lines and personal lines, respectively. Within our commercial lines segment, we primarily target policyholders that we believe are underserved due to either the size of the market or unique operating characteristics of potential policyholders. Examples of the classes of commercial policyholders that we serve are owner-operated small and mid-sized restaurants, bars, taverns, small grocery and convenience stores, bowling centers, automobile repair facilities and artisan contractors. Our personal lines segment is currently focused on specialty homeowners insurance in Florida, Indiana, Illinois and Iowa.

Our insurance company subsidiaries write both property and liability insurance. Property insurance covers a policyholder whose property is damaged or destroyed by a covered risk. The loss is the reduction in the value of the property being insured after the covered risk has occurred. Liability, also known as casualty, insurance covers a policyholder’s liability resulting from a covered risk in the form of an act or omission that causes bodily injury or property damage to a third party. In liability insurance, the loss is the amount of the claim or payment made on the policyholder’s behalf. Our insurance company subsidiaries write property and liability insurance for businesses and professional organizations (commercial lines) and for individuals (personal lines).

We write insurance with both short-tail and longer-tail liability. Short-tail liability is liability for losses which become known to the policyholder and are reported to the insurance company within a short period of time, generally within the policy period or within one or two years of expiration. Conversely, longer-tail liability is liability for losses that may take many years before they become known to the policyholder and are reported as claims. We consider our property, homeowners and automobile damage coverages to be short-tail, because we generally know by policy expiration or shortly thereafter if there is a loss. We consider our liquor

Most property and casualty insurance policies are purchased from insurance companies that are licensed to write insurance in the state in which the policy was sold. These companies are admitted to do business in the state by its insurance department, and therefore are generally known as admitted companies. Admitted companies’ insurance rates and forms are regulated by state insurance departments. In contrast, non-admitted companies, also known as excess or surplus lines companies, are not closely regulated in the particular state. They provide coverage for risks that either do not fit the underwriting criteria of admitted carriers or are of such a class of risk that the admitted carriers in that state generally avoid them altogether, often due to the difficulty of insuring these risks in an environment where rates and forms are regulated. To help ensure the availability of those lines of insurance that the admitted companies will not provide, the individual insurance departments of various states will permit surplus lines companies to offer these lines, foregoing the standard regulation of solvency, rates and forms. As of December 31, 2005, one or more of our insurance company subsidiaries were licensed as admitted companies in 46 states and authorized as surplus lines companies in 30 states. We have admittances or authorizations in 48 states plus the District of Columbia.

Commercial Multi-Peril. Commercial multi-peril, also known as CMP, is composed of two or more coverages including property, commercial automobile, boiler and machinery and general liability, and is tailored to the policyholder’s needs. Business owners policies, also known as BOP, are included within our CMP line and combine property, liability and business interruption coverage to cover expenses of a small business resulting from damage to the business’ property or the acts or omissions of the business that cause damage to a third party. Optional specialty coverages can also be added to these packages, including liquor liability, business crime, accounts receivable, theft of money and securities, computer equipment and outdoor sign coverages. Our typical policy for CMP or BOP has a $1.0 million limit, but we have the ability to write umbrella coverage over our basic limits through a reinsurer.

Homeowners and Dwelling/ Fire. We currently offer non-standard homeowners insurance and dwelling/fire insurance products to individuals in Indiana, Illinois, Iowa and Tennessee which composes our Midwest homeowners insurance line. Non-standard homeowners insurance and dwelling/fire insurance provides coverage to homeowners who find it difficult to obtain coverage from standard carriers due to various factors including the age of the home, its replacement value and/or location. Our Midwest homeowners line typically offers coverage with property limits ranging from $100,000 to $250,000 and personal liability limits ranging from $50,000 to $300,000. The dwelling/fire insurance line provides individual owners with property coverage and basic perils coverage only, with no liability coverage attached.

Automobile. Non-standard personal automobile insurance provides coverage to drivers who find it difficult to obtain insurance from standard insurance companies due to a lack of prior insurance, failure to maintain continuous coverage, age, prior accidents, driving violations, type of vehicle or limited financial resources. In general, customers in the non-standard market pay higher premiums for comparable coverage than customers who qualify for the standard market. Typically, our non-standard personal automobile insurance policies were issued for six months and for the minimum limits of coverage mandated by state law. On October 15, 2004, we sold the renewal rights to this book of business. We continue, however, to be responsible for performing claims and other administrative services with respect to the run-off of non-standard automobile policies that were either expired or still in-force at the time of the sale.

North Pointe Financial, which is our wholly-owned licensed general agent, was our original general agent for the restaurant, bar and tavern, or RBT, business in Michigan in the period before North Pointe Insurance became licensed, in 1987. It also provides management and administrative services for our insurance company subsidiaries and our premium finance subsidiary. These services include providing staff, offices and equipment, and collecting premium, for which North Pointe Financial earns fee income. We also offer premium financing to commercial accounts through N.P. Premium Finance Company, our wholly-owned premium finance company. We generally provide premium financing for our policyholders only. This subsidiary is licensed to provide premium financing in seven states, but does most of its business in Michigan, Iowa, Ohio and Illinois. As of each month-end during 2005, we had an average finance receivable balance of approximately $1.0 million, and averaged just over 500 accounts serviced for each month during such period.

We market and sell our products through a network of over 1,650 independent agents that distribute our policies through their approximately 2,490 sales offices located in 34 states. Our marketing and distribution programs are designed to reach our targeted policyholders efficiently and to provide superior customer service to our network of independent agents. Because we treat our agents as our customers, we are focused on delivering outstanding service by providing short response times to requests for quotes, working with agents to develop unique policies to meet the specific needs of their customers and developing agent-friendly technology, such as the internet-based, quote system for our specialty homeowners insurance product. We distribute most of our insurance products through a geographically dispersed network of agents that serve local communities. We believe that geographic penetration is important to reach many potential customers because they tend to purchase insurance policies from agents in their general vicinity. For example, agents that serve multiple policyholders in a local community are the primary distribution channel for our products focused on the RBT, small business and specialty homeowners markets.

that we are able to quickly implement changes in pricing, underwriting guidelines and product offerings as necessary to remain competitive. We generally do not pursue commercial product lines where competition is based primarily on pricing. We augment our own internally-developed pricing models with benchmark rates and policy terms set forth by the Insurance Services Office, or ISO. The ISO system is a widely recognized industry resource for common and centralized rates and forms. It provides advisory rating, statistical and actuarial services, sample policy provisions and other services to its members.

Personal Lines. We employ internal product managers to review our position relative to our competition, create better segmentation of pricing and originate premium rate changes as appropriate. Consistent with industry practice, we grant our personal lines agents binding authority within our specific guidelines. Once a completed application and premium payment are submitted to us, the application is bound but still reviewed for final approval. If the agent has underwritten and submitted the account according to our guidelines, we process the application as complete. If our guidelines have not been followed, the application may be cancelled or updated and re-submitted for further underwriting review. If the agent does not submit the minimum down payment, we allow for a specific notice and cure period, then process or cancel as appropriate.

We believe that effective claims management is critical to our success, allowing us to cost-effectively pay valid claims, while vigorously defending those claims that lack merit. To this end, we utilize a proactive claims handling philosophy and seek to internally manage or supervise all of our claims from inception until settlement. By handling our claims internally, we believe we can quickly assess claims, improve communication with our policyholders and claimants, manage against fraud and better control our claims management costs.

In conjunction with a third-party vendor, we have developed a customized claims handling management information system with remote access capability to assist us in the claims handling process. This system has been tailored to our claims information processing needs and allows for ongoing automated claims management and reporting. With the more up-to-date information that is available through this system, our adjusters and claims managers can better track and assess claims, litigation and reinsurance developments. We can also readily capture information that is useful in establishing loss reserves and determining premium rates. As a result, we believe our claims management approach has helped us to generate loss ratios that are better than averages for our industry.

We review our reserves by product line, coverage and state on an annual, semiannual, or quarterly basis, depending on the size of the product line or emerging issues related to the coverage. Our reserves are estimates of what we expect to pay on claims, based on facts and circumstances known at the time we set the reserves, and there is a certain amount of random variation in loss development patterns, which results in some uncertainty regarding projected ultimate losses. As a result, our ultimate liability for losses and loss adjustment expenses may exceed or be less than our reserve estimates. In setting our loss reserve estimates, we review statistical data covering several years, analyze loss patterns by line of business and consider several factors, including trends in claim frequency and severity, changes in operations, emerging economic and social trends, inflation and changes in the regulatory and litigation environment. We also regularly evaluate our loss reserves through an examination of our loss ratio and claims severity trends and, if necessary, increase or decrease the level of our reserves as experience develops or new information becomes known. In addition, during the loss settlement period of a claim, which in some of our product lines can last several years, we may obtain additional information about a claim, which may cause us to adjust the reserve for that claim upward or downward, as we believe appropriate.

In developing our loss and loss adjustment expense reserves, we utilize ten years of historical loss experience when available. If ten years of historical data is not available or volume is too small to make historical data a reliable predictor of future losses, we attribute various levels of importance to available industry data. We use our historical development and industry data to establish factors to calculate our reserve estimates. Development is defined as the change between two dates in the value of the loss reserve estimates.

At December 31, 2005, our best estimate of our ultimate liability for loss and loss adjustment expense reserves, net of reinsurance recoverables, was $57.7 million. Our estimate of loss and loss adjustment expense reserves is necessarily derived through actuarial analysis and requires substantial judgment in the course of establishing the reserves. We established a reasonable range of net reserves of approximately $52.7 million to $61.5 million primarily by reviewing the various actuarial methods used to estimate net loss and loss adjustment expense reserves by each coverage or product line. We calculated the high end of the range by applying more weight to the results from methods that generated higher estimates and we calculated the low end of the range by applying more weight to the results from methods that generated lower estimates.

We further generated a sensitivity analysis of our net reserves based on reasonably likely changes to the key assumptions which drive our reserves. Our most significant assumptions are the loss development factors applied to paid losses and case reserves to develop IBNR by product or coverage. Although historical loss development provides us with an indication of future loss development, it typically varies from year to year. Thus, for each accident year within each product or coverage we select one loss development factor out of a range of historical factors. Our sensitivity analysis provides for possible variations from the selected loss development factors based on the year-to-year variations of historical loss development.

Such changes in key assumptions would have increased or decreased net reserves as of December 31, 2005 by $2.7 million or $4.6 million, respectively. If net reserves were $2.7 million greater as of December 31, 2005 our net income in 2005 and shareholders’ equity as of December 31, 2005 would have been lower by $1.8 million. Conversely, if net reserves were $4.6 million less as of December 31, 2005 our net income in 2005 and shareholders’ equity as of December 31, 2005 would have been greater by $3.0 million. We do not believe such changes to our reserve balance would have a material impact on our liquidity.

reserve changes relating to prior periods. Favorable development in each of these years was primarily attributable to two factors: (i) settlement of claims at amounts lower than the established reserves; and (ii) reductions in IBNR estimates due to reductions in loss factors reflecting more favorable experience. Favorable settlements of claims is partially attributable to an improved tort environment over the last few years, which has resulted in more favorable outcomes than expected in some of the more difficult liability claims. In addition, we historically have considered available industry data in establishing our reserves for those lines in which our own historical data was not extensive enough either in terms of the number of years of loss experience or the size of our data pool. Statistics regarding industry loss experience have typically indicated loss experience higher than our historical experience, partially due to the fact that available industry statistics generally include risks which we do not cover, such as environmental and asbestos liabilities, or the industry data is not specific enough to our particular specialty lines. In circumstances where we believe industry loss experience is less useful, we have accorded it less weight in establishing our reserves and have accorded more weight to other factors, including underwriting standards, policy provisions, policyholder demographics, legal environment and inflationary trends. There have been no significant changes in key assumptions utilized in the analyses and calculations of our reserves during 2005, 2004 or 2003. As our historical data for a particular line of business increases, both in terms of the number of years of loss experience and the size of our data pool, we will increasingly accord greater weight to our own loss experience rather than industry loss experience in establishing our reserves.

The $2.1 million of favorable development in 2005 for the RBT and bowling center lines was primarily attributable to the 2002, 2003 and 2004 accident years with $353,000, $1.4 million and $678,000 in redundancies, respectively. We also experienced other, smaller redundancies relating to accident years 1998 and prior, aggregating to $300,000. The redundancies were partially offset by $671,000 of deficiencies generated from the 1999 through 2001 accident years. The development was primarily generated in our liability product lines which require greater estimations when establishing reserves than required with property product lines and require more years to fully develop. The favorable reserve adjustments were primarily attributable to lower actual loss development as compared to our originally estimated loss development factors.

The $1.3 million of favorable development in 2005 for the personal automobile line was primarily attributable to the 2001, 2002 and 2003 accident years with $457,000, $308,000 and $663,000 in redundancies, respectively, and lesser redundancies attributable to accident years 2000 and prior. These redundancies were partially offset by a deficiency in the 2004 accident year of $479,000 relating to the personal injury protection coverage. We ceased writing policies in the personal automobile line in October 2004. As this line of business has been running off we have experienced better than expected loss development, particularly in the liability coverages.

In 2004, the $2.5 million decrease in run-off reserves acquired from North Pointe Casualty was due to positive settlements of claims during 2004 following the acquisition date. Savings from claims settled in 2004 for less than the case reserves at the time of acquisition amounted to $1.8 million. These favorable settlement developments, in conjunction with favorable indications of open liability claims, resulted in a reassessment of the IBNR, which was favorably adjusted by $749,000. The reserve redundancies were primarily attributable to the 1997, 1999 and 2000 accident years. The $1.0 million favorable development in 2004 for the RBT and bowling center lines was primarily attributable to the 1997, 2000, 2002 and 2003 accident years with $179,000, $299,000, $290,000 and $465,000 in redundancies, respectively. These redundancies were partially offset by a deficiency in the 2001 accident year of $217,000. The $1.9 million favorable development in the commercial automobile lines in 2004 was primarily attributable to the 1999 through 2003 accident years, weighted more heavily toward the more current years. The $552,000 favorable development in 2004 on our personal lines was attributable to $354,000 of redundancies from our homeowners line, primarily related to the 2003 accident year and the remainder was attributable to our personal automobile line. Our personal automobile line’s

In 2003, the $3.1 million redundancy in our RBT and bowling center lines was primarily attributable to the 1999, 2000, 2001 and 2002 accident years with $674,000, $1.2 million, $323,000 and $369,000 in redundancies, respectively. In addition, our commercial automobile insurance line reflected $1.9 million of redundancies in 2003, primarily attributable to the 2002 and 2001 accident years. Redundancies arising from our commercial automobile line were the result of better than expected loss development following a trend toward greater claim frequency and severity developing in 2001 and 2002, particularly in the business written in Illinois. This trend resulted in our decision to exit the Illinois commercial automobile insurance business in early 2003. Subsequent development of the Illinois commercial automobile insurance business resulted in some redundancies, but the overall trend continued to indicate growing losses. The remainder of the $5.4 million total redundancy in 2003 was attributable to a number of smaller redundancies and deficiencies in a number of other business lines.

The following table presents the development of reserves for unpaid losses and loss adjustment expenses from 1995 through 2005 for our insurance company subsidiaries, net of reinsurance recoveries or recoverables. The first line of the table presents the reserves at December 31 for each year. This represents the estimated amounts of losses and loss adjustment expense for claims arising in that year and all prior years that were unpaid at the balance sheet date, including losses incurred but not reported to us. The upper portion of the table presents the cumulative amounts subsequently paid as of successive years with respect to those claims. The lower portion of the table presents the estimated amount of the previously recorded reserves based upon the experience as of the end of each succeeding year. The estimates are revised as more information becomes known about payments and the frequency and severity of claims for particular years. A redundancy exists when the estimated reserves at December 31 are less than the prior reserve estimate; a deficiency exists when the estimated reserves are greater than the prior reserve estimate. The cumulative redundancy depicted in the table for any particular year represents the aggregate change in the initial estimates over all subsequent years.

We have maintained adequate overall reserves for each of the last ten years. We believe that our policy of analyzing industry loss data in setting our reserves has been a contributing factor to our reserve redundancies because in recent years industry loss averages have been higher than our own loss experience. Due to our consistent loss reserving practices, we have generally produced reserve redundancies. The $1.7 million deficiency of our gross reserves, in 2004, was attributable to adverse development of the 2004 gross hurricane losses. As our historical data for a particular line of business increases, both in terms of the number of years of loss experience and the size of our data pool, we will increasingly rely upon our own loss experience rather than industry loss experience in establishing our reserves. We plan to continue to apply reserving practices consistent with historical methodologies.

The increase in commercial lines loss and loss adjustment expense reserves from December 31, 2003 to December 31, 2004 was primarily attributable to the four hurricanes that hit Florida in the third quarter of 2004. We incurred gross losses of $29.8 million related to these events in 2004, of which $16.4 million was paid in 2004 and $13.4 million was included in reserves as of December 31, 2004. The remaining amount of the increase is substantially attributable to the reserves acquired from the purchase of North Pointe Casualty in February 2004. The gross reserves in North Pointe Casualty amounted to $4.4 million at December 31, 2004, and represent the run off of claims from premiums earned in North Pointe Casualty prior to January 1, 2001.

Our investment strategy is to invest in marketable and highly liquid investment grade securities. We employ outside money managers to manage our investment portfolio based on investment guidelines approved by our board of directors. Our board reviews these guidelines annually, and we have an investment committee, currently comprised of our Chief Executive Officer, Chief Operating Officer and an independent director, which meets at least quarterly to discuss our performance relative to our objectives. Our key objectives in developing our investment guidelines include maintaining sufficient liquidity to meet insurance operation obligations, ensuring capital preservation, and maximizing total return on the portfolio.

Accordingly, when a decline in the value of a specific investment is considered to be “other-than-temporary,” a provision for impairment is charged to earnings. While it is not possible to accurately predict if or when a specific security will become impaired, charges for other-than-temporary impairment could be material to results of operations in a future period. Management believes it is not likely that future impairment charges will have a significant effect on our liquidity. See footnotes to the accompanying consolidated financial statements for further discussion of other-than-temporary impairment of investments.

We measure the performance of our debt securities portfolio based on a comparison to a benchmark portfolio which maintains other comparable characteristics such as credit quality and duration. Our benchmark incorporates a weighting of 73% of the Lehman Intermediate Government/ Credit Index, 23% of the Lehman Mortgage Backed Securities Index and 4% of the three-month U.S. Treasury bill. We completed the transition of our debt securities portfolio to reflect the characteristics of the benchmark portfolio on April 1, 2004.

When we purchase reinsurance, we remain liable for policy claim losses if the reinsurer fails to meet its obligations under the reinsurance treaty due to insolvency or other factors. To mitigate this inherent credit risk, we carefully select our reinsurers. In so doing, we evaluate numerous factors, including the reinsurer’s financial stability, history of responding to claims, continuity of relationships with our company and reputation in the industry. We also review the reinsurer’s A.M. Best rating and generally select only reinsurers with a minimum rating of “A-” (Excellent). If a reinsurer’s credit rating falls below that level, we review the circumstances and, if we consider it necessary, attempt to replace the reinsurer.

Our reinsurance contracts are for one-year terms and are renegotiated annually. We review each contract as it comes up for renewal and negotiate with our reinsurers to make appropriate modifications in light of market conditions and the price of reinsurance. In soft markets, when reinsurance premiums may be lower due to greater availability and capacity, we may make more liberal use of reinsurance to shift risk. In contrast, in hard markets, when availability may be tighter and prices may be higher, we may seek to retain a greater

Based on our current reinsurance program, and subject to applicable policy limits, we generally retain our liability to the policyholder for the first $500,000 (within our Florida homeowners business) and $250,000 (within all our other coverages) of each individual loss for the current treaty year and use reinsurance to cover any liability in excess of this retention. This is called an excess of loss reinsurance treaty. For example, if we have insured a commercial property for $1,000,000 and a storm causes $600,000 of damage, we will pay the $600,000 to the policyholder and the reinsurers will reimburse us $350,000 (the amount of the paid loss in excess of our retention of $250,000).

Our catastrophe reinsurance program for all of our lines of business except our Florida homeowners business (which is handled under a separate program) provides coverage up to $60.0 million and will expire on June 30, 2006. This catastrophe reinsurance program provides full coverage of the first $10.0 million of losses, subject to a $3.0 million retention. For losses in excess of $10.0 million and up to $26.0 million, we pay 1.25% of losses and for losses in excess of $50.0 million and up to $60.0 million, we pay 2.5% of losses.

Our Florida homeowners reinsurance program includes a combination of private third party reinsurance and coverage which we are required to purchase through the Florida Hurricane Catastrophe Fund, or FHCF. The FHCF is a state-administered reinsurance program that provides coverage to insurers writing policies having exposure to Florida hurricane risks. The FHCF policy year is from each June 1st to the following June 1st. FHCF policy limits and premium rates generally correspond to a company’s market share as of June in the applicable year in which coverage is sought. Insurers may elect one of three levels of loss coverage — 45%, 70% or 90%. Because the FHCF historically has offered reasonable value relative to cost and coverages provided, we have elected 90% coverage through the FHCF, the highest level permitted.

Insurance companies can apply to receive a financial strength rating from A.M. Best. These ratings range from “A++” (Superior) to “F” (In Liquidation). In November 2005, A.M. Best upgraded North Pointe Insurance’s financial strength rating from “B+” to “B++” (Very Good) and reaffirmed North Pointe Casualty’s rating of “B+” (Very Good) with a “Stable” outlook. North Pointe Insurance’s and North Pointe Casualty’s financial size categories are VI and V, respectively. These ratings are assigned to companies that have, in A.M. Best’s opinion, very good financial strength and a very good ability to pay claims and to meet their ongoing obligations to policyholders.

The property and casualty insurance industry is highly competitive, and except for certain regulatory considerations, there are relatively few barriers to entry. In this fragmented market, we compete with both large national insurance providers and smaller regional companies on the basis of customer service, coverages offered, claims handling, price, agent commission and financial strength ratings. Many of our competitors have higher ratings, more capital, greater resources and additional access to capital than we have. They may offer a wider range of products and services than we do and may cover larger geographic markets. It is possible that new entrants to our markets may arise and create additional competition leading to potentially lower prices and/or higher limits offered. Some of our commercial lines competitors include United States Liability Insurance Group, Michigan Licensed Beverage Association Mutual Insurance Company, St. Paul Surplus Lines Company (a subsidiary of St. Paul Travelers Companies, Inc.) and Philadelphia Consolidated.

North Pointe Financial, our wholly-owned subsidiary, is the immediate parent company of our operating insurance companies, North Pointe Insurance and North Pointe Casualty. In addition, in 2005, we organized a new Florida insurance subsidiary, Home Pointe Insurance, to write our Florida homeowners insurance business and we organized a new captive insurance company, Midfield, domiciled in the District of Columbia. Our insurance companies and our other affiliates are subject to regulation by insurance regulatory agencies in each state in which they do business. This regulation is designed for the protection of our policyholders rather than our shareholders. The regulatory requirements and restrictions include or involve the following:

Most states require admitted property and casualty insurance companies to become members of insolvency funds or associations which generally protect policyholders against the insolvency of the admitted insurance companies. Members of the fund or association must contribute to the payment of certain claims made against insolvent insurance companies through annual assessments. The annual assessments required in any one year will vary from state to state, but they typically fall within a range of 1% to 2% of the annual premiums written by a member in that state, subject to various maximum assessments per line of insurance.

We sold the renewal rights to our non-standard personal automobile insurance line, which we only wrote in Michigan, in October 2004. To offer this insurance in Michigan, we had to be a member of the Michigan Catastrophic Claims Association, or MCCA. The MCCA is a statutorily-created nonprofit association providing mandatory reinsurance to its members. This reinsurance indemnifies its members for personal injury protection losses exceeding specified limits. The MCCA must provide this reinsurance and we, like all members of MCCA, must accept and pay for the reinsurance. The cost of this insurance was passed on to our insureds.

Certain of our insurance company subsidiaries are subject to assessments from Citizens Property Insurance Company, or Citizens, which was created by the state of Florida to provide insurance to both commercial and personal property owners unable to obtain coverage in the private insurance market. Citizens, at the discretion of its board of directors, can levy annual, interim, and/or emergency assessments to cover its financial deficits for up to the greater of 10% of the deficit or 10% of Florida property premiums industry-wide for the prior year.

Citizens is designed so that the ultimate cost is borne by policyholders; however, the exposure to assessments and the availability of recoupments vary between competing insurance companies. Market conditions may affect an insurer’s ability to fully recoup the assessment. Moreover, even if they do offset each other they may not offset each other in the same fiscal period’s financial statements due to the ultimate timing of the assessments and recoupments, as well as the possibility of the related coverages not being written in subsequent years.

To sell homeowners insurance in Florida, reinsurance must be purchased from the FHCF. See Business — Reinsurance. The FHCF is a state-administered reinsurance program in Florida providing mandatory reinsurance for hurricane losses to any insurer writing covered policies — including homeowners insurance — in Florida. The FHCF charges each participating insurer an actuarially indicated premium for the reinsurance it provides, which generally corresponds to the insurer’s market share as of June in the year in which coverage is sought. The FHCF policy year is from each June 1st to the following June 1st. In addition, if the revenue generated through the premiums charged by the FHCF is insufficient to fund the obligations, costs and expenses of the FHCF, the Florida Office of Insurance Regulation may levy an emergency assessment on all property and casualty insurers doing business in Florida. Insurers may pass this assessment through to their policyholders, but insurers are not responsible for assessments that are uncollectible from their policyholders.

The NAIC has developed a set of 12 financial ratios referred to as the Insurance Regulatory Information System, or IRIS. IRIS is part of a regulatory early warning system used to monitor the financial health and condition of insurance companies. On the basis of statutory financial statements filed with state insurance regulators, the NAIC annually calculates these IRIS ratios to assist state insurance regulators in monitoring the financial condition of insurance companies. The NAIC has established an acceptable range for each of the IRIS financial ratios. A ratio result falling outside the usual range of IRIS ratios is not considered a failing result. In fact, since these ratios are arbitrarily set for all companies, it may not be unusual for financially sound companies to have several ratios with results falling outside the usual ranges. If four or more of a company’s IRIS ratios fall outside the usual ranges, however, an insurance company may receive inquiries from individual state insurance departments.

The unusual values from changes in net writings is attributable to the fact that North Pointe Casualty wrote only $6.9 million of gross premiums in 2004 as compared to $49.7 million in 2005. After acquiring North Pointe Casualty in 2004 we began transferring some of our Florida small business writings from North Pointe Insurance to North Pointe Casualty. The premiums in 2005 reflect a full year of premiums written on lines transferred from North Pointe Insurance, increased writings within our Florida small business line and the addition of the Florida homeowners business.

Captive insurance companies generally are not subject to the same degree of regulation by applicable insurance departments as are other insurance companies. For example, the laws and regulations that are applicable to non-captive insurance companies domiciled in the District of Columbia do not apply to captive insurance companies domiciled in the District of Columbia unless such laws are expressly made applicable under the District’s captive insurance laws. As a result, Midfield will not be subject to, among other things, the District’s rate and form filing requirements, guaranty fund assessments, or insurance regulatory trust fund assessments. However, Midfield is required to file an annual report with the Commissioner of the District of Columbia Department of Insurance, Securities and Banking and will be subject to periodic financial examinations by the Commissioner’s office. Moreover, Midfield’s investments will be subject to review and possible disapproval by the Commissioner’s office, and Midfield will be subject to premium taxes levied by the District of Columbia. Midfield will also be subject to the District of Columbia’s minimum capital and surplus requirements for captive insurance companies.

We voluntarily make electronic or paper copies available, free of charge, of all reports we file with, or furnish to, the SEC, including our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K, as well as any amendments to those reports, as soon as reasonably practicable after those documents are filed with, or furnished to, the SEC, through our website at http://www.npte.com/ or upon written request to our Investor Relations Department at 28819 Franklin Road, Southfield, Michigan 48034 or through contact with Brian Roney, Vice President — Finance at (248) 358-1171.

Our results of operations and financial condition depend on our ability to underwrite and set premium rates accurately for a wide variety of risks. Adequate rates are necessary to generate premiums sufficient to pay losses, loss adjustment expenses and underwriting expenses and to earn a profit. To price our products accurately, we must collect and properly analyze a substantial amount of data; develop, test and apply appropriate pricing techniques; closely monitor and timely recognize changes in trends; and project both severity and frequency of losses with reasonable accuracy. Our ability to undertake these efforts successfully, and as a result price our products accurately, is subject to a number of risks and uncertainties, some of which are outside our control, including:

We maintain reserves to cover our estimated ultimate liability for losses and related loss adjustment expenses for both reported and unreported claims on insurance policies issued by our insurance companies. For certain of our lines of business, several years may elapse between the occurrence of an insured loss, the reporting of the loss to us and our payment of the relevant claim. The establishment of appropriate reserves is an inherently uncertain process, involving actuarial and statistical projections of what we expect to be the cost of the ultimate settlement and administration of claims based on historical claims information, estimates of future trends in claims severity and other variable factors such as inflation. Due to the inherent uncertainty of estimating reserves, it has been, and will continue to be, necessary to revise estimated future liabilities as reflected in our reserves for claims and related expenses. Our gross loss and loss adjustment expense reserves totaled $117.8 million at December 31, 2005. Our loss and loss adjustment expense reserves, net of reinsurance recoverables, were $57.7 million at that date. We cannot be sure that our ultimate losses and loss adjustment expenses will not exceed our reserves. For example, we recently began writing homeowners insurance in the state of Florida. Given our limited history writing this business, we initially will rely heavily on industry loss experience in establishing our loss reserves. Our own loss experience in this new line of business could run materially higher than industry loss experience. If and to the extent that our reserves prove inadequate, whether in our Florida homeowners insurance line or any other line of business, we will be required to increase our reserves for losses and loss adjustment expenses and incur a charge to earnings in the period during which our reserves are increased, which could materially and adversely affect our financial condition and results of operations. For example, based on our range analysis in “Unpaid Losses and Loss Adjustment Expenses,” if our net loss and loss adjustment expense reserves as of December 31, 2005, were greater by $2.7 million or lower by $4.6 million, therein would result in a corresponding decrease or increase in our net income for 2005 of $1.8 million or $3.0 million, respectively. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Estimates” and “— Unpaid Losses and Loss Adjustment Expenses,” incorporated elsewhere within this Annual Report on Form 10-K.

Our network of independent agents accounts for almost all of the gross premiums on insurance policies that we write and constitutes our primary distribution channel for our products. In addition, we have developed several successful products based on referrals from our independent agents of new specialty market opportunities. As a result, our business depends heavily on the efforts of our independent agents and on our ability to offer products that meet the needs of our independent agents and their customers, and the continued growth of our business will depend materially upon our ability to retain existing, and attract new, independent agents.

Independent agents are not obligated to market or sell our insurance products or consult with us. Since many of our competitors also rely significantly on independent agents, we must compete for the business and goodwill of our independent agents. Some of our competitors may offer a larger variety of products, lower prices for insurance coverage and higher commissions for independent agents. Accordingly, we might not be able to continue to attract and retain independent agents to market and sell our products and otherwise work with us. A material reduction in the amount of business that our independent agents sell for us would materially and adversely affect our results of operations. The failure for any reason of our independent agents to refer new market opportunities to us could have adverse effects on our growth prospects.

We must accurately evaluate and pay claims made under our policies. Many factors affect our ability to pay claims accurately, including the training and experience of our in-house claims representatives, the culture of our claims handling group, the effectiveness of our management and our development or selection and implementation of appropriate procedures and systems to support our claims handling functions. For example, given the recent expansion in our homeowners insurance business in Florida, we could experience difficulties in hiring and training claims personnel sufficient to evaluate and pay claims on a timely and accurate basis if a catastrophic event were to occur in that state. Our failure to pay claims accurately could lead to material litigation, undermine our reputation in the marketplace and, as a result, adversely affect our results of operations and capital. Our failure to hire and train new claims handling employees effectively or our loss of a significant number of experienced claims handling employees could have adverse effects on our ability to handle an increasing claims workload as we grow, thereby hindering our ability to profitably expand our business. In addition, we could suffer decreased quality of claims handling, which in turn could negatively impact our results of operations.

While we currently offer insurance products in 34 states, our business is primarily concentrated in two states, Florida and Michigan. For the year ended December 31, 2005, 60.6% of our net premiums earned related to policies issued to customers in Florida and 22.0% of our net premiums earned related to policies issued to customers in Michigan. Our revenues and profitability are subject to prevailing regulatory, legal, economic, political, demographic, competitive, weather and other conditions in the principal states in which we do business. Changes in any of these conditions could make it less attractive for us to do business in such states and would have a more pronounced effect on us compared to companies which are more geographically diversified. Because our business is concentrated in this manner, the occurrence of one or more catastrophic events or other conditions affecting losses in Michigan or Florida could have an adverse effect on our financial condition and results of operations.

We have a limited history of underwriting, reserving and managing claims for homeowners insurance policies in Florida. We began writing our first Florida homeowners insurance policies in December 2004 and by December 31, 2005 we had 29,000 Florida homeowners policies outstanding, constituting 20.4% of our net premiums earned for the year ended December 31, 2005. Our Florida homeowners insurance policies have terms of one year, and we expect that certain claims made under these policies may remain outstanding following the end of the policy term. As a result, there is no historical information available to help you evaluate our track record in this type of business. Since our existing underwriting and claims management personnel have limited prior experience underwriting and managing claims for Florida homeowners insurance policies, we cannot predict with a high degree of certainty how this new business will affect our profitability or our financial condition. It is possible that the actual performance of our Florida homeowners business will not meet our expectations or that we may suffer losses in our operations from poor performance of our Florida homeowners business. In addition, due to our limited experience writing Florida homeowners insurance, we will be forced to rely more heavily on industry loss experience in establishing our loss reserves than we normally would for lines of business that we write. Our own loss experience in this new line of business could be materially higher than industry loss experience, whether due to our inexperience in underwriting, claims managing or otherwise, which could materially and adversely affect our financial condition and results of operations. Also, anticipated catastrophic losses due to hurricanes or other disasters are difficult to predict and model. Our pricing may not be sufficient to cover such future catastrophic losses.

We may encounter other difficulties in the implementation of our growth strategies, including unanticipated expenditures and damaged or lost relationships with customers and independent agents. In addition, our growth strategies may require us to enter into a geographic or business market in which we have little or no prior experience. For example, we recently entered the homeowners insurance market in Florida. Since our existing personnel have limited prior experience writing homeowners insurance in Florida, we cannot predict with a high degree of certainty how this new business will impact our profitability. Any such difficulties could result in excessive diversion of senior management time and adversely affect our financial results.

Further, any acquisitions that we pursue may require significant capital outlays and will require the consent of the lenders under our senior credit facility. If we issue equity or convertible debt securities to pay for an acquisition, these securities may have rights, preferences or privileges senior to those of our common shareholders or the issuance may be dilutive to our existing shareholders. Once an acquisition is made, we could suffer increased costs, disruption of our business and distraction of our management while we integrate the acquired business into our operations. Any failure by us to manage our growth and to respond to changes in our business could have a material adverse effect on our business and profitability and could cause the price of our common stock to decline.

As part of our overall risk and capacity management strategy, we purchase one or more types of reinsurance coverage, including excess of loss, catastrophe, corporate clash and facultative reinsurance coverage, for 100% (subject to applicable retentions and limits) of the risks underwritten by our insurance company subsidiaries. Market conditions beyond our control determine the availability and cost of the reinsurance we purchase, which may affect the level of our business and profitability. We may be unable to maintain our current reinsurance coverage or to obtain, on a timely basis, other reinsurance coverage in adequate amounts or at acceptable rates. Similar risks exist whether we are seeking to replace coverage terminated during the applicable coverage period or to renew or replace coverage upon the expiration thereof. For example, as a result of the large hurricane losses in 2004 and 2005, market conditions for private reinsurance on Florida hurricane coverage are generally unfavorable and the terms and pricing available to us may not be as favorable as the terms and pricing we have obtained in the past and, as a result, may be prohibitively expensive.

Moreover, there may be a situation in which we have more than two catastrophe events within one policy year. Since our current catastrophe reinsurance programs only allow for one automatic reinstatement, we would be required to obtain new catastrophe reinsurance to maintain our current level of catastrophe reinsurance coverage. We may find it difficult to obtain such coverage, particularly in the middle of the hurricane season. For example, if a second event has just occurred and, at the same time, another tropical storm or hurricane is approaching the coast, posing a threat of a third event, the reinsurance market may exclude that particular risk from the third event coverage. In addition, reinstatement charges resulting from a catastrophe may constitute material expenses that are in addition to the losses incurred. For example, of our $7.3 million pre-tax expenses relating to four hurricanes in 2004, $1.1 million was attributable to reinstatement charges for our catastrophe reinsurance program. Similarly, in 2005, of our $14.8 million pre-tax expenses relating to four hurricanes in 2005, $3.0 million was attributable to reinstatement charges for our catastrophe reinsurance program. In addition, we incurred $248,000 of reinstatement charges on our catastrophe reinsurance programs relating to assessments from Citizens. In 2005, we have paid, or accrued a liability in anticipation of paying, $8.5 million in assessments imposed, or expected to be imposed, by Citizens. Of the $8.5 million of assessments, we expect to recover $8.0 million from our catastrophe reinsurers. In the future, catastrophe reinsurance contracts may limit or eliminate this coverage, or significantly increase reinsurance rates for such coverage.

As of December, 2005, we maintained reinsurance coverage from approximately 60 reinsurers. In the past, depending upon the type of coverage and line of business, it has generally taken us between one and two months to replace reinsurance coverage upon the cancellation or expiration of existing coverage. In order to replace existing reinsurance coverage, we first identify possible alternative reinsurers to provide us with the coverage we require. We do this either through our reinsurance broker or through our contacts in the direct reinsurance market, as well as independent research. Once alternative reinsurers have been identified, we allow them to perform due diligence on our relevant insurance business. Upon completion of this due diligence process, we will negotiate the terms of the applicable reinsurance coverage with the selected reinsurer. We believe that, in the future, it would take at least the same amount of time to identify alternative providers of reinsurance coverage, allow them to perform the necessary diligence regarding our insurance business, and negotiate the terms of the applicable coverage as it has in the past. If we are unwilling to increase our risk exposure or seek to reduce the amount of risk we underwrite, we may be required to pay substantially greater premiums to obtain the desired reinsurance coverage. These increased premiums could, in turn, adversely impact our profitability. Alternatively, if we were to increase our risk exposure in an effort to reduce our reinsurance coverage costs, our results of operations and financial condition could be materially and adversely affected as a result of having to pay greater losses on claims.

$3.0 million. For losses in excess of $10.0 million and up to $26.0 million, we pay 1.25% of losses and for losses in excess of $50.0 million and up to $60.0 million, we pay 2.5% of losses. Our catastrophe reinsurance program for our Florida homeowners business provides coverage up to $139.0 million, subject to a retention of $3.0 million. For losses in excess of $64.0 million and up to $104.0 million, we pay 1.25% of losses. Both catastrophe reinsurance programs are designed to provide coverage for two occurrences in a policy year, subject to applicable reinstatement charges. See “Business — Reinsurance.” If we are unable to renew our expiring coverage or to obtain new reinsurance coverage, either our net exposure to risk would increase or, if we are unwilling to bear an increase in net risk exposures, we would have to reduce the amount of risk we underwrite.

In addition, both the insurance policies we issue and our reinsurance contracts generally renew annually, but, in most cases, there is a timing difference between when we know what reinsurance rates we will be charged and when we can charge new premium rates to existing policyholders. We are required to wait until a policy renews before we can increase the premium rate on that policy. In the event reinsurance coverage premium rates increase significantly in the interim, there may be a period of time during which our policy pricing may not be sufficient to cover the costs of available reinsurance coverage, thereby adversely affecting our profitability or requiring us to bear additional risk. For example, substantially all of our existing Florida homeowners insurance policies were renewed effective January 2006. The premium rates charged by us for those policies were subject to prior regulatory approval and other requirements and, consequently, were established in late 2005, prior to the occurrence of Hurricane Wilma at the end of October. Our current catastrophe reinsurance coverage for our Florida homeowners business expires on May 31, 2006, and we may be required to pay substantially higher premiums to renew or replace this coverage than we were anticipating when we established our Florida homeowners insurance rates in late 2005. The foregoing timing considerations could have a material adverse effect on our results of operations and financial condition.

Virtually all states require insurers licensed to do business therein to bear a portion of the unfunded obligations of impaired or insolvent insurance companies. These obligations are funded by assessments, which are levied by guaranty associations within the state, up to prescribed limits, on all member insurers in the state on the basis of the proportionate share of the premiums written by member insurers in the lines of business in which the impaired, insolvent or failed insurer was engaged. Accordingly, the assessments levied on us by the states in which we are licensed to write insurance may increase as we increase our premiums written. In addition, as a condition to the ability to conduct business in Florida, insurance companies are required to participate in Florida’s mandatory reinsurance fund, the Florida Hurricane Catastrophe Fund. We are also subject to assessments from the Citizens Property Insurance Company. The effect of these assessments and mandatory reinsurance arrangements, or changes in them, could reduce our profitability in any given period or limit our ability to grow our business. In 2005, we incurred $539,000 of after-tax expenses, net of reinsurance recoverables, attributable to Citizens’ assessments. See “Business — Regulatory Environment — Membership in Insolvency Funds and Associations; Mandatory Pools and Insurance Entities,” incorporated elsewhere in this Annual Report on Form 10-K.

All of our property insurance business is exposed to the risk of severe weather conditions and other catastrophes. Catastrophes can be caused by various events, including natural events such as hurricanes, winter weather, tornadoes, windstorms, earthquakes, hailstorms, severe thunderstorms and fires and other events such as explosions, terrorist attacks and riots. For example, we incurred $4.8 million of after-tax expenses relating to four hurricanes which caused significant property damage in Florida in 2004. We also incurred $9.8 million of after-tax expenses relating to four hurricanes which caused significant property damage in Florida, Texas and the U.S. Gulf coast in 2005. Substantially all of these losses were generated in our Florida commercial and homeowners lines of business. Because we are increasing the amount of

The incidence and severity of catastrophes and severe weather conditions are inherently unpredictable. Severe weather conditions and catastrophes can cause losses in all of our property lines and generally result in both an increase in the number of claims incurred and an increase in the dollar amount of each claim asserted, which might require us to increase our reserves and cause our liquidity and financial condition to deteriorate. In addition, our inability to obtain reinsurance coverage at reasonable rates and in amounts adequate to mitigate the risks associated with severe weather conditions and other catastrophes could have a material adverse effect on our business and results of operations.

The financial performance of the property and casualty insurance industry historically has been cyclical in nature, characterized by periods of severe price competition and excess underwriting capacity, or soft markets, followed by periods of high premium rates and shortages of underwriting capacity, or hard markets. Although an individual insurance company’s financial performance is dependent on its own specific business characteristics, the profitability of most property and casualty insurance companies tends to follow this cyclical market pattern. This cyclicality is due in large part to the actions of our competitors and to general economic factors that are not within our control, and therefore we cannot predict how long any given hard or soft market will last. If we find it necessary to reduce premiums or limit premium increases due to competitive pressures on pricing in a softening market, we may experience a reduction in our premiums written and in our profit margins and revenues, which could adversely affect our financial results.

Our business has historically been seasonal. We generally experience higher losses in our personal lines insurance segment, namely homeowners insurance, during the first quarter of the year as a result of an increase in claims due to winter weather conditions in the Midwestern states in which we do business. For example, winter weather may cause property damage that impacts claim incidence and severity. We also expect to experience higher losses in our homeowners line during the second and third quarters of the year due to our recent expansion into the Florida homeowners insurance business and the incidence of hurricanes and other severe weather that often occur in that state during those quarters. The recurrence of these seasonal patterns, or any deviation from them, could affect the market price of our common stock.

Our markets are highly competitive and, except for regulatory considerations, there are few barriers to entry. Our insurance companies compete with other insurance companies that sell commercial and personal insurance policies through independent agents as well as with insurance companies that sell policies directly to their customers. Our competitors include not only large national insurance companies, but also small regional companies. Some of our competitors have higher financial strength ratings and greater resources than we have and offer a wider array of products and services or competing products and services at lower prices. In addition, existing competitors may attempt to increase market share by lowering rates. In that case, we could experience reductions in our underwriting margins, or sales of our insurance policies could decline as customers purchase lower-priced products from our competitors. Losing business to competitors offering similar products at lower prices, or having other competitive advantages, would adversely affect our results of operations.

Our success depends in part upon the continued services of our senior management team, particularly our Chairman, Chief Executive Officer and President, James G. Petcoff, and our Chief Operating Officer and Executive Vice President, B. Matthew Petcoff. We have entered into employment agreements with James G. Petcoff and B. Matthew Petcoff. As of December 31, 2005, we also had key-person life insurance on James G. Petcoff having a face value of $6.0 million. We do not have employment agreements with any other executive officers or employees. The loss of any of our executive officers or other key personnel, or our inability to recruit and retain additional qualified personnel as we grow, could materially and adversely affect our business and results of operations and could prevent us from fully implementing our growth strategies.

Our marketing efforts and the growth of certain of our lines of business depend to a significant extent upon our receipt of trade association endorsements. For example, our early success in selling property, general liability and liquor liability insurance policies to owner-operated bowling centers in Michigan was attributable, in large part, to our endorsement by the Bowling Centers Association of Michigan. Our subsequent expansion of our bowling program into other states has been facilitated by similar trade association endorsements in those states. In addition, our liquor liability insurance product line has benefited from our endorsement by the Associated Food Dealers of Michigan. Although we pay marketing fees in connection with these endorsements, we have no long-term contractual rights to any endorsements, and we cannot assure that we will be able to maintain these endorsements. In addition, we cannot predict whether a particular trade association in a state into which we might seek to expand would grant us any similar endorsement (whether exclusive or non-exclusive). The loss of one or more of our existing endorsements or our failure to obtain additional endorsements could hinder our marketing efforts and limit our ability to compete with other insurance providers.

We are organized as a holding company, a legal entity separate and distinct from our operating subsidiaries. As a holding company without significant operations of our own, we depend upon dividends and other payments from our subsidiaries. We cannot meet our financial obligations unless we receive payments from our subsidiaries, including our insurance company subsidiaries. In addition, the payment of future cash dividends, if any, by us to our shareholders will be at the discretion of our board of directors and will depend on, among other things, our financial condition, results of operations, cash requirements, future prospects, regulatory and contractual restrictions on the payment of dividends by us and our subsidiaries (including those contained in our senior credit facility) and other factors deemed relevant by our board of directors.

State insurance laws limit the ability of our insurance company subsidiaries to pay dividends to us and require our insurance company subsidiaries to maintain specified minimum levels of statutory capital and surplus. In addition, for competitive reasons, our insurance companies need to maintain financial strength ratings, which in turn require us to maintain certain levels of capital and surplus in those subsidiaries. The need to maintain capital and surplus levels may affect the ability of our insurance company subsidiaries to pay dividends to us. Without regulatory approval, the aggregate maximum amount of dividends that could be paid to us in 2006 by our insurance company subsidiaries is approximately $6.6 million.

dividends on surplus, which could affect the ratings of our insurance company subsidiaries; our competitive position; and the amount of premiums that we can write. State insurance regulators have broad discretion to limit the payment of dividends by insurance companies, and our right to participate in any distribution of assets of one of our insurance company subsidiaries is subject to prior claims of policyholders and creditors except to the extent that our rights, if any, as a creditor are recognized. As a result, a prolonged, significant decline in the profits of our insurance company subsidiaries, or regulatory action limiting dividends, could subject us to shortages of cash because our insurance company subsidiaries would not be able to pay us dividends. We also rely on service contracts entered into with or between our non-insurance company subsidiaries and our insurance company subsidiaries, and to the extent that the amounts charged under these contracts are modified by the applicable insurance regulatory authority, less cash may be available to us.

Our insurance company subsidiaries are subject to comprehensive regulation by state insurance agencies in Michigan and Florida, the states in which they are domiciled. They are also subject to regulation by state insurance agencies in the states where they sell insurance products, issue policies and handle claims. Additionally, our captive reinsurance subsidiary is subject to regulation under the laws of the District of Columbia. Our ability to comply with these laws and regulations and obtain necessary and timely regulatory action is and will continue to be critical to our success and ability to earn profits.

Compliance with these state laws and regulations requires us to incur administrative costs that decrease our profits. These laws and regulations may also prevent or limit our ability to underwrite and price risks accurately, obtain timely rate increases necessary to cover increased costs, discontinue unprofitable relationships or exit unprofitable markets, and otherwise grow our business profitably. In addition, our failure to comply with these laws and regulations could result in actions by state or federal regulators, including the imposition of fines and penalties or, in an extreme case, revocation of our ability to do business in one or more states. Finally, we could face individual, group and class-action lawsuits by our policyholders and others for

Our insurance companies are subject to risk-based capital standards and other minimum capital and surplus requirements imposed by state laws, including the laws of their states of domicile (Michigan and Florida). The risk-based capital standards, or RBC standards, based upon the Risk-Based Capital Model Act adopted by the National Association of Insurance Commissioners, or NAIC, require our insurance company subsidiaries to report their results of risk-based capital calculations to state insurance departments and the NAIC. These RBC standards provide for different levels of regulatory attention depending upon the ratio of an insurance company’s total adjusted capital, as calculated in accordance with NAIC guidelines, to its authorized control level RBC limits. In addition, our premium finance subsidiary is subject to minimum capital requirements imposed under the laws of some of the states in which it conducts business, and our captive reinsurance subsidiary is subject to minimum capital and surplus requirements under the laws of the District of Columbia.

Any failure to meet applicable RBC requirements or minimum statutory capital requirements could subject our insurance companies or our premium finance subsidiary to further examination or corrective action by state regulators, including limitations on our writing of additional business or engaging in finance activities, state supervision or liquidation. Any changes in existing RBC requirements or minimum statutory capital requirements may require us to increase our statutory capital levels, which we might be unable to do.

A.M. Best, generally considered to be a leading authority on insurance company ratings and information, has currently assigned our insurance company subsidiaries financial strength ratings of “B++” (Very Good) for North Pointe Insurance and “B+” (Very Good) for North Pointe Casualty. A.M. Best assigns financial strength ratings ranging from “A++” (Superior) to “F” (In Liquidation). According to A.M. Best, “B+” and “B++” ratings are assigned to insurers that have a very good ability to meet their current obligations to policyholders. A.M. Best’s ratings reflect its opinion of an insurance company’s financial strength, operating performance and ability to meet its obligations to policyholders. These ratings are not evaluations directed to potential purchasers of our common stock and are not recommendations to buy, sell or hold our common stock. These ratings are subject to change at any time and could be revised downward or revoked in the sole discretion of A.M. Best. The failure of either North Pointe Insurance or North Pointe Casualty to maintain their A.M. Best ratings could cause our current and future independent agents and insureds to choose to transact their insurance business with more highly rated competitors. Because lenders and reinsurers will use our A.M. Best ratings as a factor in deciding whether to transact business with us, the failure of our insurance company subsidiaries to maintain their current ratings could dissuade a lender or reinsurance company from conducting business with us or might increase our interest or reinsurance costs. In addition, the failure of either North Pointe Insurance or North Pointe Casualty to maintain an A.M. Best rating of “B+” (Very Good) or higher would constitute an event of default under the terms of our existing credit facility. These factors would likely have a material adverse effect on our business and financial condition.

Although our reinsurers are liable to us to the extent we transfer risk to them, if any of our reinsurers cannot pay their reinsurance obligations, or dispute these obligations, we remain liable to pay the claims of our policyholders. At December 31, 2005, we had a total of $84.9 million due us from reinsurers, including $77.5 million of recoverables from losses and $7.4 million in prepaid reinsurance premiums. The largest amount due us from a single reinsurer was $16.8 million, recoverable from Swiss Reinsurance American Corporation. Moreover, at December 31, 2005, we had nineteen reinsurers that owed us in excess of $1.0 million each and $74.8 million in the aggregate. If any of our reinsurers are unable or unwilling to pay amounts they owe us in a timely fashion, we could suffer a significant loss or a shortage of liquidity, which would have a material adverse effect on our business and results of operations.

The insurance industry has recently become the focus of increased scrutiny by regulatory and law enforcement authorities, as well as class action attorneys and the general public, relating to allegations of improper special payments, price-fixing, bid-rigging, improper accounting practices and other alleged misconduct, including payments made by insurers to brokers and the practices surrounding the placement of insurance business. Formal and informal inquiries have been made of a large segment of the industry, and a large number of companies in the industry have received or may receive subpoenas, requests for information from regulatory authorities or other inquiries relating to these and similar matters. These efforts are expected to result in both enforcement actions and proposals for new state and federal regulation. In addition, a number of class action lawsuits have been filed against insurance companies, brokers and other insurance industry participants. It is difficult to predict the outcome of these investigations and proceedings, whether they will expand into other areas not yet contemplated, whether activities and practices currently thought to be lawful will be characterized as unlawful, what form new regulations will have when finally adopted, or the impact, if any, of this increased regulatory and law enforcement action and litigation with respect to the insurance industry on our business and financial condition.

We utilize contingent commission arrangements with certain of our independent agents in Florida that obligate us to pay contingent commissions to these agents based on the profitability of the insurance business written through such agents. We expensed $224,000, $316,000 and $302,000 in the years ended December 31, 2005, 2004 and 2003, respectively, relating to such contingent commission payments. Certain regulatory officials have recently questioned the use of certain contingent commission arrangements, primarily alleging that they may be improper if not adequately disclosed to consumers. The NAIC has adopted model legislation that would require greater disclosure of these arrangements by certain insurance agents and brokers, and several state regulators continue to investigate the use of these arrangements throughout the insurance industry.

The adoption of regulations prohibiting the use of contingent commission arrangements or requiring greater disclosure of such arrangements, especially in the state of Florida, could adversely affect our business by, among other things, requiring us to implement less economically attractive methods of compensating our independent agents in Florida, requiring us to monitor our independent agents’ compliance with applicable disclosure requirements and potentially subjecting us to regulatory action or other liability for their failure to so comply.

We cannot assure you that states will not make existing insurance-related laws and regulations more restrictive in the future or enact new restrictive laws. New or more restrictive laws and regulations in any state in which we conduct business could make it more expensive for us to conduct our business, restrict the premiums we are able to charge or otherwise change the way we do business. In such event, we might seek to reduce our insurance policy writings in, or to withdraw entirely from, the state in question. In addition, from time to time, Congress and certain federal agencies investigate the current condition of the insurance industry to determine whether federal regulation is necessary. We cannot predict whether and to what extent new laws and regulations that would affect our business will be adopted, the timing of adoption or the effects, if any, they would have on our business, results of operations or financial condition.

Further, state statutes currently require that certain types of insurance be maintained by individuals and businesses, including several of our key product lines. For example, a Michigan statute requires any applicant seeking a retail liquor license or a renewal of such license, including restaurants, bars and taverns, to obtain and maintain proof of financial responsibility providing security for liability under the Michigan Liquor Control Code of 1998, which creates liability for a person who sells or otherwise furnishes liquor to an intoxicated person or a minor. The required proof of financial responsibility may be in the form of a policy or policies of liquor liability insurance. Any amendment or repeal of such a state law could adversely affect our business in that state by diminishing the demand for our liquor liability insurance and related products.

Our results of operations depend in part on the performance of our invested assets. As of December 31, 2005, our total portfolio was $142.9 million, of which $98.0 million was invested in fixed-income securities, $34.3 million in cash and cash equivalents, $10.0 million in common stocks and $0.6 million in other investments. Certain risks are inherent in connection with fixed maturity securities, including loss upon default and price volatility in reaction to changes in interest rates and general market factors. In general, the fair value of a portfolio of fixed-income securities increases or decreases inversely with changes in market interest rates, while net investment income realized from future investments in fixed-income securities increases or decreases along with interest rates. In addition, some of our fixed-income securities have call or prepayment options. This subjects us to reinvestment risk should interest rates fall and issuers call their securities. We attempt to mitigate this risk by investing in securities with varied maturity dates, so that only a portion of the portfolio will mature at any point in time. Furthermore, actual net investment income or cash flows from

investments that carry prepayment risk, such as mortgage-backed and other asset-backed securities, may differ from those anticipated at the time of investment as a result of interest rate fluctuations. An investment has prepayment risk when there is a risk that the timing of cash flows that result from the repayment of principal might occur earlier than anticipated because of declining interest rates. As of December 31, 2005, if market interest rates were to increase 1.0% (for example, the difference between 5.0% and 6.0%), then the fair value of our fixed-income securities would decrease by approximately $3.4 million. This change in fair value was determined using duration modeling, assuming no prepayments.

Our business is highly dependent upon the successful and uninterrupted functioning of our information technology and telecommunications systems. We rely on these systems to process new and renewal business, provide customer service, make claims payments and facilitate collections and cancellations, as well as to perform actuarial and other analytical functions necessary for pricing and product development. Our systems could fail of their own accord or might be disrupted by factors such as natural disasters, power disruptions or surges, computer hackers or terrorist attacks. Failure or disruption of these systems for any reason could interrupt our business and adversely affect our results of operations.

We became a public company in September 2005. As a private company without public reporting obligations, we have historically committed limited personnel and resources to the development of the external reporting and compliance obligations that would be required of a public company. We are in the process of documenting and testing our internal control procedures in order to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act of 2002 and we are retaining a third party to assist us with our internal control evaluation. Section 404 requires annual management assessments of the effectiveness of our internal controls over financial reporting and a report by our independent auditors addressing these assessments. We may be required to comply with Section 404 no later than the time we are required to file our annual report for fiscal 2006 with the Commission. Recently, we have begun to take measures to address and improve our financial reporting and compliance capabilities and we are in the process of instituting changes to satisfy our obligations as a public company, including the requirements associated with the Sarbanes-Oxley Act of 2002.

If we fail to achieve and maintain the adequacy of our internal controls in accordance with applicable standards as then in effect and as supplemented or amended from time to time, we may be unable to conclude on an ongoing basis that we have effective internal controls over financial reporting in accordance with Section 404. Moreover, effective internal controls are necessary for us to produce reliable financial reports. If we cannot produce reliable financial reports or otherwise maintain appropriate internal controls, our business, financial condition and results of operations could be harmed, investors could lose confidence in our reported financial information, the market price for our stock could decline significantly and we may be unable to obtain additional financing to operate and expand our business. See Item 9A — “Controls and Procedures,” incorporated elsewhere within this Annual Report on Form 10-K.

Our home office is in Southfield, Michigan, where we occupy approximately 30,000 square feet of office space for use in all of our business segments. On August 18, 2005, our subsidiary, North Pointe Financial acquired 100% of the ownership interests in Northwestern Zodiac Limited Partnership (“Northwestern Zodiac”) for $1,500,000 in cash. Northwestern Zodiac owned the office building and land in Southfield, Michigan which we previously leased. Northwestern Zodiac was purchased so we could own and manage that property.

We lease 10,000 square feet of office space in Jacksonville, Florida for use in our specialty commercial lines business segment. This lease expires in June 2009. We lease nearly 13,000 square feet of office space in Lombard, Illinois, all of which was sublet to unrelated third parties when we closed our Chicago operation in April 2003. We also lease space for small offices in East Lansing, Michigan; Coral Gables and Cooper City, Florida; and Wilmette, Illinois, all of which are used in our specialty commercial lines business segment (except the Cooper City, Florida office, which is used in our homeowners insurance business).

On September 28, 2005, we completed an initial public offering of 4,000,000 shares of common stock, at an initial public offering price of $12.00 per share, for an aggregate offering price of $48.0 million. On November 15, 2005, we completed the issuance of 225,000 shares of the over-allotment option granted to the underwriters in connection with the initial public offering of common stock at a price of $12.00 per share, for an aggregate price of $2.7 million. The managing underwriters for the offering were SunTrust Robinson Humphrey, William Blair & Company and Sandler O’Neill & Partners, L.P. Costs associated with the initial public offering and over-allotment included $3.5 million in underwriting discounts and commissions and $2.9 million of offering expenses, resulting in net proceeds to us of $44.3 million.

We contributed $19.0 million of the net proceeds from the offering to our insurance subsidiaries. Of this amount, $10.0 million was contributed to North Pointe Insurance, $5.0 million was contributed to North Pointe Casualty and $4.0 million was contributed to Midfield. Of the remaining $25.3 million in net proceeds, we used $22.6 million to repay indebtedness on our senior credit facility and $2.4 million was used to pay North Pointe Casualty in December 2005 to satisfy a federal income tax amount due North Pointe Casualty in accordance with our tax sharing agreement. The remaining $300,000 of net proceeds was used for general corporate purposes.

The information as of December 31, 2005, 2004, 2003 and 2002 and for the years ended December 31, 2005, 2004 and 2003 and the period from June 26, 2002 through December 31, 2002 was derived from our audited consolidated financial statements. We purchased our initial operating subsidiaries on June 26, 2002, and our holding company had minimal activity prior to the acquisition of our subsidiaries. The information as of and for the period ended June 25, 2002 and the year ended December 31, 2001 was derived from the predecessor companies’ audited combined financial statements.

The discussion and analysis of our financial condition and results of operations contained herein should be read in conjunction with our consolidated financial statements and accompanying notes which appear elsewhere in this report. It contains forward-looking statements that involve risks and uncertainties. Please see “Note on Forward-Looking Statements” for more information. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those discussed below and elsewhere in this report.

Some of the statements contained herein are “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. Whenever used in this report, the words “estimate”, “expect”, “believe” or similar expressions are intended to identify such forward-looking statements. Forward-looking statements are derived from information that the Company (also referred to herein as “we,” “us” and “our”) currently has and assumptions that we make. We cannot assure that anticipated results will be achieved, since results may differ materially because of both known and unknown risks and uncertainties which we face. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Factors that could cause actual results to differ materially from our forward-looking statements include, but are not limited to:

Net income for 2005 includes after-tax expenses of $9.8 million attributable to four hurricanes which struck Florida and the U.S. Gulf coast in 2005, $539,000 of after-tax expenses attributable to statutory assessments from Citizens and $115,000 of after-tax expenses attributable to reserve adjustments relating to the 2004 hurricane losses. Of the $9.8 million of after-tax expenses attributable to hurricanes in 2005, $1.6 million, $1.9 million, $196,000 and $6.1 million were attributable to Hurricanes Dennis, Katrina, Rita and Wilma, respectively.

In 2005, our gross premiums written grew to $112.1 million from $96.5 million in 2004, an increase of $15.6 million, or 16.2%. Our commercial lines gross premiums written increased by $5.2 million, or 7.0% and our personal lines gross premiums written increased by $10.4 million or 45.0%. We experienced continued expansion in our Florida small business line accounted for most of the growth in our commercial lines segment. We entered the Florida homeowners market in December 2004 which accounts for the growth in our personal lines segment. The growth in the Florida homeowners line of business was partially offset by a decrease in writings in our personal automobile insurance line, which we exited in October 2004.

On September 28, 2005, we completed an initial public offering and raised $44.3 million (net of underwriters’ discounts and related expenses), including proceeds of an over-allotment exercised by the underwriters on November 15, 2005. We contributed $19.0 million of the net proceeds to our insurance company subsidiaries, utilized $22.6 million to pay down our senior debt facility and the remainder was used to satisfy a federal income tax amount due North Pointe Casualty in accordance with our tax sharing agreement.

We prepare our financial statements in conformity with generally accepted accounting principles in the United States of America, or GAAP. Under GAAP, we make estimates and assumptions that affect the amounts reported in our financial statements. As additional information becomes available, these estimates and assumptions can change and impact amounts reported in the future. We have identified below accounting policies that we use to make these estimates and assumptions. We consider these policies to be critical due to the amount of judgment and uncertainty inherent in their application.

Unpaid loss and loss adjustment expense reserves represent our best estimate of the ultimate liability for losses and loss adjustment expenses that occurred prior to, but were unpaid at, the end of any given accounting period. At December 31, 2005 and 2004, we had $117.8 million and $96.6 million, respectively, of gross loss and loss adjustment expense reserves. Evaluation of these gross reserves requires the estimation of loss development over an extended period of time. Numerous factors will affect the ultimate settlement values of claims, including tort reform, expected future inflationary trends, medical costs and jury awards. These factors, coupled with the character of the business we write (much of which is small volume specialty commercial lines), continual changes in the mix of business we write, as well as ongoing rate and underwriting modifications, require that significant judgment be used in the reserve setting process. For example, our gross premiums written in commercial multi-peril increased by 16.3% in 2005; our personal automobile business is now in run-off, and we began writing homeowners in Florida in December 2004. These changes in our mix of business, among other less substantial changes, create additional uncertainty in estimating the ultimate loss costs.

We use actuarial methodologies to assist us in establishing these estimates, including estimates of the severity and frequency of future claims, the length of time to obtain an ultimate resolution, outcomes of litigation and other third-party factors that are often beyond our control. Due to the inherent uncertainty associated with the cost of unsettled and unreported claims, our ultimate liability may differ from our original estimate. Our reserves estimates are regularly reviewed and updated and any resulting adjustments are included in the current period’s results. See “Results of Operations — Losses and Loss Adjustment Expenses,” “Business — Unpaid Losses and Loss Adjustment Expenses,” Note 7 to our audited consolidated financial statements all of which are included elsewhere in this annual report on Form 10-K.

SFAS 115, “Accounting for Certain Investments in Debt and Equity Securities,” and Staff Accounting Bulletin 59, “Noncurrent Marketable Equity Securities,” require companies to perform periodic reviews of individual securities in their investment portfolios to determine whether a decline in the value of a security is other than temporary. A review for other-than-temporary impairment (“OTTI”) requires companies to make certain forward-looking judgments regarding the materiality of the decline, its effect on the financial statements, and the probability, extent and timing of a valuation recovery, and the Company’s ability and intent to hold the security. The scope of this review is broad and requires a forward-looking assessment of the fundamental characteristics of a security, as well as market-related prospects of the issuer and its industry.

Pursuant to these requirements, we assess valuation declines to determine the extent to which such changes are attributable to (i) fundamental factors specific to the issuer, such as financial conditions, business prospects or other factors or (ii) market-related factors, such as interest rates or equity market declines. This evaluation reflects our assessments of current conditions, as well as predictions of uncertain future events, that may have a material impact on the financial statements related to security valuation.

Fixed-income investments with unrealized losses due to the market- or industry-related declines, are not deemed to qualify as other than temporarily impaired where we have the intent and ability to hold the investment for the period of time necessary to recover the investment’s original principal and interest obligation. Our policy for equity securities with market-related declines is to recognize impairment losses on individual securities with losses that are not reasonably expected to be recovered under historical market conditions when the security has been in a loss position for four consecutive quarters. This does not preclude us from recognizing an impairment prior to a security remaining in a loss position for four consecutive quarters if events or evidence would dictate an earlier recognition.

When persuasive evidence exists that causes us to evaluate a decline in market value to be other than temporary, we reduce the book value of such security to its current market value, recognizing the decline as a realized loss in the income statement. All other unrealized gains or losses are reflected as a change in shareholders’ equity. Since total unrealized losses are already a component of our shareholders’ equity, any recognition of additional other-than-temporary impairment losses would have no effect on our comprehensive income or book value.

Significant judgment is required in determining the fair values of net assets acquired. In our evaluation of the fair values of the net assets acquired pursuant to the above acquisition, we took into account a combination of factors, including the likelihood of recoveries on various assets, as well as the anticipated timing of recoveries. In the case of the investment portfolio securities, we utilized market values. In determining the fair value of unpaid losses and loss adjustment expenses we developed assumptions for the discounting of cash flows and estimates of risk loads a hypothetical arms-length buyer would require to assume such liabilities. Fixed and intangible assets were written off before determining the extraordinary gain. Substantially all other assets and liabilities were short term in nature reducing the amount of judgment involved in determining estimated fair value. See Note 1 to our consolidated financial statements, included elsewhere in this annual report on Form 10-K.

Gross premiums written in our commercial lines segment for 2005 were $78.6 million as compared to $73.4 million for 2004, an increase of $5.2 million, or 7.1%. This increase in gross premiums written was attributable to an increase in policy count and an increase in the average premiums written per policy. Policy count in our commercial lines segment was 28,100 as of December 31, 2005 as compared to 26,800 as of December 31, 2004, an increase of 1,300 policies, or 4.9%. We experienced an increase in gross premiums written of $7.0 million in our Florida small business line, as well as smaller increases in other commercial lines. These increases were partially offset by a $1.9 million decrease in our RBT line and a $713,000 decrease in our accident and health line which we ceased writing in May 2005. The decrease in gross premiums written in our RBT line was a result of the loss of several liquor liability and general liability policyholders in Michigan which we attribute to a more competitive market.

Gross premiums written in our personal lines segment for 2005 were $33.5 million as compared to $23.1 million for 2004, an increase of $10.4 million, or 45.0%. Policy count in our personal lines segment was 35,200 as of December 31, 2005 as compared to 16,700 as of December 31, 2004, an increase of 18,500 policies, or 110.8%. The increase in gross premiums written was primarily attributable to $27.8 million increase in gross premiums written in our Florida homeowners insurance line in 2005, which business we began writing in December 2004. This increase was partially offset by a $15.6 million decrease in our personal automobile line and a $1.8 million decrease in our Midwest homeowners line. We ceased writing personal automobile policies in October 2004 upon the sale of our renewal rights to that line of business. The average annual premiums per policy for the Florida homeowners insurance line is approximately 50% of the average annual premiums per policy that we obtained from our personal automobile insurance line. The decrease in our Midwest homeowners line was attributable to rate increases implemented in late 2003 and early 2004 in an effort to improve the profitability of our Midwest homeowners line, which led to a reduction in policy count of 14.7% from December 31, 2004 to December 31, 2005.

Gross premiums written in our commercial lines segment for 2004 were $73.4 million as compared to $59.8 million for 2003, an increase of $13.6 million, or 22.7%. This increase in gross premiums written was primarily attributable to an increase in policy count. Policy count in our commercial lines segment was 26,796 as of December 31, 2004 as compared to 22,212 as of December 31, 2003, an increase of 4,584 policies, or 20.6%. We experienced an increase in gross premiums written of $12.0 million in our Florida small business line, $2.6 million in our bowling center line and $1.9 million in our RBT line.

2003 and early 2004 in an effort to improve the profitability of our Midwest homeowners line, which led to a reduction in policy count of 25.1%, and a reduction in gross premiums written of 16.3%, from 2003 to 2004. The reduction in policy count represents a reversal in a trend of significant policy count growth in 2003 and 2002. Partially offsetting the decrease in gross premiums written from our personal automobile line and Midwest homeowners line was a $937,000 increase in gross premiums written from our Florida homeowners insurance line which we began writing in December 2004.

Net premiums written is the amount of our gross premiums written less the amount of premiums that we transfer, or cede, to our reinsurers based upon the risks they accept pursuant to our reinsurance treaties. We relate our net premiums written to gross premiums written to measure the amount of premium we retain after cessions to reinsurers. Our primary reinsurance agreement is a multi-line, excess of loss treaty; we also maintain a variety of other reinsurance treaties, including corporate clash, catastrophe and facultative coverage. See “Business — Reinsurance,” incorporated elsewhere within this Annual Report on Form 10-K.

Year Ended December 31, 2005 as Compared to Year Ended December 31, 2004. Net premiums written for 2005 were $87.1 million as compared to $80.5 million in 2004, an increase of $6.6 million, or 8.2%. The increase in net premiums written resulted from an increase in gross premiums written, partially offset by a decrease in the percentage of premiums retained after cessions to reinsurers. Net premiums written as a percentage of gross premiums written were 77.7% in 2005 and 83.4% in 2004. The decrease in the percentage of net premiums written that we retained in 2005 as compared to 2004 was primarily attributable to the shift in the mix of business to personal property insurance policies in Florida which resulted in higher catastrophe reinsurance premiums. Also, catastrophe reinsurance rates increased on our commercial insurance lines as a result of the hurricane losses incurred by the reinsurers during 2004.

The decrease in the percentage of net premiums written that we retained in 2004 as compared to 2003 was primarily attributable to the negotiation of a new primary reinsurance treaty in early 2003, pursuant to which premiums that were written but not earned in 2002 were subject to the lower rates under our new primary 2003 treaty. We recorded these savings as a reduction to our ceded premiums in early 2003. In addition, we incurred a total of $1.1 million of additional catastrophic reinsurance ceded premiums as a result of three hurricanes in Florida in August and September of 2004 that resulted in losses triggering our catastrophic reinsurance coverage. Our initial catastrophic reinsurance agreement provided for one automatic reinstatement after the first event upon payment of a reinstatement fee. After the second event we entered into a new catastrophic reinsurance agreement to provide catastrophic reinsurance coverage for the remainder of the July 1, 2004 to June 30, 2005 catastrophic reinsurance policy period. This second catastrophic reinsurance policy also had one automatic reinstatement following its first event. We also incurred losses from a fourth hurricane in Florida in September 2004, but these losses were insufficient to trigger our catastrophic reinsurance coverage.

The increase in net investment income is attributable to a combination of an increase in average cash and invested assets which generated investment income and an increase in the investment yield. Average cash and invested assets for 2005 was $129.1 million as compared to $107.3 million for 2004. The increase in average cash and invested assets resulted primarily from the increase in gross premiums written and proceeds of the initial public offering in September 2005. Pre-tax yield on our portfolio increased to 3.1% in 2005 from 2.2% in 2004. This increase in pre-tax yield is primarily attributable to an increase in prevailing market interest rates. For example, the three-year U.S. Treasury notes increased to 3.9% in 2005 from 2.8% in 2004, which we believe reflects the trend in market interest rates for debt securities with durations similar to our cash and debt securities mix. As of December 31, 2005, we had $34.1 million of unrestricted cash and cash equivalents. We intend to invest a significant portion of those funds in 2006. The average duration of our cash and debt securities portfolio was 3.3 and 2.5 years as of December 31, 2005 and 2004, respectively. The increase in average duration of our cash and debt securities portfolio also contributed to the increase in the pre-tax yield.

Average cash and invested assets for 2004 was $107.3 million as compared to $96.5 million for 2003. The increase in average cash and invested assets resulted primarily from cash and invested assets purchased as part of the acquisition of North Pointe Casualty. The increase in net investment income generated by the increase in our average cash and invested assets was partially offset by a decrease in the pre-tax yield on our portfolio from 2.3% in 2003 to 2.2% in 2004. The decline in the yield was primarily attributable to a larger average cash position in 2004 as compared to 2003 due to the fact that North Pointe Casualty’s cash and investments consisted substantially of cash at the time of acquisition. In addition, due to uncertain cash demands as a result of hurricane losses and the investment portfolio manager transition during 2004, we did not invest the cash assumed as part of the North Pointe Casualty acquisition until late 2004. The decrease in our pre-tax yield as a result of our large cash position was partially offset by an increase in prevailing market interest rates. For example, the average yield on three-year U.S. Treasury notes increased to 2.8% in 2004 from 2.1% in 2003, which we believe reflects the trend in market interest rates for debt securities with durations similar to our cash and debt securities mix. The average duration of our cash and debt securities portfolio was 2.5 and 2.0 years as of December 31, 2004 and 2003, respectively. The increase in average duration of our cash and debt securities portfolio occurred primarily in the last quarter of 2004 when our debt securities investment manager began to invest much of the cash held by North Pointe Casualty.

Year Ended December 31, 2004 as Compared to Year Ended December 31, 2003. Realized gains, net of realized losses, on the disposition of investments for 2004 were $886,000 as compared to $1.3 million for 2003, a decrease of $378,000, or 29.1%. The decrease in net realized gains was attributable to a decrease in the quantity of debt securities sold in 2004 as compared to 2003, as well as a stabilization in prevailing market interest rates, which reduced the amount of unrealized gains carried within our debt securities portfolio.

Fees and other income were substantially composed of policy issuance fees generated in our Florida homeowners line in 2005 and installment fees generated from our non-standard automobile insurance line in 2004 and earlier. Policy issuance fees are primarily derived from billings upon the issuance or renewal of the Florida homeowners policies and, to a lesser extent, on certain commercial policies. Installment fees were primarily derived from billings to non-standard automobile policyholders. Policy issuance fees, installment fees and other service fees are earned over the life of the policy and are reported within our administrative services segment. As described above under “Business,” we sold the renewal policy rights relating to our non-standard personal automobile insurance line in October 2004. Other income is generated from commissions earned for policies written by our wholly-owned MGAs for unrelated insurance companies, fees related to accident and health products, inspection fees charged on our personal homeowners and commercial policies, and premium finance charges.

Year Ended December 31, 2005 as Compared to Year Ended December 31, 2004. Fees and other income for 2005 were $1.9 million as compared to $2.2 million for 2004, a decrease of $300,000, or 13.6%. The decrease was primarily attributable to exiting the personal automobile line of business in October 2004, which business generated a substantial portion of the installment fees in 2004. The decrease in installments fees attributable to the automobile line of business was partially offset by an increase in fees generated from the new Florida homeowners line of business as well as some additional charges and commissions attributable to our bowling center line.

Losses and loss adjustment expenses represent our largest expense item and include payments made to settle claims, estimates for future claim payments and changes in those estimates for current and prior periods, as well as adjusting costs incurred in connection with settling claims. Losses and loss adjustment expenses for a given period are influenced by the number of exposures covered in the current year, trends in claim frequency and severity, changes in the cost of adjusting claims, changes in the legal environment and the re-

Losses and loss adjustment expenses include a reduction in those expenses resulting from continued reassessment of reserves established in prior periods. In 2005, 2004, and 2003, losses and loss adjustment expenses included a reduction of $5.4 million, $6.0 million, and $5.4 million, respectively, as a result of favorable development (or redundancies) from reserve changes relating to prior periods. See “Business — Unpaid Losses and Loss Adjustment Expenses,” incorporated elsewhere within this Annual Report on Form 10-K.

The loss ratio for our commercial lines segment for 2005 was 47.8% as compared to 50.9% for 2004. This decrease in our loss ratio was attributable to a combination of fewer hurricane losses incurred in our commercial lines segment in 2005 as compared to 2004 as well as improved loss experience from the non-catastrophe risks. For the years ended December 31, 2005 and 2004, we incurred $4.8 million and $6.2 million, respectively, of net losses and loss adjustment expenses related to these hurricanes as well as $2.0 million and $1.1 million, respectively, of catastrophe reinsurance reinstatement charges which we recorded as a reduction of net premiums earned. Of the $2.0 million of reinstatement charges, in 2005, $1.8 million was attributable to our hurricane losses and $248,000 was attributable to the Citizens’ assessments. The losses from the hurricanes and reinstated charges increased our commercial lines segment loss ratio from 38.3% to 47.8% in 2005 and from 38.7% to 50.9% in 2004.

The loss ratio for our personal lines segment for 2005 was 62.5% as compared to 61.7% for 2004. The increase in our personal lines loss ratio was primarily attributable to hurricane losses in our Florida homeowners line partially offset by a decrease in non-catastrophe losses arising from the change in the mix of business as well as an increase in favorable reserve development. We experienced lower non-catastrophe losses in our Florida homeowners line, which we began writing in December 2004, as compared to our personal automobile line which we ceased writing in October 2004. For the year ended December 31, 2005, we incurred $7.0 million of net losses and loss adjustment expenses related to hurricane losses, as well as $1.3 million of catastrophe reinsurance reinstatement charges which we recorded as a reduction of net premiums earned. Hurricane losses increased our personal lines loss ratio from 30.9% to 62.5% in 2005. Our personal lines segment did not incur any losses due to hurricanes in 2004.

Losses and loss adjustment expenses include a reduction in those expenses resulting from continued reassessment of reserves established in prior periods. In 2004, 2003 and 2002, loss and loss adjustment expenses included a reduction of $6.0 million, $5.4 million and $5.2 million, respectively, as a result of favorable development (or redundancies) from reserve changes relating to prior periods. See “Business — Unpaid Losses and Loss Adjustment Expenses,” incorporated elsewhere within this Annual Report on Form 10-K.

The loss ratio for our commercial lines segment for 2004 was 50.9% as compared to 39.6% for 2003. The increase in our loss ratio for 2004 as compared to 2003 was primarily attributable to losses incurred from four hurricanes which caused significant property damage in Florida during August and September of 2004. We incurred $6.2 million of net losses related to these hurricanes as well as $1.1 million of catastrophic reinsurance reinstatement charges which we recorded as a reduction of net premiums earned. The losses from the hurricanes increased our commercial lines segment loss ratio from 38.7% to 50.9%.

Our commercial lines loss ratio was reduced by 4.6 percentage points as a result of a $2.5 million favorable adjustment to the run-off reserves acquired from the North Pointe Casualty acquisition. Subsequent to the acquisition, we experienced favorable settlements of outstanding claims resulting in a $1.2 million redundancy on the reported reserves of claims closed during 2004, following the acquisition. As a result of the favorable development of the case reserves and due to further positive developments on open liability claims we also adjusted the incurred but not yet reported reserve, or IBNR, lower by $1.3 million. We believe the reserves established as of the date of acquisition were accurate based on the best information available at that time. Only through the course of new information and events following the acquisition did we believe it was appropriate to adjust the run-off reserves.

Year Ended December 31, 2005 as Compared to Year Ended December 31, 2004. Other underwriting and operating expenses for the year ended December 31, 2005 were $17.9 million as compared to $13.7 million for the year ended December 31, 2004, an increase of $4.2 million, or 30.7%. This increase was primarily attributable to additional personnel and other expenses associated with the expansion in our Florida small business and homeowners operations and increased personnel and external services costs associated with being a public company. In addition, in 2005, we incurred $568,000 of operating expenses attributable to the Citizens’ assessments (for both the imposed and anticipated assessments) relating to hurricane losses in 2004 and 2005, however we incurred no similar expenses in 2004.

Year Ended December 31, 2005 as Compared to Year Ended December 31, 2004. Interest expense for 2005 was $959,000 as compared to $763,000 for 2004, an increase of $196,000, or 25.7%. The increase was primarily attributable to an increase in our outstanding senior debt for the purpose of financing the repurchase of the preferred shares and common shares held by our preferred shareholder, on June 30, 2004, and an increase in borrowings of $7.5 million in June 2005 in order to fund the contributions to newly-formed Home Pointe Insurance. In addition, the floating interest rate on our senior credit facility has increased to 7.0% as of December 31, 2005 as compared to 5.25% as of December 31, 2004. The increase in the interest rate has also contributed to the increase in interest expense. Subsequent to the initial public offering, outstanding senior debt decreased to $2.4 million as of December 31, 2005. Interest expense also increased as a result of the mortgage loan assumed from the acquisition of Northwestern Zodiac, which acquisition occurred on August 18, 2005. Interest expense attributable to the mortgage loan amounted to $52,000 in 2005.

Year Ended December 31, 2005. Federal income tax expense for 2005 was $2.0 million, representing an effective tax rate of 34.5% which approximates the statutory rate of 34.0%. The federal income tax expense calculation included two offsetting items affecting the effective rate, which were: 1) a $262,000 increase in federal income tax expense attributable to an adjustment to net operating losses, or NOL, carryforwards acquired as part of the acquisition of North Pointe Casualty and 2) a $284,000 decrease in federal income tax expense relating to a provision to return variance.

Year Ended December 31, 2004. Federal income tax expense for 2004 was $3.5 million, representing an effective tax rate of 29.2%. Our effective rate in 2004 was lower than the statutory rate of 34.0% due to a $249,000 favorable adjustment to our NOL carryforwards acquired as part of the management-led buyout from Queensway Holdings, Inc. that increased the NOL carryforwards available to us and a $300,000 decrease to the provision relating to the taxable gain from the sale of Universal Fire & Casualty originally recorded in 2003.

North Pointe Holdings Corporation is a holding company with no business operations of its own. Consequently, our ability to pay dividends to shareholders, meet our debt payment obligations and pay our taxes and administrative expenses is dependent on intercompany service agreements with, and dividends from, our subsidiaries, including our insurance company subsidiaries. Our insurance company subsidiaries are subject to extensive regulation by insurance regulatory agencies in each state in which they do business, including restrictions on the amount of dividends they can pay to their shareholder. See “Liquidity and Capital Resources — Capital Constraints,” incorporated elsewhere within this Annual Report on Form-10K.

There are no restrictions on the payment of dividends to us by our non-insurance company subsidiaries other than state corporate laws regarding solvency. As a result, our non-insurance company subsidiaries generate revenues, profits and net cash flows that are generally unrestricted as to their availability for payment of dividends. We may use these revenues to service our corporate financial obligations, such as debt service, shareholder dividends or acquisitions. Our administrative segment is comprised of the operations of our non-insurance company subsidiaries.

Our primary assets are the stock of North Pointe Financial (a non-insurance company) and the stock of our insurance companies. Our ability to pay dividends to shareholders, meet our debt payment obligations and pay our general and administrative expenses is largely dependent on cash dividends we occasionally receive from North Pointe Financial. In turn, North Pointe Financial’s primary source of revenue, from which any dividends to us would have historically been paid, are the service fees and commissions it receives from our insurance companies pursuant to various servicing, marketing and management agreements in effect between those entities. In addition, it is possible that North Pointe Financial could receive dividends from our insurance companies paid out of their retained earnings, which North Pointe Financial could then pay to us as dividends. However, we traditionally have not issued dividends from our insurance companies to fund our general expenses and debt payment obligations. Moreover, the Holding Company Laws regulate the dividends and other payments by our insurance companies.

Our non-insurance companies provide management and administration services for our insurance company subsidiaries pursuant to intercompany service agreements. These services include providing management, marketing, offices and equipment, and premium collection, for which our insurance companies pay our non-insurance companies fees primarily based on a percentage of our gross premiums written. In exchange for providing these intercompany services, our non-insurance companies recorded revenues of $19.3 million, $10.9 million, and $10.0 million, for the years ended December 31, 2005, 2004 and 2003, respectively. Our non-insurance companies also derive nonaffiliated revenues from installment fees, commissions from nonaffiliated insurance carriers, premium financing and other income which totaled $1.9 million, $2.2 million, and $2.0 million for the years ended December 31, 2005, 2004, and 2003, respectively. There were no material non-cash components of our non-insurance company revenues. All of the agreements between our regulated insurance company subsidiaries and our non-insurance company subsidiaries have been approved by the applicable regulators.

We generally expect to pay claims and other expenses from operating cash flows. Historically, cash and cash equivalents (i.e., investments having an original maturity of 90 days or less) have comprised at least 10% of our investment portfolio, and our current investment guidelines require us to maintain this level of liquidity. We also seek to stagger the maturities of our investments so that we have access to maturing instruments on a regular basis. In addition, we seek to invest at least 70% of our investment portfolio in highly liquid, fixed-income securities having an average duration of less than four years. We believe that managing our cash and investments in the foregoing manner limits our exposure to losses resulting from the untimely sale of securities due to unanticipated cash requirements.

In 2005, we incurred losses as a result of Hurricanes Dennis, Katrina, Rita and Wilma. These hurricanes crossed over Florida, Texas and the U.S. Gulf Coast. As of December 31, 2005, total losses incurred, net of reinsurance, related to these hurricanes were $11.8 million plus $3.0 million in reinsurance reinstatement charges. Of the total expenses incurred attributable to hurricane losses of $14.8 million, $9.3 million was attributable to Hurricane Wilma. We do not believe the losses from these events will have a material adverse impact on our liquidity or cash flows due to adequate cash and cash equivalents.

Net cash provided by operating activities for the year ended December 31, 2005 was $4.8 million as compared to $185,000 for 2004, an increase of $4.6 million. The increase in cash from operations was attributable to a combination of factors including an increase in premiums collected, net of premiums ceded, of $7.7 million, an increase in investment income of $1.5 million and a reduction in underwriting and operating expenses paid of $1.2 million. These increases in cash were partially offset by a $1.1 million decrease in the change in restricted cash, an increase in losses and loss adjustment expenses paid, net of reinsurance recovered, of $1.6 million, an increase in federal income taxes paid of $2.7 million and a $319,000 reduction in cash received from other income. Losses and loss adjustment expenses paid in 2005 and 2004 were significantly impacted by the Florida hurricanes, much of which was recoverable from reinsurers. Our reinsurance recovered on paid losses was $11.5 million and $8.2 million in 2005 and 2004, respectively.

Net cash provided by operating activities for the year ended December 31, 2004 was $185,000 as compared to $8.2 million for 2003, a decrease of $8.0 million. The decrease in cash from operations was attributable to a combination of factors including a decrease in cash due to an increase in losses and loss adjustment expenses paid of $13.5 million, an increase in other underwriting and operating expenses paid of $3.5 million, and an increase in federal income taxes paid of $1.0 million. The decrease in cash was partially offset by an increase in premiums collected, net of premiums ceded, of $9.2 million and an increase of cash of $814,000 from the reclassification of restricted cash to cash and cash equivalents associated with pending litigation that was resolved favorably. The increase in losses and loss adjustment expenses paid was primarily attributable to the Florida hurricanes, much of which was recoverable from reinsurers. For example, our reinsurance recoverables on paid losses increased by $6.8 million to $8.2 million as of December 31, 2004 from $1.4 million as of December 31, 2003.

We believe that existing cash and investment balances, as well as cash flows from operation, will be adequate to meet the capital and liquidity needs of North Pointe Holdings and each of its subsidiaries during the 12-month period following the filing of this Annual Report on Form 10-K. We currently anticipate meeting our long-term capital and liquidity needs through a combination of cash flows from operations and possible future debt or equity financings. No assurances can be given, however, that we will generate cash flows from operations sufficient to meet our ongoing financial requirements or that debt or equity financing will be available to us upon acceptable terms, if at all, in the future.

Writings to Surplus Ratios: Our ability to write additional insurance policies is largely dependent on the statutory leverage of our insurance company subsidiaries. The Michigan insurance regulator requires insurance companies to maintain a gross premium writings-to-capital and surplus ratio under 3.0-to-1. Florida insurance regulations require insurance companies to maintain a net premiums-to-capital and surplus ratio (rather than a gross premiums-to-capital and surplus ratio), of 4.0-to-1. Statutory capital and surplus is defined as total assets less total liabilities of insurance companies determined in accordance with statutory accounting principles.

Risk Based Capital: The National Association of Insurance Commissioners, or NAIC, has adopted risk-based capital, or RBC, requirements that require insurance companies to calculate and report information under an RBC formula. The RBC formula attempts to measure statutory capital and surplus needs based on the risks in an insurance company’s mix of products and investment portfolio. The RBC formula is used by state insurance regulators to monitor trends in an insurance company’s statutory capital and surplus, for the purpose, if necessary, of initiating regulatory action. Our insurance companies, except for Midfield, are required to submit a report of their RBC levels to the insurance departments of their states of domicile as of the end of the previous calendar year.

Regulations on Dividends Paid by Insurance Companies: State insurance laws restrict the ability of our insurance company subsidiaries to declare dividends to us. Michigan and Florida have regulations, outlined below, which provide guidance as to when an insurance company may pay a dividend. The District of Columbia does not have detailed regulations, but provides a broader guideline which leaves much of the judgment in the hands of the insurance commissioner in the District of Columbia. In addition to the regulations outlined below, insurance departments will also look to financial measurements such as writings-to-surplus ratios, RBC levels or IRIS ratios when determining whether to approve a dividend. Other than the $3.3 million dividend paid by North Pointe Insurance in 2005, none of our insurance companies have paid dividends in the last three years.

Under the Michigan Holding Company Law, our Michigan insurance company, North Pointe Insurance, can only declare or pay dividends from its earned surplus, unless the Michigan insurance regulator approves the dividend prior to payment. In addition, our Michigan insurance company must obtain prior approval from the Michigan insurance regulator before it may pay extraordinary dividends or distributions to its shareholder, North Pointe Financial. In Michigan, an extraordinary dividend or distribution includes any dividend or distribution of cash or other property if the fair market value of the cash or other property, together with that of other dividends or distributions made within the preceding 12 months, exceeds the greater of (1) 10% of the

insurer’s surplus as of December 31 of the preceding year or (2) the net income of the insurer, not including realized capital gains, for the twelve-month period ending December 31 of the preceding year, in each case determined in accordance with statutory accounting practices. Dividends or distributions falling below this threshold are considered ordinary shareholder dividends. Ordinary shareholder dividends declared by our Michigan insurer must be reported to the Michigan insurance regulator at least ten days before they are paid, but these dividends are not subject to prior approval. Michigan’s insurance law would allow North Pointe Insurance to pay up to $6.6 million in ordinary dividends in 2006. Nonetheless, the Michigan insurance regulator retains the right to deny any dividend, extraordinary or otherwise. Accordingly, we typically obtain prior approval on all dividend distributions from North Pointe Insurance.

Under the Florida Holding Company Law, our Florida insurance companies (North Pointe Casualty and Home Pointe Insurance) can only declare or pay dividends out of that part of its available and accumulated surplus funds that is derived from its realized net operating profits on its business and net realized capital gains. In addition, our Florida insurance companies must obtain prior approval from the Florida insurance regulator before it may pay extraordinary dividends or distributions to its shareholder, North Pointe Financial. In Florida, an extraordinary dividend or distribution includes any dividend or distribution that exceeds either of the following two thresholds:

Senior Credit Facility. We are party to a $7.0 million revolving credit note (the “Facility”) with Comerica Bank, Fifth Third Bank and JPMorgan Chase Bank, N.A. which we originally entered into on January 26, 2002 and have subsequently amended on several occasions. Prior to the initial public offering, the credit facility also included a $17.0 million five-year term note. On September 28, 2005, we paid off all of the term note and revolving credit note utilizing $22.6 million of the net proceeds from our initial public offering. However, the revolving credit note remained available for future borrowings, maturing on July 1, 2006, and had an outstanding balance of $2.4 million as of December 31, 2005. We had $4.6 million available under the revolving credit note as of December 31, 2005. We paid down all of the outstanding senior debt in January 2006.

In addition, our senior credit facility contains negative covenants restricting our ability to, among other things, enter into a merger or consolidation, sell, lease or otherwise dispose of our assets, acquire the stock or assets of another entity or declare or pay any dividends. As of December 31, 2005 and 2004, we were in compliance with all the covenants under our senior credit facility except for maintaining an A.M. Best rating of no less than “B+” for each of our insurance company subsidiaries. Our two recently-formed insurance companies, Home Pointe Insurance and Midfield, were not yet rated by A.M. Best, as of December 31, 2005. We consequently requested and received a waiver of the breach of this covenant from our senior lenders effective December 31, 2005.

In May 2005, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standard (“SFAS”) No. 154, “Accounting Changes and Error Corrections, a replacement of Accounting Principles Board (“APB”) No. 20, Accounting Changes and FASB Statement No. 3.” This statement requires retrospective application in prior period financial statements for changes in accounting principles in both voluntary changes, as well as to changes required by an accounting pronouncement if the pronouncement does not include specific transition provisions. APB No. 20 previously required that most voluntary changes in accounting principles be recognized by recording the cumulative effect of a change in accounting principle. SFAS No. 154 is effective for fiscal years beginning after December 15, 2005. Management believes the adoption of SFAS No. 154 will not have a material effect on the Company’s consolidated financial statements.

Our investment portfolio consists principally of investment-grade, fixed-income securities, all of which are classified as available for sale. Accordingly, the primary market risk exposure to our debt securities is interest rate risk. In general, the fair market value of a portfolio of fixed-income securities increases or decreases inversely with changes in market interest rates, while net investment income realized from future investments in fixed-income securities increases or decreases along with interest rates. In addition, some of our fixed-income securities have call or prepayment options. This could subject us to reinvestment risk should interest rates fall and issuers call their securities, requiring us to reinvest at lower interest rates. We attempt to mitigate this interest rate risk by investing in securities with varied maturity dates and by managing the duration of our investment portfolio to a defined range of three to four years. The effective duration of our portfolio as of December 31, 2005 was 3.3 years.

We are subject to credit risks with respect to our reinsurers. Although a reinsurer is liable for losses to the extent of the coverage which it assumes, our reinsurance contracts do not discharge our insurance companies from primary liability to each policyholder for the full amount of the applicable policy, and consequently our insurance companies remain obligated to pay claims in accordance with the terms of the policies regardless of whether a reinsurer fulfills or defaults on its obligations under the related reinsurance agreement. To mitigate our credit risk to reinsurance companies, we attempt to select financially strong reinsurers with an A.M. Best rating of “A-” or better and continue to evaluate their financial condition throughout the duration of our agreements.

We do not believe that inflation has a material effect on our results of operations, except for the effect that inflation may have on interest rates and claims costs. We consider the effects of inflation in pricing and estimating reserves for unpaid losses and loss adjustment expenses. The actual effects of inflation on our results are not known until claims are ultimately settled. In addition to general price inflation, we are exposed to a long-term upward trend in the cost of judicial awards for damages, as well as short-term spikes in local prices attributable to increases in demand. For example, construction costs in Florida have increased significantly during 2005 as a result of increased demand stemming from the hurricanes which struck Florida in 2004 and 2005.

Our management is responsible for establishing and maintaining disclosure controls and procedures that are designed to ensure information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934 (the “Exchange Act”) is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required financial disclosures.

In accordance with Exchange Act Rule 13a-15(b), as of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our Disclosure Committee and management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) of the Exchange Act). Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of December 31, 2005.

As of September 30, 2005, our management had concluded that we did not maintain effective controls over the completeness of liabilities related to a recent assessment from Citizens. Specifically, we did not properly identify and recognize the liability when probable and reasonably estimable. This control deficiency resulted in an adjustment to the 2005 third quarter consolidated financial statements. In addition, this control deficiency could result in a misstatement to the liability for other insurance-related assessments and related expense accounts that would cause a material misstatement in our annual or interim financial statements that would not be prevented or detected. Accordingly, our management had concluded that this control deficiency constituted a material weakness.

As of September, 2005, our management had concluded that we did not maintain effective controls over the accounting for certain reinsurance contracts. Specifically, we did not properly evaluate certain of our reinsurance contracts to determine amounts recoverable related to the above-referenced assessment from Citizens. This control deficiency resulted in an adjustment to the 2005 third quarter consolidated financial statements. In addition, this control deficiency could result in a misstatement to the reinsurance recoverables and related expense accounts that would cause a material misstatement in our annual or interim financial statements that would not be prevented or detected. Accordingly, our management had concluded that this control deficiency constituted a material weakness.

In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of North Pointe Holdings Corporation and Subsidiaries at December 31, 2005 and 2004, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2005 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedules listed in the accompanying index present fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedules are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and financial statement schedules based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

North Pointe Financial is the sole shareholder of North Pointe Insurance Company (“North Pointe Insurance”), North Pointe Casualty Insurance Company (“North Pointe Casualty”), Home Pointe Insurance Company (“Home Pointe Insurance”), Home Pointe Managing General Agency, Inc. (Home Pointe MGA”), N.P. Premium Finance Company (“NP Premium”) and South Pointe Financial Services, Inc. (“South Pointe”). North Pointe Casualty was acquired in 2004. Home Pointe Insurance and Home Pointe MGA were created in 2005 specifically to write and service the Florida homeowners insurance business.

Universal Fire & Casualty is an Indiana-domiciled property and casualty insurance company licensed by the Indiana Department of Insurance (“IDOI”). Universal Fire & Casualty principally wrote homeowners, fire and other liability insurance in Indiana, Illinois and Missouri. Effective June 30, 2003, all of the business of Universal Fire & Casualty was transferred to North Pointe Insurance including all unpaid losses and all other assets and liabilities except for $5,000,000 of cash and investments. The Company sold 100% of the outstanding common stock of Universal Fire & Casualty on July 1, 2003 for $5,200,000. Universal Fire & Casualty was sold as an insurance company shell, including its cash, investments and licenses.

On February 28, 2004, North Pointe Financial purchased all of the outstanding common shares of Queensway International Indemnity Company (“Queensway International”) for $11,000,000 in cash, funded through a combination of senior debt and available cash. Concurrent with this acquisition, Queensway International’s name was changed to North Pointe Casualty. Queensway International stopped writing business on December 31, 2000 and, upon acquisition, its only operations related to the run-off of its old business and its investment portfolio.

On November 10, 2004, North Pointe Casualty entered into an agreement with the FDFS, in its capacity as receiver of American Superior Insurance Company (“American Superior”), pursuant to which North Pointe Casualty obtained the right to offer standard and non-standard homeowners insurance to approximately 50,000 former policyholders of American Superior in Florida whose coverage terminated effective January 2005. North Pointe Casualty paid the receiver $2 for each new policy issued to these former policyholders. North Pointe Casualty did not assume any liabilities of American Superior relating to these former policyholders or otherwise in connection with this transaction.

On August 18, 2005, North Pointe Financial completed the purchase of 100% of the ownership interests in Northwestern Zodiac Limited Partnership (“Northwestern Zodiac”) for $1,500,000 in cash. The Company incurred $53,000 in acquisition costs. As a result of the acquisition, Northwestern Zodiac ceased to exist as a separate entity, effectively being merged into North Pointe Financial. The results from Northwestern Zodiac’s operations were included in the Company’s financial results beginning on August 18, 2005.

On September 28, 2005, the Company completed an initial public offering of 4,000,000 shares of common stock at $12.00 per share. On November 15, 2005, the Company issued another 225,000 shares at $12.00 per share resulting from the underwriters exercising the over-allotment option granted in connection with the initial public offering. There were no selling shareholders. Total proceeds to the Company amounted to $44,270,000, net of the underwriting discount of $3,549,000 and $2,881,000 of expenses related to the offering (See Note 11).

The Company contributed $19,000,000 of the net proceeds from the offering to its insurance company subsidiaries. Of the remaining $25,270,000 in net proceeds, the Company used $22,585,000 to repay the senior debt facility, $2,400,000 was used to pay North Pointe Casualty in December 2005 to satisfy a federal income tax amount due North Pointe Casualty in accordance with our tax sharing agreement, and $285,000 was used for general corporate purposes. Of the $19,000,000 contributed to the Company’s insurance subsidiaries, $10,000,000 was contributed to North Pointe Insurance, $5,000,000 was contributed to North Pointe Casualty and $4,000,000 was contributed to Midfield.

All of the Company’s securities have been classified as available-for-sale at December 31, 2005 and 2004. Available-for-sale securities are those securities that would be available to be sold in the future in response to the Company’s liquidity needs, changes in market interest rates, and asset-liability management strategies, among others. Available-for-sale securities are reported at fair value, with unrealized gains and losses reported as a separate component of shareholders’ equity, net of deferred taxes. The mortgage-backed and asset-backed portfolio investment income is recorded considering expected cash flows adjusted for changes in assumptions utilizing the retrospective method; prepayment assumptions are based on market expectations. Other investments is comprised of an investment in a limited partnership. The limited partnership is accounted for under the equity method.

The Company evaluates all investments with market values below cost or amortized cost, as appropriate, at the balance sheet date to determine if the investments are other than temporarily impaired. The determination of other than temporary impairment is based on analyses including, but not limited to, the following factors: market value less than amortized cost for a twelve month period; rating downgrade or other credit event; past due interest or principal payments; financial condition and near-term prospects of the issuer; any specific events which may influence the operations of the issuer; prospects for the issuer’s industry segment; general market conditions and prevailing interest rate changes; and the intent and ability of the Company to retain the investment for a period of time sufficient to allow for anticipated recovery in market value. The Company evaluates its investments in securities to determine other than temporary impairment in each reporting period. Investments which are deemed other than temporarily impaired are written down to their estimated fair value and the related losses are recognized as realized losses.

Property and equipment is stated at cost, net of accumulated depreciation and is composed of real estate property, for the Company’s head office, office improvements and equipment. Depreciation is computed using a straight-line method over 39 years for the real estate property, using a straight-line method over 15 years for office improvements and fixtures and using an accelerated method over five years for equipment. Upon retirement or sale, the cost of assets disposed of and the related accumulated depreciation are removed from the accounts. Any resulting gain or loss is credited or charged to operations. Accumulated depreciation for property and equipment was $715,000 and $360,000 as of December 31, 2005 and 2004, respectively.

Reinsurance premiums and losses related to reinsured business are accounted for on bases consistent with those used in accounting for the original policies issued and the terms of the reinsurance contract. The Company records all reinsurance recoverables and prepaid reinsurance premiums as assets. Premiums ceded to other companies have been reported as a reduction of premium revenue. Reinsured losses incurred are reported as a reduction of loss and loss adjustment expenses on the accompanying consolidated statements of income. In the event of nonperformance by reinsurers, the Company remains primarily liable to its policyholders.

The Company uses the fair-value-based measurement method to account for all stock-based employee compensation plans in accordance with Statement of Financial Accounting Standard (“SFAS”) No. 123(revised 2004), “Share-Based Payment” (“SFAS 123R”). For stock options and restricted stock, the Company recognizes compensation expense equal to the fair value of the options or restricted stock on the grant date. The compensation expense, net of deferred taxes, is recognized on a straight-line basis over the vesting period, adjusted for an estimated forfeiture rate. SFAS 123R is effective for public companies for annual periods that begin after June 15, 2005. The Company early adopted the provisions of SFAS 123R.

At December 31, 2005, the Company had 550 debt securities and 33 equity securities that were in an unrealized loss position deemed to be temporarily impaired. The debt securities all had unrealized losses of less than 6% except for five securities with a combined fair value of approximately $2,175,000, none of which had an unrealized loss greater than 8%. The equity securities all had unrealized losses of less than 12% except for nine securities with a combined fair value of $384,000. Of this amount, only two equities had unrealized losses that exceeded 20% resulting in a combined fair value of $62,000. Ninety-nine of the debt securities and five of the equity securities have had unrealized losses for longer than one year.

At December 31, 2004, the Company had 144 debt securities and 20 equity securities that were in an unrealized loss position deemed to be temporarily impaired. The debt securities all had unrealized losses of less than 4% except for one security with a fair value of approximately $122,000, which had an unrealized loss of 7%. The equity securities all had unrealized losses of less than 8% except for three securities with a combined fair value of $170,000 and combined unrealized losses of 13%. Nine of the debt securities and one of the equity securities have had unrealized losses for longer than one year.

Positive evidence considered in reaching the Company’s conclusion that the investments with unrealized loss positions are not other-than-temporarily impaired, at December 31, 2005 and 2004, consisted of: 1) there were no specific events which caused concerns; 2) there were no past due interest payments; 3) the Company’s ability and intent to retain the investment for a sufficient amount of time to allow an anticipated recovery in value; and 4) the Company also determined that the changes in market value of the debt securities were considered normal in relation to overall fluctuations in interest rates.

The $5,435,000 favorable development in 2005 was primarily attributable to $2,080,000 of redundancies from the restaurant, bar and tavern (“RBT”) and bowling center lines of business primarily attributable to the 2002, 2003 and 2004 accident years, $848,000 from the commercial multi-peril coverages in the Florida small business line, primarily attributable to the 2001, 2003 and 2004 accident years, $1,290,000 from the personal automobile line, primarily attributable to the 2001, 2002 and 2003 accident years and $682,000 from the Midwest homeowners line, primarily attributable to the 2003 and 2004 accident years.

The $5,992,000 favorable development in 2004 was primarily attributable to three lines of business. Due to positive claims settlements, as well as favorable open claim developments, the run-off reserves acquired as part of the North Pointe Casualty acquisition generated $2,526,000 of the redundancy. North Pointe Casualty’s run-off reserves relate to business written prior to January 1, 2001. The commercial automobile line generated another $1,948,000 of the redundancy mostly attributable to the 1999 through 2003 accident years, weighted more heavily toward the more current years. The RBT and bowling center lines of business generated $1,006,000 of redundancies in 2004 primarily attributable to the 2000 through 2003 accident years.

The Company establishes reserves based on actuarial methodologies which utilize a combination of Company historical loss data and industry loss data. The weighting of the data utilized depends on the volume and amount of historical data the Company has available for each particular line of business. The redundancies that have arisen are generally attributable to the utilization of industry data with reported loss experience that was higher than the Company’s ultimate loss development. The more significant redundancies are primarily attributable to the liability coverages and require two to four years to develop sufficiently before actuarially sound methodologies will permit the Company to apply substantially its own loss experience to the reserve calculation.

Substantially all of the Company’s reinsurance agreements are excess of loss programs. In 2005, the Company’s retentions were $250,000 in commercial and Midwest homeowners lines of business and $500,000 in the Florida homeowners line of business. Retentions in the commercial lines and Midwest homeowners lines of business in 2004 and 2003 were $200,000. In general, the limits on the primary multi-line reinsurance agreement coincide with limits offered under the Company’s insurance programs which did not exceed $1,000,000 in 2005, 2004 and 2003. The Company obtains additional reinsurance on a policy by policy basis for coverage limits that exceed the primary reinsurance treaty’s limits. The Company carried no reinsurance on its commercial and personal automobile physical damage coverages.

For the years ended December 31, 2005, 2004 and 2003, the Company carried catastrophe reinsurance coverage to cover losses up to $60,000,000, $35,000,000 and $19,000,000, respectively, subject to retentions of $3,000,000, $2,000,000 and $2,000,000, respectively, for the commercial, Midwest homeowners and personal automobile lines of business. The Company is also subject to a 1.25% participation for losses between $10,000,000 and $26,000,000 and a 2.5% participation for losses between $50,000,000 and $60,000,000, in its catastrophe reinsurance contract expiring June 30, 2006. For the catastrophe reinsurance contracts in 2005, 2004 and 2003, Company was also subject to various participation percentages within certain layers of reinsurance. For the same periods the Company also carried clash reinsurance coverage equal to $4,000,000, subject to retentions of $1,000,000. The Company carried separate catastrophe reinsurance coverage for the Florida homeowners line of business with a limit of $139,000,000, subject to a retention of $3,000,000 and a 1.25% participation in losses between $64,000,000 and $104,000,000, in 2005. These reinsurance arrangements help to reduce the Company’s losses arising from large risks or from hazards of an unusual nature.

The Company experienced one event subject to the catastrophe reinsurance contracts from Hurricane Wilma that hit Florida in 2005 and three events subject to the catastrophe reinsurance contracts from hurricanes that hit Florida in 2004. The initial catastrophic reinsurance agreement provided for an automatic reinstatement after the first event. After the second event, the Company entered into a new catastrophic reinsurance agreement in September 2004 to provide catastrophic reinsurance coverage for the remainder of the July 1, 2004 to June 30, 2005 catastrophic reinsurance policy period. This second catastrophic reinsurance policy also had one automatic reinstatement following its first event (representing the Company’s third event for that period). Both the Company and the reinsurer are obligated to participate in an automatic reinstatement.

On June 30, 2004, the Company repurchased 100% of the outstanding cumulative convertible preferred shares for $2,888,000. All rights of the preferred shares, including any conversion provisions or warrants issued in connection with the preferred, were rescinded as of June 30, 2004. The price and terms for the repurchase of the preferred shares (and common shares held by the preferred shareholder) were negotiated with the shareholder as the redemption provisions of the shares were not exercisable until June 12, 2005.

Redemption Rights — The Company had the option to redeem all (but not less than all) of the preferred shares within a two-year period, between June 12, 2005 and June 12, 2007. To redeem the stock, the Company would pay an amount that would generate a total annual return to the preferred shareholders of 22% from June 12, 2002 to the day of redemption, not including the return from dividends if the dividends were paid in cash when due. To the extent dividends were not paid in cash, a total annual return of 30% (including returns from dividends paid in cash) was required.

On September 28, 2005, the Company awarded one employee 2,500 shares of restricted stock, having a market value of $12.00 per share. The vesting requirements relating to this restricted stock grant are the same as those applicable to the stock options granted on the same date. No restricted stock was awarded prior to September 28, 2005. In 2005, the Company recognized $2,000 of compensation expense related to the restricted stock. A total of $28,000 of compensation expense for unvested restricted stock will be recognized on a straight-line basis over the remainder of the five-year vesting period.

As of December 31, 2005, the Company was party to a $7,000,000 revolving credit note (the “Facility”) with Comerica Bank, Fifth Third Bank and JPMorgan Chase Bank, N.A., which was originally entered into on January 26, 2002 and has subsequently been amended on several occasions. Prior to the initial public offering, the credit facility also included a $17,000,000 five-year term note. On September 28, 2005, the Company paid off all of the term note and revolving credit note utilizing $22,585,000 of the net proceeds from the initial public offering. However, the revolving credit note remained available for future borrowings, maturing on July 1, 2006, and had an outstanding balance of $2,400,000, as of December 31, 2005. The revolving credit balance was completely paid down in January 2006. The Company had $4,600,000 available under the revolving credit note as of December 31, 2005.

In addition, the senior credit facility contains negative covenants restricting, among other things, mergers or consolidations, dispositions of assets, the stock or asset acquisition of another entity or the declaration or payment of any dividends. As of December 31, 2005 and 2004, the Company was in compliance with all of the covenants under the senior credit facility except for maintaining an A.M. Best rating of no less than “B+” for each of the insurance company subsidiaries. The two recently-formed insurance companies, Home Pointe Insurance and Midfield, were not yet rated by A.M. Best, as of December 31, 2005. The Company consequently requested and received a waiver of the breach of this covenant from the senior lenders effective December 31, 2005.

The Company’s insurance subsidiaries participate in the guaranty associations of the various states in which they write insurance business. Guaranty fund assessments are accrued at the time of insolvencies. The Company accrues for these costs when they can be reasonably estimated by management based upon the current information available. As of December 31, 2005 and 2004, the Company recorded a liability for potential guaranty fund assessments of $6,478,000 (including a $6,393,000 liability attributable to the Citizens’ assessment, discussed below) and $384,000, respectively. The Company incurred expenses related to guaranty fund assessments of $953,000 (including $816,000 of expenses attributable to the Citizens’ assessment, discussed below), $387,000 and $569,000 in 2005, 2004, and 2003, respectively.

In September 2004, the Company sold the renewal rights of approximately 100 liquor liability policies to an insurance company for which the Company has a management services agreement providing all of the accounting, premium collections and claims adjusting and processing. The Company recorded revenues from management services provided to that insurance company of $62,500, $60,000, and $57,500 in 2005, 2004, and 2003, respectively. The Chief Executive Officer and Chief Operating Officer of the Company hold minority ownership interests in that insurance company. The sales price for the renewal rights was $285,000 which the Company recorded as a gain on sale of business in 2004. The Company and the buyer also entered into a mutual non-compete agreement.

A director of the Company’s board and minority shareholder of the Company was paid $5,000 per month for monitoring and evaluating the investments of, and investment advisory services provided to the Company. The Company expensed $10,000, $60,000, and $60,000 in 2005, 2004, and 2003, respectively, for this service. The service was terminated in February 2005. This individual was paid $5,000 per month, beginning in October 2005, to assist the Company’s management in reviewing, evaluating and structuring possible future acquisitions. The Company expensed $15,000 in 2005 for this service.

The Chief Executive Officer owned a minority interest in Northwestern Zodiac, a partnership that owned the Southfield, Michigan office building, occupied by the Company. Lease expense of $486,000, $729,000, and $707,000 in 2005, 2004, and 2003, respectively, was attributable to this building. A company wholly owned by the Chief Operating Officer managed the building. Total fees for these services were $27,000, $35,000, and $35,000 in 2005, 2004, and 2003, respectively. In August 2005, the lease and management agreements were terminated when the Company acquired Northwestern Zodiac (see Note 1).

The Company and its subsidiaries sponsor a contributory 401(k) profit-sharing plan. All employees of the Company and its subsidiaries who have completed six months of service and attained the age of 19 are eligible for participation in the plan. Company contributions, other than matching employee contributions up to 4 percent of compensation, are discretionary. Company contributions, including matching contributions, are fully vested after three years. In 2005, 2004 and 2003, the Company expensed $500,000, $396,000 and $329,000, respectively, relating to contributions to this plan.

As of December 31, 2005 and 2004, $261,894,000 and $204,236,000, respectively, of the consolidated assets of the Company represent assets of the Company’s insurance operations that are subject to regulation and may not be transferred in the form of dividends, loans or advances. Dividends paid by the Company’s insurance subsidiaries are subject to limitations imposed by the domiciliary states’ insurance codes (the “Codes”). In general, under the Codes, an insurance company may pay dividends only from statutory earnings

The National Association of Insurance Commissioners (“NAIC”) has adopted risk-based capital requirements that require insurance companies to calculate and report information under a risk-based capital formula. The risk-based capital formula attempts to measure statutory capital and surplus needs based on the risks in an insurance company’s mix of products and investment portfolio. The risk-based capital formula is used by state insurance regulators to monitor trends in an insurance company’s statutory capital and surplus, for the purpose, if necessary, of initiating regulatory action. The Company’s insurance subsidiaries are required to submit a report of their risk-based capital levels to their respective state regulators as of each calendar year end.

Under the formula, a company first determines its authorized control level risk-based capital. This authorized control level takes into account a company’s (1) asset risk; (2) credit risk; (3) underwriting risk; and (4) all other business risks and such other relevant risks as are set forth in the RBC instructions. The company then compares its total adjusted capital against its authorized control level risk-based capital to determine its actual risk-based capital level. A company’s total adjusted capital is the sum of statutory capital and surplus and such other items as the risk-based capital instructions may provide.

The Company’s insurance subsidiaries file financial statements prepared in accordance with statutory accounting practices prescribed or permitted by their respective states of domicile. North Pointe Insurance files under OFIS rules and regulations, North Pointe Casualty and Home Pointe Insurance file under FDFS rules and regulations and Midfield files under DCDOI rules and regulations. The principal differences for statutory financial statements are; policy acquisition costs are not deferred, bonds are generally carried at amortized cost, deferred tax assets are subject to limitations and certain assets are non-admitted and charged directly to surplus.

North Pointe Casualty recorded an unpaid contribution from its parent as a receivable in its statutory financial statements amounting to $600,000 and $1,550,000 as of December 31, 2005 and 2004, respectively. These contributions were made to increase North Pointe Casualty’s statutory capital and surplus for regulatory purposes. The FDFS permitted these receivables from its parent to be recorded as assets on its statutory balance sheets, as of December 31, 2005 and 2004. This accounting differs from the accounting practice promulgated by NAIC Statutory Accounting Practices (“SAP”). Under NAIC SAP, the receivables would not have been recognized as assets and North Pointe Casualty’s statutory capital and surplus would have been lower by $600,000 and $1,550,000 as of December 31, 2005 and 2004, respectively.

The Company will primarily invest the $19,373,000 of proceeds, net of issuance costs, in high-grade debt securities which will remain available to fund future contributions to its subsidiaries, acquisition activities as they may arise, and other capital uses. This securities issuance is part of the Company’s long-term strategy to expand it operations through organic growth and acquisition in an opportunistic fashion, and continue to strengthen the financial position of its underlying insurance company subsidiaries.

The Company evaluates segment profitability based on income before federal income taxes and extraordinary items. Expense allocations are based on certain assumptions and estimates; stated segment operating results would change if different methods were applied. The Company does not allocate assets, investment income, interest expense or income taxes to operating segments. In addition, the Company does not separately identify depreciation and amortization expense by segment and such disclosure would be impracticable.

116 EX-4.1 2 k02899exv4w1.txt JUNIOR SUBORDINATE INDENTURE, DATED AS OF FEBRUARY 22, 2006 EXHIBIT 4.1 EXECUTION COPY ================================================================================ JUNIOR SUBORDINATED INDENTURE between NORTH POINTE HOLDINGS CORPORATION and LASALLE BANK NATIONAL ASSOCIATION, as Trustee ---------- Dated as of February 22, 2006 ---------- ================================================================================ TABLE OF CONTENTS

-i- TABLE OF CONTENTS (continued)

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-v- SCHEDULES Schedule A - Determination of LIBOR Exhibit A - Form of Officer's Financial Certificate Exhibit B - Form of Officer's Certificate Pursuant to Section 10.3 -vi- JUNIOR SUBORDINATED INDENTURE, dated as of February 22, 2006, between NORTH POINTE HOLDINGS CORPORATION, a Michigan corporation (the "Company"), and LASALLE BANK NATIONAL ASSOCIATION, a national banking association, as Trustee (in such capacity, the "Trustee"). RECITALS OF THE COMPANY WHEREAS, the Company has duly authorized the execution and delivery of this Indenture to provide for the issuance of its unsecured junior subordinated deferrable interest notes (the "Securities") issued to evidence loans made to the Company of the proceeds from the issuance by NP Capital Trust I, a Delaware statutory trust (the "Trust"), of undivided preferred beneficial interests in the assets of the Trust (the "Preferred Securities") and undivided common beneficial interests in the assets of the Trust (the "Common Securities" and, collectively with the Preferred Securities, the "Trust Securities"), and to provide the terms and conditions upon which the Securities are to be authenticated, issued and delivered; and WHEREAS, all things necessary to make this Indenture a valid agreement of the Company, in accordance with its terms, have been done. NOW, THEREFORE, this Indenture Witnesseth: For and in consideration of the premises and the purchase of the Securities by the Holders thereof, it is mutually covenanted and agreed, for the equal and proportionate benefit of all Holders of the Securities, as follows: ARTICLE I DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION SECTION 1.1. Definitions. For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires: (a) the terms defined in this Article I have the meanings assigned to them in this Article I; (b) the words "include", "includes" and "including" shall be deemed to be followed by the phrase "without limitation"; (c) all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with GAAP; (d) unless the context otherwise requires, any reference to an "Article" or a "Section" refers to an Article or a Section, as the case may be, of this Indenture; (e) the words "hereby", "herein", "hereof" and "hereunder" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision; (f) a reference to the singular includes the plural and vice versa; and (g) the masculine, feminine or neuter genders used herein shall include the masculine, feminine and neuter genders. "Act" when used with respect to any Holder, has the meaning specified in Section 1.4. "Administrative Trustee" means, with respect to the Trust, each Person identified as an "Administrative Trustee" in the Trust Agreement, solely in its capacity as Administrative Trustee of the Trust under the Trust Agreement and not in its individual capacity, or its successor in interest in such capacity, or any successor Administrative Trustee appointed as therein provided. "Additional Interest" means the interest, if any, that shall accrue on any amounts payable on the Securities, the payment of which has not been made on the applicable Interest Payment Date and which shall accrue at the rate per annum specified or determined as specified in such Security, in each case to the extent legally enforceable. "Additional Tax Sums" has the meaning specified in Section 10.5. "Additional Taxes" means taxes, duties or other governmental charges imposed on the Trust as a result of a Tax Event (which, for the sake of clarity, does not include amounts required to be deducted or withheld by the Trust from payments made by the Trust to or for the benefit of the Holder of, or any Person that acquires a beneficial interest in, the Securities). "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, "control," when used with respect to any specified Person, means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Applicable Accounting Principles" means accounting practices prescribed or permitted by the National Association of Insurance Commissioners and, with respect to the Company's subsidiary insurance companies, the applicable insurance department of the state of domicile of such insurance subsidiary, and in each case, applied consistently throughout the periods involved. "Applicable Depositary Procedures" means, with respect to any transfer or transaction involving a Global Security or beneficial interest therein, the rules and procedures of the Depositary for such Security, in each case to the extent applicable to such transaction and as in effect from time to time. "Applicable Insurance Regulatory Authority" means the Office of Financial and Insurance Services of the State of Michigan, the Office of Insurance Regulation of the State of 2 Florida and the Department of Insurance, Securities and Banking of the District of Columbia, as applicable, or, if at any time after the execution of this Indenture any such entity is not existing and performing the duties now assigned to it, any successor body performing similar duties or functions. "Authenticating Agent" means any Person authorized by the Trustee pursuant to Section 6.11 to act on behalf of the Trustee to authenticate the Securities. "Bankruptcy Code" means Title 11 of the United States Code or any successor statute(s) thereto, or any similar federal or state law for the relief of debtors, in each case as amended from time to time. "Board of Directors" means the board of directors of the Company or any duly authorized committee of that board. "Board Resolution" means a copy of a resolution certified by the Secretary or an Assistant Secretary of the Company to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification. "Business Day" means any day other than (i) a Saturday or Sunday, (ii) a day on which banking institutions in the City of New York are authorized or required by law or executive order to remain closed or (iii) a day on which the Corporate Trust Office of the Trustee is closed for business. "Calculation Agent" has the meaning specified in Section 10.4. "Common Securities" has the meaning specified in the first recital of this Indenture. "Common Stock" means the common stock, without par value, of the Company. "Company" means the Person named as the "Company" in the first paragraph of this Indenture until a successor corporation shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Company" shall mean such successor corporation. "Company Request" and "Company Order" mean, respectively, the written request or order, which may be in the form of a blanket or standing request or order, signed in the name of the Company by its Chairman of the Board of Directors, its Vice Chairman of the Board of Directors, its Chief Executive Officer, President or a Vice President, and by its Chief Financial Officer, its Treasurer, an Assistant Treasurer, its Secretary or an Assistant Secretary, and delivered to the Trustee. "Corporate Trust Office" means the principal office of the Trustee at which at any particular time its corporate trust business shall be administered, which office at the date of this Indenture is located at 135 South LaSalle Street, Suite 1511, Chicago, Illinois 60603, Attn: CDO Trust Services Group--NP Capital Trust I. "Debt" means, with respect to any Person, whether recourse is to all or a portion of the assets of such Person, whether currently existing or hereafter incurred and whether or not 3 contingent and without duplication, (i) every obligation of such Person for money borrowed; (ii) every obligation of such Person evidenced by bonds, debentures, notes or other similar instruments, including obligations incurred in connection with the acquisition of property, assets or businesses; (iii) every reimbursement obligation of such Person with respect to letters of credit, bankers' acceptances or similar facilities issued for the account of such Person; (iv) every obligation of such Person issued or assumed as the deferred purchase price of property or services (but excluding trade accounts payable or other accrued liabilities arising in the ordinary course of business); (v) every capital lease obligation of such Person; (vi) all indebtedness of such Person, whether incurred on or prior to the date of this Indenture or thereafter incurred, for claims in respect of derivative products, including interest rate, foreign exchange rate and commodity forward contracts, options and swaps and similar arrangements; (vii) every obligation of the type referred to in clauses (i) through (vi) of another Person and all dividends of another Person the payment of which, in either case, such Person has guaranteed or is responsible or liable for, directly or indirectly, as obligor or otherwise; and (viii) any renewals, extensions, refundings, amendments or modifications of any obligation of the type referred to in clauses (i) through (vii). "Defaulted Interest" has the meaning specified in Section 3.1. "Delaware Trustee" means, with respect to the Trust, the Person identified as the "Delaware Trustee" in the Trust Agreement, solely in its capacity as Delaware Trustee of the Trust under the Trust Agreement and not in its individual capacity, or its successor in interest in such capacity, or any successor Delaware Trustee appointed as therein provided. "Depositary" means an organization registered as a clearing agency under the Exchange Act that is designated as Depositary by the Company or any successor thereto. DTC will be the initial Depositary. "Depositary Participant" means a broker, dealer, bank, other financial institution or other Person for whom from time to time a Depositary effects book-entry transfers and pledges of securities deposited with the Depositary. "Distributions" means amounts payable in respect of the Trust Securities as provided in the Trust Agreement and referred to therein as "Distributions." "Dollar" or "$" means the currency of the United States of America that, as at the time of payment, is legal tender for the payment of public and private debts. "DTC" means The Depository Trust Company, a New York corporation, or any successor thereto. "Event of Default" has the meaning specified in Section 5.1. "Exchange Act" means the Securities Exchange Act of 1934 or any statute successor thereto, in each case as amended from time to time. "Expiration Date" has the meaning specified in Section 1.4. 4 "Extension Period" has the meaning specified in Section 3.9. "GAAP" means United States generally accepted accounting principles, consistently applied, from time to time in effect. "Global Security" means a Security that evidences all or part of the Securities, the ownership and transfers of which shall be made through book entries by a Depositary. "Government Obligation" means (a) any security that is (i) a direct obligation of the United States of America of which the full faith and credit of the United States of America is pledged or (ii) an obligation of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America or the payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America, which, in either case (i) or (ii), is not callable or redeemable at the option of the issuer thereof, and (b) any depositary receipt issued by a bank (as defined in Section 3(a)(2) of the Securities Act) as custodian with respect to any Government Obligation that is specified in clause (a) above and held by such bank for the account of the holder of such depositary receipt, or with respect to any specific payment of principal of or interest on any Government Obligation that is so specified and held, provided, that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depositary receipt from any amount received by the custodian in respect of the Government Obligation or the specific payment of principal or interest evidenced by such depositary receipt. "Guarantee Agreement" means the Guarantee Agreement executed by the Company and LaSalle Bank National Association, as Guarantee Trustee, contemporaneously with the execution and delivery of this Indenture, for the benefit of the holders of the Preferred Securities, as modified, amended or supplemented from time to time. "Holder" means a Person in whose name a Security is registered in the Securities Register. "Indenture" means this instrument as originally executed or as it may from time to time be amended or supplemented by one or more amendments or indentures supplemental hereto entered into pursuant to the applicable provisions hereof. "Interest Payment Date" means March 15, June 15, September 15 and December 15 of each year, commencing on March 15, 2006, during the term of this Indenture. "Investment Company Act" means the Investment Company Act of 1940 or any successor statute thereto, in each case as amended from time to time. "Investment Company Event" means the receipt by the Company of an Opinion of Counsel experienced in such matters to the effect that, as a result of the occurrence of a change in law or regulation (including any announced prospective change) or a written change in interpretation or application of law or regulation by any legislative body, court, governmental agency or regulatory authority, there is more than an insubstantial risk that the Trust is or, within ninety (90) days of the date of such opinion will be, considered an "investment company" that is 5 required to be registered under the Investment Company Act, which change or prospective change becomes effective or would become effective, as the case may be, on or after the date of the issuance of the Securities. "LIBOR" has the meaning specified in Schedule A. "LIBOR Business Day" has the meaning specified in Schedule A. "LIBOR Determination Date" has the meaning specified in Schedule A. "Liquidation Amount" has the meaning specified in the Trust Agreement. "Maturity," when used with respect to any Security, means the date on which the principal of such Security or any installment of principal becomes due and payable as therein or herein provided, whether at the Stated Maturity or by declaration of acceleration, call for redemption or otherwise. "Notice of Default" means a written notice of the kind specified in Section 5.1(c). "Officers' Certificate" means a certificate signed by the Chairman of the Board, a Vice Chairman of the Board, the Chief Executive Officer, the President or a Vice President, and by the Chief Financial Officer, the Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary, of the Company and delivered to the Trustee. "Operative Documents" means the Trust Agreement, the Indenture, the Purchase Agreement and the Securities. "Opinion of Counsel" means a written opinion of counsel, who may be counsel for or an employee of the Company or any Affiliate of the Company. "Optional Redemption Price" has the meaning set forth in Section 11.1. "Original Issue Date" means the date of original issuance of each Security. "Outstanding" means, when used in reference to any Securities, as of the date of determination, all Securities theretofore authenticated and delivered under this Indenture, except: (i) Securities theretofore canceled by the Trustee or delivered to the Trustee for cancellation; (ii) Securities for whose payment or redemption money in the necessary amount has been theretofore deposited with the Trustee or any Paying Agent (other than the Company) in trust or set aside and segregated in trust by the Company (if the Company shall act as its own Paying Agent) for the Holders of such Securities; provided, that, if such Securities are to be redeemed, notice of such redemption has been duly given pursuant to this Indenture or provision therefor satisfactory to the Trustee has been made; and 6 (iii) Securities that have been paid or in substitution for or in lieu of which other Securities have been authenticated and delivered pursuant to the provisions of this Indenture, unless proof satisfactory to the Trustee is presented that any such Securities are held by Holders in whose hands such Securities are valid, binding and legal obligations of the Company; provided, that, in determining whether the Holders of the requisite principal amount of Outstanding Securities have given any request, demand, authorization, direction, notice, consent or waiver hereunder, Securities owned by the Company or any other obligor upon the Securities or any Affiliate of the Company or such other obligor shall be disregarded and deemed not to be Outstanding, except that, in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Securities that a Responsible Officer of the Trustee actually knows to be so owned shall be so disregarded. Securities so owned that have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to such Securities and that the pledgee is not the Company or any other obligor upon the Securities or any Affiliate of the Company or such other obligor. Notwithstanding anything herein to the contrary, Securities initially issued to the Trust that are owned by the Trust shall be deemed to be Outstanding notwithstanding the ownership by the Company or an Affiliate of any beneficial interest in the Trust. "Paying Agent" means the Trustee or any Person authorized by the Company to pay the principal of or any premium or interest on, or other amounts in respect of, any Securities on behalf of the Company. "Person" means a legal person, including any individual, corporation, estate, partnership, joint venture, association, joint stock company, limited liability company, trust, unincorporated association, government or any agency or political subdivision thereof, or any other entity of whatever nature. "Place of Payment" means, with respect to the Securities, the Corporate Trust Office of the Trustee. "Preferred Securities" has the meaning specified in the first recital of this Indenture. "Predecessor Security" of any particular Security means every previous Security evidencing all or a portion of the same debt as that evidenced by such particular Security. For the purposes of this definition, any security authenticated and delivered under Section 3.6 in lieu of a mutilated, destroyed, lost or stolen Security shall be deemed to evidence the same debt as the mutilated, destroyed, lost or stolen Security. "Proceeding" has the meaning specified in Section 12.2. "Property Trustee" means the Person identified as the "Property Trustee" in the Trust Agreement, solely in its capacity as Property Trustee of the Trust under the Trust Agreement and not in its individual capacity, or its successor in interest in such capacity, or any successor Property Trustee appointed as therein provided. 7 "Purchase Agreement" means the agreement, dated as of the date hereof, between the Company and the Trust and ALESCO Preferred Funding VII, Ltd. "Redemption Date" means, when used with respect to any Security to be redeemed, the date fixed for such redemption by or pursuant to this Indenture. "Redemption Price" means, when used with respect to any Security to be redeemed, in whole or in part, the Special Redemption Price or the Optional Redemption Price, as applicable, at which such Security or portion thereof is to be redeemed as fixed by or pursuant to this Indenture. "Reference Banks" has the meaning specified in Schedule A. "Regular Record Date" for the interest payable on any Interest Payment Date with respect to the Securities means the date that is fifteen (15) days preceding such Interest Payment Date (whether or not a Business Day). "Responsible Officer" means, when used with respect to the Trustee, the officer in the CDO Trust Services Group of the Trustee having direct responsibility for the administration of this Indenture. "Rights Plan" means a plan of the Company providing for the issuance by the Company to all holders of its Common Stock of rights entitling the holders thereof to subscribe for or purchase shares of any class or series of capital stock of the Company which rights (i) are deemed to be transferred with such shares of such Common Stock and (ii) are also issued in respect of future issuances of such Common Stock, in each case until the occurrence of a specified event or events. "Securities" or "Security means any debt securities or debt security, as the case may be, authenticated and delivered under this Indenture. "Securities Act" means the Securities Act of 1933 or any successor statute thereto, in each case as amended from time to time. "Securities Register" and "Securities Registrar" have the respective meanings specified in Section 3.5. "Senior Debt" means the principal of and any premium and interest on (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to the Company, whether or not such claim for post-petition interest is allowed in such proceeding) all Debt of the Company, whether incurred on or prior to the date of this Indenture or thereafter incurred, unless it is provided in the instrument creating or evidencing the same or pursuant to which the same is outstanding, that such obligations are not superior in right of payment to the Securities issued under this Indenture; provided, however, that if the Company is subject to the regulation and supervision of any Applicable Insurance Regulatory Authority, the Company shall have received the approval of each appropriate Applicable Insurance Regulatory Authority prior to issuing any such obligation if then required; and provided, further, that Senior Debt shall not 8 be deemed to include any other debt securities and guarantees in respect of such debt securities issued to any trust other than the Trust (or a trustee of any such trust), partnership or other entity affiliated with the Company that is a financing vehicle of the Company (a "financing entity") in connection with the issuance by such financing entity of equity securities or other securities that are treated as equity capital for regulatory capital purposes guaranteed by the Company pursuant to an instrument that ranks pari passu with or junior in right of payment to this Indenture. "Special Event" means the occurrence of an Investment Company Event or a Tax Event. "Special Record Date" for the payment of any Defaulted Interest means a date fixed by the Trustee pursuant to Section 3.1. "Special Redemption Price" has the meaning set forth in Section 11.2. "Stated Maturity" means March 15, 2036. "Statutory Financial Statements" means all financial statements of the Company's subsidiary insurance companies for each relevant period, each prepared in accordance with Applicable Accounting Principles. "Subsidiary" means a Person more than fifty percent (50%) of the outstanding voting stock or other voting interests of which is owned, directly or indirectly, by the Company or by one or more other Subsidiaries, or by the Company and one or more other Subsidiaries. For purposes of this definition, "voting stock" means stock that ordinarily has voting power for the election of directors, whether at all times or only so long as no senior class of stock has such voting power by reason of any contingency. "Tax Event" means the receipt by the Company of an Opinion of Counsel experienced in such matters to the effect that, as a result of (a) any amendment to or change (including any announced prospective change) in the laws or any regulations thereunder of the United States or any political subdivision or taxing authority thereof or therein or (b) any judicial decision or any official administrative pronouncement (including any private letter ruling, technical advice memorandum or field service advice) or regulatory procedure, including any notice or announcement of intent to adopt any such pronouncement or procedure (an "Administrative Action"), regardless of whether such judicial decision or Administrative Action is issued to or in connection with a proceeding involving the Company or the Trust and whether or not subject to review or appeal, which amendment, change, judicial decision or Administrative Action is enacted, promulgated or announced, in each case, on or after the date of issuance of the Securities, there is more than an insubstantial risk that (i) the Trust is, or will be within ninety (90) days of the date of such opinion, subject to United States federal income tax with respect to income received or accrued on the Securities, (ii) interest payable by the Company on the Securities is not, or within ninety (90) days of the date of such opinion, will not be, deductible by the Company, in whole or in part, for United States federal income tax purposes, or (iii) the Trust is, or will be within ninety (90) days of the date of such opinion, subject to more than a de minimis amount of other taxes, duties or other governmental charges. "Trust" has the meaning specified in the first recital of this Indenture. 9 "Trust Agreement" means the Amended and Restated Trust Agreement executed and delivered by the Company, the Property Trustee, Christiana Bank & Trust Company, as Delaware Trustee and the Administrative Trustees named therein, contemporaneously with the execution and delivery of this Indenture, for the benefit of the holders of the Trust Securities, as amended or supplemented from time to time. "Trustee" means the Person named as the "Trustee" in the first paragraph of this instrument, solely in its capacity as such and not in its individual capacity, until a successor Trustee shall have become such pursuant to the applicable provisions of this Indenture, and, thereafter, "Trustee" shall mean or include each Person who is then a Trustee hereunder. "Trust Indenture Act" means the Trust Indenture Act of 1939, as amended and as in effect on the date as of this Indenture. "Trust Securities" has the meaning specified in the first recital of this Indenture. SECTION 1.2. Compliance Certificate and Opinions. (a) Upon any application or request by the Company to the Trustee to take any action under any provision of this Indenture, the Company shall, if requested by the Trustee, furnish to the Trustee an Officers' Certificate stating that all conditions precedent (including covenants compliance with which constitutes a condition precedent), if any, provided for in this Indenture relating to the proposed action have been complied with and an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent (including covenants compliance with which constitutes a condition precedent), if any, have been complied with. (b) Every certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture (other than the certificate provided pursuant to Section 10.3) shall include: (i) a statement by each individual signing such certificate or opinion that such individual has read such covenant or condition and the definitions herein relating thereto; (ii) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions of such individual contained in such certificate or opinion are based; (iii) a statement that, in the opinion of such individual, he or she has made such examination or investigation as is necessary to enable him or her to express an informed opinion as to whether or not such covenant or condition has been complied with; and (iv) a statement as to whether, in the opinion of such individual, such condition or covenant has been complied with. SECTION 1.3. Forms of Documents Delivered to Trustee. (a) In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or 10 covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents. (b) Any certificate or opinion of an officer of the Company may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer knows, or after reasonable inquiry should know, that the certificate or opinion or representations with respect to matters upon which his or her certificate or opinion is based are erroneous. Any such certificate or Opinion of Counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Company stating that the information with respect to such factual matters is in the possession of the Company, unless such counsel knows, or after reasonable inquiry should know, that the certificate or opinion or representations with respect to such matters are erroneous. (c) Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument. (d) Whenever, subsequent to the receipt by the Trustee of any Board Resolution, Officers' Certificate, Opinion of Counsel or other document or instrument, a clerical, typographical or other inadvertent or unintentional error or omission shall be discovered therein, a new document or instrument may be substituted therefor in corrected form with the same force and effect as if originally received in the corrected form and, irrespective of the date or dates of the actual execution and/or delivery thereof, such substitute document or instrument shall be deemed to have been executed and/or delivered as of the date or dates required with respect to the document or instrument for which it is substituted. Without limiting the generality of the foregoing, any Securities issued under the authority of such defective document or instrument shall nevertheless be the valid obligations of the Company entitled to the benefits of this Indenture equally and ratably with all other Outstanding Securities. SECTION 1.4. Acts of Holders. (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given to or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by an agent thereof duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments (including any appointment of an agent) is or are delivered to the Trustee, and, where it is hereby expressly required, to the Company. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the Holders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and conclusive in favor of the Trustee and the Company, if made in the manner provided in this Section 1.4. (b) The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by the certificate of any 11 notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him or her the execution thereof. Where such execution is by a Person acting in other than his or her individual capacity, such certificate or affidavit shall also constitute sufficient proof of his or her authority. The fact and date of the execution by any Person of any such instrument or writing, or the authority of the Person executing the same, may also be proved in any other manner that the Trustee deems sufficient and in accordance with such reasonable rules as the Trustee may determine. (c) The ownership of Securities shall be proved by the Securities Register. (d) Any request, demand, authorization, direction, notice, consent, waiver or other action by the Holder of any Security shall bind every future Holder of the same Security and the Holder of every Security issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done or suffered to be done by the Trustee or the Company in reliance thereon, whether or not notation of such action is made upon such Security. (e) Without limiting the foregoing, a Holder entitled to take any action hereunder with regard to any particular Security may do so with regard to all or any part of the principal amount of such Security or by one or more duly appointed agents each of which may do so pursuant to such appointment with regard to all or any part of such principal amount. (f) Except as set forth in paragraph (g) of this Section 1.4, the Company may set any day as a record date for the purpose of determining the Holders of Outstanding Securities entitled to give, make or take any request, demand, authorization, direction, notice, consent, waiver or other action provided or permitted by this Indenture to be given, made or taken by Holders of Securities. If any record date is set pursuant to this paragraph, the Holders of Outstanding Securities on such record date, and no other Holders, shall be entitled to take the relevant action, whether or not such Holders remain Holders after such record date; provided, that no such action shall be effective hereunder unless taken on or prior to the applicable Expiration Date (as defined in Section 1.4(h)) by Holders of the requisite principal amount of Outstanding Securities on such record date. Nothing in this paragraph shall be construed to prevent the Company from setting a new record date for any action for which a record date has previously been set pursuant to this paragraph (whereupon the record date previously set shall automatically and with no action by any Person be canceled and of no effect). Promptly after any record date is set pursuant to this paragraph, the Company, at its own expense, shall cause notice of such record date, the proposed action by Holders and the applicable Expiration Date to be given to the Trustee in writing and to each Holder of Securities in the manner set forth in Section 1.6. (g) The Trustee may set any day as a record date for the purpose of determining the Holders of Outstanding Securities entitled to join in the giving or making of (i) any Notice of Default, (ii) any declaration of acceleration or rescission or annulment thereof referred to in Section 5.2, (iii) any request to institute proceedings referred to in Section 5.7(b) or (iv) any direction referred to in Section 5.12. If any record date is set pursuant to this paragraph, the Holders of Outstanding Securities on such record date, and no other Holders, shall be entitled to join in such notice, declaration, request or direction, whether or not such Holders remain Holders after such record date; provided, that no such action shall be effective hereunder unless taken on or prior to the applicable Expiration Date by Holders of the requisite principal amount of 12 Outstanding Securities on such record date. Nothing in this paragraph shall be construed to prevent the Trustee from setting a new record date for any action for which a record date has previously been set pursuant to this paragraph (whereupon the record date previously set shall automatically and with no action by any Person be canceled and of no effect). Promptly after any record date is set pursuant to this paragraph, the Trustee, at the Company's expense, shall cause notice of such record date, the proposed action by Holders and the applicable Expiration Date to be given to the Company in writing and to each Holder of Securities in the manner set forth in Section 1.6. (h) With respect to any record date set pursuant to paragraph (f) or (g) of this Section 1.4, the party hereto that sets such record date may designate any day as the "Expiration Date" and from time to time may change the Expiration Date to any earlier or later day; provided, that no such change shall be effective unless notice of the proposed new Expiration Date is given to the other party hereto in writing, and to each Holder of Securities in the manner set forth in Section 1.6, on or prior to the existing Expiration Date. If an Expiration Date is not designated with respect to any record date set pursuant to this Section 1.4, the party hereto that set such record date shall be deemed to have initially designated the ninetieth (90th) day after such record date as the Expiration Date with respect thereto, subject to its right to change the Expiration Date as provided in this paragraph. Notwithstanding the foregoing, no Expiration Date shall be later than the one hundred eightieth (180th) day after the applicable record date. SECTION 1.5. Notices, Etc. to Trustee and Company. Any request, demand, authorization, direction, notice, consent, waiver, Act of Holders, or other document provided or permitted by this Indenture to be made upon, given or furnished to, or filed with: (a) the Trustee by any Holder, any holder of Preferred Securities or the Company shall be sufficient for every purpose hereunder if made, given, furnished or filed in writing to or with and received by the Trustee at its Corporate Trust Office, or (b) the Company by the Trustee, any Holder or any holder of Preferred Securities shall be sufficient for every purpose hereunder if in writing and mailed, first class, postage prepaid, to the Company addressed to it at 28819 Franklin Road, Southfield, MI 48034 or at any other address previously furnished in writing to the Trustee by the Company. SECTION 1.6. Notice to Holders; Waiver. Where this Indenture provides for notice to Holders of any event, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first class, postage prepaid, to each Holder affected by such event to the address of such Holder as it appears in the Securities Register, not later than the latest date, and not earlier than the earliest date, prescribed for the giving of such notice. If, by reason of the suspension of or irregularities in regular mail service or for any other reason, it shall be impossible or impracticable to mail notice of any event to Holders when said notice is required to be given pursuant to any provision of this Indenture, then any manner of giving such notice as shall be satisfactory to the Trustee shall be deemed to be a sufficient giving of such notice. In any case where notice to Holders is 13 given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to other Holders. Where this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. SECTION 1.7. Effect of Headings and Table of Contents. The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction of this Indenture. SECTION 1.8. Successors and Assigns. This Indenture shall be binding upon and shall inure to the benefit of any successor to the Company and the Trustee, including any successor by operation of law. Except in connection with a transaction involving the Company that is permitted under Article VIII and pursuant to which the assignee agrees in writing to perform the Company's obligations hereunder, the Company shall not assign its obligations hereunder. SECTION 1.9. Separability Clause. If any provision in this Indenture or in the Securities shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby, and there shall be deemed substituted for the provision at issue a valid, legal and enforceable provision as similar as possible to the provision at issue. SECTION 1.10. Benefits of Indenture. Nothing in this Indenture or in the Securities, express or implied, shall give to any Person, other than the parties hereto and their successors and assigns, the holders of Senior Debt, the Holders of the Securities and, to the extent expressly provided in Sections 5.2, 5.8, 5.9, 5.11, 5.13, 9.2 and 10.7, the holders of Preferred Securities, any benefit or any legal or equitable right, remedy or claim under this Indenture. SECTION 1.11. Governing Law. THIS INDENTURE AND THE RIGHTS AND OBLIGATIONS OF EACH OF THE HOLDERS, THE COMPANY AND THE TRUSTEE SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO ITS CONFLICT OF LAWS PROVISIONS (OTHER THAN SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW). SECTION 1.12. Submission to Jurisdiction. ANY LEGAL ACTION OR PROCEEDING BY OR AGAINST ANY PARTY HERETO OR WITH RESPECT TO OR ARISING OUT OF THIS INDENTURE MAY BE BROUGHT IN OR REMOVED TO THE COURTS OF THE STATE OF NEW YORK, IN AND FOR THE 14 COUNTY OF NEW YORK, OR OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK (IN EACH CASE SITTING IN THE BOROUGH OF MANHATTAN). BY EXECUTION AND DELIVERY OF THIS INDENTURE, EACH PARTY ACCEPTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS (AND COURTS OF APPEALS THEREFROM) FOR LEGAL PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS INDENTURE. SECTION 1.13. Non-Business Days. If any Interest Payment Date, Redemption Date or Stated Maturity of any Security shall not be a Business Day, then (notwithstanding any other provision of this Indenture or the Securities) payment of interest, premium, if any, or principal or other amounts in respect of such Security shall not be made on such date, but shall be made on the next succeeding Business Day (and additional interest shall accrue in respect of the amounts whose payment is so delayed for the period from and after such Interest Payment Date, Redemption Date or Stated Maturity, as the case may be, until such next succeeding Business Day) except that, if such Business Day falls in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on the Interest Payment Date or Redemption Date or at the Stated Maturity. ARTICLE II SECURITY FORMS SECTION 2.1. Form of Security. Any Security issued hereunder shall be in substantially the following form: NORTH POINTE HOLDINGS CORPORATION FLOATING RATE JUNIOR SUBORDINATED NOTE DUE 2036 No. _____________ $____________ North Pointe Holdings Corporation, a corporation organized and existing under the laws of Michigan (hereinafter called the "Company," which term includes any successor Person under the Indenture hereinafter referred to), for value received, hereby promises to pay to LaSalle Bank National Association, not in its individual capacity, but solely as Property Trustee for NP Capital Trust I, a Delaware statutory trust (the "Holder"), or registered assigns, the principal sum of Twenty Million Six Hundred Twenty Thousand Dollars ($20,620,000) [IF THE SECURITY IS A GLOBAL SECURITY, THEN INSERT-- OR SUCH OTHER PRINCIPAL AMOUNT REPRESENTED HEREBY AS MAY BE SET FORTH IN THE RECORDS OF THE SECURITIES REGISTRAR HEREINAFTER REFERRED TO IN ACCORDANCE WITH THE INDENTURE] on March 15, 2036. The Company further promises to pay interest on said principal sum from February 22, 2006, or from the most recent Interest Payment Date to which interest has been paid or duly provided for, quarterly (subject to deferral as set forth herein) in arrears on quarterly (subject to deferral as set forth herein) in arrears on March 15, June 15, 15 September 15 and December 15 of each year, commencing March 15, 2006 or if any such day is not a Business Day, on the next succeeding Business Day (and additional interest shall accrue in respect of the amounts whose payment is so delayed for the period from and after such Interest Payment Date until such next succeeding Business Day), except that, if such Business Day falls in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case, with the same force and effect as if made on the Interest Payment Date, at a fixed rate equal to 8.70% per annum through the interest payment date in March 2011 and thereafter at a variable rate equal to LIBOR plus 3.64% per annum, together with Additional Tax Sums, if any, as provided in Section 10.5 of the Indenture, until the principal hereof is paid or duly provided for or made available for payment; provided, further, that any overdue principal, premium, if any, or Additional Tax Sums and any overdue installment of interest shall bear Additional Interest at a fixed rate equal to 8.70% per annum through the Interest Payment Date in March 2011 and thereafter at a variable rate equal to LIBOR plus 3.64% per annum (to the extent that the payment of such interest shall be legally enforceable), compounded quarterly, from the dates such amounts are due until they are paid or made available for payment, and such interest shall be payable on demand. The amount of interest payable shall be computed on the basis of a 360-day year and the actual number of days elapsed in the relevant interest period. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date shall, as provided in the Indenture, be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest installment. Any such interest not so punctually paid or duly provided for shall forthwith cease to be payable to the Holder on such Regular Record Date and may either be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to Holders of Securities not less than ten (10) days prior to such Special Record Date, or be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities may be listed, and upon such notice as may be required by such exchange, all as more fully provided in the Indenture. So long as no Event of Default has occurred and is continuing, the Company shall have the right, at any time and from time to time during the term of this Security, to defer the payment of interest on this Security for a period of up to twenty (20) consecutive quarterly interest payment periods (each such period, an "Extension Period"), during which Extension Period(s), no interest shall be due and payable (except any Additional Tax Sums that may be due and payable). No Extension Period shall end on a date other than an Interest Payment Date, and no Extension Period shall extend beyond the Stated Maturity of the principal of this Security. No interest shall be due and payable during an Extension Period (except any Additional Tax Sums that may be due and payable), except at the end thereof, but each installment of interest that would otherwise have been due and payable during such Extension Period shall bear Additional Interest (to the extent payment of such interest would be legally enforceable) at a fixed rate equal to 8.70% per annum through the Interest Payment Date in March 2011 and thereafter at a variable rate equal to LIBOR plus 3.64% per annum, compounded quarterly, from the dates on which amounts would have otherwise been due and payable until paid or made available for payment. At the end of any such Extension Period, the Company shall pay all interest then 16 accrued and unpaid on this Security, together with such Additional Interest. Prior to the termination of any such Extension Period, the Company may further defer the payment of interest; provided, that (i) all such previous and further extensions comprising such Extension Period do not exceed twenty (20) quarterly interest payment periods, (ii) no Extension Period shall end on a date other than an Interest Payment Date and (iii) no Extension Period shall extend beyond the Stated Maturity of the principal of this Security. Upon the termination of any such Extension Period and upon the payment of all accrued and unpaid interest and any Additional Interest then due on any Interest Payment Date, the Company may elect to begin a new Extension Period; provided, that (i) such Extension Period does not exceed twenty (20) quarterly interest payment periods, (ii) no Extension Period shall end on a date other than an Interest Payment Date and (iii) no Extension Period shall extend beyond the Stated Maturity of the principal of this Security. The Company shall give the Holder of this Security and the Trustee written notice of its election to begin any such Extension Period at least five Business Days prior to the next succeeding Interest Payment Date on which interest on this Security would be payable but for such deferral or, so long as this Security is held by the Trust, at least five Business Days prior to the earlier of (i) the next succeeding date on which Distributions on the Preferred Securities of NP Capital Trust I would be payable but for such deferral and (ii) the date on which the Property Trustee of such Trust is required to give notice to any securities exchange or other applicable self-regulatory organization or to holders of such Preferred Securities of the record date for the payment of such Distributions. During any such Extension Period, the Company shall not (i) declare or pay any dividends or distributions on, or redeem, purchase, acquire or make a liquidation payment with respect to, any of the Company's capital stock or (ii) make any payment of principal of or any interest or premium, if any, on or repay, repurchase or redeem any debt securities of the Company that rank pari passu in all respects with or junior in interest to this Security (other than (a) repurchases, redemptions or other acquisitions of shares of capital stock of the Company in connection with (1) any employment contract, benefit plan or other similar arrangement with or for the benefit of any one or more employees, officers, directors or consultants, (2) a dividend reinvestment or stockholder stock purchase plan and (3) the issuance of capital stock of the Company (or securities convertible into or exercisable for such capital stock) as consideration in an acquisition transaction entered into prior to the applicable Extension Period, (b) as a result of an exchange or conversion of any class or series of the Company's capital stock (or any capital stock of a Subsidiary of the Company) for any class or series of the Company's capital stock or of any class or series of the Company's indebtedness for any class or series of the Company's capital stock, (c) the purchase of fractional interests in shares of the Company's capital stock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged, (d) any declaration of a dividend in connection with any Rights Plan, the issuance of rights, stock or other property under any Rights Plan, or the redemption or repurchase of rights pursuant thereto or (e) any dividend in the form of stock, warrants, options or other rights where the dividend stock or the stock issuable upon exercise of such warrants, options or other rights is the same stock as that on which the dividend is being paid or ranks pari passu with or junior to such stock). Payment of principal of, premium, if any, and interest on this Security shall be made in such coin or currency of the United States of America as at the time of payment is legal tender 17 for payment of public and private debts. Payments of principal, premium, if any, and interest due at the Maturity of this Security shall be made at the Place of Payment upon surrender of such Securities to the Paying Agent, and payments of interest shall be made, subject to such surrender where applicable, by wire transfer at such place and to such account at a banking institution in the United States as may be designated in writing to the Paying Agent at least ten (10) Business Days prior to the date for payment by the Person entitled thereto unless proper written transfer instructions have not been received by the relevant record date, in which case such payments shall be made by check mailed to the address of such Person as such address shall appear in the Security Register. Notwithstanding the foregoing, so long as the Holder of this Security is the Property Trustee, the payment of the principal of (and premium, if any) and interest (including any overdue installment of interest and Additional Tax Sums, if any) on this Security will be made at such place and to such account as may be designated by the Property Trustee. The indebtedness evidenced by this Security is, to the extent provided in the Indenture, subordinate and junior in right of payment to the prior payment in full of all Senior Debt, and this Security is issued subject to the provisions of the Indenture with respect thereto. Each Holder of this Security, by accepting the same, (a) agrees to and shall be bound by such provisions, (b) authorizes and directs the Trustee on his or her behalf to take such actions as may be necessary or appropriate to effectuate the subordination so provided and (c) appoints the Trustee his or her attorney-in-fact for any and all such purposes. Each Holder hereof, by his or her acceptance hereof, waives all notice of the acceptance of the subordination provisions contained herein and in the Indenture by each holder of Senior Debt, whether now outstanding or hereafter incurred, and waives reliance by each such holder upon said provisions. Unless the certificate of authentication hereon has been executed by the Trustee by manual signature, this Security shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose. [FORM OF REVERSE OF SECURITY] This Security is one of a duly authorized issue of securities of the Company (the "Securities") issued under the Junior Subordinated Indenture, dated as of February 22, 2006 (the "Indenture"), between the Company and LaSalle Bank National Association, as Trustee (in such capacity, the "Trustee," which term includes any successor trustee under the Indenture), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Company, the Trustee, the holders of Senior Debt, the Holders of the Securities and the holders of the Preferred Securities, and of the terms upon which the Securities are, and are to be, authenticated and delivered. All terms used in this Security that are defined in the Indenture or in the Amended and Restated Trust Agreement, dated as of February 22, 2006 (as modified, amended or supplemented from time to time, the "Trust Agreement"), relating to the NP Capital Trust I (the "Trust") among the Company, as Depositor, the Trustees named therein and the Holders from time to time of the Trust Securities issued pursuant thereto, shall have the meanings assigned to them in the Indenture or the Trust Agreement, as the case may be. 18 The Company may, on any Interest Payment Date, at its option and in accordance with the Indenture, on or after December 15, 2011 and subject to the terms and conditions of Article XI of the Indenture, redeem this Security in whole at any time or in part from time to time at a Redemption Price equal to one hundred percent (100%) of the principal amount hereof, together, in the case of any such redemption, with accrued interest, including any Additional Interest, through but excluding the date fixed as the Redemption Date; provided, that the Company shall have received the prior approval of any Applicable Insurance Regulatory Authority then required. In addition, upon the occurrence and during the continuation of a Special Event, the Company may, at its option and in accordance with the Indenture, redeem this Security, in whole but not in part, subject to the terms and conditions of Article XI of the Indenture at a Redemption Price equal to one hundred seven and one half percent (107.5%) of the principal amount hereof, together, in the case of any such redemption, with accrued interest, including any Additional Interest, through but excluding the date fixed as the Redemption Date; provided, that the Company shall have received the prior approval of any Applicable Insurance Regulatory Authority then required. In the event of redemption of this Security in part only, a new Security or Securities for the unredeemed portion hereof will be issued in the name of the Holder hereof upon the cancellation hereof. If less than all the Securities are to be redeemed, the particular Securities to be redeemed shall be selected not more than sixty (60) days prior to the Redemption Date by the Trustee from the Outstanding Securities not previously called for redemption, by such method as the Trustee shall deem fair and appropriate and which may provide for the selection for redemption of a portion of the principal amount of any Security. The Indenture permits, with certain exceptions as therein provided, the Company and the Trustee at any time to enter into a supplemental indenture or indentures for the purpose of modifying in any manner the rights and obligations of the Company and of the Holders of the Securities, with the consent of the Holders of not less than a majority in principal amount of the Outstanding Securities. The Indenture also contains provisions permitting Holders of specified percentages in principal amount of the Securities, on behalf of the Holders of all Securities, to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Security shall be conclusive and binding upon such Holder and upon all future Holders of this Security and of any Security issued upon the registration of transfer hereof or in exchange herefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this Security. No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of and any premium, if any, and interest, including any Additional Interest (to the extent legally enforceable), on this Security at the times, place and rate, and in the coin or currency, herein prescribed. As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Security is registrable in the Securities Register, upon surrender of this Security 19 for registration of transfer at the office or agency of the Company maintained for such purpose, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Securities Registrar and duly executed by, the Holder hereof or such Holder's attorney duly authorized in writing, and thereupon one or more new Securities, of like tenor, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees. The Securities are issuable only in registered form without coupons in minimum denominations of $100,000 and any integral multiple of $1,000 in excess thereof. As provided in the Indenture and subject to certain limitations therein set forth, Securities are exchangeable for a like aggregate principal amount of Securities and of like tenor of a different authorized denomination, as requested by the Holder surrendering the same. No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. The Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name this Security is registered as the owner hereof for all purposes, whether or not this Security be overdue, and neither the Company, the Trustee nor any such agent shall be affected by notice to the contrary. The Company and, by its acceptance of this Security or a beneficial interest herein, the Holder of, and any Person that acquires a beneficial interest in, this Security agree that, for United States federal, state and local tax purposes, it is intended that this Security constitute indebtedness. THIS SECURITY SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAWS PROVISIONS (OTHER THAN SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW). IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed on this ____ day of __________, 20__. North Pointe Holdings Corporation By: ------------------------------------ Name: ---------------------------------- Title: --------------------------------- SECTION 2.2. Restricted Legend. (a) Any Security issued hereunder shall bear a legend in substantially the following form: 20 "[IF THIS SECURITY IS A GLOBAL SECURITY INSERT: THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF THE DEPOSITORY TRUST COMPANY ("DTC") OR A NOMINEE OF DTC. THIS SECURITY IS EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN DTC OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER OF THIS SECURITY (OTHER THAN A TRANSFER OF THIS SECURITY AS A WHOLE BY DTC TO A NOMINEE OF DTC OR BY A NOMINEE OF DTC TO DTC OR ANOTHER NOMINEE OF DTC) MAY BE REGISTERED EXCEPT IN LIMITED CIRCUMSTANCES. UNLESS THIS SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF DTC TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY SECURITY ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.] THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND SUCH SECURITIES, AND ANY INTEREST THEREIN, MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF ANY SECURITIES IS HEREBY NOTIFIED THAT THE SELLER OF THE SECURITIES MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A UNDER THE SECURITIES ACT. THE HOLDER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH SECURITIES MAY BE OFFERED, RESOLD OR OTHERWISE TRANSFERRED ONLY (I) TO THE COMPANY, (II) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (III) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (a) (1), (2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF AN "ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY 21 DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, (IV) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR (V) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT, IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND, IN THE CASE OF (III) OR (V), SUBJECT TO THE RIGHT OF THE COMPANY TO REQUIRE AN OPINION OF COUNSEL AND OTHER INFORMATION SATISFACTORY TO IT AND (B) THE HOLDER WILL NOTIFY ANY PURCHASER OF ANY SECURITIES FROM IT OF THE RESALE RESTRICTIONS REFERRED TO IN (A) ABOVE. THE SECURITIES WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN BLOCKS HAVING AN AGGREGATE PRINCIPAL AMOUNT OF NOT LESS THAN $100,000. TO THE FULLEST EXTENT PERMITTED BY LAW, ANY ATTEMPTED TRANSFER OF SECURITIES, OR ANY INTEREST THEREIN, IN A BLOCK HAVING AN AGGREGATE PRINCIPAL AMOUNT OF LESS THAN $100,000 AND MULTIPLES OF $1,000 IN EXCESS THEREOF SHALL BE DEEMED TO BE VOID AND OF NO LEGAL EFFECT WHATSOEVER. TO THE FULLEST EXTENT PERMITTED BY LAW, ANY SUCH PURPORTED TRANSFEREE SHALL BE DEEMED NOT TO BE THE HOLDER OF SUCH SECURITIES FOR ANY PURPOSE, INCLUDING, BUT NOT LIMITED TO, THE RECEIPT OF PRINCIPAL OF OR INTEREST ON SUCH SECURITIES, OR ANY INTEREST THEREIN, AND SUCH PURPORTED TRANSFEREE SHALL BE DEEMED TO HAVE NO INTEREST WHATSOEVER IN SUCH SECURITIES. THE HOLDER OF THIS SECURITY, OR ANY INTEREST THEREIN, BY ITS ACCEPTANCE HEREOF OR THEREOF ALSO AGREES, REPRESENTS AND WARRANTS THAT IT IS NOT AN EMPLOYEE BENEFIT, INDIVIDUAL RETIREMENT ACCOUNT OR OTHER PLAN OR ARRANGEMENT SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") (EACH A "PLAN"), OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE "PLAN ASSETS" BY REASON OF ANY PLAN'S INVESTMENT IN THE ENTITY, AND NO PERSON INVESTING "PLAN ASSETS" OF ANY PLAN MAY ACQUIRE OR HOLD THIS SECURITY OR ANY INTEREST THEREIN. ANY PURCHASER OR HOLDER OF THE SECURITIES OR ANY INTEREST THEREIN WILL BE DEEMED TO HAVE REPRESENTED BY ITS PURCHASE AND HOLDING THEREOF THAT IT IS NOT AN EMPLOYEE BENEFIT PLAN WITHIN THE MEANING OF SECTION 3(3) OF ERISA, OR A PLAN TO WHICH SECTION 4975 OF THE CODE IS APPLICABLE, A TRUSTEE OR OTHER PERSON ACTING ON BEHALF OF AN EMPLOYEE BENEFIT PLAN OR PLAN, OR ANY OTHER PERSON OR ENTITY USING THE ASSETS OF ANY EMPLOYEE BENEFIT PLAN OR PLAN TO FINANCE SUCH PURCHASE." 22 (b) The above legends shall not be removed from any Security unless there is delivered to the Company satisfactory evidence, which may include an Opinion of Counsel, as may be reasonably required to ensure that any future transfers thereof may be made without restriction under or violation of the provisions of the Securities Act and other applicable law. Upon provision of such satisfactory evidence, the Company shall execute and deliver to the Trustee, and the Trustee shall deliver, upon receipt of a Company Order directing it to do so, a Security that does not bear the legend. SECTION 2.3. Form of Trustee's Certificate of Authentication. The Trustee's certificate of authentication shall be in substantially the following form: This represents the Securities referred to in the within-mentioned Indenture. Dated: ----------------------------- LASALLE BANK NATIONAL ASSOCIATION, as Trustee By: ------------------------------------ Authorized signatory SECTION 2.4. Temporary Securities. (a) Pending the preparation of definitive Securities, the Company may execute, and upon Company Order the Trustee shall authenticate and deliver, temporary Securities that are printed, lithographed, typewritten, mimeographed or otherwise produced, in any denomination, substantially of the tenor of the definitive Securities in lieu of which they are issued and with such appropriate insertions, omissions, substitutions and other variations as the officers executing such Securities may determine, as evidenced by their execution of such Securities. (b) If temporary Securities are issued, the Company will cause definitive Securities to be prepared without unreasonable delay. After the preparation of definitive Securities, the temporary Securities shall be exchangeable for definitive Securities upon surrender of the temporary Securities at the office or agency of the Company designated for that purpose without charge to the Holder. Upon surrender for cancellation of any one or more temporary Securities, the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor one or more definitive Securities of any authorized denominations having the same Original Issue Date and Stated Maturity and having the same terms as such temporary Securities. Until so exchanged, the temporary Securities shall in all respects be entitled to the same benefits under this Indenture as definitive Securities. 23 SECTION 2.5. Definitive Securities. The Securities issued on the Original Issue Date shall be in definitive form. The definitive Securities shall be printed, lithographed or engraved, or produced by any combination of these methods, if required by any securities exchange on which the Securities may be listed, on a steel engraved border or steel engraved borders or may be produced in any other manner permitted by the rules of any securities exchange on which the Securities may be listed, all as determined by the officers executing such Securities, as evidenced by their execution of such Securities. ARTICLE III THE SECURITIES SECTION 3.1. Payment of Principal and Interest. (a) The unpaid principal amount of the Securities shall bear interest at a fixed rate equal to 8.70% per annum through the Interest Payment Date in March 2011 and thereafter at a variable rate of LIBOR plus 3.64% per annum until paid or duly provided for, such interest to accrue from the Original Issue Date or from the most recent Interest Payment Date to which interest has been paid or duly provided for, and any overdue principal, premium, if any, or Additional Tax Sums and any overdue installment of interest shall bear Additional Interest at the rate equal to a fixed rate equal to 8.70% per annum through the interest payment date in March 2011 and thereafter at a variable rate of LIBOR plus 3.64% per annum, compounded quarterly from the dates such amounts are due until they are paid or funds for the payment thereof are made available for payment. (b) Interest and Additional Interest on any Security that is payable, and is punctually paid or duly provided for, on any Interest Payment Date shall be paid to the Person in whose name that Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest, except that interest and any Additional Interest payable on the Stated Maturity (or any date of principal repayment upon early maturity) of the principal of a Security or on a Redemption Date shall be paid to the Person to whom principal is paid. The initial payment of interest on any Security that is issued between a Regular Record Date and the related Interest Payment Date shall be payable as provided in such Security. (c) Any interest on any Security that is due and payable, but is not timely paid or duly provided for, on any Interest Payment Date for Securities (herein called "Defaulted Interest") shall forthwith cease to be payable to the registered Holder on the relevant Regular Record Date by virtue of having been such Holder, and such Defaulted Interest may be paid by the Company, at its election in each case, as provided in paragraph (i) or (ii) below: (i) The Company may elect to make payment of any Defaulted Interest to the Persons in whose names the Securities (or their respective Predecessor Securities) are registered at the close of business on a Special Record Date for the payment of such Defaulted Interest (a "Special Record Date"), which shall be fixed in the following manner. At least thirty (30) days prior to the date of the proposed payment, the Company 24 shall notify the Trustee in writing of the amount of Defaulted Interest proposed to be paid on each Security and the date of the proposed payment, and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest. Thereupon the Trustee shall fix a Special Record Date for the payment of such Defaulted Interest, which shall be not more than fifteen (15) days and not less than ten (10) days prior to the date of the proposed payment and not less than ten (10) days after the receipt by the Trustee of the notice of the proposed payment. The Trustee shall promptly notify the Company of such Special Record Date and, in the name and at the expense of the Company, shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor to be mailed, first class, postage prepaid, to each Holder of a Security at the address of such Holder as it appears in the Securities Register not less than ten (10) days prior to such Special Record Date. Notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor having been so mailed, such Defaulted Interest shall be paid to the Persons in whose names the Securities (or their respective Predecessor Securities) are registered on such Special Record Date; or (ii) The Company may make payment of any Defaulted Interest in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities may be listed and, upon such notice as may be required by such exchange (or by the Trustee if the Securities are not listed), if, after notice given by the Company to the Trustee of the proposed payment pursuant to this clause, such payment shall be deemed practicable by the Trustee. (d) Payments of interest on the Securities shall include interest accrued to but excluding the respective Interest Payment Dates. Interest payments for the Securities shall be computed and paid on the basis of a 360-day year and the actual number of days elapsed in the relevant interest period. (e) Payment of principal of, premium, if any, and interest on the Securities shall be made in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. Payments of principal, premium, if any, and interest due at the Maturity of such Securities shall be made at the Place of Payment upon surrender of such Securities to the Paying Agent and payments of interest shall be made subject to such surrender where applicable, by wire transfer at such place and to such account at a banking institution in the United States as may be designated in writing to the Paying Agent at least ten (10) Business Days prior to the date for payment by the Person entitled thereto unless proper written transfer instructions have not been received by the relevant record date, in which case such payments shall be made by check mailed to the address of such Person as such address shall appear in the Security Register. Notwithstanding the foregoing, so long as the holder of the Security is the Property Trustee, the payment of the principal of (and premium, if any) and interest (including any overdue installment of interest and Additional Tax Sums, if any) on the 25 Security will be made at such place and to such account as may be designated by the Property Trustee. (f) Subject to the foregoing provisions of this Section 3.1, each Security delivered under this Indenture upon transfer of or in exchange for or in lieu of any other Security shall carry the rights to interest accrued and unpaid, and to accrue, that were carried by such other Security. SECTION 3.2. Denominations. The Securities shall be in registered form without coupons and shall be issuable in minimum denominations of $100,000 and any integral multiple of $1,000 in excess thereof. SECTION 3.3. Execution, Authentication, Delivery and Dating. (a) At any time and from time to time after the execution and delivery of this Indenture, the Company may deliver Securities in an aggregate principal amount (including all then Outstanding Securities) not in excess of Twenty Million Six Hundred Twenty Thousand Dollars ($20,620,000) executed by the Company to the Trustee for authentication, together with a Company Order for the authentication and delivery of such Securities, and the Trustee in accordance with the Company Order shall authenticate and deliver such Securities. In authenticating such Securities, and accepting the additional responsibilities under this Indenture in relation to such Securities, the Trustee shall be entitled to receive, and shall be fully protected in relying upon: (i) a copy of any Board Resolution relating thereto; and (ii) an Opinion of Counsel stating that: (1) such Securities, when authenticated and delivered by the Trustee and issued by the Company in the manner and subject to any conditions specified in such Opinion of Counsel, will constitute, and the Indenture constitutes, valid and legally binding obligations of the Company, each enforceable in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles; (2) the Securities have been duly authorized and executed by the Company and have been delivered to the Trustee for authentication in accordance with this Indenture; (3) the Securities are not required to be registered under the Securities Act; and (4) the Indenture is not required to be qualified under the Trust Indenture Act. (b) The Securities shall be executed on behalf of the Company by its Chairman of the Board, its Vice Chairman of the Board, its Chief Executive Officer, its President or one of its Vice Presidents. The signature of any of these officers on the Securities may be manual or facsimile. Securities bearing the manual or facsimile signatures of individuals who were at any time the proper officers of the Company shall bind the Company, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Securities or did not hold such offices at the date of such Securities. 26 (c) No Security shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose, unless there appears on such Security a certificate of authentication substantially in the form provided for herein executed by the Trustee by the manual signature of one of its authorized signatories, and such certificate upon any Security shall be conclusive evidence, and the only evidence, that such Security has been duly authenticated and delivered hereunder. Notwithstanding the foregoing, if any Security shall have been authenticated and delivered hereunder but never issued and sold by the Company, and the Company shall deliver such Security to the Trustee for cancellation as provided in Section 3.8, for all purposes of this Indenture such Security shall be deemed never to have been authenticated and delivered hereunder and shall never be entitled to the benefits of this Indenture. (d) Each Security shall be dated the date of its authentication. SECTION 3.4. Global Securities. (a) Upon the election of the Holder after the Original Issue Date, which election need not be in writing, the Securities owned by such Holder shall be issued in the form of one or more Global Securities registered in the name of the Depositary or its nominee. Each Global Security issued under this Indenture shall be registered in the name of the Depositary designated by the Company for such Global Security or a nominee thereof and delivered to such Depositary or a nominee thereof or custodian therefor, and each such Global Security shall constitute a single Security for all purposes of this Indenture. (b) Notwithstanding any other provision in this Indenture, no Global Security may be exchanged in whole or in part for registered Securities, and no transfer of a Global Security in whole or in part may be registered, in the name of any Person other than the Depositary for such Global Security or a nominee thereof unless (i) such Depositary advises the Trustee and the Company in writing that such Depositary is no longer willing or able to properly discharge its responsibilities as Depositary with respect to such Global Security, and no qualified successor is appointed by the Company within ninety (90) days of receipt by the Company of such notice, (ii) such Depositary ceases to be a clearing agency registered under the Exchange Act and no successor is appointed by the Company within ninety (90) days after obtaining knowledge of such event, (iii) the Company executes and delivers to the Trustee a Company Order stating that the Company elects to terminate the book-entry system through the Depositary or (iv) an Event of Default shall have occurred and be continuing. Upon the occurrence of any event specified in clause (i), (ii), (iii) or (iv) above, the Trustee shall notify the Depositary and instruct the Depositary to notify all owners of beneficial interests in such Global Security of the occurrence of such event and of the availability of Securities to such owners of beneficial interests requesting the same. The Trustee may conclusively rely, and be protected in relying, upon the written identification of the owners of beneficial interests furnished by the Depositary, and shall not be liable for any delay resulting from a delay by the Depositary. Upon the issuance of such Securities and the registration in the Securities Register of such Securities in the names of the Holders of the beneficial interests therein, the Trustees shall recognize such holders of beneficial interests as Holders. (c) If any Global Security is to be exchanged for other Securities or canceled in part, or if another Security is to be exchanged in whole or in part for a beneficial interest in any 27 Global Security, then either (i) such Global Security shall be so surrendered for exchange or cancellation as provided in this Article III or (ii) the principal amount thereof shall be reduced or increased by an amount equal to (x) the portion thereof to be so exchanged or canceled, or (y) the principal amount of such other Security to be so exchanged for a beneficial interest therein, as the case may be, by means of an appropriate adjustment made on the records of the Securities Registrar, whereupon the Trustee, in accordance with the Applicable Depositary Procedures, shall instruct the Depositary or its authorized representative to make a corresponding adjustment to its records. Upon any such surrender or adjustment of a Global Security by the Depositary, accompanied by registration instructions, the Company shall execute and the Trustee shall authenticate and deliver any Securities issuable in exchange for such Global Security (or any portion thereof) in accordance with the instructions of the Depositary. The Trustee shall not be liable for any delay in delivery of such instructions and may conclusively rely on, and shall be fully protected in relying on, such instructions. (d) Every Security authenticated and delivered upon registration of transfer of, or in exchange for or in lieu of, a Global Security or any portion thereof shall be authenticated and delivered in the form of, and shall be, a Global Security, unless such Security is registered in the name of a Person other than the Depositary for such Global Security or a nominee thereof. (e) Securities distributed to holders of Book-Entry Preferred Securities (as defined in the applicable Trust Agreement) upon the dissolution of the Trust shall be distributed in the form of one or more Global Securities registered in the name of a Depositary or its nominee, and deposited with the Securities Registrar, as custodian for such Depositary, or with such Depositary, for credit by the Depositary to the respective accounts of the beneficial owners of the Securities represented thereby (or such other accounts as they may direct). Securities distributed to holders of Preferred Securities other than Book-Entry Preferred Securities upon the dissolution of the Trust shall not be issued in the form of a Global Security or any other form intended to facilitate book-entry trading in beneficial interests in such Securities. (f) The Depositary or its nominee, as the registered owner of a Global Security, shall be the Holder of such Global Security for all purposes under this Indenture and the Securities, and owners of beneficial interests in a Global Security shall hold such interests pursuant to the Applicable Depositary Procedures. Accordingly, any such owner's beneficial interest in a Global Security shall be shown only on, and the transfer of such interest shall be effected only through, records maintained by the Depositary or its nominee or its Depositary Participants. The Securities Registrar and the Trustee shall be entitled to deal with the Depositary for all purposes of this Indenture relating to a Global Security (including the payment of principal and interest thereon and the giving of instructions or directions by owners of beneficial interests therein and the giving of notices) as the sole Holder of the Security and shall have no obligations to the owners of beneficial interests therein. Neither the Trustee nor the Securities Registrar shall have any liability in respect of any transfers effected by the Depositary. (g) The rights of owners of beneficial interests in a Global Security shall be exercised only through the Depositary and shall be limited to those established by law and agreements between such owners and the Depositary and/or its Depositary Participants. 28 (h) No holder of any beneficial interest in any Global Security held on its behalf by a Depositary shall have any rights under this Indenture with respect to such Global Security, and such Depositary may be treated by the Company, the Trustee and any agent of the Company or the Trustee as the owner of such Global Security for all purposes whatsoever. None of the Company, the Trustee nor any agent of the Company or the Trustee will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests of a Global Security or maintaining, supervising or reviewing any records relating to such beneficial ownership interests. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Trustee or any agent of the Company or the Trustee from giving effect to any written certification, proxy or other authorization furnished by a Depositary or impair, as between a Depositary and such holders of beneficial interests, the operation of customary practices governing the exercise of the rights of the Depositary (or its nominee) as Holder of any Security. SECTION 3.5. Registration, Transfer and Exchange Generally. (a) The Trustee shall cause to be kept at the Corporate Trust Office a register (the "Securities Register") in which the registrar and transfer agent with respect to the Securities (the "Securities Registrar"), subject to such reasonable regulations as it may prescribe, shall provide for the registration of Securities and of transfers and exchanges of Securities. The Trustee shall at all times also be the Securities Registrar. The provisions of Article VI shall apply to the Trustee in its role as Securities Registrar. (b) Subject to compliance with Section 2.2(b), upon surrender for registration of transfer of any Security at the offices or agencies of the Company designated for that purpose the Company shall execute, and the Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Securities of any authorized denominations of like tenor and aggregate principal amount. (c) At the option of the Holder, Securities may be exchanged for other Securities of any authorized denominations, of like tenor and aggregate principal amount, upon surrender of the Securities to be exchanged at such office or agency. Whenever any Securities are so surrendered for exchange, the Company shall execute, and the Trustee shall authenticate and deliver, the Securities that the Holder making the exchange is entitled to receive. (d) All Securities issued upon any transfer or exchange of Securities shall be the valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Securities surrendered upon such transfer or exchange. (e) Every Security presented or surrendered for transfer or exchange shall (if so required by the Company or the Trustee) be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Company and the Securities Registrar, duly executed by the Holder thereof or such Holder's attorney duly authorized in writing. (f) No service charge shall be made to a Holder for any transfer or exchange of Securities, but the Company may require payment of a sum sufficient to cover any tax or other 29 governmental charge that may be imposed in connection with any transfer or exchange of Securities. (g) Neither the Company nor the Trustee shall be required pursuant to the provisions of this Section 3.5 (g): (i) to issue, register the transfer of or exchange any Security during a period beginning at the opening of business fifteen (15) days before the day of selection for redemption of Securities pursuant to Article XI and ending at the close of business on the day of mailing of the notice of redemption or (ii) to register the transfer of or exchange any Security so selected for redemption in whole or in part, except, in the case of any such Security to be redeemed in part, any portion thereof not to be redeemed. (h) The Company shall designate an office or offices or agency or agencies where Securities may be surrendered for registration or transfer or exchange. The Company initially designates the Corporate Trust Office as its office and agency for such purposes. The Company shall give prompt written notice to the Trustee and to the Holders of any change in the location of any such office or agency. SECTION 3.6. Mutilated, Destroyed, Lost and Stolen Securities. (a) If any mutilated Security is surrendered to the Trustee together with such security or indemnity as may be required by the Trustee to save the Company and the Trustee harmless, the Company shall execute and upon receipt thereof the Trustee shall authenticate and deliver in exchange therefor a new Security of like tenor and aggregate principal amount and bearing a number not contemporaneously outstanding. (b) If there shall be delivered to the Trustee (i) evidence to its satisfaction of the destruction, loss or theft of any Security and (ii) such security or indemnity as may be required by it to save each of the Company and the Trustee harmless, then, in the absence of notice to the Company or the Trustee that such Security has been acquired by a bona fide purchaser, the Company shall execute and upon its written request the Trustee shall authenticate and deliver, in lieu of any such destroyed, lost or stolen Security, a new Security of like tenor and aggregate principal amount as such destroyed, lost or stolen Security, and bearing a number not contemporaneously outstanding. (c) If any such mutilated, destroyed, lost or stolen Security has become or is about to become due and payable, the Company in its discretion may, instead of issuing a new Security, pay such Security. (d) Upon the issuance of any new Security under this Section 3.6, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) connected therewith. (e) Every new Security issued pursuant to this Section 3.6 in lieu of any mutilated, destroyed, lost or stolen Security shall constitute an original additional contractual obligation of the Company, whether or not the mutilated, destroyed, lost or stolen Security shall be at any time 30 enforceable by anyone, and shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Securities duly issued hereunder. (f) The provisions of this Section 3.6 are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities. SECTION 3.7. Persons Deemed Owners. The Company, the Trustee and any agent of the Company or the Trustee shall treat the Person in whose name any Security is registered as the owner of such Security for the purpose of receiving payment of principal of and any interest on such Security and for all other purposes whatsoever, and neither the Company, the Trustee nor any agent of the Company or the Trustee shall be affected by notice to the contrary. SECTION 3.8. Cancellation. All Securities surrendered for payment, redemption, transfer or exchange shall, if surrendered to any Person other than the Trustee, be delivered to the Trustee, and any such Securities and Securities surrendered directly to the Trustee for any such purpose shall be promptly canceled by it. The Company may at any time deliver to the Trustee for cancellation any Securities previously authenticated and delivered hereunder that the Company may have acquired in any manner whatsoever, and all Securities so delivered shall be promptly canceled by the Trustee. No Securities shall be authenticated in lieu of or in exchange for any Securities canceled as provided in this Section 3.8, except as expressly permitted by this Indenture. All canceled Securities shall be retained or disposed of by the Trustee in accordance with its customary practices and the Trustee shall deliver to the Company a certificate of such disposition. SECTION 3.9. Deferrals of Interest Payment Dates. (a) So long as no Event of Default has occurred and is continuing, the Company shall have the right, at any time and from time to time during the term of the Security, to defer the payment of interest on the Securities for a period of up to twenty (20) consecutive quarterly interest payment periods (each such period, an "Extension Period"), during which Extension Period(s), the Company shall have the right to make no payments or partial payments of interest on any Interest Payment Date (except any Additional Tax Sums that otherwise may be due and payable). No Extension Period shall end on a date other than an Interest Payment Date and no Extension Period shall extend beyond the Stated Maturity of the principal of the Securities. No interest shall be due and payable during an Extension Period, except at the end thereof, but each installment of interest that would otherwise have been due and payable during such Extension Period shall bear Additional Interest (to the extent payment of such interest would be legally enforceable) at the rate equal to a fixed rate equal to 8.70% per annum through the Interest Payment Date in March 2011 and thereafter at a variable rate equal to LIBOR plus 3.64% per annum, compounded quarterly, from the dates on which amounts would have otherwise been due and payable until paid or until funds for the payment thereof have been made available for payment. At the end of any such Extension Period, the Company shall pay all interest then 31 accrued and unpaid on the Securities together with such Additional Interest. Prior to the termination of any such Extension Period, the Company may extend such Extension Period and further defer the payment of interest; provided, that (i) all such previous and further extensions comprising such Extension Period do not exceed twenty (20) quarterly interest payment periods, (ii) no Extension Period shall end on a date other than an Interest Payment Date and (iii) no Extension Period shall extend beyond the Stated Maturity of the principal of the Securities. Upon the termination of any such Extension Period and upon the payment of all accrued and unpaid interest and any Additional Interest then due on any Interest Payment Date, the Company may elect to begin a new Extension Period; provided, that (i) such Extension Period does not exceed twenty (20) quarterly interest payment periods, (ii) no Extension Period shall end on a date other than an Interest Payment Date and (iii) no Extension Period shall extend beyond the Stated Maturity of the principal of the Securities. The Company shall give the Holders of the Securities and the Trustee written notice of its election to begin any such Extension Period at least five Business Days prior to the next succeeding Interest Payment Date on which interest on the Securities would be payable but for such deferral or, so long as any Securities are held by the Trust, at least five Business Days prior to the earlier of (i) the next succeeding date on which Distributions on the Preferred Securities of such Trust would be payable but for such deferral and (ii) the date on which the Property Trustee of such Trust is required to give notice to any securities exchange or other applicable self-regulatory organization or to holders of such Preferred Securities of the record date for the payment of such Distributions. (b) In connection with any such Extension Period, the Company shall be subject to the restrictions set forth in Section 10.6(a). SECTION 3.10. Right of Set-Off. Notwithstanding anything to the contrary herein, the Company shall have the right to set off any payment it is otherwise required to make in respect of any Security to the extent the Company has theretofore made, or is concurrently on the date of such payment making, a payment under the Guarantee Agreement relating to such Security or to a holder of Preferred Securities pursuant to an action undertaken under Section 5.8 of this Indenture. SECTION 3.11. Agreed Tax Treatment. Each Security issued hereunder shall provide that the Company and, by its acceptance or acquisition of a Security or a beneficial interest therein, the Holder of, and any Person that acquires a direct or indirect beneficial interest in, such Security, intend and agree to treat such Security as indebtedness of the Company for United States Federal, state and local tax purposes and to treat the Preferred Securities (including but not limited to all payments and proceeds with respect to the Preferred Securities) as an undivided beneficial ownership interest in the Securities (and any other Trust property) (and payments and proceeds therefrom, respectively) for United States Federal, state and local tax purposes. The provisions of this Indenture shall be interpreted to further this intention and agreement of the parties. 32 SECTION 3.12. CUSIP Numbers. The Company in issuing the Securities may use "CUSIP" numbers (if then generally in use), and, if so, the Trustee shall use "CUSIP" numbers in notices of redemption and other similar or related materials as a convenience to Holders; provided, that any such notice or other materials may state that no representation is made as to the correctness of such numbers either as printed on the Securities or as contained in any notice of redemption or other materials and that reliance may be placed only on the other identification numbers printed on the Securities, and any such redemption shall not be affected by any defect in or omission of such numbers. ARTICLE IV SATISFACTION AND DISCHARGE SECTION 4.1. Satisfaction and Discharge of Indenture. This Indenture shall, upon Company Request, cease to be of further effect (except as to any surviving rights of registration of transfer or exchange of Securities herein expressly provided for and as otherwise provided in this Section 4.1) and the Trustee, on demand of and at the expense of the Company, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture, when (a) either (i) all Securities theretofore authenticated and delivered (other than (A) Securities that have been mutilated, destroyed, lost or stolen and that have been replaced or paid as provided in Section 3.6 and (B) Securities for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Company and thereafter repaid to the Company or discharged from such trust as provided in Section 10.2) have been delivered to the Trustee for cancellation; or (ii) all such Securities not theretofore delivered to the Trustee for cancellation (A) have become due and payable, or (B) will become due and payable at their Stated Maturity within one year of the date of deposit, or (C) are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Company, and the Company, in the case of subclause (ii)(A), (B) or (C) above, has deposited or caused to be deposited with the Trustee as trust funds in trust for such purpose (x) an amount in the currency or currencies in which the Securities are payable, (y) Government Obligations which through the scheduled payment of principal and interest in respect thereof in accordance with their terms will provide, not later than the due date of any payment, money in an amount or (z) a combination thereof, in each case sufficient, in the 33 opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, to pay and discharge the entire indebtedness on such Securities not theretofore delivered to the Trustee for cancellation, for principal and any premium and interest (including any Additional Interest) to the date of such deposit (in the case of Securities that have become due and payable) or to the Stated Maturity (or any date of principal repayment upon early maturity) or Redemption Date, as the case may be; (b) the Company has paid or caused to be paid all other sums payable hereunder by the Company; and (c) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture have been complied with. Notwithstanding the satisfaction and discharge of this Indenture, the obligations of the Company to the Trustee under Section 6.6, the obligations of the Company to any Authenticating Agent under Section 6.11 and, if money shall have been deposited with the Trustee pursuant to subclause (a)(ii) of this Section 4.1, the obligations of the Trustee under Section 4.2 and Section 10.2(e) shall survive. SECTION 4.2. Application of Trust Money. Subject to the provisions of Section 10.2(e), all money deposited with the Trustee pursuant to Section 4.1 shall be held in trust and applied by the Trustee, in accordance with the provisions of the Securities and this Indenture, to the payment in accordance with Section 3.1, either directly or through any Paying Agent (including the Company acting as its own Paying Agent) as the Trustee may determine, to the Persons entitled thereto, of the principal and any premium and interest (including any Additional Interest) for the payment of which such money or obligations have been deposited with or received by the Trustee. Moneys held by the Trustee under this Section 4.2 shall not be subject to the claims of holders of Senior Debt under Article XII. ARTICLE V REMEDIES SECTION 5.1. Events of Default. "Event of Default" means, wherever used herein with respect to the Securities, any one of the following events (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): (a) default in the payment of any interest upon any Security, including any Additional Interest in respect thereof, when it becomes due and payable, and continuance of such default for 34 a period of thirty (30) days (subject to the deferral of any due date in the case of an Extension Period); or (b) default in the payment of the principal of or any premium on any Security at its Maturity; or (c) default in the performance, or breach, of any covenant or warranty of the Company in this Indenture and continuance of such default or breach for a period of thirty (30) days after there has been given, by registered or certified mail, to the Company by the Trustee or to the Company and the Trustee by the Holders of at least twenty five percent (25%) in aggregate principal amount of the Outstanding Securities a written notice specifying such default or breach and requiring it to be remedied and stating that such notice is a "Notice of Default" hereunder; (d) the entry by a court having jurisdiction in the premises of a decree or order adjudging the Company a bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of the Company under any applicable Federal or state bankruptcy, insolvency, reorganization or other similar law, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company or of any substantial part of its property, or ordering the winding up or liquidation of its affairs, and the continuance of any such decree or order for relief or any such other decree or order unstayed and in effect for a period of sixty (60) consecutive days; (e) the institution by the Company of proceedings to be adjudicated a bankrupt or insolvent, or the consent by the Company to the institution of bankruptcy or insolvency proceedings against it, or the filing by the Company of a petition or answer or consent seeking reorganization or relief under any applicable Federal or state bankruptcy, insolvency, reorganization or other similar law, or the consent by it to the filing of such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company or of any substantial part of its property, or the making by it of an assignment for the benefit of creditors, or the admission by it in writing of its inability to pay its debts generally as they become due and its willingness to be adjudicated a bankrupt or insolvent, or the taking of corporate action by the Company in furtherance of any such action; or (f) the Trust shall have voluntarily or involuntarily liquidated, dissolved, wound-up its business or otherwise terminated its existence, except in connection with (1) the distribution of the Securities to holders of the Preferred Securities in liquidation of their interests in the Trust, (2) the redemption of all of the outstanding Preferred Securities or (3) certain mergers, consolidations or amalgamations, each as and to the extent permitted by the Trust Agreement. SECTION 5.2. Acceleration of Maturity; Rescission and Annulment. (a) If an Event of Default occurs and is continuing, then and in every such case the Trustee or the Holders of not less than twenty five percent (25%) in aggregate principal amount of the Outstanding Securities may declare the principal amount of all the Securities to be due and payable immediately, by a notice in writing to the Company (and to the Trustee if given by Holders), provided, that if, upon an Event of Default, the Trustee or the Holders of not less than 35 twenty five percent (25%) in principal amount of the Outstanding Securities fail to declare the principal of all the Outstanding Securities to be immediately due and payable, the holders of at least twenty five percent (25%) in aggregate Liquidation Amount of the Preferred Securities then outstanding shall have the right to make such declaration by a notice in writing to the Property Trustee, the Company and the Trustee; and upon any such declaration the principal amount of and the accrued interest (including any Additional Interest) on all the Securities shall become immediately due and payable. (b) At any time after such a declaration of acceleration with respect to Securities has been made and before a judgment or decree for payment of the money due has been obtained by the Trustee as hereinafter provided in this Article V, the Holders of a majority in aggregate principal amount of the Outstanding Securities, by written notice to the Indenture Trustee, or the holders of a majority in aggregate Liquidation Amount of the Preferred Securities, by written notice to the Property Trustee, the Company and the Trustee, may rescind and annul such declaration and its consequences if: (i) the Company has paid or deposited with the Trustee a sum sufficient to pay: (A) all overdue installments of interest on all Securities, (B) any accrued Additional Interest on all Securities, (C) the principal of and any premium on any Securities that have become due otherwise than by such declaration of acceleration and interest (including any Additional Interest) thereon at the rate borne by the Securities, and (D) all sums paid or advanced by the Trustee hereunder and the reasonable compensation, expenses, disbursements, indemnities and advances of the Trustee, the Property Trustee and their agents and counsel; and (ii) all Events of Default with respect to Securities, other than the non-payment of the principal of Securities that has become due solely by such acceleration, have been cured or waived as provided in Section 5.13; provided, that if the Holders of such Securities fail to annul such declaration and waive such default, the holders of not less than a majority in aggregate Liquidation Amount of the Preferred Securities then outstanding shall also have the right to rescind and annul such declaration and its consequences by written notice to the Property Trustee, the Company and the Trustee, subject to the satisfaction of the conditions set forth in paragraph (b) of this Section 5.2. No such rescission shall affect any subsequent default or impair any right consequent thereon. SECTION 5.3. Collection of Indebtedness and Suits for Enforcement by Trustee. (a) The Company covenants that if: (i) default is made in the payment of any installment of interest (including any Additional Interest) on any Security when such interest becomes due and payable and such default continues for a period of thirty (30) days, or 36 (ii) default is made in the payment of the principal of and any premium on any Security at the Maturity thereof, the Company will, upon demand of the Trustee, pay to the Trustee, for the benefit of the Holders of such Securities, the whole amount then due and payable on such Securities for principal and any premium and interest (including any Additional Interest) and, in addition thereto, all amounts owing the Trustee under Section 6.6. (b) If the Company fails to pay such amounts forthwith upon such demand, the Trustee, in its own name and as trustee of an express trust, may institute a judicial proceeding for the collection of the sums so due and unpaid, and may prosecute such proceeding to judgment or final decree, and may enforce the same against the Company or any other obligor upon such Securities and collect the moneys adjudged or decreed to be payable in the manner provided by law out of the property of the Company or any other obligor upon the Securities, wherever situated. (c) If an Event of Default with respect to Securities occurs and is continuing, the Trustee may in its discretion proceed to protect and enforce its rights and the rights of the Holders of Securities by such appropriate judicial proceedings as the Trustee shall deem most effectual to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy. SECTION 5.4. Trustee May File Proofs of Claim. In case of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or similar judicial proceeding relative to the Company (or any other obligor upon the Securities), its property or its creditors, the Trustee shall be entitled and empowered, by intervention in such proceeding or otherwise, to take any and all actions authorized hereunder in order to have claims of the Holders and the Trustee allowed in any such proceeding. In particular, the Trustee shall be authorized to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same; and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to first pay to the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts owing the Trustee, any predecessor Trustee and other Persons under Section 6.6. SECTION 5.5. Trustee May Enforce Claim Without Possession of Securities. All rights of action and claims under this Indenture or the Securities may be prosecuted and enforced by the Trustee without the possession of any of the Securities or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall, subject to Article XII and after provision for the payment of all the amounts owing the 37 Trustee, any predecessor Trustee and other Persons under Section 6.6, be for the ratable benefit of the Holders of the Securities in respect of which such judgment has been recovered. SECTION 5.6. Application of Money Collected. Any money or property collected or to be applied by the Trustee with respect to the Securities pursuant to this Article V shall be applied in the following order, at the date or dates fixed by the Trustee and, in case of the distribution of such money or property on account of principal or any premium or interest (including any Additional Interest), upon presentation of the Securities and the notation thereon of the payment if only partially paid and upon surrender thereof if fully paid: FIRST: To the payment of all amounts due the Trustee, any predecessor Trustee and other Persons under Section 6.6; SECOND: To the payment of all Senior Debt of the Company if and to the extent required by Article XII; THIRD: Subject to Article XII, to the payment of the amounts then due and unpaid upon the Securities for principal and any premium and interest (including any Additional Interest) in respect of which or for the benefit of which such money has been collected, ratably, without preference or priority of any kind, according to the amounts due and payable on the Securities for principal and any premium and interest (including any Additional Interest), respectively; and FOURTH: The balance, if any, to the Person or Persons entitled thereto. SECTION 5.7. Limitation on Suits. Subject to Section 5.8, no Holder of any Securities shall have any right to institute any proceeding, judicial or otherwise, with respect to this Indenture or for the appointment of a custodian, receiver, assignee, trustee, liquidator, sequestrator (or other similar official) or for any other remedy hereunder, unless: (a) such Holder has previously given written notice to the Trustee of a continuing Event of Default with respect to the Securities; (b) the Holders of not less than a majority in aggregate principal amount of the Outstanding Securities shall have made written request to the Trustee to institute proceedings in respect of such Event of Default in its own name as Trustee hereunder; (c) such Holder or Holders have offered to the Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such request; (d) the Trustee after its receipt of such notice, request and offer of indemnity has failed to institute any such proceeding for sixty (60) days; and 38 (e) no direction inconsistent with such written request has been given to the Trustee during such sixty (60)-day period by the Holders of a majority in aggregate principal amount of the Outstanding Securities; it being understood and intended that no one or more of such Holders shall have any right in any manner whatever by virtue of, or by availing itself of, any provision of this Indenture to affect, disturb or prejudice the rights of any other Holders of Securities, or to obtain or to seek to obtain priority or preference over any other of such Holders or to enforce any right under this Indenture, except in the manner herein provided and for the equal and ratable benefit of all such Holders. SECTION 5.8. Unconditional Right of Holders to Receive Principal, Premium, if any, and Interest; Direct Action by Holders of Preferred Securities. Notwithstanding any other provision in this Indenture, the Holder of any Security shall have the right, which is absolute and unconditional, to receive payment of the principal of and any premium on such Security at its Maturity and payment of interest (including any Additional Interest) on such Security when due and payable and to institute suit for the enforcement of any such payment, and such right shall not be impaired without the consent of such Holder. Any registered holder of the Preferred Securities shall have the right, upon the occurrence of an Event of Default described in Section 5.1(a) or Section 5.1(b), to institute a suit directly against the Company for enforcement of payment to such holder of principal of and any premium and interest (including any Additional Interest) on the Securities having a principal amount equal to the aggregate Liquidation Amount of the Preferred Securities held by such holder. SECTION 5.9. Restoration of Rights and Remedies. If the Trustee, any Holder or any holder of Preferred Securities has instituted any proceeding to enforce any right or remedy under this Indenture and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee, such Holder or such holder of Preferred Securities, then and in every such case the Company, the Trustee, such Holders and such holder of Preferred Securities shall, subject to any determination in such proceeding, be restored severally and respectively to their former positions hereunder, and thereafter all rights and remedies of the Trustee, such Holder and such holder of Preferred Securities shall continue as though no such proceeding had been instituted. SECTION 5.10. Rights and Remedies Cumulative. Except as otherwise provided in Section 3.6(f), no right or remedy herein conferred upon or reserved to the Trustee or the Holders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. 39 SECTION 5.11. Delay or Omission Not Waiver. No delay or omission of the Trustee, any Holder of any Securities or any holder of any Preferred Security to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Article V or by law to the Trustee or to the Holders and the right and remedy given to the holders of Preferred Securities by Section 5.8 may be exercised from time to time, and as often as may be deemed expedient, by the Trustee, the Holders or the holders of Preferred Securities, as the case may be. SECTION 5.12. Control by Holders. The Holders of not less than a majority in aggregate principal amount of the Outstanding Securities (or, as the case may be, the holders of a majority in aggregate Liquidation Amount of Preferred Securities) shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee; provided, that: (a) such direction shall not be in conflict with any rule of law or with this Indenture, (b) the Trustee may take any other action deemed proper by the Trustee that is not inconsistent with such direction, and (c) subject to the provisions of Section 6.2, the Trustee shall have the right to decline to follow such direction if a Responsible Officer or Officers of the Trustee shall, in good faith, reasonably determine that the proceeding so directed would be unjustly prejudicial to the Holders not joining in any such direction or would involve the Trustee in personal liability. SECTION 5.13. Waiver of Past Defaults. (a) The Holders of not less than a majority in aggregate principal amount of the Outstanding Securities or the holders of not less than a majority in aggregate Liquidation Amount of the Preferred Securities may waive any past Event of Default hereunder and its consequences except an Event of Default: (i) in the payment of the principal of or any premium or interest (including any Additional Interest) on any Security (unless such Event of Default has been cured and the Company has paid to or deposited with the Trustee a sum sufficient to pay all installments of interest (including any Additional Interest) due and past due and all principal of and any premium on all Securities due otherwise than by acceleration), or (ii) in respect of a covenant or provision hereof that under Article IX cannot be modified or amended without the consent of each Holder of any Outstanding Security. (b) Any such waiver shall be deemed to be on behalf of the Holders of all the Securities or, in the case of a waiver by holders of Preferred Securities issued by such Trust, by all holders of Preferred Securities. 40 (c) Upon any such waiver, such Event of Default shall cease to exist and any Event of Default arising therefrom shall be deemed to have been cured for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other Event of Default or impair any right consequent thereon. SECTION 5.14. Undertaking for Costs. All parties to this Indenture agree, and each Holder of any Security by his or her acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Trustee for any action taken or omitted by it as Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys' fees and expenses, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; but the provisions of this Section 5.14 shall not apply to any suit instituted by the Trustee, to any suit instituted by any Holder, or group of Holders, holding in the aggregate more than ten percent (10%) in aggregate principal amount of the Outstanding Securities, or to any suit instituted by any Holder for the enforcement of the payment of the principal of or any premium on the Security after the Stated Maturity or any interest (including any Additional Interest) on any Security after it is due and payable. SECTION 5.15. Waiver of Usury, Stay or Extension Laws. The Company covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any usury, stay or extension law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. ARTICLE VI THE TRUSTEE SECTION 6.1. Corporate Trustee Required. There shall at all times be a Trustee hereunder with respect to the Securities. The Trustee shall be a corporation or national banking association organized and doing business under the laws of the United States or of any state thereof, authorized to exercise corporate trust powers, having a combined capital and surplus of at least $50,000,000, subject to supervision or examination by Federal or state authority and having an office within the United States. If such corporation or national banking association publishes reports of condition at least annually, pursuant to law or to the requirements of such supervising or examining authority, then, for the purposes of this Section 6.1, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition 41 so published. If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section 6.1, it shall resign immediately in the manner and with the effect hereinafter specified in this Article VI. SECTION 6.2. Certain Duties and Responsibilities. Except during the continuance of an Event of Default: (i) the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (ii) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture; provided, that in the case of any such certificates or opinions that by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they substantially conform on their face to the requirements of this Indenture. (b) If an Event of Default known to the Trustee has occurred and is continuing, the Trustee shall, prior to the receipt of directions, if any, from the Holders of at least a majority in aggregate principal amount of the Outstanding Securities (or, if applicable, from the holders of at least a majority in aggregate Liquidation Amount of Preferred Securities), exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in its exercise, as a prudent person would exercise or use under the circumstances in the conduct of such person's own affairs. (c) Notwithstanding the foregoing, no provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. Whether or not therein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section 6.2. To the extent that, at law or in equity, the Trustee has duties and liabilities relating to the Holders, the Trustee shall not be liable to any Holder or any holder of Preferred Securities for the Trustee's good faith reliance on the provisions of this Indenture. The provisions of this Indenture, to the extent that they restrict the duties and liabilities of the Trustee otherwise existing at law or in equity, are agreed by the Company and the Holders and the holders of Preferred Securities to replace such other duties and liabilities of the Trustee. (d) No provisions of this Indenture shall be construed to relieve the Trustee from liability with respect to matters that are within the authority of the Trustee under this Indenture for its own negligent action, negligent failure to act or willful misconduct, except that: 42 (i) the Trustee shall not be liable for any error or judgment made in good faith by an authorized officer of the Trustee, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts; (ii) the 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 direction of the Holders of at least a majority in aggregate principal amount of the Outstanding Securities (or, as the case may be, the holders of a majority in aggregate Liquidation Amount of Preferred Securities) relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee under this Indenture; and (iii) the Trustee shall be under no liability for interest on any money received by it hereunder and money held by the Trustee in trust hereunder need not be segregated from other funds except to the extent required by law. (e) If at any time the Trustee hereunder is not the same Person as the Property Trustee under the Trust Agreement: (i) whenever a reference is made herein to the dissolution, termination or liquidation of the Trust, the Trustee shall be entitled to assume that no such dissolution, termination, or liquidation has occurred so long as the Securities are or continue to be registered in the name of such Property Trustee, and the Trustee shall be charged with notice or knowledge of such dissolution, termination or liquidation only upon written notice thereof given to the Trustee by the Depositor under the Trust Agreement; and (ii) the Trustee shall not be charged with notice or knowledge that any Person is a holder of Preferred Securities or Common Securities issued by the Trust or whether any group of holders of Preferred Securities constitutes any specified percentage of all outstanding Preferred Securities for any purpose under this Indenture, unless and until the Trustee is furnished with a list of holders by such Property Trustee and the aggregate Liquidation Amount of the Preferred Securities then outstanding. The Trustee may conclusively rely and shall be protected in relying on such list. (f) Notwithstanding Section 1.10, the Trustee shall not, and shall not be deemed to, owe any fiduciary duty to the holders of any of the Trust Securities issued by the Trust and shall not be liable to any such holder (other than for the willful misconduct or negligence of the Trustee) if the Trustee in good faith (i) pays over or distributes to a registered Holder of the Securities or to the Company or to any other Person, cash, property or securities to which such holders of such Trust Securities shall be entitled or (ii) takes any action or omits to take any action at the request of the Holder of such Securities. Nothing in this paragraph shall affect the obligation of any other such Person to hold such payment for the benefit of, and to pay such amount over to, such holders of Preferred Securities or Common Securities or their representatives. 43 SECTION 6.3. Notice of Defaults. Within ninety (90) days after the occurrence of any default actually known to the Trustee, the Trustee shall give the Holders notice of such default unless such default shall have been cured or waived; provided, that except in the case of a default in the payment of the principal of or any premium or interest on any Securities, the Trustee shall be fully protected in withholding the notice if and so long as the board of directors, the executive committee or a trust committee of directors and/or Responsible Officers of the Trustee in good faith determines that withholding the notice is in the interest of holders of Securities; and provided, further, that in the case of any default of the character specified in Section 5.1(c), no such notice to Holders shall be given until at least thirty (30) days after the occurrence thereof. For the purpose of this Section 6.3, the term "default" means any event which is, or after notice or lapse of time or both would become, an Event of Default. SECTION 6.4. Certain Rights of Trustee. Subject to the provisions of Section 6.2: (a) the Trustee may conclusively rely and shall be fully protected in acting or refraining from acting in good faith and in accordance with the terms hereof upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties; (b) if (i) in performing its duties under this Indenture the Trustee is required to decide between alternative courses of action, (ii) in construing any of the provisions of this Indenture the Trustee finds ambiguous or inconsistent with any other provisions contained herein or (iii) the Trustee is unsure of the application of any provision of this Indenture, then, except as to any matter as to which the Holders are entitled to decide under the terms of this Indenture, the Trustee shall deliver a notice to the Company requesting the Company's written instruction as to the course of action to be taken and the Trustee shall take such action, or refrain from taking such action, as the Trustee shall be instructed in writing to take, or to refrain from taking, by the Company; provided, that if the Trustee does not receive such instructions from the Company within ten Business Days after it has delivered such notice or such reasonably shorter period of time set forth in such notice the Trustee may, but shall be under no duty to, take such action, or refrain from taking such action, as the Trustee shall deem advisable and in the best interests of the Holders, in which event the Trustee shall have no liability except for its own negligence, bad faith or willful misconduct; (c) any request or direction of the Company shall be sufficiently evidenced by a Company Request or Company Order and any resolution of the Board of Directors may be sufficiently evidenced by a Board Resolution; (d) the Trustee may consult with counsel (which counsel may be counsel to the Trustee, the Company or any of its Affiliates, and may include any of its employees) and the advice of such counsel or any Opinion of Counsel shall be full and complete authorization and 44 protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon; (e) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders or any holder of Preferred Securities pursuant to this Indenture, unless such Holders (or such holders of Preferred Securities) shall have offered to the Trustee security or indemnity reasonably satisfactory to it against the costs, expenses (including reasonable attorneys' fees and expenses) and liabilities that might be incurred by it in compliance with such request or direction, including reasonable advances as may be requested by the Trustee; (f) the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, indenture, note or other paper or document, but the Trustee in its discretion may make such inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such inquiry or investigation, it shall be entitled to examine the books, records and premises of the Company, personally or by agent or attorney; (g) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents, attorneys, custodians or nominees and the Trustee shall not be responsible for any misconduct or negligence on the part of any such agent, attorney, custodian or nominee appointed with due care by it hereunder; (h) whenever in the administration of this Indenture the Trustee shall deem it desirable to receive instructions with respect to enforcing any remedy or right or taking any other action with respect to enforcing any remedy or right hereunder, the Trustees (i) may request instructions from the Holders (which instructions may only be given by the Holders of the same aggregate principal amount of Outstanding Securities as would be entitled to direct the Trustee under this Indenture in respect of such remedy, right or action), (ii) may refrain from enforcing such remedy or right or taking such action until such instructions are received and (iii) shall be protected in acting in accordance with such instructions; (i) except as otherwise expressly provided by this Indenture, the Trustee shall not be under any obligation to take any action that is discretionary under the provisions of this Indenture; (j) without prejudice to any other rights available to the Trustee under applicable law, when the Trustee incurs expenses or renders services in connection with any bankruptcy, insolvency or other proceeding referred to in clauses (d) or (e) of the definition of Event of Default, such expenses (including legal fees and expenses of its agents and counsel) and the compensation for such services are intended to constitute expenses of administration under any bankruptcy laws or law relating to creditors rights generally; (k) whenever in the administration of this Indenture the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the 45 absence of bad faith on its part, conclusively rely upon an Officers' Certificate addressing such matter, which, upon receipt of such request, shall be promptly delivered by the Company; (l) the Trustee shall not be charged with knowledge of any default or Event of Default unless either (i) a Responsible Officer of the Trustee shall have actual knowledge thereof or (ii) the Trustee shall have received written notice thereof from the Company or a Holder; and (m) in the event that the Trustee is also acting as Paying Agent, Authenticating Agent or Securities Registrar hereunder, the rights and protections afforded to the Trustee pursuant to this Article VI shall also be afforded such Paying Agent, Authenticating Agent, or Securities Registrar. SECTION 6.5. May Hold Securities. The Trustee, any Authenticating Agent, any Paying Agent, any Securities Registrar or any other agent of the Company, in its individual or any other capacity, may become the owner or pledgee of Securities and may otherwise deal with the Company with the same rights it would have if it were not Trustee, Authenticating Agent, Paying Agent, Securities Registrar or such other agent. SECTION 6.6. Compensation; Reimbursement; Indemnity. (a) The Company agrees: (i) to pay to the Trustee from time to time reasonable compensation for all services rendered by it hereunder in such amounts as the Company and the Trustee shall agree from time to time (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); (ii) to reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any provision of this Indenture (including the reasonable compensation and the expenses and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to its negligence, bad faith or willful misconduct; and (iii) to the fullest extent permitted by applicable law, to indemnify the Trustee (including in its individual capacity) and its Affiliates, and their officers, directors, shareholders, agents, representatives and employees for, and to hold them harmless against, any loss, damage, liability, tax (other than income, franchise or other taxes imposed on amounts paid pursuant to (i) or (ii) hereof), penalty, expense or claim of any kind or nature whatsoever incurred without negligence, bad faith or willful misconduct on its part arising out of or in connection with the acceptance or administration of this trust or the performance of the Trustee's duties hereunder, including the advancement of funds to cover the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. 46 (b) To secure the Company's payment obligations in this Section 6.6, the Company hereby grants and pledges to the Trustee and the Trustee shall have a lien prior to the Securities on all money or property held or collected by the Trustee, other than money or property held in trust to pay principal and interest on particular Securities. Such lien shall survive the satisfaction and discharge of this Indenture or the resignation or removal of the Trustee. (c) The obligations of the Company under this Section 6.6 shall survive the satisfaction and discharge of this Indenture and the earlier resignation or removal of the Trustee. (d) In no event shall the Trustee be liable for any indirect, special, punitive or consequential loss or damage of any kind whatsoever, including, but not limited to, lost profits, even if the Trustee has been advised of the likelihood of such loss or damage and regardless of the form of action. (e) In no event shall the Trustee be liable for any failure or delay in the performance of its obligations hereunder because of circumstances beyond its control, including, but not limited to, acts of God, flood, war (whether declared or undeclared), terrorism, fire, riot, embargo, government action, including any laws, ordinances, regulations, governmental action or the like which delay, restrict or prohibit the providing of the services contemplated by this Indenture. SECTION 6.7. Resignation and Removal; Appointment of Successor. (a) No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this Article VI shall become effective until the acceptance of appointment by the successor Trustee under Section 6.8. (b) The Trustee may resign at any time by giving written notice thereof to the Company. (c) Unless an Event of Default shall have occurred and be continuing, the Trustee may be removed at any time by the Company by a Board Resolution. If an Event of Default shall have occurred and be continuing, the Trustee may be removed by Act of the Holders of a majority in aggregate principal amount of the Outstanding Securities, delivered to the Trustee and to the Company. (d) If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Trustee for any reason, at a time when no Event of Default shall have occurred and be continuing, the Company, by a Board Resolution, shall promptly appoint a successor Trustee, and such successor Trustee and the retiring Trustee shall comply with the applicable requirements of Section 6.8. If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Trustee for any reason, at a time when an Event of Default shall have occurred and be continuing, the Holders, by Act of the Holders of a majority in aggregate principal amount of the Outstanding Securities, shall promptly appoint a successor Trustee, and such successor Trustee and the retiring Trustee shall comply with the applicable requirements of Section 6.8. If no successor Trustee shall have been so appointed by the Company or the Holders and accepted appointment within sixty (60) days 47 after the giving of a notice of resignation by the Trustee or the removal of the Trustee in the manner required by Section 6.8, any Holder who has been a bona fide Holder of a Security for at least six months may, on behalf of such Holder and all others similarly situated, and any resigning Trustee may, at the expense of the Company, petition any court of competent jurisdiction for the appointment of a successor Trustee. (e) The Company shall give notice to all Holders in the manner provided in Section 1.6 of each resignation and each removal of the Trustee and each appointment of a successor Trustee. Each notice shall include the name of the successor Trustee and the address of its Corporate Trust Office. SECTION 6.8. Acceptance of Appointment by Successor. (a) In case of the appointment hereunder of a successor Trustee, each successor Trustee so appointed shall execute, acknowledge and deliver to the Company and to the retiring Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee; but, on the request of the Company or the successor Trustee, such retiring Trustee shall, upon payment of its charges, execute and deliver an instrument transferring to such successor Trustee all the rights, powers and trusts of the retiring Trustee and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder. (b) Upon request of any such successor Trustee, the Company shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Trustee all rights, powers and trusts referred to in paragraph (a) of this Section 6.8. (c) No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be qualified and eligible under this Article VI. SECTION 6.9. Merger, Conversion, Consolidation or Succession to Business. Any Person into which the Trustee may be merged or converted or with which it may be consolidated, or any Person resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any Person succeeding to all or substantially all of the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, without the execution or filing of any paper or any further act on the part of any of the parties hereto, provided, that such Person shall be otherwise qualified and eligible under this Article VI. In case any Securities shall have been authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation or as otherwise provided above in this Section 6.9 to such authenticating Trustee may adopt such authentication and deliver the Securities so authenticated, and in case any Securities shall not have been authenticated, any successor to the Trustee may authenticate such Securities either in the name of any predecessor Trustee or in the name of such successor Trustee, and in all cases the certificate of authentication shall have the full force which it is provided anywhere in the Securities or in this Indenture that the certificate of the Trustee shall have. 48 SECTION 6.10. Not Responsible for Recitals or Issuance of Securities. The recitals contained herein and in the Securities, except the Trustee's certificates of authentication, shall be taken as the statements of the Company, and neither the Trustee nor any Authenticating Agent assumes any responsibility for their correctness. The Trustee makes no representations as to the validity or sufficiency of this Indenture or of the Securities. Neither the Trustee nor any Authenticating Agent shall be accountable for the use or application by the Company of the Securities or the proceeds thereof. SECTION 6.11. Appointment of Authenticating Agent. (a) The Trustee may appoint an Authenticating Agent or Agents with respect to the Securities, which shall be authorized to act on behalf of the Trustee to authenticate Securities issued upon original issue and upon exchange, registration of transfer or partial redemption thereof or pursuant to Section 3.6, and Securities so authenticated shall be entitled to the benefits of this Indenture and shall be valid and obligatory for all purposes as if authenticated by the Trustee hereunder. Wherever reference is made in this Indenture to the authentication and delivery of Securities by the Trustee or the Trustee's certificate of authentication, such reference shall be deemed to include authentication and delivery on behalf of the Trustee by an Authenticating Agent. Each Authenticating Agent shall be acceptable to the Company and shall at all times be a corporation organized and doing business under the laws of the United States of America, or of any State or Territory thereof or the District of Columbia, authorized under such laws to act as Authenticating Agent, having a combined capital and surplus of not less than $50,000,000 and subject to supervision or examination by Federal or state authority. If such Authenticating Agent publishes reports of condition at least annually pursuant to law or to the requirements of said supervising or examining authority, then for the purposes of this Section 6.11 the combined capital and surplus of such Authenticating Agent shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time an Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section 6.11, such Authenticating Agent shall resign immediately in the manner and with the effect specified in this Section 6.11. (b) Any Person into which an Authenticating Agent may be merged or converted or with which it may be consolidated, or any Person resulting from any merger, conversion or consolidation to which such Authenticating Agent shall be a party, or any Person succeeding to all or substantially all of the corporate trust business of an Authenticating Agent shall be the successor Authenticating Agent hereunder, provided such Person shall be otherwise eligible under this Section 6.11, without the execution or filing of any paper or any further act on the part of the Trustee or the Authenticating Agent. (c) An Authenticating Agent may resign at any time by giving written notice thereof to the Trustee and to the Company. The Trustee may at any time terminate the agency of an Authenticating Agent by giving written notice thereof to such Authenticating Agent and to the Company. Upon receiving such a notice of resignation or upon such a termination, or in case at any time such Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section 6.11, the Trustee may appoint a successor Authenticating Agent eligible under the provisions of this Section 6.11, which shall be acceptable to the Company, and shall give notice 49 of such appointment to all Holders. Any successor Authenticating Agent upon acceptance of its appointment hereunder shall become vested with all the rights, powers and duties of its predecessor hereunder, with like effect as if originally named as an Authenticating Agent. (d) The Company agrees to pay to each Authenticating Agent from time to time reasonable compensation for its services under this Section 6.11 in such amounts as the Company and the Authenticating Agent shall agree from time to time. (e) If an appointment of an Authenticating Agent is made pursuant to this Section 6.11, the Securities may have endorsed thereon, in addition to the Trustee's certificate of authentication, an alternative certificate of authentication in the following form: This represents Securities referred to in the within mentioned Indenture. Dated: ------------ LASALLE BANK NATIONAL ASSOCIATION, as Trustee By: ------------------------------------ Authenticating Agent By: ------------------------------------ Authorized signatory ARTICLE VII HOLDER'S LISTS AND REPORTS BY COMPANY SECTION 7.1. Company to Furnish Trustee Names and Addresses of Holders. The Company will furnish or cause to be furnished to the Trustee: (a) semiannually, on or before June 30 and December 31 of each year, a list, in such form as the Trustee may reasonably require, of the names and addresses of the Holders as of a date not more than fifteen (15) days prior to the delivery thereof, and (b) at such other times as the Trustee may request in writing, within thirty (30) days after the receipt by the Company of any such request, a list of similar form and content as of a date not more than fifteen (15) days prior to the time such list is furnished, in each case to the extent such information is in the possession or control of the Company and has not otherwise been received by the Trustee in its capacity as Securities Registrar. 50 SECTION 7.2. Preservation of Information, Communications to Holders. (a) The Trustee shall preserve, in as current a form as is reasonably practicable, the names and addresses of Holders contained in the most recent list furnished to the Trustee as provided in Section 7.1 and the names and addresses of Holders received by the Trustee in its capacity as Securities Registrar. The Trustee may destroy any list furnished to it as provided in Section 7.1 upon receipt of a new list so furnished. (b) The rights of Holders to communicate with other Holders with respect to their rights under this Indenture or under the Securities, and the corresponding rights and privileges of the Trustee, shall be as provided in the Trust Indenture Act. (c) Every Holder of Securities, by receiving and holding the same, agrees with the Company and the Trustee that neither the Company nor the Trustee nor any agent of either of them shall be held accountable by reason of the disclosure of information as to the names and addresses of the Holders made pursuant to the Trust Indenture Act. SECTION 7.3. Reports by Company. (a) The Company shall furnish to the Holders and to prospective purchasers of Securities, upon their request, the information required to be furnished pursuant to Rule 144A(d)(4) under the Securities Act. The Company shall furnish to the Trustee and, so long as the Property Trustee holds any of the Securities, the Company shall furnish to the Property Trustee, Statutory Financial Statements promptly following their filing with the Applicable Insurance Regulatory Authority. The delivery requirement set forth in the preceding sentence may be satisfied by compliance with Section 7.3(b) hereof. (b) The Company shall furnish to each of (i) the Trustee, (ii) the Holders and to subsequent holders of Securities, (iii) Cohen Bros. Financial Management LLC (at 1818 Market Street, 28th Floor, Philadelphia, Pennsylvania 19103, Attn: Matthew Mueller or such other address as designated by Cohen Bros. Financial Management LLC) and (iv) any beneficial owner of the Securities reasonably identified to the Company (which identification may be made either by such beneficial owner or by Cohen Bros. Financial Management LLC), a duly completed and executed certificate substantially and substantively in the form attached hereto as Exhibit A, including the financial statements referenced in such Exhibit, which certificate and financial statements shall be so furnished by the Company not later than forty-five (45) days after the end of each of the first three fiscal quarters of each fiscal year of the Company and not later than ninety (90) days after the end of each fiscal year of the Company. The delivery requirements under this Section 7.3(b) may be satisfied by compliance with Section 8.16(b) of the Trust Agreement. (c) If the Company intends to file its annual and quarterly information with the Securities and Exchange Commission (the "Commission") in electronic form pursuant to Regulation S-T of the Commission using the Commission's Electronic Data Gathering, Analysis and Retrieval ("EDGAR") system, the Company shall notify the Trustee in the manner prescribed herein of each such annual and quarterly filing. The Trustee is hereby authorized and directed to access the EDGAR system for purposes of retrieving the financial information so filed. 51 Compliance with the foregoing shall constitute delivery by the Company of its financial statements to the Trustee in compliance with the provisions of Section 314(a) of the Trust Indenture Act, if applicable. The Trustee shall have no duty to search for or obtain any electronic or other filings that the Company makes with the Commission, regardless of whether such filings are periodic, supplemental or otherwise. Delivery of reports, information and documents to the Trustee pursuant to this Section 7.3(c) shall be solely for purposes of compliance with this Section 7.3(c) and, if applicable, with Section 314(a) of the Trust Indenture Act. The Trustee's receipt of such reports, information and documents shall not constitute notice to it of the content thereof or any matter determinable from the content thereof, including the Company's compliance with any of its covenants hereunder, as to which the Trustee is entitled to rely upon Officers' Certificates. ARTICLE VIII CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE SECTION 8.1. Company May Consolidate, Etc., Only on Certain Terms. The Company shall not consolidate with or merge into any other Person or convey, transfer or lease its properties and assets substantially as an entirety to any Person, and no Person shall consolidate with or merge into the Company or convey, transfer or lease its properties and assets substantially as an entirety to the Company, unless: (a) if the Company shall consolidate with or merge into another Person or convey, transfer or lease its properties and assets substantially as an entirety to any Person, the entity formed by such consolidation or into which the Company is merged or the Person that acquires by conveyance or transfer, or that leases, the properties and assets of the Company substantially as an entirety shall be an entity organized and existing under the laws of the United States of America or any State or Territory thereof or the District of Columbia and shall expressly assume, by an indenture supplemental hereto, executed and delivered to the Trustee, in form reasonably satisfactory to the Trustee, the due and punctual payment of the principal of and any premium and interest (including any Additional Interest) on all the Securities and the performance of every covenant of this Indenture on the part of the Company to be performed or observed; (b) immediately after giving effect to such transaction, no Event of Default, and no event that, after notice or lapse of time, or both, would constitute an Event of Default, shall have happened and be continuing; and (c) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger, conveyance, transfer or lease and, if a supplemental indenture is required in connection with such transaction, any such supplemental indenture comply with this Article VIII and that all conditions precedent herein provided for relating to such transaction have been complied with; and the Trustee may rely upon such Officers' Certificate and Opinion of Counsel as conclusive evidence that such transaction complies with this Section 8.1. 52 SECTION 8.2. Successor Company Substituted. (a) Upon any consolidation or merger by the Company with or into any other Person, or any conveyance, transfer or lease by the Company of its properties and assets substantially as an entirety to any Person in accordance with Section 8.1 and the execution and delivery to the Trustee of the supplemental indenture described in Section 8.1(a), the successor entity formed by such consolidation or into which the Company is merged or to which such conveyance, transfer or lease is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture with the same effect as if such successor Person had been named as the Company herein; and in the event of any such conveyance or transfer, following the execution and delivery of such supplemental indenture, the Company shall be discharged from all obligations and covenants under the Indenture and the Securities. (b) Such successor Person may cause to be executed, and may issue either in its own name or in the name of the Company, any or all of the Securities issuable hereunder that theretofore shall not have been signed by the Company and delivered to the Trustee; and, upon the order of such successor Person instead of the Company and subject to all the terms, conditions and limitations in this Indenture prescribed, the Trustee shall authenticate and shall deliver any Securities that previously shall have been signed and delivered by the officers of the Company to the Trustee for authentication, and any Securities that such successor Person thereafter shall cause to be executed and delivered to the Trustee on its behalf. All the Securities so issued shall in all respects have the same legal rank and benefit under this Indenture as the Securities theretofore or thereafter issued in accordance with the terms of this Indenture. (c) In case of any such consolidation, merger, sale, conveyance or lease, such changes in phraseology and form may be made in the Securities thereafter to be issued as may be appropriate to reflect such occurrence. ARTICLE IX SUPPLEMENTAL INDENTURES SECTION 9.1. Supplemental Indentures without Consent of Holders. Without the consent of any Holders, the Company, when authorized by a Board Resolution, and the Trustee, at any time and from time to time, may enter into one or more indentures supplemental hereto, in form reasonably satisfactory to the Trustee, for any of the following purposes: (a) to evidence the succession of another Person to the Company, and the assumption by any such successor of the covenants of the Company herein and in the Securities; or (b) to cure any ambiguity, to correct or supplement any provision herein that may be defective or inconsistent with any other provision herein, or to make or amend any other provisions with respect to matters or questions arising under this Indenture, which shall not be inconsistent with the other provisions of this Indenture, provided, that such action pursuant to 53 this clause (b) shall not adversely affect in any material respect the interests of any Holders or the holders of the Preferred Securities; or (c) to add to the covenants, restrictions or obligations of the Company or to add to the Events of Default, provided, that such action pursuant to this clause (c) shall not adversely affect in any material respect the interests of any Holders or the holders of the Preferred Securities; or (d) to modify, eliminate or add to any provisions of the Indenture or the Securities to such extent as shall be necessary to ensure that the Securities are treated as indebtedness of the Company for United States Federal income tax purposes, provided, that such action pursuant to this clause (d) shall not adversely affect in any material respect the interests of any Holders or the holders of the Preferred Securities. SECTION 9.2. Supplemental Indentures with Consent of Holders. (a) With the consent of the Holders of not less than a majority in aggregate principal amount of the Outstanding Securities, by Act of said Holders delivered to the Company and the Trustee, the Company, when authorized by a Board Resolution, and the Trustee may enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of modifying in any manner the rights of the Holders of Securities under this Indenture; provided, that no such supplemental indenture shall, without the consent of the Holder of each Outstanding Security, (i) change the Stated Maturity of the principal or any premium of any Security or change the date of payment of any installment of interest (including any Additional Interest) on any Security, or reduce the principal amount thereof or the rate of interest thereon or any premium payable upon the redemption thereof or change the place of payment where, or the coin or currency in which, any Security or interest thereon is payable, or restrict or impair the right to institute suit for the enforcement of any such payment on or after such date, or (ii) reduce the percentage in aggregate principal amount of the Outstanding Securities, the consent of whose Holders is required for any such supplemental indenture, or the consent of whose Holders is required for any waiver of compliance with any provision of this Indenture or of defaults hereunder and their consequences provided for in this Indenture, or (iii) modify any of the provisions of this Section 9.2, Section 5.13 or Section 10.7, except to increase any percentage in aggregate principal amount of the Outstanding Securities, the consent of whose Holders is required for any reason, or to provide that certain other provisions of this Indenture cannot be modified or waived without the consent of the Holder of each Security; provided, further, that, so long as any Preferred Securities remain outstanding, no amendment under this Section 9.2 shall be effective until the holders of a majority in Liquidation Amount of the Preferred Securities shall have consented to such amendment; provided, further, that if the consent of the Holder of each Outstanding Security is required for any amendment under this 54 Indenture, such amendment shall not be effective until the holder of each Outstanding Preferred Security shall have consented to such amendment. (b) It shall not be necessary for any Act of Holders under this Section 9.2 to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such Act shall approve the substance thereof. SECTION 9.3. Execution of Supplemental Indentures. In executing or accepting the additional trusts created by any supplemental indenture permitted by this Article IX or the modifications thereby of the trusts created by this Indenture, the Trustee shall be entitled to receive, and shall be fully protected in conclusively relying upon, an Officers' Certificate and an Opinion of Counsel stating that the execution of such supplemental indenture is authorized or permitted by this Indenture, and that all conditions precedent herein provided for relating to such action have been complied with. The Trustee may, but shall not be obligated to, enter into any such supplemental indenture that affects the Trustee's own rights, duties, indemnities or immunities under this Indenture or otherwise. Copies of the final form of each supplemental indenture shall be delivered by the Trustee at the expense of the Company to each Holder, and, if the Trustee is the Property Trustee, to each holder of Preferred Securities, promptly after the execution thereof. SECTION 9.4. Effect of Supplemental Indentures. Upon the execution of any supplemental indenture under this Article IX, this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; and every Holder of Securities and every holder of Preferred Securities theretofore or thereafter authenticated and delivered hereunder shall be bound thereby. SECTION 9.5. Reference in Securities to Supplemental Indentures. Securities authenticated and delivered after the execution of any supplemental indenture pursuant to this Article IX may, and shall if required by the Company, bear a notation in form approved by the Company as to any matter provided for in such supplemental indenture. If the Company shall so determine, new Securities so modified as to conform, in the opinion of the Company, to any such supplemental indenture may be prepared and executed by the Company and authenticated and delivered by the Trustee in exchange for Outstanding Securities. ARTICLE X COVENANTS SECTION 10.1. Payment of Principal, Premium, if any, and Interest. The Company covenants and agrees for the benefit of the Holders of the Securities that it will duly and punctually pay the principal of and any premium and interest (including any Additional Interest) on the Securities in accordance with the terms of the Securities and this 55 Indenture. As of the date of this Indenture, the Company represents that it has no present intention to exercise its right under Section 2.11 to defer payments of interest on the Securities. SECTION 10.2. Money for Security Payments to be Held in Trust. (a) If the Company shall at any time act as its own Paying Agent with respect to the Securities, it will, on or before each due date of the principal of and any premium or interest (including any Additional Interest) on the Securities, segregate and hold in trust for the benefit of the Persons entitled thereto a sum sufficient to pay the principal and any premium or interest (including Additional Interest) so becoming due until such sums shall be paid to such Persons or otherwise disposed of as herein provided, and will promptly notify the Trustee in writing of its failure so to act. (b) Whenever the Company shall have one or more Paying Agents, it will, on the Business Day prior to each due date of the principal of or any premium or interest (including any Additional Interest) on any Securities, deposit with a Paying Agent a sum sufficient to pay such amount, such sum to be held as provided in the Trust Indenture Act and (unless such Paying Agent is the Trustee) the Company will promptly notify the Trustee of its failure so to act. (c) The Company will cause each Paying Agent for the Securities other than the Trustee to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee, subject to the provisions of this Section 10.2, that such Paying Agent will (i) comply with the provisions of this Indenture and the Trust Indenture Act applicable to it as a Paying Agent and (ii) during the continuance of any default by the Company (or any other obligor upon the Securities) in the making of any payment in respect of the Securities, upon the written request of the Trustee, forthwith pay to the Trustee all sums held in trust by such Paying Agent for payment in respect of the Securities. (d) The Company may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, pay, or by Company Order direct any Paying Agent to pay, to the Trustee all sums held in trust by the Company or such Paying Agent, such sums to be held by the Trustee upon the same trusts as those upon which such sums were held by the Company or such Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying Agent shall be released from all further liability with respect to such money. (e) Any money deposited with the Trustee or any Paying Agent, or then held by the Company in trust for the payment of the principal of and any premium or interest (including any Additional Interest) on any Security and remaining unclaimed for two years after such principal and any premium or interest has become due and payable shall (unless otherwise required by mandatory provision of applicable escheat or abandoned or unclaimed property law) be paid on Company Request to the Company, or (if then held by the Company) shall (unless otherwise required by mandatory provision of applicable escheat or abandoned or unclaimed property law) be discharged from such trust; and the Holder of such Security shall thereafter, as an unsecured general creditor, look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease; provided, that the Trustee or such Paying Agent, before being 56 required to make any such repayment, may at the expense of the Company cause to be published once, in a newspaper published in the English language, customarily published on each Business Day and of general circulation in the Borough of Manhattan, The City of New York, notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than thirty (30) days from the date of such publication, any unclaimed balance of such money then remaining will be repaid to the Company. SECTION 10.3. Statement as to Compliance. The Company shall deliver to the Trustee, within one hundred and twenty (120) days after the end of each fiscal year of the Company ending after the date hereof, an Officers' Certificate (substantially in the form attached hereto as Exhibit B) covering the preceding calendar year, stating whether or not to the knowledge of the signers thereof the Company is in default in the performance or observance of any of the terms, provisions and conditions of this Indenture (without regard to any period of grace or requirement of notice provided hereunder), and if the Company shall be in default, specifying all such defaults and the nature and status thereof of which they may have knowledge. The delivery requirements of this Section 10.3 may be satisfied by compliance with Section 8.16(a) of the Trust Agreement. SECTION 10.4. Calculation Agent. (a) The Company hereby agrees that for so long as any of the Securities remain Outstanding, there will at all times be an agent appointed to calculate LIBOR in respect of each Interest Payment Date in accordance with the terms of Schedule A (the "Calculation Agent"). The Company has initially appointed the Property Trustee as Calculation Agent for purposes of determining LIBOR for each Interest Payment Date. The Calculation Agent may be removed by the Company at any time. So long as the Property Trustee holds any of the Securities, the Calculation Agent shall be the Property Trustee, except as described in the immediately preceding sentence. If the Calculation Agent is unable or unwilling to act as such or is removed by the Company, the Company will promptly appoint as a replacement Calculation Agent the London office of a leading bank which is engaged in transactions in Eurodollar deposits in the international Eurodollar market and which does not control or is not controlled by or under common control with the Company or its Affiliates. The Calculation Agent may not resign its duties without a successor having been duly appointed. (b) The Calculation Agent shall be required to agree that, as soon as possible after 11:00 a.m. (London time) on each LIBOR Determination Date (as defined in Schedule A), but in no event later than 11:00 a.m. (London time) on the Business Day immediately following each LIBOR Determination Date, the Calculation Agent will calculate the interest rate (the Interest Payment shall be rounded to the nearest cent, with half a cent being rounded upwards) for the related Interest Payment Date, and will communicate such rate and amount to the Company, the Trustee, each Paying Agent and the Depositary. The Calculation Agent will also specify to the Company the quotations upon which the foregoing rates and amounts are based and, in any event, the Calculation Agent shall notify the Company before 5:00 p.m. (London time) on each LIBOR Determination Date that either: (i) it has determined or is in the process of determining the foregoing rates and amounts or (ii) it has not determined and is not in the process of determining the foregoing rates and amounts, together with its reasons therefor. The Calculation 57 Agent's determination of the foregoing rates and amounts for any Interest Payment Date will (in the absence of manifest error) be final and binding upon all parties. For the sole purpose of calculating the interest rate for the Securities, "Business Day" shall be defined as any day on which dealings in deposits in Dollars are transacted in the London interbank market. SECTION 10.5. Additional Tax Sums. So long as no Event of Default has occurred and is continuing, if (a) the Trust is the Holder of all of the Outstanding Securities and (b) a Tax Event described in clause (i) or (iii) in the definition of Tax Event in Section 1.1 hereof has occurred and is continuing, the Company shall pay to the Trust (and its permitted successors or assigns under the related Trust Agreement) for so long as the Trust (or its permitted successor or assignee) is the registered holder of the Outstanding Securities, such amounts as may be necessary in order that the amount of Distributions (including any Additional Interest Amount (as defined in the Trust Agreement)) then due and payable by the Trust on the Preferred Securities and Common Securities that at any time remain outstanding in accordance with the terms thereof shall not be reduced as a result of any Additional Taxes arising from such Tax Event (additional such amounts payable by the Company to the Trust, the "Additional Tax Sums"). Whenever in this Indenture or the Securities there is a reference in any context to the payment of principal of or interest on the Securities, such mention shall be deemed to include mention of the payments of the Additional Tax Sums provided for in this Section 10.5 to the extent that, in such context, Additional Tax Sums are, were or would be payable in respect thereof pursuant to the provisions of this Section 10.5 and express mention of the payment of Additional Tax Sums (if applicable) in any provisions hereof shall not be construed as excluding Additional Tax Sums in those provisions hereof where such express mention is not made; provided, that the deferral of the payment of interest pursuant to Section 3.9 on the Securities shall not defer the payment of any Additional Tax Sums that may be due and payable. SECTION 10.6. Additional Covenants. (a) The Company covenants and agrees with each Holder of Securities that if an Event of Default shall have occurred and be continuing or the Company shall have given notice of its election to begin an Extension Period with respect to the Securities or such Extension Period, or any extension thereof, shall be continuing, it shall not (i) declare or pay any dividends or distributions on, or redeem, purchase, acquire or make a liquidation payment with respect to, any shares of the Company's capital stock, or (ii) make any payment of principal of or any interest or premium, if any, on or repay, repurchase or redeem any debt securities of the Company that rank pari passu in all respects with or junior in interest to the Securities (other than (A) repurchases, redemptions or other acquisitions of shares of capital stock of the Company in connection with any employment contract, benefit plan or other similar arrangement with or for the benefit of any one or more employees, officers, directors or consultants, in connection with a dividend reinvestment or stockholder stock purchase plan or in connection with the issuance of capital stock of the Company (or securities convertible into or exercisable for such capital stock) as consideration in an acquisition transaction entered into prior to the applicable Extension Period, (B) as a result of an exchange or conversion of any class or series of the Company's capital stock (or any capital stock of a Subsidiary of the Company) for any class or series of the Company's capital stock or of any class or series of the Company's indebtedness 58 for any class or series of the Company's capital stock, (C) the purchase of fractional interests in shares of the Company's capital stock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged, (D) any declaration of a dividend in connection with any Rights Plan, the issuance of rights, stock or other property under any Rights Plan or the redemption or repurchase of rights pursuant thereto or (E) any dividend in the form of stock, warrants, options or other rights where the dividend stock or the stock issuable upon exercise of such warrants, options or other rights is the same stock as that on which the dividend is being paid or ranks pari passu with or junior to such stock). (b) The Company also covenants with each Holder of Securities (i) to hold, directly or indirectly, one hundred percent (100%) of the Common Securities of the Trust, provided, that any permitted successor of the Company hereunder may succeed to the Company's ownership of such Common Securities, (ii) as holder of such Common Securities, not to voluntarily dissolve, wind-up or liquidate the Trust other than (A) in connection with a distribution of the Securities to the holders of the Preferred Securities in liquidation of the Trust or (B) in connection with certain mergers, consolidations or amalgamations permitted by the Trust Agreement and (iii) to use its reasonable commercial efforts, consistent with the terms and provisions of the Trust Agreement, to cause the Trust to continue to be taxable as a grantor trust and not as a corporation for United States Federal income tax purposes. SECTION 10.7. Waiver of Covenants. The Company may omit in any particular instance to comply with any covenant or condition contained in Section 10.6 if, before or after the time for such compliance, the Holders of at least a majority in aggregate principal amount of the Outstanding Securities shall, by Act of such Holders, and at least a majority of the aggregate Liquidation Amount of the Preferred Securities then outstanding, by consent of such holders, either waive such compliance in such instance or generally waive compliance with such covenant or condition, but no such waiver shall extend to or affect such covenant or condition except to the extent so expressly waived, and, until such waiver shall become effective, the obligations of the Company in respect of any such covenant or condition shall remain in full force and effect. SECTION 10.8. Treatment of Securities. The Company will treat the Securities as indebtedness, and the amounts, other than payments of principal, payable in respect of the principal amount of such Securities as interest, for all U.S. federal income tax purposes. All payments in respect of the Securities will be made free and clear of U.S. withholding tax to any beneficial owner thereof that has provided an Internal Revenue Service Form W-9 or W-8BEN (or any substitute or successor form) establishing its U.S. or non-U.S. status for U.S. federal income tax purposes, or any other applicable form establishing a complete exemption from U.S. withholding tax. 59 ARTICLE XI REDEMPTION OF SECURITIES SECTION 11.1. Optional Redemption. The Company may, at its option, on any Interest Payment Date, on or after March 15, 2011, redeem the Securities in whole at any time or in part from time to time, at a Redemption Price equal to one hundred percent (100%) of the principal amount thereof (or of the redeemed portion thereof, as applicable), together, in the case of any such redemption, with accrued interest, including any Additional Interest, through but excluding the date fixed as the Redemption Date (the "Optional Redemption Price"); provided, that the Company shall have received the prior approval of any Applicable Insurance Regulatory Authorities with respect to such redemption if then required. SECTION 11.2. Special Event Redemption. Prior to June 15, 2011, upon the occurrence and during the continuation of a Special Event, the Company may, at its option, redeem the Securities, in whole but not in part, at a Redemption Price equal to one hundred seven and one half percent (107.5%) of the principal amount thereof, together, in the case of any such redemption, with accrued interest, including any Additional Interest, through but excluding the date fixed as the Redemption Date (the "Special Redemption Price"), provided, that the Company shall have received the prior approval of any Applicable Insurance Regulatory Authority with respect to such redemption if then required. SECTION 11.3. Election to Redeem; Notice to Trustee. The election of the Company to redeem any Securities, in whole or in part, shall be evidenced by or pursuant to a Board Resolution. In case of any redemption at the election of the Company, the Company shall, not less than forty-five (45) days and not more than seventy-five (75) days prior to the Redemption Date (unless a shorter notice shall be satisfactory to the Trustee), notify the Trustee and the Property Trustee under the Trust Agreement in writing of such date and of the principal amount of the Securities to be redeemed and provide the additional information required to be included in the notice or notices contemplated by Section 11.5. In the case of any redemption of Securities, in whole or in part, (a) prior to the expiration of any restriction on such redemption provided in this Indenture or the Securities or (b) pursuant to an election of the Company which is subject to a condition specified in this Indenture or the Securities, the Company shall furnish the Trustee with an Officers' Certificate and an Opinion of Counsel evidencing compliance with such restriction or condition. SECTION 11.4. Selection of Securities to be Redeemed. (a) If less than all the Securities are to be redeemed, the particular Securities to be redeemed shall be selected and redeemed on a pro rata basis not more than sixty (60) days prior to the Redemption Date by the Trustee from the Outstanding Securities not previously called for redemption, provided, that the unredeemed portion of the principal amount of any Security shall 60 be in an authorized denomination (which shall not be less than the minimum authorized denomination) for such Security. (b) The Trustee shall promptly notify the Company in writing of the Securities selected for redemption and, in the case of any Securities selected for partial redemption, the principal amount thereof to be redeemed. For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to the redemption of Securities shall relate, in the case of any Security redeemed or to be redeemed only in part, to the portion of the principal amount of such Security that has been or is to be redeemed. (c) The provisions of paragraphs (a) and (b) of this Section 11.4 shall not apply with respect to any redemption affecting only a single Security, whether such Security is to be redeemed in whole or in part. In the case of any such redemption in part, the unredeemed portion of the principal amount of the Security shall be in an authorized denomination (which shall not be less than the minimum authorized denomination) for such Security. SECTION 11.5. Notice of Redemption. (a) Notice of redemption shall be given not later than the thirtieth (30th) day, and not earlier than the sixtieth (60th) day, prior to the Redemption Date to each Holder of Securities to be redeemed, in whole or in part, (unless a shorter notice shall be satisfactory to the Property Trustee under the related Trust Agreement). (b) With respect to Securities to be redeemed, in whole or in part, each notice of redemption shall state: (i) the Redemption Date; (ii) the Redemption Price or, if the Redemption Price cannot be calculated prior to the time the notice is required to be sent, the estimate of the Redemption Price, as calculated by the Company, together with a statement that it is an estimate and that the actual Redemption Price will be calculated on the fifth Business Day prior to the Redemption Date (and if an estimate is provided, a further notice shall be sent of the actual Redemption Price on the date that such Redemption Price is calculated); (iii) if less than all Outstanding Securities are to be redeemed, the identification (and, in the case of partial redemption, the respective principal amounts) of the particular Securities to be redeemed; (iv) that on the Redemption Date, the Redemption Price will become due and payable upon each such Security or portion thereof, and that any interest (including any Additional Interest) on such Security or such portion, as the case may be, shall cease to accrue on and after said date; and (v) the place or places where such Securities are to be surrendered for payment of the Redemption Price. 61 (c) Notice of redemption of Securities to be redeemed, in whole or in part, at the election of the Company shall be given by the Company or, at the Company's request, by the Trustee in the name and at the expense of the Company and shall be irrevocable. The notice if mailed in the manner provided above shall be conclusively presumed to have been duly given, whether or not the Holder receives such notice. In any case, a failure to give such notice by mail or any defect in the notice to the Holder of any Security designated for redemption as a whole or in part shall not affect the validity of the proceedings for the redemption of any other Security. SECTION 11.6. Deposit of Redemption Price. Prior to 10:00 a.m., New York City time, on the Redemption Date specified in the notice of redemption given as provided in Section 11.5, the Company will deposit with the Trustee or with one or more Paying Agents (or if the Company is acting as its own Paying Agent, the Company will segregate and hold in trust as provided in Section 10.2) an amount of money sufficient to pay the Redemption Price of, and any accrued interest (including any Additional Interest) on, all the Securities (or portions thereof) that are to be redeemed on that date. SECTION 11.7. Payment of Securities Called for Redemption. (a) If any notice of redemption has been given as provided in Section 11.5, the Securities or portion of Securities with respect to which such notice has been given shall become due and payable on the date and at the place or places stated in such notice at the applicable Redemption Price, together with accrued interest (including any Additional Interest) to the Redemption Date. On presentation and surrender of such Securities at a Place of Payment specified in such notice, the Securities or the specified portions thereof shall be paid and redeemed by the Company at the applicable Redemption Price, together with accrued interest (including any Additional Interest) to the Redemption Date. (b) Upon presentation of any Security redeemed in part only, the Company shall execute and upon receipt thereof the Trustee shall authenticate and deliver to the Holder thereof, at the expense of the Company, a new Security or Securities, of authorized denominations, in aggregate principal amount equal to the unredeemed portion of the Security so presented and having the same Original Issue Date, Stated Maturity and terms. (c) If any Security called for redemption shall not be so paid upon surrender thereof for redemption, the principal of and any premium on such Security shall, until paid, bear interest from the Redemption Date at the rate prescribed therefor in the Security. ARTICLE XII SUBORDINATION OF SECURITIES SECTION 12.1. Securities Subordinate to Senior Debt. The Company covenants and agrees, and each Holder of a Security, by its acceptance thereof, likewise covenants and agrees, that, to the extent and in the manner hereinafter set forth in this Article XII, the payment of the principal of and any premium and interest (including any 62 Additional Interest) on each and all of the Securities are hereby expressly made subordinate and subject in right of payment to the prior payment in full of all Senior Debt. SECTION 12.2. No Payment When Senior Debt in Default; Payment Over of Proceeds Upon Dissolution, Etc. (a) In the event and during the continuation of any default by the Company in the payment of any principal of or any premium or interest on any Senior Debt (following any grace period, if applicable) when the same becomes due and payable, whether at maturity or at a date fixed for prepayment or by declaration of acceleration or otherwise, then, upon written notice of such default to the Company by the holders of such Senior Debt or any trustee therefor, unless and until such default shall have been cured or waived or shall have ceased to exist, no direct or indirect payment (in cash, property, securities, by set-off or otherwise) shall be made or agreed to be made on account of the principal of or any premium or interest (including any Additional Interest) on any of the Securities, or in respect of any redemption, repayment, retirement, purchase or other acquisition of any of the Securities. (b) In the event of a bankruptcy, insolvency or other proceeding described in clause (d) or (e) of the definition of Event of Default (each such event, if any, herein sometimes referred to as a "Proceeding"), all Senior Debt (including any interest thereon accruing after the commencement of any such proceedings) shall first be paid in full before any payment or distribution, whether in cash, securities or other property, shall be made to any Holder of any of the Securities on account thereof. Any payment or distribution, whether in cash, securities or other property (other than securities of the Company or any other entity provided for by a plan of reorganization or readjustment the payment of which is subordinate, at least to the extent provided in these subordination provisions with respect to the indebtedness evidenced by the Securities, to the payment of all Senior Debt at the time outstanding and to any securities issued in respect thereof under any such plan of reorganization or readjustment), which would otherwise (but for these subordination provisions) be payable or deliverable in respect of the Securities shall be paid or delivered directly to the holders of Senior Debt in accordance with the priorities then existing among such holders until all Senior Debt (including any interest thereon accruing after the commencement of any Proceeding) shall have been paid in full. (c) In the event of any Proceeding, after payment in full of all sums owing with respect to Senior Debt, the Holders of the Securities, together with the holders of any obligations of the Company ranking on a parity with the Securities, shall be entitled to be paid from the remaining assets of the Company the amounts at the time due and owing on account of unpaid principal of and any premium and interest (including any Additional Interest) on the Securities and such other obligations before any payment or other distribution, whether in cash, property or otherwise, shall be made on account of any capital stock or any obligations of the Company ranking junior to the Securities and such other obligations. If, notwithstanding the foregoing, any payment or distribution of any character or any security, whether in cash, securities or other property (other than securities of the Company or any other entity provided for by a plan of reorganization or readjustment the payment of which is subordinate, at least to the extent provided in these subordination provisions with respect to the indebtedness evidenced by the Securities, to the payment of all Senior Debt at the time outstanding and to any securities issued in respect thereof under any such plan of reorganization or readjustment) shall be received by the 63 Trustee or any Holder in contravention of any of the terms hereof and before all Senior Debt shall have been paid in full, such payment or distribution or security shall be received in trust for the benefit of, and shall be paid over or delivered and transferred to, the holders of the Senior Debt at the time outstanding in accordance with the priorities then existing among such holders for application to the payment of all Senior Debt remaining unpaid, to the extent necessary to pay all such Senior Debt (including any interest thereon accruing after the commencement of any Proceeding) in full. In the event of the failure of the Trustee or any Holder to endorse or assign any such payment, distribution or security, each holder of Senior Debt is hereby irrevocably authorized to endorse or assign the same. (d) The Trustee and the Holders, at the expense of the Company, shall take such reasonable action (including the delivery of this Indenture to an agent for any holders of Senior Debt or consent to the filing of a financing statement with respect hereto) as may, in the opinion of counsel designated by the holders of a majority in principal amount of the Senior Debt at the time outstanding, be necessary or appropriate to assure the effectiveness of the subordination effected by these provisions. (e) The provisions of this Section 12.2 shall not impair any rights, interests, remedies or powers of any secured creditor of the Company in respect of any security interest the creation of which is not prohibited by the provisions of this Indenture. (f) The securing of any obligations of the Company, otherwise ranking on a parity with the Securities or ranking junior to the Securities, shall not be deemed to prevent such obligations from constituting, respectively, obligations ranking on a parity with the Securities or ranking junior to the Securities. SECTION 12.3. Payment Permitted If No Default. Nothing contained in this Article XII or elsewhere in this Indenture or in any of the Securities shall prevent (a) the Company, at any time, except during the pendency of the conditions described in paragraph (a) of Section 12.2 or of any Proceeding referred to in Section 12.2, from making payments at any time of principal of and any premium or interest (including any Additional Interest) on the Securities or (b) the application by the Trustee of any moneys deposited with it hereunder to the payment of or on account of the principal of and any premium or interest (including any Additional Interest) on the Securities or the retention of such payment by the Holders, if, at the time of such application by the Trustee, it did not have knowledge (in accordance with Section 12.8) that such payment would have been prohibited by the provisions of this Article XII, except as provided in Section 12.8. SECTION 12.4. Subrogation to Rights of Holders of Senior Debt. Subject to the payment in full of all amounts due or to become due on all Senior Debt, or the provision for such payment in cash or cash equivalents or otherwise in a manner satisfactory to the holders of Senior Debt, the Holders of the Securities shall be subrogated to the extent of the payments or distributions made to the holders of such Senior Debt pursuant to the provisions of this Article XII (equally and ratably with the holders of all indebtedness of the Company that by its express terms is subordinated to Senior Debt of the Company to substantially the same 64 extent as the Securities are subordinated to the Senior Debt and is entitled to like rights of subrogation by reason of any payments or distributions made to holders of such Senior Debt) to the rights of the holders of such Senior Debt to receive payments and distributions of cash, property and securities applicable to the Senior Debt until the principal of and any premium and interest (including any Additional Interest) on the Securities shall be paid in full. For purposes of such subrogation, no payments or distributions to the holders of the Senior Debt of any cash, property or securities to which the Holders of the Securities or the Trustee would be entitled except for the provisions of this Article XII, and no payments made pursuant to the provisions of this Article XII to the holders of Senior Debt by Holders of the Securities or the Trustee, shall, as among the Company, its creditors other than holders of Senior Debt, and the Holders of the Securities, be deemed to be a payment or distribution by the Company to or on account of the Senior Debt. SECTION 12.5. Provisions Solely to Define Relative Rights. The provisions of this Article XII are and are intended solely for the purpose of defining the relative rights of the Holders of the Securities on the one hand and the holders of Senior Debt on the other hand. Nothing contained in this Article XII or elsewhere in this Indenture or in the Securities is intended to or shall (a) impair, as between the Company and the Holders of the Securities, the obligations of the Company, which are absolute and unconditional, to pay to the Holders of the Securities the principal of and any premium and interest (including any Additional Interest) on the Securities as and when the same shall become due and payable in accordance with their terms, (b) affect the relative rights against the Company of the Holders of the Securities and creditors of the Company other than their rights in relation to the holders of Senior Debt or (c) prevent the Trustee or the Holder of any Security (or to the extent expressly provided herein, the holder of any Preferred Security) from exercising all remedies otherwise permitted by applicable law upon default under this Indenture, including filing and voting claims in any Proceeding, subject to the rights, if any, under this Article XII of the holders of Senior Debt to receive cash, property and securities otherwise payable or deliverable to the Trustee or such Holder. SECTION 12.6. Trustee to Effectuate Subordination. Each Holder of a Security by his or her acceptance thereof authorizes and directs the Trustee on his or her behalf to take such action as may be necessary or appropriate to acknowledge or effectuate the subordination provided in this Article XII and appoints the Trustee his or her attorney-in-fact for any and all such purposes. SECTION 12.7. No Waiver of Subordination Provisions. (a) No right of any present or future holder of any Senior Debt to enforce subordination as herein provided shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Company or by any act or failure to act, in good faith, by any such holder, or by any noncompliance by the Company with the terms, provisions and covenants of this Indenture, regardless of any knowledge thereof that any such holder may have or be otherwise charged with. 65 (b) Without in any way limiting the generality of paragraph (a) of this Section 12.7, the holders of Senior Debt may, at any time and from to time, without the consent of or notice to the Trustee or the Holders of the Securities, without incurring responsibility to such Holders of the Securities and without impairing or releasing the subordination provided in this Article XII or the obligations hereunder of such Holders of the Securities to the holders of Senior Debt, do any one or more of the following: (i) change the manner, place or terms of payment or extend the time of payment of, or renew or alter, Senior Debt, or otherwise amend or supplement in any manner Senior Debt or any instrument evidencing the same or any agreement under which Senior Debt is outstanding, (ii) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing Senior Debt, (iii) release any Person liable in any manner for the payment of Senior Debt and (iv) exercise or refrain from exercising any rights against the Company and any other Person. SECTION 12.8. Notice to Trustee. (a) The Company shall give prompt written notice to a Responsible Officer of the Trustee of any fact known to the Company that would prohibit the making of any payment to or by the Trustee in respect of the Securities. Notwithstanding the provisions of this Article XII or any other provision of this Indenture, the Trustee shall not be charged with knowledge of the existence of any facts that would prohibit the making of any payment to or by the Trustee in respect of the Securities, unless and until a Responsible Officer of the Trustee shall have received written notice thereof from the Company or a holder of Senior Debt or from any trustee, agent or representative therefor; provided, that if the Trustee shall not have received the notice provided for in this Section 12.8 at least two Business Days prior to the date upon which by the terms hereof any monies may become payable for any purpose (including, the payment of the principal of and any premium on or interest (including any Additional Interest) on any Security), then, anything herein contained to the contrary notwithstanding, the Trustee shall have full power and authority to receive such monies and to apply the same to the purpose for which they were received and shall not be affected by any notice to the contrary that may be received by it within two Business Days prior to such date. (b) The Trustee shall be entitled to rely on the delivery to it of a written notice by a Person representing himself or herself to be a holder of Senior Debt (or a trustee, agent, representative or attorney-in-fact therefor) to establish that such notice has been given by a holder of Senior Debt (or a trustee, agent, representative or attorney-in-fact therefor). In the event that the Trustee determines in good faith that further evidence is required with respect to the right of any Person as a holder of Senior Debt to participate in any payment or distribution pursuant to this Article XII, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of Senior Debt held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and any other facts pertinent to the rights of such Person under this Article XII, and if such evidence is not furnished, the Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment. 66 SECTION 12.9. Reliance on Judicial Order or Certificate of Liquidating Agent. Upon any payment or distribution of assets of the Company referred to in this Article XII, the Trustee and the Holders of the Securities shall be entitled to conclusively rely upon any order or decree entered by any court of competent jurisdiction in which such Proceeding is pending, or a certificate of the trustee in bankruptcy, receiver, liquidating trustee, custodian, assignee for the benefit of creditors, agent or other Person making such payment or distribution, delivered to the Trustee or to the Holders of Securities, for the purpose of ascertaining the Persons entitled to participate in such payment or distribution, the holders of the Senior Debt and other indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article XII. SECTION 12.10. Trustee Not Fiduciary for Holders of Senior Debt. The Trustee, in its capacity as trustee under this Indenture, shall not owe or be deemed to owe any fiduciary duty to the holders of Senior Debt and shall not be liable to any such holders if it shall in good faith mistakenly pay over or distribute to Holders of Securities or to the Company or to any other Person cash, property or securities to which any holders of Senior Debt shall be entitled by virtue of this Article XII or otherwise. SECTION 12.11. Rights of Trustee as Holder of Senior Debt; Preservation of Trustee's Rights. The Trustee in its individual capacity shall be entitled to all the rights set forth in this Article XII with respect to any Senior Debt that may at any time be held by it, to the same extent as any other holder of Senior Debt, and nothing in this Indenture shall deprive the Trustee of any of its rights as such holder. With respect to the holders of Senior Debt of the Company, the Trustee undertakes to perform only such of its obligations as are specifically set forth in this Article XII, and no implied covenants or obligations with respect to the holders of such Senior Debt shall be read into this Indenture against the Trustee. Nothing in this Article XII shall apply to claims of, or payments to, the Trustee under or pursuant to Section 6.6. SECTION 12.12. Article Applicable to Paying Agents. If at any time any Paying Agent other than the Trustee shall have been appointed by the Company and be then acting hereunder, the term "Trustee" as used in this Article XII shall in such case (unless the context otherwise requires) be construed as extending to and including such Paying Agent within its meaning as fully for all intents and purposes as if such Paying Agent were named in this Article XII in addition to or in place of the Trustee; provided, that Sections 12.8 and 12.11 shall not apply to the Company or any Affiliate of the Company if the Company or such Affiliate acts as Paying Agent. * * * * This instrument may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. 67 * * * * 68 IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed as of the day and year first above written. NORTH POINTE HOLDINGS CORPORATION By: /s/ James G. Petcoff ------------------------------------ Name: James G. Petcoff Title: Chairman, President & Chief Executive Officer LASALLE BANK NATIONAL ASSOCIATION as Trustee By: /s/ Koren E. Sumser ------------------------------------ Name: Koren E. Sumser Title: First Vice President 69 SCHEDULE A DETERMINATION OF LIBOR With respect to the Securities, the London interbank offered rate ("LIBOR") shall be determined by the Calculation Agent in accordance with the following provisions (in each case rounded to the nearest .000001%): (1) On the second LIBOR Business Day (as defined below) prior to an Interest Payment Date (each such day, a "LIBOR Determination Date"), LIBOR for any given security shall for the following interest payment period equal the rate, as obtained by the Calculation Agent from Bloomberg Financial Markets Commodities News, for three-month Eurodollar deposits that appears on Dow Jones Telerate Page 3750 (as defined in the International Swaps and Derivatives Association, Inc. 1991 Interest Rate and Currency Exchange Definitions), or such other page as may replace such Page 3750, as of 11:00 a.m. (London time) on such LIBOR Determination Date. (2) If, on any LIBOR Determination Date, such rate does not appear on Dow Jones Telerate Page 3750 or such other page as may replace such Page 3750, the Calculation Agent shall determine the arithmetic mean of the offered quotations of the Reference Banks (as defined below) to leading banks in the London interbank market for three-month Eurodollar deposits in an amount determined by the Calculation Agent by reference to requests for quotations as of approximately 11:00 a.m. (London time) on the LIBOR Determination Date made by the Calculation Agent to the Reference Banks. If, on any LIBOR Determination Date, at least two of the Reference Banks provide such quotations, LIBOR shall equal such arithmetic mean of such quotations. If, on any LIBOR Determination Date, only one or none of the Reference Banks provide such quotations, LIBOR shall be deemed to be the arithmetic mean of the offered quotations that leading banks in the City of New York selected by the Calculation Agent are quoting on the relevant LIBOR Determination Date for three-month Eurodollar deposits in an amount determined by the Calculation Agent by reference to the principal London offices of leading banks in the London interbank market; provided that, if the Calculation Agent is required but is unable to determine a rate in accordance with at least one of the procedures provided above, LIBOR shall be LIBOR as determined on the previous LIBOR Determination Date. (3) As used herein: "Reference Banks" means four major banks in the London interbank market selected by the Calculation Agent; and "LIBOR Business Day" means a day on which commercial banks are open for business (including dealings in foreign exchange and foreign currency deposits) in London. Schedule A-1 EXHIBIT A FORM OF OFFICER'S FINANCIAL CERTIFICATE The undersigned, the [Chief Financial Officer/Treasurer/Assistant Treasurer/ Secretary/ Assistant Secretary, Chairman/ViceChairman/Chief Executive Officer/President/Vice President] hereby certifies, pursuant to Section 7.3(b) of the Junior Subordinated Indenture, dated as of February 22, 2006 (the "Indenture"), among North Pointe Holdings Corporation (the "Company") and LaSalle Bank National Association, as trustee, that, as of [date], [20__], the Company, if applicable, and its Subsidiary Insurance Companies (as defined below) had the following ratios and balances: [For the Company, if applicable, and each Subsidiary Insurance Company (as defined below) provide:] [INSURANCE COMPANY] As of [Quarterly/Annual Financial Date], 20__ NAIC Risk Based Capital Ratio (authorized control level) _____% 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, ALSO PROVIDE:] Expense Ratio _____% Loss and LAE Ratio _____% Combined Ratio _____% Net Premiums Written (annualized) to Policyholders' Surplus _____%]

- - A table describing the quarterly report calculation procedures is provided on page 3 hereof The following is a complete list as of [Quarterly/Annual Financial Date] of the Company's companies which are authorized to write insurance business or otherwise conduct insurance or reinsurance business (the "Subsidiary Insurance Companies"): [List of subsidiary insurance companies] [FOR FISCAL YEAR END: Attached hereto are the audited consolidated financial statements (including the balance sheet, income statement and statement of cash flows, and notes thereto, together with the report of the independent accountants thereon) of the Company and its consolidated subsidiaries for the three years ended [date], 20__ and the Statutory Financial Statements (as defined in the Indenture) for the one year ended [date] 200_.] [FOR FISCAL QUARTER END: Attached hereto are the unaudited consolidated and consolidating financial statements (including the balance sheet and income statement) of the Company and its consolidated subsidiaries and the Statutory Financial Statements (as defined in the Indenture) for the fiscal quarter ended [date], 20__.] The financial statements fairly present in all material respects, in accordance with U.S. generally accepted accounting principles ("GAAP"), the financial position of the Company and its consolidated subsidiaries, and the results of operations and changes in financial condition as of the date, and for the [quarter] [annual] period ended [date], 20__, and such financial statements have been prepared in accordance with GAAP consistently applied throughout the period involved (expect as otherwise noted therein). The Statutory Financial Statements fairly present in all material respects in accordance with Applicable Accounting Principles, as defined in the Indenture, the financial position of the subject insurance company and have been prepared in accordance with Applicable Accounting Principles. IN WITNESS WHEREOF, the undersigned has executed this Officer's Financial Certificate as of this _____ day of _____________, 20__ North Pointe Holdings Corporation By: ------------------------------------ Name: ---------------------------------- 28819 Franklin Road Southfield, MI 48034 (248) 359-9945 FINANCIAL DEFINITIONS INSURANCE COMPANY
REPORT ITEM DESCRIPTION OF CALCULATION ----------- -------------------------- NAIC RISK BASED CAPITAL RATIO-P&C Total Adjusted Capital/Authorized Control Level Risk-Based Capital NAICRISK BASED CAPITAL RATIO-LIFE (Total Adjusted Capital-Asset Valuation Reserve)/Authorized Control Level Risk-Based Capital 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 Write Ins for other than special surplus funds + Surplus Notes + Gross Paid-In and Contributed Surplus + Unassigned Funds (Surplus) - Treasury Stock TOTAL CLASS 1 & 2 RATED (Total Class 1 + Total Class 2 Rated INVESTMENTS TO TOTAL FIXED INCOME Investments)/Total Fixed Income INVESTMENTS Investments TOTAL CLASS 1 & 2 RATED (Total Class 1 + Total Class 2 Rated INVESTMENTS TO TOTAL INVESTMENTS 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) Net Premiums Written/Policyholders' TO POLICYHOLDERS' SURPLUS Surplus
EXHIBIT B FORM OF OFFICERS' CERTIFICATE UNDER SECTION 10.3 Pursuant to Section 10.3 of the Indenture, dated as of February 22, 2006 (as amended or supplemented from time to time, the "Indenture"), between North Pointe Holdings Corporation, as issuer (the "Company"), and LaSalle Bank National Association, as trustee, each of the undersigned hereby certifies that, to the knowledge of the undersigned, the Company is not in default in the performance or observance of any of the terms, provisions or conditions contained in the Indenture (without regard to any period of grace or requirement of notice provided under the Indenture), for the calendar year ending on ________, 20__ [, except as follows: specify each such default and the nature and status thereof]. Capitalized terms used herein, and not otherwise defined herein, have the respective meanings assigned thereto in the Indenture. IN WITNESS WHEREOF, the undersigned have executed this Officer's Certificate as of ________, 20__. ---------------------------------------- Name: ---------------------------------- Title: [Must be the Chairman of the Board, a Vice Chairman of the Board, the Chief Executive Officer, the President or a Vice President of Company] ---------------------------------------- Name: ---------------------------------- Title: [Must be the Chief Financial Officer, the Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary of Company] EX-4.2 3 k02899exv4w2.txt FORM OF FLOATING RATE JUNIOR SUBORDINATED NOTE DUE 2036 EXHIBIT 4.2 FORM OF FLOATING RATE JUNIOR SUBORDINATED NOTE DUE 2036 THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF THE DEPOSITORY TRUST COMPANY ("DTC") OR A NOMINEE OF DTC. THIS SECURITY IS EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN DTC OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER OF THIS SECURITY (OTHER THAN A TRANSFER OF THIS SECURITY AS A WHOLE BY DTC TO A NOMINEE OF DTC OR BY A NOMINEE OF DTC TO DTC OR ANOTHER NOMINEE OF DTC) MAY BE REGISTERED EXCEPT IN LIMITED CIRCUMSTANCES. UNLESS THIS SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF DTC TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY SECURITY ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND SUCH SECURITIES, AND ANY INTEREST THEREIN, MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF ANY SECURITIES IS HEREBY NOTIFIED THAT THE SELLER OF THE SECURITIES MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A UNDER THE SECURITIES ACT. THE HOLDER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH SECURITIES MAY BE OFFERED, RESOLD OR OTHERWISE TRANSFERRED ONLY (I) TO THE COMPANY, (II) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (III) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (A) (1), (2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF AN "ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, (IV) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR (V) PURSUANT TO AN EXEMPTION FROM THE SECURITIES ACT, IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND, IN THE CASE OF (III) OR (V), SUBJECT TO THE RIGHT OF THE COMPANY TO REQUIRE AN OPINION OF COUNSEL AND OTHER INFORMATION SATISFACTORY TO IT AND (B) THE HOLDER WILL NOTIFY ANY PURCHASER OF ANY SECURITIES FROM IT OF THE RESALE RESTRICTIONS REFERRED TO IN (A) ABOVE. THE SECURITIES WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN BLOCKS HAVING AN AGGREGATE PRINCIPAL AMOUNT OF NOT LESS THAN $100,000. TO THE FULLEST EXTENT PERMITTED BY LAW, ANY ATTEMPTED TRANSFER OF SECURITIES, OR ANY INTEREST THEREIN, IN A BLOCK HAVING AN AGGREGATE PRINCIPAL AMOUNT OF LESS THAN $100,000 AND MULTIPLES OF $1,000 IN EXCESS THEREOF SHALL BE DEEMED TO BE VOID AND OF NO LEGAL EFFECT WHATSOEVER. TO THE FULLEST EXTENT PERMITTED BY LAW, ANY SUCH PURPORTED TRANSFEREE SHALL BE DEEMED NOT TO BE THE HOLDER OF SUCH SECURITIES FOR ANY PURPOSE, INCLUDING, BUT NOT LIMITED TO, THE RECEIPT OF PRINCIPAL OF OR INTEREST ON SUCH SECURITIES, OR ANY INTEREST THEREIN, AND SUCH PURPORTED TRANSFEREE SHALL BE DEEMED TO HAVE NO INTEREST WHATSOEVER IN SUCH SECURITIES. THE HOLDER OF THIS SECURITY, OR ANY INTEREST THEREIN, BY ITS ACCEPTANCE HEREOF OR THEREOF ALSO AGREES, REPRESENTS AND WARRANTS THAT IT IS NOT AN EMPLOYEE BENEFIT, INDIVIDUAL RETIREMENT ACCOUNT OR OTHER PLAN OR ARRANGEMENT SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") (EACH A "PLAN"), OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE "PLAN ASSETS" BY REASON OF ANY PLAN'S INVESTMENT IN THE ENTITY, AND NO PERSON INVESTING "PLAN ASSETS" OF ANY PLAN MAY ACQUIRE OR HOLD THIS SECURITY OR ANY INTEREST THEREIN. ANY PURCHASER OR HOLDER OF THE SECURITIES OR ANY INTEREST THEREIN WILL BE DEEMED TO HAVE REPRESENTED BY ITS PURCHASE AND HOLDING THEREOF THAT IT IS NOT AN EMPLOYEE BENEFIT PLAN WITHIN THE MEANING OF SECTION 3(3) OF ERISA, OR A PLAN TO WHICH SECTION 4975 OF THE CODE IS APPLICABLE, A TRUSTEE OR OTHER PERSON ACTING ON BEHALF OF AN EMPLOYEE BENEFIT PLAN OR PLAN, OR ANY OTHER PERSON OR ENTITY USING THE ASSETS OF ANY EMPLOYEE BENEFIT PLAN OR PLAN TO FINANCE SUCH PURCHASE. NORTH POINTE HOLDINGS CORPORATION FLOATING RATE JUNIOR SUBORDINATED NOTE DUE 2036 No. 1 $20,620,000 North Pointe Holdings Corporation, a corporation organized and existing under the laws of Michigan (hereinafter called the "Company," which term includes any successor Person under the Indenture hereinafter referred to), for value received, hereby promises to pay to LaSalle Bank National Association, not in its individual capacity, but solely as Property Trustee for NP Capital Trust I, a Delaware statutory trust (the "Holder"), or registered assigns, the principal sum of Twenty Million Six Hundred Twenty Thousand Dollars ($20,620,000) or such other principal amount represented hereby as may be set forth in the records of the Securities Registrar hereinafter referred to in accordance with the Indenture on March 15, 2036. The Company further promises to pay interest on said principal sum from February 22, 2006, or from the most recent Interest Payment Date to which interest has been paid or duly provided for, quarterly (subject to deferral as set forth herein) in arrears on March15, June 15, September 15 and December 15 of each year, commencing March 15, 2006, or if any such day is not a Business Day, on the next succeeding Business Day (and additional interest shall accrue in respect of the amounts whose payment is so delayed for the period from and after such Interest Payment Date until such next succeeding Business Day), except that, if such Business Day falls in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case, with the same force and effect as if made on the Interest Payment Date, at a fixed rate equal to 8.70% per annum through the interest payment date in March 2011 and thereafter at a variable rate equal to LIBOR plus 3.64% per annum, together with Additional Tax Sums, if any, as provided in Section 10.5 of the Indenture, until the principal hereof is paid or duly provided for or made available for payment; provided, further, that any overdue principal, premium, if any, or Additional Tax Sums and any overdue installment of interest shall bear Additional Interest at a fixed rate equal to 8.70% per annum through the interest payment date in March 2011 and thereafter at a variable rate equal to LIBOR plus 3.64% per annum (to the extent that the payment of such interest shall be legally enforceable), compounded quarterly, from the dates such amounts are due until they are paid or made available for payment, and such interest shall be payable on demand. The amount of interest payable shall be computed on the basis of a 360-day year and the actual number of days elapsed in the relevant interest period. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date shall, as provided in the Indenture, be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest installment. Any such interest not so punctually paid or duly provided for shall forthwith cease to be payable to the Holder on such Regular Record Date and may either be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to Holders of Securities not less than ten (10) days prior to such Special Record Date, or be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities may be listed, and upon such notice as may be required by such exchange, all as more fully provided in the Indenture. So long as no Event of Default has occurred and is continuing, the Company shall have the right, at any time and from time to time during the term of this Security, to defer the payment of interest on this Security for a period of up to twenty (20) consecutive quarterly interest payment periods (each such period, an "Extension Period"), during which Extension Period(s), no interest shall be due and payable (except any Additional Tax Sums that may be due and payable). No Extension Period shall end on a date other than an Interest Payment Date, and no Extension Period shall extend beyond the Stated Maturity of the principal of this Security. No interest shall be due and payable during an Extension Period (except any Additional Tax Sums that may be due and payable), except at the end thereof, but each installment of interest that would otherwise have been due and payable during such Extension Period shall bear Additional Interest (to the extent payment of such interest would be legally enforceable) at a fixed rate equal to 8.70% per annum through the Interest Payment Date in March 2011 and thereafter at a variable rate equal to LIBOR plus 3.64% per annum, compounded quarterly, from the dates on which amounts would have otherwise been due and payable until paid or made available for payment. At the end of any such Extension Period, the Company shall pay all interest then accrued and unpaid on this Security, together with such Additional Interest. Prior to the termination of any such Extension Period, the Company may further defer the payment of interest; provided, that (i) all such previous and further extensions comprising such Extension Period do not exceed twenty (20) quarterly interest payment periods, (ii) no Extension Period shall end on a date other than an Interest Payment Date and (iii) no Extension Period shall extend beyond the Stated Maturity of the principal of this Security. Upon the termination of any such Extension Period and upon the payment of all accrued and unpaid interest and any Additional Interest then due on any Interest Payment Date, the Company may elect to begin a new Extension Period; provided, that (i) such Extension Period does not exceed twenty (20) quarterly interest payment periods, (ii) no Extension Period shall end on a date other than an Interest Payment Date and (iii) no Extension Period shall extend beyond the Stated Maturity of the principal of this Security. The Company shall give the Holder of this Security and the Trustee written notice of its election to begin any such Extension Period at least five Business Days prior to the next succeeding Interest Payment Date on which interest on this Security would be payable but for such deferral or, so long as this Security is held by the Trust, at least five Business Days prior to the earlier of (i) the next succeeding date on which Distributions on the Preferred Securities of NP Capital Trust I would be payable but for such deferral and (ii) the date on which the Property Trustee of such Trust is required to give notice to any securities exchange or other applicable self-regulatory organization or to holders of such Preferred Securities of the record date for the payment of such Distributions. During any such Extension Period, the Company shall not (i) declare or pay any dividends or distributions on, or redeem, purchase, acquire or make a liquidation payment with respect to, any of the Company's capital stock or (ii) make any payment of principal of or any interest or premium, if any, on or repay, repurchase or redeem any debt securities of the Company that rank pari passu in all respects with or junior in interest to this Security (other than (a) repurchases, redemptions or other acquisitions of shares of capital stock of the Company in connection with (1) any employment contract, benefit plan or other similar arrangement with or for the benefit of any one or more employees, officers, directors or consultants, (2) a dividend reinvestment or stockholder stock purchase plan and (3) the issuance of capital stock of the Company (or securities convertible into or exercisable for such capital stock) as consideration in an acquisition transaction entered into prior to the applicable Extension Period, (b) as a result of an exchange or conversion of any class or series of the Company's capital stock (or any capital stock of a Subsidiary of the Company) for any class or series of the Company's capital stock or of any class or series of the Company's indebtedness for any class or series of the Company's capital stock, (c) the purchase of fractional interests in shares of the Company's capital stock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged, (d) any declaration of a dividend in connection with any Rights Plan, the issuance of rights, stock or other property under any Rights Plan, or the redemption or repurchase of rights pursuant thereto or (e) any dividend in the form of stock, warrants, options or other rights where the dividend stock or the stock issuable upon exercise of such warrants, options or other rights is the same stock as that on which the dividend is being paid or ranks pari passu with or junior to such stock). Payment of principal of, premium, if any, and interest on this Security shall be made in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. Payments of principal, premium, if any, and interest due at the Maturity of this Security shall be made at the Place of Payment upon surrender of such Securities to the Paying Agent, and payments of interest shall be made, subject to such surrender where applicable, by wire transfer at such place and to such account at a banking institution in the United States as may be designated in writing to the Paying Agent at least ten (10) Business Days prior to the date for payment by the Person entitled thereto unless proper written transfer instructions have not been received by the relevant record date, in which case such payments shall be made by check mailed to the address of such Person as such address shall appear in the Security Register. Notwithstanding the foregoing, so long as the Holder of this Security is the Property Trustee, the payment of the principal of (and premium, if any) and interest (including any overdue installment of interest and Additional Tax Sums, if any) on this Security will be made at such place and to such account as may be designated by the Property Trustee. The indebtedness evidenced by this Security is, to the extent provided in the Indenture, subordinate and junior in right of payment to the prior payment in full of all Senior Debt, and this Security is issued subject to the provisions of the Indenture with respect thereto. Each Holder of this Security, by accepting the same, (a) agrees to and shall be bound by such provisions, (b) authorizes and directs the Trustee on his or her behalf to take such actions as may be necessary or appropriate to effectuate the subordination so provided and (c) appoints the Trustee his or her attorney-in-fact for any and all such purposes. Each Holder hereof, by his or her acceptance hereof, waives all notice of the acceptance of the subordination provisions contained herein and in the Indenture by each holder of Senior Debt, whether now outstanding or hereafter incurred, and waives reliance by each such holder upon said provisions. Unless the certificate of authentication hereon has been executed by the Trustee by manual signature, this Security shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose. IN WITNESS WHEREOF, the Company has duly executed this certificate on this ____ day of _____________, 2006. NORTH POINTE HOLDINGS CORPORATION, By: ------------------------------------ Name: James G. Petcoff Title: Chairman, President & Chief Executive Officer This represents Securities referred to in the within mentioned Indenture. Dated: ___________, 2006 LASALLE BANK NATIONAL ASSOCIATION, as Trustee By: ------------------------------------ Authorized Signatory REVERSE OF SECURITY This Security is one of a duly authorized issue of securities of the Company (the "Securities") issued under the Junior Subordinated Indenture, dated as of February 22, 2006 (the "Indenture"), between the Company and LaSalle Bank National Association, as Trustee (in such capacity, the "Trustee," which term includes any successor trustee under the Indenture), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Company, the Trustee, the holders of Senior Debt, the Holders of the Securities and the holders of the Preferred Securities, and of the terms upon which the Securities are, and are to be, authenticated and delivered. All terms used in this Security that are defined in the Indenture or in the Amended and Restated Trust Agreement, dated as of February 22, 2006 (as modified, amended or supplemented from time to time, the "Trust Agreement"), relating to the NP Capital Trust I (the "Trust") among the Company, as Depositor, the Trustees named therein and the Holders from time to time of the Trust Securities issued pursuant thereto, shall have the meanings assigned to them in the Indenture or the Trust Agreement, as the case may be. The Company may, on any Interest Payment Date, at its option and in accordance with the Indenture, on or after March 15, 2011 and subject to the terms and conditions of Article XI of the Indenture, redeem this Security in whole at any time or in part from time to time at a Redemption Price equal to one hundred percent (100%) of the principal amount hereof, together, in the case of any such redemption, with accrued interest, including any Additional Interest, through but excluding the date fixed as the Redemption Date; provided, that the Company shall have received the prior approval of any Applicable Insurance Regulatory Authority then required. In addition, upon the occurrence and during the continuation of a Special Event, the Company may, at its option and in accordance with the Indenture, redeem this Security, in whole but not in part, subject to the terms and conditions of Article XI of the Indenture at a Redemption Price equal to one hundred seven and one half percent (107.5%) of the principal amount hereof, together, in the case of any such redemption, with accrued interest, including any Additional Interest, through but excluding the date fixed as the Redemption Date; provided, that the Company shall have received the prior approval of any Applicable Insurance Regulatory Authority then required. In the event of redemption of this Security in part only, a new Security or Securities for the unredeemed portion hereof will be issued in the name of the Holder hereof upon the cancellation hereof. If less than all the Securities are to be redeemed, the particular Securities to be redeemed shall be selected not more than sixty (60) days prior to the Redemption Date by the Trustee from the Outstanding Securities not previously called for redemption, by such method as the Trustee shall deem fair and appropriate and which may provide for the selection for redemption of a portion of the principal amount of any Security. The Indenture permits, with certain exceptions as therein provided, the Company and the Trustee at any time to enter into a supplemental indenture or indentures for the purpose of modifying in any manner the rights and obligations of the Company and of the Holders of the Securities, with the consent of the Holders of not less than a majority in principal amount of the Outstanding Securities. The Indenture also contains provisions permitting Holders of specified percentages in principal amount of the Securities, on behalf of the Holders of all Securities, to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Security shall be conclusive and binding upon such Holder and upon all future Holders of this Security and of any Security issued upon the registration of transfer hereof or in exchange herefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this Security. No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of and any premium, if any, and interest, including any Additional Interest (to the extent legally enforceable), on this Security at the times, place and rate, and in the coin or currency, herein prescribed. As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Security is registrable in the Securities Register, upon surrender of this Security for registration of transfer at the office or agency of the Company maintained for such purpose, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Securities Registrar and duly executed by, the Holder hereof or such Holder's attorney duly authorized in writing, and thereupon one or more new Securities, of like tenor, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees. The Securities are issuable only in registered form without coupons in minimum denominations of $100,000 and any integral multiple of $1,000 in excess thereof. As provided in the Indenture and subject to certain limitations therein set forth, Securities are exchangeable for a like aggregate principal amount of Securities and of like tenor of a different authorized denomination, as requested by the Holder surrendering the same. No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. The Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name this Security is registered as the owner hereof for all purposes, whether or not this Security be overdue, and neither the Company, the Trustee nor any such agent shall be affected by notice to the contrary. The Company and, by its acceptance of this Security or a beneficial interest herein, the Holder of, and any Person that acquires a beneficial interest in, this Security agree that, for United States federal, state and local tax purposes, it is intended that this Security constitute indebtedness. THIS SECURITY SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAWS PROVISIONS (OTHER THAN SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW). EX-4.3 4 k02899exv4w3.txt FORM OF PREFERRED SECURITIES CERTIFICATE OF NP CAPITAL TRUST I EXHIBIT 4.3 FORM OF PREFERRED SECURITIES CERTIFICATE THIS PREFERRED SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE TRUST AGREEMENT HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF THE DEPOSITORY TRUST COMPANY ("DTC") OR A NOMINEE OF DTC. THIS PREFERRED SECURITY IS EXCHANGEABLE FOR PREFERRED SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN DTC OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE TRUST AGREEMENT, AND NO TRANSFER OF THIS PREFERRED SECURITY (OTHER THAN A TRANSFER OF THIS PREFERRED SECURITY AS A WHOLE BY DTC TO A NOMINEE OF DTC OR BY A NOMINEE OF DTC TO DTC OR ANOTHER NOMINEE OF DTC) MAY BE REGISTERED EXCEPT IN LIMITED CIRCUMSTANCES. UNLESS THIS PREFERRED SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF DTC TO NP CAPITAL TRUST I OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY PREFERRED SECURITY ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. THE PREFERRED SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND SUCH PREFERRED SECURITIES OR ANY INTEREST THEREIN MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF ANY PREFERRED SECURITIES IS HEREBY NOTIFIED THAT THE SELLER OF THE PREFERRED SECURITIES MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A UNDER THE SECURITIES ACT. THE HOLDER OF THE PREFERRED SECURITIES REPRESENTED BY THIS CERTIFICATE AGREES FOR THE BENEFIT OF THE TRUST AND THE DEPOSITOR THAT (A) SUCH PREFERRED SECURITIES MAY BE OFFERED, RESOLD OR OTHERWISE TRANSFERRED ONLY (I) TO THE TRUST, (II) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (III) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (a) (1), (2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF AN "ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, (IV) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR (V) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT, IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND, IN THE CASE OF (III) OR (V), SUBJECT TO THE RIGHT OF THE TRUST AND THE DEPOSITOR TO REQUIRE AN OPINION OF COUNSEL AND OTHER INFORMATION SATISFACTORY TO EACH OF THEM AND (B) THE HOLDER WILL NOTIFY ANY PURCHASER OF ANY PREFERRED SECURITIES FROM IT OF THE RESALE RESTRICTIONS REFERRED TO IN (A) ABOVE. THE PREFERRED SECURITIES WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN BLOCKS HAVING AN AGGREGATE LIQUIDATION AMOUNT OF NOT LESS THAN $100,000. TO THE FULLEST EXTENT PERMITTED BY LAW, ANY ATTEMPTED TRANSFER OF PREFERRED SECURITIES, OR ANY INTEREST THEREIN, IN A BLOCK HAVING AN AGGREGATE LIQUIDATION AMOUNT OF LESS THAN $100,000 AND MULTIPLES OF $1,000 IN EXCESS THEREOF SHALL BE DEEMED TO BE VOID AND OF NO LEGAL EFFECT WHATSOEVER. TO THE FULLEST EXTENT PERMITTED BY LAW, ANY SUCH PURPORTED TRANSFEREE SHALL BE DEEMED NOT TO BE THE HOLDER OF SUCH PREFERRED SECURITIES FOR ANY PURPOSE, INCLUDING, BUT NOT LIMITED TO, THE RECEIPT OF LIQUIDATION AMOUNT OF OR DISTRIBUTIONS ON SUCH PREFERRED SECURITIES, OR ANY INTEREST THEREIN, AND SUCH PURPORTED TRANSFEREE SHALL BE DEEMED TO HAVE NO INTEREST WHATSOEVER IN SUCH PREFERRED SECURITIES. THE HOLDER OF THIS SECURITY, OR ANY INTEREST THEREIN, BY ITS ACCEPTANCE HEREOF OR THEREOF ALSO AGREES, REPRESENTS AND WARRANTS THAT IT IS NOT AN EMPLOYEE BENEFIT, INDIVIDUAL RETIREMENT ACCOUNT OR OTHER PLAN OR ARRANGEMENT SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") (EACH A "PLAN"), OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE "PLAN ASSETS" BY REASON OF ANY PLAN'S INVESTMENT IN THE ENTITY, AND NO PERSON INVESTING "PLAN ASSETS" OF ANY PLAN MAY ACQUIRE OR HOLD THIS PREFERRED SECURITY OR ANY INTEREST THEREIN. ANY PURCHASER OR HOLDER OF THE PREFERRED SECURITIES OR ANY INTEREST THEREIN WILL BE DEEMED TO HAVE REPRESENTED BY ITS PURCHASE AND HOLDING THEREOF THAT IT IS NOT AN EMPLOYEE BENEFIT PLAN WITHIN THE MEANING OF SECTION 3(3) OF ERISA, OR A PLAN TO WHICH SECTION 4975 OF THE CODE IS APPLICABLE, A TRUSTEE OR OTHER PERSON ACTING ON BEHALF OF AN EMPLOYEE BENEFIT PLAN OR PLAN, OR ANY OTHER PERSON OR ENTITY USING THE ASSETS OF ANY EMPLOYEE BENEFIT PLAN OR PLAN TO FINANCE SUCH PURCHASE. THE HOLDER OF THE PREFERRED SECURITIES REPRESENTED BY THIS CERTIFICATE AGREES TO TREAT THE TRUST AS A GRANTOR TRUST FOR UNITED STATES FEDERAL, STATE AND LOCAL TAX PURPOSES, AND TO TREAT THE TRUST SECURITIES (INCLUDING ALL PAYMENTS AND PROCEEDS WITH RESPECT TO SUCH TRUST SECURITIES) AS UNDIVIDED BENEFICIAL OWNERSHIP INTERESTS IN THE TRUST PROPERTY (AND PAYMENTS AND PROCEEDS THEREFROM, RESPECTIVELY) FOR UNITED STATES FEDERAL, STATE AND LOCAL TAX PURPOSES AND TO TREAT THE NOTES AS INDEBTEDNESS OF THE DEPOSITOR FOR UNITED STATES FEDERAL, STATE AND LOCAL TAX PURPOSES.
CERTIFICATE NUMBER AGGREGATE LIQUIDATION AMOUNT - ------------------ ---------------------------- ~~G-1 PREFERRED SECURITIES $20,000,000~~
CUSIP NO. 62937J AA 4 CERTIFICATE EVIDENCING PREFERRED SECURITIES OF NP CAPITAL TRUST I FLOATING RATE PREFERRED SECURITIES (LIQUIDATION AMOUNT $1,000 PER PREFERRED SECURITY) NP Capital Trust I, a statutory trust created under the laws of the State of Delaware (the "Trust"), hereby certifies that Cede & Co (the "Holder") is the registered owner of Twenty Thousand (20,000) Preferred Securities or such other number of Preferred Securities represented hereby as may be set forth in the records of the Securities Registrar hereinafter referred to in accordance with the Trust Agreement (as defined below) of the Trust representing an undivided preferred beneficial interest in the assets of the Trust and designated the NP Capital Trust I Floating Rate Preferred Securities, (liquidation amount $1,000 per Preferred Security) (the "Preferred Securities"). Subject to the terms of the Trust Agreement (as defined below), the Preferred Securities are transferable on the books and records of the Trust, in person or by a duly authorized attorney, upon surrender of this certificate duly endorsed and in proper form for transfer as provided in Section 5.7 of the Trust Agreement (as defined below). The designations, rights, privileges, restrictions, preferences and other terms and provisions of the Preferred Securities are set forth in, and this certificate and the Preferred Securities represented hereby are issued and shall in all respects be subject to the terms and provisions of, the Amended and Restated Trust Agreement of the Trust, dated as of February 22, 2006, as the same may be amended from time to time (the "Trust Agreement"), among North Pointe Holdings Corporation, as Depositor, LaSalle Bank National Association, as Property Trustee, Christiana Bank & Trust Company, as Delaware Trustee, the Administrative Trustees named therein and the Holders, from time to time, of Trust Securities. The Holder is entitled to the benefits of the Guarantee Agreement entered into by North Pointe Holdings Corporation, a Michigan corporation, and LaSalle Bank National Association, as Guarantee Trustee, dated as of February 22, 2006, as the same may be amended from time to time (the "Guarantee Agreement"), to the extent provided therein. The Trust will furnish a copy of each of the Trust Agreement and the Guarantee Agreement to the Holder without charge upon written request to the Property Trustee at its Corporate Trust Office. Upon receipt of this certificate, the Holder is bound by the Trust Agreement and is entitled to the benefits thereunder. This Preferred Securities Certificate shall be governed by and construed in accordance with the laws of the State of Delaware. All capitalized terms used but not defined in this Preferred Securities Certificate are used with the meanings specified in the Trust Agreement, including the Schedules and Exhibits thereto. IN WITNESS WHEREOF, one of the Administrative Trustees of the Trust has executed on behalf of the Trust this certificate this __ day of __________, 2006. NP CAPITAL TRUST I By: ------------------------------------ Name: John Berry Administrative Trustee This represents Preferred Securities referred to in the within-mentioned Trust Agreement. Dated: --------------- LASALLE BANK NATIONAL ASSOCIATION, not in its individual capacity, but solely as Property Trustee By: ------------------------------------ Authorized signatory [REVERSE OF SECURITY] The Trust promises to pay Distributions from February 22, 2006, or from the most recent Distribution Date to which Distributions have been paid or duly provided for, quarterly (subject to deferral as set forth herein) in arrears on March 15, June 15, September 15 and December 15 of each year, commencing on March 15, 2006, at a fixed rate equal to 8.70% per annum through the interest payment date in March 2011 and thereafter at a variable rate per annum equal to LIBOR plus 3.64% of the Liquidation Amount of the Preferred Securities represented by this Preferred Securities Certificate, together with any Additional Interest Amounts, in respect to such period. Distributions on the Trust Securities shall be made by the Paying Agent from the Payment Account and shall be payable on each Distribution Date only to the extent that the Trust has funds then on hand and available in the Payment Account for the payment of such Distributions. In the event (and to the extent) that the Depositor exercises its right under the Indenture to defer the payment of interest on the Notes, Distributions on the Preferred Securities shall be deferred. Under the Indenture, so long as no Note Event of Default has occurred and is continuing, the Depositor shall have the right, at any time and from time to time during the term of the Notes, to defer the payment of interest on the Notes for a period of up to twenty (20) consecutive quarterly interest payment periods (each such extended interest payment period, an "Extension Period"), during which Extension Period no interest shall be due and payable (except any Additional Tax Sums that may be due and payable). No interest on the Notes shall be due and payable during an Extension Period, except at the end thereof, but each installment of interest that would otherwise have been due and payable during such Extension Period shall bear Additional Interest (to the extent payment of such interest would be legally enforceable) at a fixed rate equal to 8.70% per annum through the interest payment date in March 2011 and thereafter at a variable rate equal to LIBOR plus 3.64% per annum compounded quarterly, from the dates on which amounts would have otherwise been due and payable until paid or until funds for the payment thereof have been made available for payment. If Distributions are deferred, the deferred Distributions (including Additional Interest Amounts) shall be paid on the date that the related Extension Period terminates to Holders (as defined in the Trust Agreement) of the Trust Securities as they appear on the books and records of the Trust on the record date immediately preceding such termination date. Distributions on the Securities must be paid on the dates payable (after giving effect to any Extension Period) to the extent that the Trust has funds available for the payment of such Distributions in the Payment Account of the Trust. The Trust's funds available for Distribution to the Holders of the Preferred Securities will be limited to payments received from the Depositor. The payment of Distributions out of moneys held by the Trust is guaranteed by the Depositor pursuant to the Guarantee Agreement. During any such Extension Period, the Depositor shall not (i) declare or pay any dividends or distributions on, or redeem, purchase, acquire or make a liquidation payment with respect to, any of the Depositor's capital stock or (ii) make any payment of principal of or any interest or premium, if any, on or repay, repurchase or redeem any debt securities of the Depositor that rank pari passu in all respects with or junior in interest to the Notes (other than (a) repurchases, redemptions or other acquisitions of shares of capital stock of the Depositor in connection with (1) any employment contract, benefit plan or other similar arrangement with or for the benefit of any one or more employees, officers, directors or consultants, (2) a dividend reinvestment or stockholder stock purchase plan or (3) the issuance of capital stock of the Depositor (or securities convertible into or exercisable for such capital stock) as consideration in an acquisition transaction entered into prior to the applicable Extension Period, (b) as a result of an exchange or conversion of any class or series of the Depositor's capital stock (or any capital stock of a Subsidiary (as defined in the Indenture) of the Depositor) for any class or series of the Depositor's capital stock or of any class or series of the Depositor's indebtedness for any class or series of the Depositor's capital stock, (c) the purchase of fractional interests in shares of the Depositor's capital stock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged, (d) any declaration of a dividend in connection with any Rights Plan (as defined in the Indenture), the issuance of rights, stock or other property under any Rights Plan, or the redemption or repurchase of rights pursuant thereto or (e) any dividend in the form of stock, warrants, options or other rights where the dividend stock or the stock issuable upon exercise of such warrants, options or other rights is the same stock as that on which the dividend is being paid or ranks pari passu with or junior to such stock). On each Note Redemption Date, on the stated maturity (or any date of principal repayment upon early maturity) of the Notes and on each other date on (or in respect of) which any principal on the Notes is repaid, the Trust will be required to redeem a Like Amount of Trust Securities at the Redemption Price. Under the Indenture, the Notes may be redeemed by the Depositor on any Interest Payment Date, at the Depositor's option, on or after March 15, 2011 in whole or in part from time to time at the Optional Note Redemption Price of the principal amount thereof or the redeemed portion thereof, as applicable, together, in the case of any such redemption, with accrued interest, including any Additional Interest, to but excluding the date fixed for redemption; provided, that the Depositor shall have received the prior approval of any Applicable Insurance Regulatory Authority then required. The Notes may also be redeemed by the Depositor, at its option, at any time, in whole but not in part, upon the occurrence of an Investment Company Event or a Tax Event at the Special Note Redemption Price; provided, that the Depositor shall have received the prior approval of any Applicable Insurance Regulatory Authority then required; and provided, further, that such Investment Company Event or a Tax Event is continuing on the Redemption Date. The Trust Securities redeemed on each Redemption Date shall be redeemed at the Redemption Price with the proceeds from the contemporaneous redemption or payment at maturity of Notes. Redemptions of the Trust Securities (or portion thereof) shall be made and the Redemption Price shall be payable on each Redemption Date only to the extent that the Trust has funds then on hand and available in the Payment Account for the payment of such Redemption Price. Payments of Distributions (including any Additional Interest Amounts), the Redemption Price, Liquidation Amount or any other amounts in respect of the Preferred Securities shall be made by wire transfer at such place and to such account at a banking institution in the United States as may be designated in writing at least ten (10) Business Days prior to the date for payment by the Person entitled thereto unless proper written transfer instructions have not been received by the relevant record date, in which case such payments shall be made by check mailed to the address of such Person as such address shall appear in the Security Register. If any Preferred Securities are held by a Depositary, such Distributions shall be made to the Depositary in immediately available funds. The indebtedness evidenced by the Notes is, to the extent provided in the Indenture, subordinate and junior in right of payment to the prior payment in full of all Senior Debt (as defined in the Indenture), and this Security is issued subject to the provisions of the Indenture with respect thereto. ASSIGNMENT FOR VALUE RECEIVED, the undersigned assigns and transfers this Preferred Securities Certificate to: ______________________________________________________________ (Insert assignee's social security or tax identification number) ____________________________________________________ (Insert address and zip code of assignee) and irrevocably appoints agent to transfer this Preferred Securities Certificate on the books of the Trust. The agent may substitute another to act for him or her. Date: ----------------------- Signature: --------------------------------------------------------------------- (Sign exactly as your name appears on the other side of this Preferred Securities Certificate) The signature(s) should be guaranteed by an eligible guarantor institution (banks, stockbrokers, savings and loan associations and credit unions with membership in an approved signature guarantee medallion program), pursuant to S.E.C. Rule 17Ad-15. EX-4.4 5 k02899exv4w4.txt FORM OF CERTIFICATE EVIDENCING COMMON SECURITIES OF NP CAPITAL TRUST I EXHIBIT 4.4 THIS COMMON SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS OR ANY OTHER APPLICABLE SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EXEMPTION FROM REGISTRATION. THIS CERTIFICATE IS NOT TRANSFERABLE EXCEPT IN COMPLIANCE WITH APPLICABLE LAW AND SECTION 5.11 OF THE TRUST AGREEMENT. THE HOLDER OF THE COMMON SECURITIES REPRESENTED BY THIS CERTIFICATE AGREES TO TREAT THE TRUST AS A GRANTOR TRUST FOR UNITED STATES FEDERAL, STATE AND LOCAL TAX PURPOSES, AND TO TREAT THE TRUST SECURITIES (INCLUDING ALL PAYMENTS AND PROCEEDS WITH RESPECT TO SUCH TRUST SECURITIES) AS UNDIVIDED BENEFICIAL OWNERSHIP INTERESTS IN THE TRUST PROPERTY (AND PAYMENTS AND PROCEEDS THEREFROM, RESPECTIVELY) FOR UNITED STATES FEDERAL, STATE AND LOCAL TAX PURPOSES AND TO TREAT THE NOTES AS INDEBTEDNESS OF THE DEPOSITOR FOR UNITED STATES FEDERAL, STATE AND LOCAL TAX PURPOSES.
CERTIFICATE NUMBER NUMBER OF COMMON SECURITIES - ------------------ --------------------------- ~~C-1 620~~
FORM OF CERTIFICATE EVIDENCING COMMON SECURITIES OF NP CAPITAL TRUST I FLOATING RATE COMMON SECURITIES (LIQUIDATION AMOUNT $1,000 PER COMMON SECURITY) NP Capital Trust I, a statutory trust created under the laws of the State of Delaware (the "Trust"), hereby certifies that North Pointe Holdings Corporation, a Michigan corporation (the "Holder") is the registered owner of Six Hundred Twenty (620) common securities of the Trust representing undivided common beneficial interests in the assets of the Trust and designated the NP Capital Trust I Floating Rate Common Securities (liquidation amount $1,000 per Common Security) (the "Common Securities"). Except in accordance with Section 5.11 of the Trust Agreement (as defined below), the Common Securities are not transferable and, to the fullest extent permitted by law, any attempted transfer hereof other than in accordance therewith shall be void. The designations, rights, privileges, restrictions, preferences and other terms and provisions of the Common Securities are set forth in, and this certificate and the Common Securities represented hereby are issued and shall in all respects be subject to the terms and provisions of, the Amended and Restated Trust Agreement of the Trust, dated as of February 22, 2006 as the same may be amended from time to time (the "Trust Agreement"), among the Holder, as Depositor, LaSalle Bank National Association, as Property Trustee, Christiana Bank & Trust Company, as Delaware Trustee, the Administrative Trustees named therein and the Holders, from time to time, of Trust Securities. The Trust will furnish a copy of the Trust Agreement to the Holder without charge upon written request to the Trust at its principal place of business or registered office. Upon receipt of this certificate, the Holder is bound by the Trust Agreement and is entitled to the benefits thereunder. This Common Securities Certificate shall be governed by and construed in accordance with the laws of the State of Delaware. Terms used but not defined herein have the meanings set forth in the Trust Agreement. IN WITNESS WHEREOF, one of the Administrative Trustees of the Trust has executed on behalf of the Trust this certificate this __ day of February, 2006. NP CAPITAL TRUST I By: ------------------------------------ Name: John Berry Administrative Trustee EX-10.14 6 k02899exv10w14.txt LINE OF CREDIT LOAN AGREEMENT, DATED MARCH 4, 2005 EXHIBIT 10.14 LINE OF CREDIT LOAN AGREEMENT This Agreement's date is March 4, 2005. Its parties are N.P. PREMIUM FINANCE COMPANY, a Michigan corporation, 28819 Franklin Road, Southfield, MI 48034 ("Borrower") and NORTH POINTE FINANCIAL SERVICES, INC., a Michigan corporation, 28819 Franklin Road, Southfield, MI 48034 ("Lender"). BACKGROUND Borrower is seeking line of credit financing for its insurance premium finance business. Lender, an insurance company, is Borrower's sister corporation. Lender has agreed to provide this financing for the Borrower solely for the financing of insurance premiums paid to Lender. This agreement's terms are stated below. TERMS 1. THE INDEBTEDNESS 1.1 INITIAL LENDING. So long as Borrower is not in default under this or any other agreement between Borrower on the one hand and Lender or any of its affiliates on the other, Lender will lend to Borrower, sums not to exceed $1,500,000 in aggregate principal amount at any one time outstanding, from this Agreement's effective date until it is terminated. This lending will be used solely to finance premiums paid to Lender. This lending-borrowing relationship will be evidenced by a Promissory Note ("Line of Credit Note") given by Borrower to Lender with the same date as this Agreement. 1.2 TERMINATION. This Agreement may be terminated at any time, for any reason, by a written notice from Lender to Borrower. 1.3 INTEREST AND MATURITY. The Note will be due UPON DEMAND. The outstanding principal balance, while not in default, will bear interest at a rate equal to the so-called "prime rate of interest" published in the Wall Street Journal, and adjusted monthly. Interest will be billed and collected monthly. 1.4 DEFAULT RATE. During any period(s) of default under this Loan Agreement, interest shall accrue on the balance owing under the Note at a rate equal to four (4) points above the so-called "prime rate of interest" published in the Wall Street Journal and adjusted quarterly. In no event will the interest charged under the Note exceed the legal maximum rate. 1.5 DRAWING ON THE LINE OF CREDIT. To receive an advance under the Note, Borrower will deliver to Lender a written request for a draw. Lender will respond to the request for the draw by transferring the amount of money needed for the advance into a bank account designated by Borrower. 1.6 PREPAYMENT. Borrower may prepay the Note in whole or in part without prejudice to Borrower to reborrow under the terms of this Article 1. 1.7 REPAYMENT. Borrower will make monthly interest payments on the Note by check to Lender by the 15th of the month for interest earned the prior month. 2. DOCUMENTS FURNISHED TO LENDER. Borrower will furnish Lender, upon Lender's request from time to time, in form to be satisfactory to Lender (i) certified copies of resolutions of Borrower's Board of Directors evidencing approval of any of this transaction as a whole or any particular borrowing, (ii) certified copies of Borrower's Articles of Incorporation and Bylaws, (iii) a certificate of good standing from Borrower's state of incorporation and/or from each jurisdiction in which it is required to be qualified to do business, or (iv) evidence that Borrower's premium finance license in the state of Michigan is fully effective. 3. REPRESENTATIONS AND WARRANTIES. Borrower makes the representations and warranties below knowing that Lender is relying on them in entering into this Agreement. They will be deemed to be continuing representations and warranties during this Agreement's term. 3.1 ORGANIZATION, STANDING AND POWER. Borrower is a corporation duly organized and existing in good standing under the laws of the State of Michigan. Borrower is in good standing in each jurisdiction in which it is required to be qualified to do business. Execution, delivery and performance of this Agreement and other documents and instruments required under this Agreement, and the issuance of the Note by Borrower are within its corporate powers. These actions have been authorized, do not contravene law or the terms of Borrower's Articles of Incorporation or Bylaws, and do not require the consent or approval of any governmental body, agency or authority. This Agreement and all related documents including the Note, when issued and delivered, will be valid and binding in accordance with their terms. 3.2 EXECUTION, DELIVERY AND PERFORMANCE. Borrower's execution, delivery and performance of this Agreement and all related documents including the Note does not contravene the unwaived terms of any indenture, agreement or undertaking binding Borrower. 3.3 PENDING OR THREATENED LITIGATION. No litigation or other legal or administrative proceeding is pending, or to the knowledge of Borrower's officers, is threatened against Borrower, the outcome of which could materially impair the Borrower's financial condition or the ability of Borrower to carry on its business. 3.4 ERISA COMPLIANCE. Borrower does not maintain or contribute to any Pension Plan subject to Title IV of the "Employee Retirement Income Security Act of 1974" ("ERISA"). 3.5 TAX RETURNS. All of Borrower's required tax returns and tax reports have been filed or extensions obtained, and all taxes, assessments and other governmental charges or levies (other than those presently payable without penalty and those currently being contested in good faith for which adequate reserves have been established) upon Borrower (or any of its properties) which are due and payable have been paid. The charges, accruals and reserves on the books of Borrower in respect of the Federal income tax for all periods are adequate in the opinion of Borrower. 3.6 NO SUBSIDIARIES. Borrower has no subsidiaries. 3.7 COMPLIANCE WITH LAWS. Borrower is in compliance with all applicable laws, ordinances and regulations. Borrower has all approvals, authorizations, consents, licenses, orders and other permits of all governmental agencies and authorities, whether federal, state or local, required to permit the operation of its business as presently conducted, except such approvals, authorizations, consents, licenses, orders and other permits with respect to which the failure to have can be cured without having an adverse effect on the operation of such business. In particular, all of Borrower's insurance agent, insurance agency, and/or premium finance licenses necessary for it to conduct its business are fully effective. 3.8 NO MATERIAL OMISSION. No representation or warranty by Borrower in this Agreement, nor any statement or certificate (including financial statements) furnished or to be furnished to Lender pursuant to this Agreement or will contain any untrue statement of any fact or omits or will omit to state a fact necessary to make such representation, warranty, statement or certificate not misleading. 4. AFFIRMATIVE COVENANTS. Borrower will do all of the following so long as Lender may make any advance, and so long as any indebtedness remains outstanding, under this Agreement. 4.1 DOCUMENTS. Borrower will furnish Lender upon its request. (a) Borrower's financial statements, including a balance sheet as at the end of such year and the related statements of income and cash flows for such year, reviewed by independent certified public accountants satisfactory to Lender, and monthly internally prepared balance sheet and income and cash flow statements. (b) Promptly, and in form to be satisfactory to Lender, such other information as Lender may reasonably request from time to time. 4.2 DEBTS. Borrower will pay and discharge all taxes, and contractual obligations calling for the payment of money, before they and all other debts become overdue, unless and to the extent only that such a payment is being contested in good faith. 4.3 INSURANCE. Borrower will maintain insurance coverage on its physical assets and against other business risks in such amounts and of such types as are customarily carried by companies similar in size and nature, including errors and omissions coverage. If Borrower acquires additional property, or incurs additional risks of any nature, it will increase this insurance coverage in such manner and to such extent as prudent business judgment and present practice would dictate. 4.4 RIGHT TO INSPECT. Borrower will permit Lender, and its attorneys, accountants and representatives, to examine Borrower's books, accounts, records, ledgers and assets, at all reasonable times upon Lender's oral or written request. 4.5 DEFAULT. Borrower will promptly notify Lender of any condition or event which constitutes, or with the running of time and/or the giving of notice would constitute, an event of default under this Agreement, and promptly inform Lender of the existence or occurrence of any condition or event which could have a material adverse effect upon Borrower's financial condition. 4.6 COMPLIANCE WITH LAWS. Borrower will maintain in full force and effect all franchises, permits, licenses or other authorizations which are material to the business's operation, and comply with their terms, and the applicable laws, rules, regulations and orders of regulatory agencies or authorities having jurisdiction over its business. In particular, all of Borrower's insurance agent, insurance agency, and/or premium finance licenses necessary for it to conduct its business will remain fully effective during this Agreement's term. 5. NEGATIVE COVENANTS. Borrower will not do any of the following while Lender may make any advance, or while any indebtedness remains outstanding, under this Agreement. 5.1 NO CHANGE IN CAPITAL STRUCTURE. Borrower will not purchase, acquire, issue or redeem any of its capital stock or make any material change in its capital structure or general business objects or purpose. 5.2 NO MERGER OR ASSET SALE. Borrower will not enter into any merger, share exchange or consolidation or sell, lease, transfer, or dispose of all, substantially all, or any material part of its assets, except in the ordinary course of its business. 5.3 NO ADDITIONAL BORROWING. Borrower will not become or remain obligated for any indebtedness for borrowed money, except (a) indebtedness to Lender, and (b) current unsecured trade, utility or non-extraordinary accounts payable arising in the ordinary course of Borrower's business. 6. EVENTS OF DEFAULT 6.1 EVENTS OF DEFAULT. The occurrence of any of the following will constitute the occurrence of an "Event of Default" under this Agreement. (a) non-payment of any installment of the principal or interest on the Note when due in accordance with its terms, or upon non-payment of any other outstanding indebtedness of Borrower to Lender under this Agreement or under any other instrument or evidence of indebtedness when due in accordance with its terms; (b) default in the observance or performance of any of this Agreement's terms; (c) any representation or warranty made by Borrower or in any instrument submitted pursuant to this Agreement proves untrue in any material respect; (d) default in the observance or performance of any of the conditions, covenants or agreements of the terms of any other document entered into by Borrower in connection with this Agreement; (f) default in the payment of any other obligation of Borrower for borrowed money, or in the observance or performance of any conditions, covenants or agreements related or given with respect to any such borrowings; (g) judgment for the payment of money in excess of $25,000 in the aggregate is rendered against Borrower, which remain unpaid, unvacated, unbonded or unstayed by appeal or otherwise from the date of its entry throughout the notice period described in Section 6.2 below; and (h) any change for any reason in Borrower's management, ownership or control that in Lender's reasonable judgment will adversely affect future prospects for the successful operation of Borrower or its performance of this Agreement. 6.2 OPPORTUNITY TO CURE. When an Event of Default occurs, Lender will notify the Borrower of the default in writing ("Lender's Notice"). Borrower will have 10 days from the date of Lender's Notice to cure any monetary default and 15 days from the date of Lender's Notice to cure any non-monetary default. If Borrower fails to cure within these time periods, Lender may exercise the remedies described below. 6.3 REMEDIES UPON DEFAULT. Upon the occurrence of an uncured Event of Default, Lender may then, or at any time thereafter, give notice to Borrower declaring all outstanding indebtedness under this Agreement and under the Note to be due and payable, without further notice and demand. In that event, Lender may exercise any remedies available to it under this Agreement or applicable law. In particular as to remedies, and notwithstanding anything in this Agreement to the contrary, Lender may concurrently with sending the Lender's Notice stop making any advances under the Line of Credit Note. 6.4 BANKRUPTCY. If a creditors committee is appointed for Borrower's business or if Borrower makes a general assignment for the benefit of creditors, is adjudicated bankrupt, files a voluntary petition or it's the subject of an involuntary petition in bankruptcy or to effect a plan or arrangement with creditors; or files an answer to a creditor's petition or other petition filed against it, admitting its material allegations for an adjudication in bankruptcy or for reorganization; or applies for or permits the appointment of a receiver, or trustee or custodian for any of its property or assets; or such a receiver, trustee or custodian is appointed for any of its property or assets and their receiver, trustee or custodian is not discharged within sixty (60) days after the date of appointment; or if an order is entered and not dismissed or stayed within sixty (60) days from its entry, approving any petition for reorganization of Borrower, then the Note and its indebtedness will automatically become immediately due and payable, and Lender will make no further advances under the Note. 7. MISCELLANEOUS 7.1 NOTICES. Notices and other communications required or permitted under this Agreement must be in writing. They will be deemed given (a) when personally delivered or sent by facsimile transmission or (b) on the business day following the day the notice or communication is sent by the US Mail postage pre-paid or nationally recognized courier to a party at the address above. 7.2 CONTINUITY AND WAIVER. No amendment to, or waiver of any provision of, this Agreement will be valid unless it is in writing and signed by the parties. 7.4 INVALID PROVISION. The invalidity or unenforceability of any particular provision of this Agreement will not affect the other provisions of this Agreement. In such a case, this Agreement will be construed as if the invalid or unenforceable provision was omitted. 7.5 BINDING EFFECT. The parties intend that this Agreement both bind and benefit them, and their respective successors and assigns. 7.6 ENTIRE AGREEMENT. This Agreement, its Exhibits and the all related documents signed pursuant to this Agreement, together constitute the parties' entire agreement. It supersedes any prior discussions, agreements and understandings relating to the subject matter of this Agreement. 7.7 REMEDIES CUMULATIVE. The rights, remedies and benefits provided by this Agreement are cumulative and not exclusive of any other rights, remedies and benefits allowed by law. A party's failure or delay to exercise any right will not waive that right, nor will the single or partial exercise of any right preclude any other exercise of that or any other right. The waiver of one breach of, or default under, this Agreement is not a waiver of any other breach or default. 7.8 GOVERNING LAW. Michigan law governs this Agreement. 7.9 FEES AND EXPENSES. Each party will bear its own costs relating to this transaction. 7.10 SURVIVAL. This Agreement's covenants, representations and warranties shall survive its execution. 7.11 FURTHER ASSURANCES. After Closing, the parties will sign documents or do any other act reasonably requested by another party, as may be appropriate, necessary or required to carry out this Agreement's transactions. 7.12 NO THIRD PARTY BENEFICIARY. The parties do not confer any benefits on any person who does not sign this Agreement. 7.13 SECTION HEADINGS. This section headings are included solely for convenience and will not be used to interpret or enforce this Agreement. 7.14 INTERPRETATION. The parties have all contributed to drafting this Agreement. There will be no presumption favoring or burdening any party based upon the identity of the drafting party. "Borrower" N.P. PREMIUM FINANCE COMPANY, a Michigan corporation By: /s/ John H. Berry ------------------------------------ John H. Berry General Manager / Treasurer "Lender" NORTH POINTE FINANCIAL SERVICES, INC., a Michigan corporation By: /s/ B. Matthew Petcoff ------------------------------------ B. Matthew Petcoff Executive Vice President/C.O.O. EX-10.15 7 k02899exv10w15.txt LINE OF CREDIT NOTE, DATED MARCH 4, 2005 EXHIBIT 10.15 $1,500,000 March 4, 2005 (Maximum) Southfield, Michigan LINE OF CREDIT NOTE N.P. PREMIUM FINANCE COMPANY, a Michigan corporation ("Borrower"), for value received, promises to pay to the order of NORTH POINTE FINANCIAL SERVICES, INC., a Michigan corporation and any assignee ("Lender") the principal sum of One Million Five Hundred Thousand Dollars ($1,500,000), or whatever lesser amount that Lender will have advanced to Borrower under a Line of Credit Agreement entered into on the same date as this Note ("Line of Credit Agreement"). Borrower will repay this principal and all accrued interest to Lender UPON DEMAND. Pending demand, Borrower will make monthly payments of interest on the principal balance then-outstanding at the per annum rate equal to the so-called "prime rate of interest" published in the Wall Street Journal. This interest rate will be adjusted monthly, as of the 10th of each month. During any period in which the Borrower is in default, the rate will equal four (4) points above that prime rate of interest. Borrower may prepay all or any of the principal balance then due at any time without prior notice to Lender and without penalty. All payments made pursuant to this Note will be applied first against any payments made by Lender on Borrower's behalf pursuant to the Line of Credit Agreement, then to accrued interest, and the balance against principal. Borrower will make its Note payments to Lender wherever Lender designates. If Borrower defaults, Lender will be entitled to recover from Borrower, in addition to the unpaid principal and all accrued interest, an amount equal to all the costs and expenses Lender actually incurs with the enforcement of this Note. This will include actual court costs paid, legal, accounting and other professional fees actually incurred and the like, regardless of whether suit is brought. Lender's waiver or failure to enforce any or its rights and remedies of Borrower's defaults will not be deemed to constitute a waiver of any prior, subsequent or contemporaneous default(s) by Borrower. Borrower waives demand, protest, presentment for payment, notice of dishonor, notice of protest, diligence in bringing suit against any party, resort to collateral and impairment of collateral, and consents that the time for payment of all or any part of the principal amount, and of the interest on the principal, may be extended from time to time by Lender without notice, and that any such extension will not discharge or otherwise impair the obligation represented by this Note. "Borrower" N.P. PREMIUM FINANCE COMPANY, a Michigan corporation By: /s/ John H. Berry ------------------------------------ John H. Berry General Manager / Treasurer Accpeted: "Lender" NORTH POINTE FINANCIAL SERVICES, INC. a Michigan corporation By: /s/ B. Matthew Petcoff --------------------------------- B. Matthew Petcoff Executive Vice President/C.O.O. EX-10.17 8 k02899exv10w17.txt CONSULTING AGREEMENT, DATED MARCH 5, 2003 EXHIBIT 10.17 CONSULTING AGREEMENT This Consulting Agreement is entered into this 5th day of March, 2003, by and between LVM Company ("LVM") and North Pointe Insurance Company ("NPIC"). RECITALS WHEREAS, LVM, and Lawrence V. MacLean ("MacLean") have been integral to the success of NPIC by providing claims adjusting services at competitive market rates since the inception of NPIC in 1987; and WHEREAS, the Board of Directors and executive management of NPIC recognize that LVM and more specifically MacLean, have substantially contributed to the financial success of NPIC through the development, implementation, and maintenance of consistently outstanding claims adjustment philosophies and procedures; and WHEREAS, the Board of Directors of NPIC intends to provide for the continued consultation by LVM with NPIC in the future. NOW, THEREFORE, the parties agree as follows: AGREEMENT 1. ENGAGEMENT. The Company hereby engages LVM to perform claims consulting services for NPIC, and LVM hereby accepts such engagement as a claims consultant to NPIC, on the terms and conditions set forth below. 2. PERFORMANCE OF SERVICES. 2.1 CONSULTING DIRECTORS. LVM shall render such consulting services to NPIC as may be requested by such person or persons designated by NPIC as the Consulting Directors. The services to be provided by LVM shall be performed through and by MacLean, and shall not be assigned or delegated to any other person. For purposes of this Agreement, the Consulting Directors shall be B. Matthew Petcoff, Matthew MacLean and James G. Petcoff. Assignments from the Consulting Directors to LVM may be in oral or written form. To the extent requested by the Consulting Directors, LVM shall provide the Consulting Directors written or oral reports reflecting LVM's activities and results of its consulting services to NPIC. 3. TERM OF AGREEMENT. This Agreement will be effective for an initial term of one (1) year from January 1, 2003 and thereafter will automatically renew for a successive term of one (1) year each unless NPIC gives written notice to LVM of its election not to renew for an additional term; notice shall be given to LVM at least ninety (90) days prior to the expiration date of any term. 4. COMPENSATION AND EXPENSES. As full, final and exclusive compensation for all LVM's services under this Agreement, NPIC agrees to pay LVM a fee equal to the sum of $12,500 per month for the term of the Agreement. 5. RELATIONSHIP OF THE PARTIES. 5.1 INDEPENDENT CONTRACTOR. LVM is an independent contractor and not an employee, partner, or joint venturer of NPIC, and nothing in this Agreement shall constitute or be construed to create an employment, partnership, joint venture or other similar relationship between NPIC and LVM. LVM shall be solely responsible for payment of any income or other taxes arising with respect to the compensation payable to LVM hereunder, and NPIC shall have no obligation to withhold income or other taxes from such compensation. 5.2 NONEXCLUSIVITY. The parties acknowledge that LVM shall not be required to be available to perform services on a full-time basis, and that LVM shall be free to pursue other business activities. 6. NONASSIGNABLE BY CONSULTANT. This Agreement is a personal service contract and the rights and duties of the LVM hereunder shall not be assignable, except with the consent of NPIC. Any other attempted assignment or transfer by LVM shall be void and of no force and effect. 7. SUCCESSORS AND ASSIGNS. If NPIC shall at any time be merged or consolidated into or with any other corporation, or sold to a third party, this Agreement shall be binding on any such successor entity to NPIC or buyer of NPIC, and to the extent applicable and appropriate, on the devises, heirs, next of kin, executors and administrators of LVM. 8. APPLICABLE GOVERNING LAW. The parties hereto agree that this Agreement shall be construed in accordance with and governed by the laws of the State of Michigan and the validity, interpretation, performance and enforcement of this Agreement shall be governed by the laws of the State of Michigan, including its laws and decisions relating to conflict of law. 2 9. SEVERABILITY. Every provision in this Agreement is intended to be severable. If any term or provision hereof is illegal or invalid, for any reason whatsoever, such illegality or invalidity shall not affect the validity of the remainder hereof. 10. AMENDMENTS/WAIVERS. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing signed by LVM and an authorized officer of NPIC. No waiver by either party at any time of any breach by the other party, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. 11. ENTIRE AGREEMENT. This Agreement expresses the entire agreement of the parties hereto, and supersedes all prior promises, representations, understandings, arrangements and agreements between these parties with respect to the subject matter herein. The parties further acknowledge and agree that neither of them has made any representation to induce the execution and delivery of this Agreement, except those as specifically set forth herein. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the 5th day of March, 2003. NORTH POINTE INSURANCE COMPANY By: /s/ James G. Petcoff --------------------------------- Its: -------------------------------- LVM COMPANY By: /s/ Lawrence MacLean --------------------------------- Dated: ------------------------------ 3 EX-10.18 9 k02899exv10w18.txt CONSULTING AGREEMENT, DATED SEPTEMBER 30, 2005 EXHIBIT 10.18 CONSULTING AGREEMENT THIS AGREEMENT is effective September 30, 2005. Its parties are NORTH POINTE HOLDINGS CORPORATION ("Company") and JOON MOON ("Consultant"). BACKGROUND Company is a holding company with subsidiaries in the insurance and financial services industry. Consultant is a member of the board of directors of the Company. Company wants to take advantage of Consultant's experience in investments and business acquisitions, as that experience would benefit the Company. Consultant is willing to work for Company as a consultant. This document states the parties' agreements on these issues. TERMS 1. RETENTION. Company retains Consultant to act as a consultant in matters relating to investments, financial and business acquisitions ("Services"). 2. TERM. This Agreement is effective on the date first shown above and is terminable by either party at any time, with or without cause, upon at least thirty (30) days prior written notice. 3. INDEPENDENT CONTRACTOR STATUS. Consultant is an independent contractor. He is not Company's employee, agent, joint venturer, or partner. Nothing in this Agreement will be interpreted as creating or establishing an employer/employee relationship between Company and Consultant. Company will not: procure workers' compensation coverage for Consultant; withhold FICA (Social Security) from Consultant's payments; make state or federal unemployment insurance contributions on behalf of Consultant or its personnel; withhold state and federal income tax from payment to Consultant; or make disability insurance contributions on behalf of Consultant. 4. NONEXCLUSIVE. Consultant retains the right to perform work for others during the term of this Agreement. Company retains the right to cause work of the same or a different kind to be performed by its own personnel or other contractors during this Agreement's term. 5. SERVICES TO BE PERFORMED BY CONSULTANT. Consultant will be reasonably available or otherwise "on-call" to Company as requested by Company's executive management. Consultant will use his best efforts to promptly respond to Company's requests for Services. 6. METHOD OF PERFORMING SERVICES. Recognizing Consultant's special skills, Company gives Consultant more control over his work than it would give to its other service providers. Consultant will determine the method, details and means of performing the work to be carried out for Company. Company will not control the manner or determine the method of accomplishing such work. This does not mean, however, that the parties will not engage in the consultation inherent in their relationship. Consultant's compensation is set by this Agreement. 7. LIAISON WITH COMPANY EMPLOYEES. Company will advise Consultant of the individuals with whom Consultant will consult. Company and Consultant will develop appropriate administrative procedures for performance of work. 8. PLACE OF WORK. Consultant will perform his work for Company as he may determine from time to time. 9. COMPENSATION. Consultant shall be paid a monthly retainer of $5,000 for each full calendar month during this Agreement's term. 10. EXPENSES. Except as otherwise agreed in writing, Company will reimburse Consultant his reasonable and necessary expenses incurred while performing services under this Agreement. 11. CONFIDENTIALITY. Consultant will maintain in strict confidence, and will use and disclose only as authorized by Company, all information of a competitively sensitive or proprietary nature that he receives in connection with the work he performs for Company under this Agreement. This information includes without limitation, customer and agent lists. These restrictions on information will not apply to information (1) generally available to the public; (2) released by Company generally without restriction; (3) independently developed or acquired by Consultant or its personnel without reliance in any way on other protected information of Company; or (4) approved for Consultant's use and disclosure without restriction. Notwithstanding the foregoing restrictions, Consultant may use and disclose any information (1) to the extent required by an order of any court or other governmental authority or (2) as necessary for it or them to protect their interest in this Agreement, but in each case only after Company has been notified and has had the opportunity, if possible, to obtain reasonable protection for this information in connection with this disclosure. The confidentiality obligations stated in this paragraph shall survive the termination of this Agreement. 12. NOTICES. Any notices to be given by either party to the other may be effected either by personal delivery in writing or by mail, registered or certified, postage prepaid with return receipt requested. Mailed notices shall be addressed to the parties at their last known addresses. A party may change this address by written notice in accordance with this paragraph. Notices delivered personally will be deemed communicated as of actual receipt. Mailed notices will be deemed communicated as of two days after mailing. 13. ENTIRE AGREEMENT OF THE PARTIES. This Agreement supersedes any and all agreements, either oral or written, between the parties with respect to the rendering of services by Consultant for Company. It contains all of the parties' agreements with respect to Consultant's services. Any modification of this agreement will be effective only if it is in writing signed by the party to be changed. 14. AMENDMENT. The parties can only amend this Agreement in a writing signed by both parties. 15. BENEFIT. The parties intend that this Agreement both benefit and bind them, as well as their successors and assigns. 16. GOVERNING LAW. Michigan law governs this agreement. 17. PARTIAL INVALIDITY. If any provision in this Agreement is held by a court of competent jurisdiction to be invalid, void, or unenforceable, the remaining provisions will nevertheless continue in full force without being impaired or invalidated in any way. 18. PARTIES IN INTEREST. This Agreement is enforceable only by Consultant and Corporation. The terms of this Agreement are not a contract or assurance regarding compensation, continued employment, or benefit of any kind to any of Consultant's personnel assigned to Corporation's work, or any beneficiary of any such personnel, and no such personnel or beneficiary will be a third-party beneficiary under or pursuant to the terms of this Agreement. The parties have executed this agreement as of the 30th day of September 2005. NORTH POINTE HOLDINGS CORPORATION By; /s/ James G. Petcoff ------------------------ Its President /s/ JOON S. MOON - --------------------------- JOON S. MOON EX-10.27 10 k02899exv10w27.txt TRUST AGREEMENT OF NP CAPITAL TRUST I, DATED AS OF FEBRUARY 21, 2006 EXHIBIT 10.27 TRUST AGREEMENT OF NP CAPITAL TRUST I THIS TRUST AGREEMENT OF NP CAPITAL TRUST I (this "Trust Agreement") is dated as of February 21, 2006 by and between North Pointe Holdings Corporation, a Michigan corporation, as depositor (the "Depositor"), and Christiana Bank & Trust Company, as trustee (in such capacity, the "Delaware Trustee"). The Depositor and the Delaware Trustee hereby agree as follows: 1. The trust created hereby shall be known as "NP Capital Trust I" (the "Trust"), in which name the Delaware Trustee or the Depositor, to the extent provided herein, may conduct the business of the Trust, make and execute contracts, and sue and be sued. 2. The Depositor hereby assigns, transfers, conveys and sets over to the Trust the sum of $10. The Delaware Trustee hereby acknowledges receipt of such amount in trust from the Depositor. Such amount shall constitute the initial trust estate of the Trust. The Delaware Trustee hereby declares that it will hold the trust estate in trust for the Depositor. It is the intention of the parties hereto that the Trust created hereby constitute a statutory trust under Chapter 38 of Title 12 of the Delaware Code, 12 Del. C. ss. 3801, et seq. (the "Statutory Trust Act"), and that this document constitute the governing instrument of the Trust. The Delaware Trustee is hereby authorized and directed to execute and file a certificate of trust with the Secretary of State of the State of Delaware in such form as the Delaware Trustee may approve. 3. The Depositor and the Delaware Trustee will enter into an amended and restated Trust Agreement satisfactory to each such party to provide for the contemplated operation of the Trust created hereby and the issuance by the Trust of the Preferred Securities and Common Securities as may be referred to therein. Prior to the execution and delivery of such amended and restated Trust Agreement, (i) the Delaware Trustee shall not have any duty or obligation hereunder or with respect to the trust estate of the Trust, except as otherwise contemplated in this Trust Agreement, and (ii) the Depositor shall take or cause to be taken on behalf of the Trust all actions required by applicable law or as may be necessary to obtain prior to such execution and delivery any licenses, consents or approvals required by applicable law or otherwise. Notwithstanding the foregoing, the Delaware Trustee is authorized to take all actions, as instructed by the Depositor, necessary to effect the transactions contemplated herein. 4. The Depositor, on behalf of the Trust, is hereby authorized, in its discretion, (i) to prepare, file and execute on behalf of the Trust such applications, reports, surety bonds, irrevocable consents, appointments of attorney for service of process and other papers and documents that shall be necessary or desirable to register or establish the exemption from the registration of the Preferred Securities of the Trust under the securities or "Blue Sky" laws of such jurisdictions as the Depositor, on behalf of the Trust, may deem necessary or desirable; (ii) to prepare, negotiate, execute and deliver letters or documents to, or instruments for filing with, a depositary relating to the Preferred Securities of the Trust as it deems necessary or desirable; and (iii) to negotiate, execute, deliver and perform on behalf of the Trust one or more placement agreements, purchase agreements, subscription agreements, dealer manager agreements, escrow agreements and other similar or related agreements providing for or relating to the sale of the Preferred Securities of the Trust. In the event that any filing referred to in this Section 4 is required by the rules and regulations of the Securities and Exchange Commission (the "Commission") or any state securities or Blue Sky laws or by any depositary to be executed on behalf of the Trust by the Delaware Trustee, the Delaware Trustee is hereby authorized and, to the extent so required, directed to join in any such filing and to execute on behalf of the Trust any and all of the foregoing, it being understood that the Delaware Trustee shall not be required to join in any such filing or execute on behalf of the Trust any such document unless directed by the Depositor as being required by the rules and regulations of the Commission and any state securities or Blue Sky laws or by any depositary. 5. This Trust Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. 6. The number of trustees of the Trust initially shall be one (1) and thereafter the number of trustees of the Trust shall be such number as shall be fixed from time to time by a written instrument signed by the Depositor, which may increase or decrease the number of trustees of the Trust; provided, that to the extent required by the Statutory Trust Act, one trustee of the Trust shall either be a natural person who is a resident of the State of Delaware or, if not a natural person, an entity that has its principal place of business in the State of Delaware and otherwise meets the requirements of applicable law. Subject to the foregoing, the Depositor is entitled to appoint or remove without cause any trustee of the Trust at any time. Any trustee of the Trust may resign upon thirty days' prior notice to the Depositor. 7. The Depositor hereby agrees to (i) reimburse the Delaware Trustee for all reasonable expenses (including reasonable fees and expenses of counsel and other experts), (ii) to the fullest extent permitted by law, indemnify, defend and hold harmless the Delaware Trustee and any of the officers, stockholders, directors, employees and agents of the Delaware Trustee (the "Indemnified Persons") from and against all losses, damages, liabilities, claims, actions, suits, costs, expenses, disbursements (including the reasonable fees and expenses of counsel), taxes and penalties of any kind and nature whatsoever (collectively, "Expenses"), to the extent that such Expenses arise out of or are imposed upon or asserted at any time against such Indemnified Persons with respect to the performance of this Trust Agreement, the creation, operation, administration or termination of the Trust or the transactions contemplated hereby; provided, that the Depositor shall not be required to indemnify any Indemnified Person for any Expenses which are judicially determined to be the result of the willful misconduct, bad faith or negligence of such Indemnified Person and (iii) to the fullest extent permitted by law, advance to each such Indemnified Person Expenses incurred by such Indemnified Person in defending any claim, demand, action, suit or proceeding prior to the final disposition of such claim, demand, action, suit or proceeding upon receipt by the Depositor of an undertaking, by or on behalf of such Indemnified Person, to repay such amount if it shall be determined that such Indemnified Person is not entitled to be indemnified therefor under this Section 7. The obligations of the Depositor under this Section 7 shall survive the resignation or removal of the Delaware Trustee, -2- shall survive the termination, amendment, supplement, and/or restatement of this Trust Agreement, and shall survive the transfer by the Depositor of any or all of its interest in the Trust. 8. The Trust may be dissolved and terminated before the issuance of the Preferred Securities of the Trust at the election of the Depositor. 9. This Trust Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of Delaware (without regard to conflict of laws principles). -3- IN WITNESS WHEREOF, the parties hereto have caused this Trust Agreement to be duly executed as of the day and year first above written. NORTH POINTE HOLDINGS CORPORATION, as Depositor By: /s/ James G. Petcoff ----------------------------- Name: James G. Petcoff ----------------------------- Title: Chairman, President & Chief Executive Officer ----------------------------- CHRISTIANA BANK & TRUST COMPANY, as Delaware Trustee By: /s/ James M. Young ----------------------------- Name: James M. Young ----------------------------- Title: Assistant Vice President ----------------------------- -4- EX-10.28 11 k02899exv10w28.txt AMENDED AND RESTATED TRUST AGREEMENT, DATED AS OF FEBRUARY 22, 2006 EXHIBIT 10.28 EXECUTION COPY ================================================================================ AMENDED AND RESTATED TRUST AGREEMENT among NORTH POINTE HOLDINGS CORPORATION, as Depositor LASALLE BANK NATIONAL ASSOCIATION, as Property Trustee CHRISTIANA BANK & TRUST COMPANY, as Delaware Trustee and THE ADMINISTRATIVE TRUSTEES NAMED HEREIN as Administrative Trustees ---------- Dated as of February 22, 2006 ---------- NP CAPITAL TRUST I ================================================================================ TABLE OF CONTENTS
Page ---- ARTICLE I. DEFINED TERMS................................................................... 1 Section 1.1. Definitions.................................................................. 1 ARTICLE II. THE TRUST....................................................................... 11 Section 2.1. Name......................................................................... 11 Section 2.2. Office of the Delaware Trustee; Principal Place of Business.................. 11 Section 2.3. Initial Contribution of Trust Property; Fees, Costs and Expenses............. 12 Section 2.4. Purposes of Trust............................................................ 12 Section 2.5. Authorization to Enter into Certain Transactions............................. 12 Section 2.6. Assets of Trust.............................................................. 15 Section 2.7. Title to Trust Property...................................................... 15 ARTICLE III. PAYMENT ACCOUNT; PAYING AGENTS.................................................. 15 Section 3.1. Payment Account.............................................................. 15 Section 3.2. Appointment of Paying Agents................................................. 16 ARTICLE IV. DISTRIBUTIONS; REDEMPTION....................................................... 16 Section 4.1. Distributions................................................................ 16 Section 4.2. Redemption................................................................... 18 Section 4.3. Subordination of Common Securities........................................... 20 Section 4.4. Payment Procedures........................................................... 21 Section 4.5. Withholding Tax.............................................................. 21 Section 4.6. Tax Returns and Other Reports................................................ 22 Section 4.7. Payment of Taxes, Duties, Etc. of the Trust.................................. 22 Section 4.8. Payments under Indenture or Pursuant to Direct Actions....................... 22 Section 4.9. Exchanges.................................................................... 22 Section 4.10. Calculation Agent............................................................ 23 Section 4.11. Certain Accounting Matters................................................... 24 ARTICLE V. SECURITIES...................................................................... 25 Section 5.1. Initial Ownership............................................................ 25 Section 5.2. Authorized Trust Securities.................................................. 25 Section 5.3. Issuance of the Common Securities; Subscription and Purchase of Notes........ 25
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Page ---- Section 5.4. The Securities Certificates.................................................. 25 Section 5.5. Rights of Holders............................................................ 26 Section 5.6. Book-Entry Preferred Securities.............................................. 26 Section 5.7. Registration of Transfer and Exchange of Preferred Securities Certificates... 28 Section 5.8. Mutilated, Destroyed, Lost or Stolen Securities Certificates................. 29 Section 5.9. Persons Deemed Holders....................................................... 30 Section 5.10. Cancellation................................................................. 30 Section 5.11. Ownership of Common Securities by Depositor.................................. 31 Section 5.12. Restricted Legends........................................................... 31 Section 5.13. Form of Certificate of Authentication........................................ 34 ARTICLE VI. MEETINGS; VOTING; ACTS OF HOLDERS............................................... 34 Section 6.1. Notice of Meetings........................................................... 34 Section 6.2. Meetings of Holders of the Preferred Securities.............................. 34 Section 6.3. Voting Rights................................................................ 35 Section 6.4. Proxies, Etc................................................................. 35 Section 6.5. Holder Action by Written Consent............................................. 35 Section 6.6. Record Date for Voting and Other Purposes.................................... 35 Section 6.7. Acts of Holders.............................................................. 35 Section 6.8. Inspection of Records........................................................ 36 Section 6.9. Limitations on Voting Rights................................................. 37 Section 6.10. Acceleration of Maturity; Rescission of Annulment; Waivers of Past Defaults..................................................................... 37 ARTICLE VII. REPRESENTATIONS AND WARRANTIES.................................................. 40 Section 7.1. Representations and Warranties of the Property Trustee and the Delaware Trustee...................................................................... 40 Section 7.2. Representations and Warranties of Depositor.................................. 41 ARTICLE VIII. THE TRUSTEES.................................................................... 42 Section 8.1. Number of Trustees........................................................... 42 Section 8.2. Property Trustee Required.................................................... 42 Section 8.3. Delaware Trustee Required.................................................... 43
ii TABLE OF CONTENTS (continued)
Page ---- Section 8.4. Appointment of Administrative Trustees....................................... 43 Section 8.5. Duties and Responsibilities of the Trustees.................................. 43 Section 8.6. Notices of Defaults and Extensions........................................... 45 Section 8.7. Certain Rights of Property Trustee........................................... 46 Section 8.8. Delegation of Power.......................................................... 48 Section 8.9. May Hold Securities.......................................................... 48 Section 8.10. Compensation; Reimbursement; Indemnity....................................... 48 Section 8.11. Resignation and Removal; Appointment of Successor............................ 49 Section 8.12. Acceptance of Appointment by Successor....................................... 51 Section 8.13. Merger, Conversion, Consolidation or Succession to Business.................. 51 Section 8.14. Not Responsible for Recitals or Issuance of Securities....................... 51 Section 8.15. Property Trustee May File Proofs of Claim.................................... 51 Section 8.16. Reports to the Property Trustee.............................................. 52 ARTICLE IX. TERMINATION, LIQUIDATION AND MERGER............................................. 53 Section 9.1. Dissolution Upon Expiration Date............................................. 53 Section 9.2. Early Termination............................................................ 53 Section 9.3. Termination.................................................................. 53 Section 9.4. Liquidation.................................................................. 54 Section 9.5. Mergers, Consolidations, Amalgamations or Replacements of Trust.............. 55 ARTICLE X. MISCELLANEOUS PROVISIONS........................................................ 56 Section 10.1. Limitation of Rights of Holders.............................................. 56 Section 10.2. Agreed Tax Treatment of Trust and Trust Securities........................... 57 Section 10.3. Amendment.................................................................... 57 Section 10.4. Separability................................................................. 58 Section 10.5. Governing Law................................................................ 58 Section 10.6. Successors................................................................... 59 Section 10.7. Headings..................................................................... 59 Section 10.8. Reports, Notices and Demands................................................. 59 Section 10.9. Agreement Not to Petition.................................................... 60
iii TABLE OF CONTENTS (continued)
Page ---- ~~Section 10.10. Counterparts................................................................. 60~~
Exhibit A Certificate of Trust of NP Capital Trust I Exhibit B Form of Common Securities Certificate Exhibit C Form of Preferred Securities Certificate Exhibit D Junior Subordinated Indenture Exhibit E Form of Transferee Certificate to be Executed for QIBs Exhibit F Form of Transferee Certificate to be Executed by Transferees other than QIBs Exhibit G Form of Officer's Financial Certificate of the Depositor Exhibit H Form of Officer's Certificate Under Section 8.16(a) Schedule A Calculation of LIBOR iv THIS AMENDED AND RESTATED TRUST AGREEMENT, dated as of February 22, 2006, among (i) North Pointe Holdings Corporation, a Michigan corporation (including any successors or permitted assigns, the "Depositor"), (ii) LaSalle Bank National Association, a national banking association, as property trustee (in such capacity, the "Property Trustee"), (iii) Christiana Bank & Trust Company, a Delaware banking corporation, as Delaware trustee (in such capacity, the "Delaware Trustee"), (iv) John Berry, an individual, and Harold Meloche, an individual, each of whose address is c/o North Pointe Holdings Corporation, 28819 Franklin Road, Southfield, MI 48034, as administrative trustees (in such capacities, each an "Administrative Trustee" and, collectively, the "Administrative Trustees" and, together with the Property Trustee and the Delaware Trustee, the "Trustees") and (v) the several Holders, as hereinafter defined. WITNESSETH WHEREAS, the Depositor and the Delaware Trustee have heretofore created a Delaware statutory trust pursuant to the Delaware Statutory Trust Act by entering into a Trust Agreement, dated as of February 21, 2006 (the "Original Trust Agreement"), and by executing and filing with the Secretary of State of the State of Delaware the Certificate of Trust, substantially in the form attached as Exhibit A; and WHEREAS, the Depositor and the Trustees desire to amend and restate the Original Trust Agreement in its entirety as set forth herein to provide for, among other things, (i) the issuance of the Common Securities by the Trust to the Depositor, (ii) the issuance and sale of the Preferred Securities by the Trust pursuant to the Purchase Agreement and (iii) the acquisition by the Trust from the Depositor of all of the right, title and interest in and to the Notes; NOW, THEREFORE, in consideration of the agreements and obligations set forth herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, each party, for the benefit of the other parties and for the benefit of the Holders, hereby amends and restates the Original Trust Agreement in its entirety and agrees as follows: ARTICLE I. DEFINED TERMS SECTION 1.1 Definitions. For all purposes of this Trust Agreement, except as otherwise expressly provided or unless the context otherwise requires: (a) the terms defined in this Article I have the meanings assigned to them in this Article I; (b) the words "include", "includes" and "including" shall be deemed to be followed by the phrase "without limitation"; (c) all accounting terms used but not defined herein have the meanings assigned to them in accordance with United States generally accepted accounting principles; (d) unless the context otherwise requires, any reference to an "Article", a "Section", a "Schedule" or an "Exhibit" refers to an Article, a Section, a Schedule or an Exhibit, as the case may be, of or to this Trust Agreement; (e) the words "hereby", "herein", "hereof" and "hereunder" and other words of similar import refer to this Trust Agreement as a whole and not to any particular Article, Section or other subdivision; (f) a reference to the singular includes the plural and vice versa; and (g) the masculine, feminine or neuter genders used herein shall include the masculine, feminine and neuter genders. "Act" has the meaning specified in Section 6.7. "Additional Interest" has the meaning specified in Section 1.1 of the Indenture. "Additional Interest Amount" means, with respect to Trust Securities of a given Liquidation Amount and/or a given period, the amount of Additional Interest paid by the Depositor on a Like Amount of Notes for such period. "Additional Taxes" has the meaning specified in Section 1.1 of the Indenture. "Additional Tax Sums" has the meaning specified in Section 10.5 of the Indenture. "Administrative Trustee" means each of the Persons identified as an "Administrative Trustee" in the preamble to this Trust Agreement, solely in each such Person's capacity as Administrative Trustee of the Trust and not in such Person's individual capacity, or any successor Administrative Trustee appointed as herein provided. "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, "control" when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Applicable Accounting Principles" means accounting practices prescribed or permitted by the National Association of Insurance Commissioners and, with respect to the Depositor's subsidiary insurance companies, the applicable insurance department of the state of domicile of such insurance subsidiary and, in each case, applied consistently throughout the periods involved. 2 "Applicable Depositary Procedures" means, with respect to any transfer or transaction involving a Book-Entry Preferred Security, the rules and procedures of the Depositary for such Book-Entry Preferred Security, in each case to the extent applicable to such transaction and as in effect from time to time. "Applicable Insurance Regulatory Authority" means the Office of Financial and Insurance Services of the State of Michigan, the Office of Insurance Regulation of the State of Florida and the Department of Insurance, Securities and Banking of the District of Columbia, as applicable, or, if at any time after the execution of this Trust Agreement any such entity is not existing and performing the duties now assigned to it, any successor body performing similar duties or functions. "Bankruptcy Event" means, with respect to any Person: (a) the entry of a decree or order by a court having jurisdiction in the premises (i) judging such Person a bankrupt or insolvent, (ii) approving as properly filed a petition seeking reorganization, arrangement, adjudication or composition of or in respect of such Person under any applicable Federal or state bankruptcy, insolvency, reorganization or other similar law, (iii) appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of such Person or of any substantial part of its property or (iv) ordering the winding up or liquidation of its affairs, and the continuance of any such decree or order unstayed and in effect for a period of sixty (60) consecutive days; or (b) the institution by such Person of proceedings to be adjudicated a bankrupt or insolvent, or the consent by it to the institution of bankruptcy or insolvency proceedings against it, or the filing by it of a petition or answer or consent seeking reorganization or relief under any applicable Federal or State bankruptcy, insolvency, reorganization or other similar law, or the consent by it to the filing of any such petition or to the appointment of a custodian, receiver, liquidator, assignee, trustee, sequestrator or similar official of such Person or of any substantial part of its property, or the making by it of an assignment for the benefit of creditors, or the admission by it in writing of its inability to pay its debts generally as they become due and its willingness to be adjudicated a bankrupt or insolvent, or the taking of corporate action by such Person in furtherance of any such action. "Bankruptcy Laws" means all Federal and state bankruptcy, insolvency, reorganization and other similar laws, including the United States Bankruptcy Code. "Book-Entry Preferred Security" means a Preferred Security, the ownership and transfers of which shall be made through book entries by a Depositary. 3 "Business Day" means a day other than (a) a Saturday or Sunday, (b) a day on which banking institutions in the City of New York are authorized or required by law or executive order to remain closed or (c) a day on which the Corporate Trust Office is closed for business. "Calculation Agent" has the meaning specified in Section 4.10. "Closing Date" has the meaning specified in the Purchase Agreement. "Code" means the United States Internal Revenue Code of 1986, as amended. "Commission" means the Securities and Exchange Commission, as from time to time constituted, created under the Exchange Act or, if at any time after the execution of this Trust Agreement such Commission is not existing and performing the duties assigned to it, then the body performing such duties at such time. "Common Securities Certificate" means a certificate evidencing ownership of Common Securities, substantially in the form attached as Exhibit B. "Common Security" means a common security of the Trust, denominated as such and representing an undivided beneficial interest in the assets of the Trust, having a Liquidation Amount of $1,000 and having the rights provided therefor in this Trust Agreement. "Corporate Trust Office" means the principal office of the Property Trustee at which any particular time its corporate trust business shall be administered, which office at the date of this Trust Agreement is located at 135 South LaSalle Street, Suite 1511, Chicago, Illinois 60603, Attention: CDO Trust Services Group--NP Capital Trust I. "Definitive Preferred Securities Certificates" means Preferred Securities issued in certificated, fully registered form that are not Global Preferred Securities. "Delaware Statutory Trust Act" means Chapter 38 of Title 12 of the Delaware Code, 12 Del. Code Section 3801 et seq., or any successor statute thereto, in each case as amended from time to time. "Delaware Trustee" means the Person identified as the "Delaware Trustee" in the preamble to this Trust Agreement, solely in its capacity as Delaware Trustee of the Trust and not in its individual capacity, or its successor in interest in such capacity, or any successor Delaware Trustee appointed as herein provided. "Depositary" means an organization registered as a clearing agency under the Exchange Act that is designated as Depositary by the Depositor or any successor thereto. DTC will be the initial Depositary. "Depositary Participant" means a broker, dealer, bank, other financial institution or other Person for whom from time to time the Depositary effects book-entry transfers and pledges of securities deposited with the Depositary. 4 "Depositor" has the meaning specified in the preamble to this Trust Agreement and any successors and permitted assigns. "Depositor Affiliate" has the meaning specified in Section 4.9. "Distribution Date" has the meaning specified in Section 4.1(a)(i). "Distributions" means amounts payable in respect of the Trust Securities as provided in Section 4.1. "DTC" means The Depository Trust Company, a New York corporation, or any successor thereto. "Early Termination Event" has the meaning specified in Section 9.2. "Event of Default" means any one of the following events (whatever the reason for such event and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): (a) the occurrence of a Note Event of Default; or (b) default by the Trust in the payment of any Distribution when it becomes due and payable, and continuation of such default for a period of thirty (30) days; or (c) default by the Trust in the payment of any Redemption Price of any Trust Security when it becomes due and payable; or (d) default in the performance, or breach, in any material respect of any covenant or warranty of the Trustees in this Trust Agreement (other than those specified in clause (b) or (c) above) and continuation of such default or breach for a period of thirty (30) days after there has been given, by registered or certified mail, to the Trustees and to the Depositor by the Holders of at least twenty five percent (25%) in aggregate Liquidation Amount of the Outstanding Preferred Securities a written notice specifying such default or breach and requiring it to be remedied and stating that such notice is a "Notice of Default" hereunder; or (e) the occurrence of a Bankruptcy Event with respect to the Property Trustee if a successor Property Trustee has not been appointed within ninety (90) days thereof. "Exchange Act" means the Securities Exchange Act of 1934, and any successor statute thereto, in each case as amended from time to time. "Expiration Date" has the meaning specified in Section 9.1. 5 "Extension Period" has the meaning specified in Section 4.1(a)(ii). "Fiscal Year" shall be the fiscal year of the Trust, which shall be the calendar year, or such other period as is required by the Code. "Global Preferred Security" means a Preferred Securities Certificate evidencing ownership of Book-Entry Preferred Securities. "Guarantee Agreement" means the Guarantee Agreement executed and delivered by the Depositor and LaSalle Bank National Association, as guarantee trustee, contemporaneously with the execution and delivery of the Trust Agreement for the benefit of the holders of the Preferred Securities, as amended from time to time. "Holder" means a Person in whose name a Trust Security or Trust Securities are registered in the Securities Register; any such Person shall be deemed to be a beneficial owner within the meaning of the Delaware Statutory Trust Act. "Indemnified Person" has the meaning specified in Section 8.10(c). "Indenture" means the Junior Subordinated Indenture executed and delivered by the Depositor and the Note Trustee contemporaneously with the execution and delivery of this Trust Agreement, for the benefit of the holders of the Notes, a copy of which is attached hereto as Exhibit D, as amended or supplemented from time to time. "Indenture Redemption Price" means the Optional Note Redemption Price or the Special Note Redemption Price, as applicable. "Interest Payment Date" has the meaning specified in Section 1.1 of the Indenture. "Investment Company Act" means the Investment Company Act of 1940, or any successor statute thereto, in each case as amended from time to time. "Investment Company Event" has the meaning specified in Section 1.1 of the Indenture. "LIBOR" has the meaning specified in Schedule A. "LIBOR Business Day" has the meaning specified in Schedule A. "LIBOR Determination Date" has the meaning specified in Schedule A. "Lien" means any lien, pledge, charge, encumbrance, mortgage, deed of trust, adverse ownership interest, hypothecation, assignment, security interest or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever. "Like Amount" means (a) with respect to a redemption of any Trust Securities, Trust Securities having a Liquidation Amount equal to the principal amount of Notes to be contemporaneously redeemed or paid at maturity in accordance with the Indenture, the proceeds of which will be used to pay the Redemption Price of such Trust Securities, (b) with respect to a 6 distribution of Notes to Holders of Trust Securities in connection with a dissolution of the Trust, Notes having a principal amount equal to the Liquidation Amount of the Trust Securities of the Holder to whom such Notes are distributed and (c) with respect to any distribution of Additional Interest Amounts to Holders of Trust Securities, Notes having a principal amount equal to the Liquidation Amount of the Trust Securities in respect of which such distribution is made. "Liquidation Amount" means the stated amount of $1,000 per Trust Security. "Liquidation Date" means the date on which assets are to be distributed to Holders in accordance with Section 9.4(a) hereunder following dissolution of the Trust. "Liquidation Distribution" has the meaning specified in Section 9.4(d). "Majority in Liquidation Amount" means Common or Preferred Securities, as the case may be, representing more than fifty percent (50%) of the aggregate Liquidation Amount of all (or a specified group of) then Outstanding Common or Preferred Securities, as the case may be. "Note Event of Default" means any "Event of Default" specified in Section 5.1 of the Indenture. "Note Redemption Date" means, with respect to any Notes to be redeemed under the Indenture, the date fixed for redemption of such Notes under the Indenture. "Note Trustee" means the Person identified as the "Trustee" in the Indenture, solely in its capacity as Trustee pursuant to the Indenture and not in its individual capacity, or its successor in interest in such capacity, or any successor Trustee appointed as provided in the Indenture. "Notes" means the Depositor's Floating Rate Junior Subordinated Notes issued pursuant to the Indenture. "Officers' Certificate" means a certificate signed by the Chief Executive Officer, the President or an Executive Vice President, and by the Chief Financial Officer, Treasurer or an Assistant Treasurer, of the Depositor, and delivered to the Trustees. Any Officers' Certificate delivered with respect to compliance with a condition or covenant provided for in this Trust Agreement (other than the certificate provided pursuant to Section 8.16 which is not an Officers' Certificate) shall include: (a) a statement by each officer signing the Officers' Certificate that such officer 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 such officer in rendering the Officers' Certificate; (c) a statement that such officer has made such examination or investigation as, in such officer's opinion, is necessary to enable 7 such officer to express an informed opinion as to whether or not such covenant or condition has been complied with; and (d) a statement as to whether, in the opinion of such officer, such condition or covenant has been complied with. "Operative Documents" means the Purchase Agreement, the Indenture, the Trust Agreement, the Guarantee Agreement, the Notes and the Trust Securities. "Opinion of Counsel" means a written opinion of counsel, who may be counsel for, or an employee of, the Depositor or any Affiliate of the Depositor. "Optional Redemption Price" means, with respect to any Trust Security, an amount equal to one hundred percent (100%) of the Liquidation Amount of such Trust Security on the Redemption Date, plus accumulated and unpaid Distributions to the Redemption Date, plus the related amount of the premium, if any, and/or accrued interest, including Additional Interest, if any, thereon paid by the Depositor upon the concurrent redemption or payment at maturity of a Like Amount of Notes. "Optional Note Redemption Price" means, with respect to any Note to be redeemed on any Redemption Date under the Indenture, an amount equal to one hundred percent (100%) of the outstanding principal amount of such Note, together with accrued interest, including any Additional Interest (to the extent legally enforceable), thereon through but not including the date fixed as such Redemption Date. "Original Issue Date" means the date of original issuance of the Trust Securities. "Original Trust Agreement" has the meaning specified in the recitals to this Trust Agreement. "Outstanding", when used with respect to any Trust Securities, means, as of the date of determination, all Trust Securities theretofore executed and delivered under this Trust Agreement, except: (a) Trust Securities theretofore canceled by the Property Trustee or delivered to the Property Trustee for cancellation; (b) Trust Securities for which payment or redemption money in the necessary amount has been theretofore deposited with the Property Trustee or any Paying Agent in trust for the Holders of such Trust Securities; provided, that if such Trust Securities are to be redeemed, notice of such redemption has been duly given pursuant to this Trust Agreement; and (c) Trust Securities that have been paid or in exchange for or in lieu of which other Trust Securities have been executed and delivered pursuant to the provisions of this Trust Agreement, unless proof satisfactory to the Property Trustee is 8 presented that any such Trust Securities are held by Holders in whose hands such Trust Securities are valid, legal and binding obligations of the Trust; provided, that in determining whether the Holders of the requisite Liquidation Amount of the Outstanding Preferred Securities have given any request, demand, authorization, direction, notice, consent or waiver hereunder, Preferred Securities owned by the Depositor, any Trustee or any Affiliate of the Depositor or of any Trustee shall be disregarded and deemed not to be Outstanding, except that (i) in determining whether any Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Preferred Securities that such Trustee knows to be so owned shall be so disregarded and (ii) the foregoing shall not apply at any time when all of the Outstanding Preferred Securities are owned by the Depositor, one or more of the Trustees and/or any such Affiliate. Preferred Securities so owned that have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Administrative Trustees the pledgee's right so to act with respect to such Preferred Securities and that the pledgee is not the Depositor, any Trustee or any Affiliate of the Depositor or of any Trustee. "Owner" means each Person who is the beneficial owner of Book-Entry Preferred Securities as reflected in the records of the Depositary or, if a Depositary Participant is not the beneficial owner, then the beneficial owner as reflected in the records of the Depositary Participant. "Paying Agent" means any Person authorized by the Administrative Trustees to pay Distributions or other amounts in respect of any Trust Securities on behalf of the Trust. "Payment Account" means a segregated non-interest-bearing corporate trust account maintained by the Property Trustee for the benefit of the Holders in which all amounts paid in respect of the Notes will be held and from which the Property Trustee, through the Paying Agent, shall make payments to the Holders in accordance with Sections 3.1, 4.1 and 4.2. "Person" means a legal person, including any individual, corporation, estate, partnership, joint venture, association, joint stock company, company, limited liability company, trust, unincorporated association or government, or any agency or political subdivision thereof, or any other entity of whatever nature. "Preferred Security" means a preferred security of the Trust, denominated as such and representing an undivided beneficial interest in the assets of the Trust, having a Liquidation Amount of $1,000 and having the rights provided therefor in this Trust Agreement. "Preferred Securities Certificate" means a certificate evidencing ownership of Preferred Securities, substantially in the form attached as Exhibit C. "Property Trustee" means the Person identified as the "Property Trustee" in the preamble to this Trust Agreement, solely in its capacity as Property Trustee of the Trust and not in its individual capacity, or its successor in interest in such capacity, or any successor Property Trustee appointed as herein provided. 9 "Purchase Agreement" means the Purchase Agreement executed and delivered by the Trust, the Depositor and ALESCO Preferred Funding VII, Ltd., as purchaser, contemporaneously with the execution and delivery of this Trust Agreement, as amended from time to time. "QIB" means a "qualified institutional buyer" as defined in Rule 144A under the Securities Act of 1933, as amended. "Redemption Date" means, with respect to any Trust Security to be redeemed, the date fixed for such redemption by or pursuant to this Trust Agreement; provided, that each Note Redemption Date and the stated maturity (or any date of principal repayment upon early maturity) of the Notes shall be a Redemption Date for a Like Amount of Trust Securities. "Redemption Price" means the Special Redemption Price or Optional Redemption Price, as applicable. If the Depositor has redeemed the Notes at the Special Note Redemption Price, the Trust shall redeem the Trust Securities at the Special Redemption Price. If the Depositor has redeemed the Notes at the Optional Note Redemption Price, the Trust shall redeem the Trust Securities at the Optional Redemption Price. "Reference Banks" has the meaning specified in Schedule A. "Responsible Officer" means, with respect to the Property Trustee, the officer in the CDO Trust Services Group of the Property Trustee having direct responsibility for the administration of this Trust Agreement. "Securities Act" means the Securities Act of 1933, and any successor statute thereto, in each case as amended from time to time. "Securities Certificate" means any one of the Common Securities Certificates or the Preferred Securities Certificates. "Securities Register" and "Securities Registrar" have the respective meanings specified in Section 5.7. "Special Redemption Price" means, with respect to any Trust Security, an amount equal to one hundred seven and one half percent (107.5%) of the Liquidation Amount of such Trust Security on the Redemption Date, plus accumulated and unpaid Distributions to the Redemption Date, plus the related amount of the premium, if any, and/or accrued interest, including Additional Interest, if any, thereon paid by the Depositor upon the concurrent redemption or payment at maturity of a Like Amount of Notes. "Special Note Redemption Price" means, with respect to any Note to be redeemed on any Redemption Date under the Indenture, an amount equal to one hundred seven and one half percent (107.5%) of the outstanding principal amount of such Note, together with accrued interest, including Additional Interest, thereon through but not including the date fixed as such Redemption Date. 10 "Statutory Financial Statements" means all financial statements of the Depositor's subsidiary insurance companies for each relevant period, prepared in accordance with Applicable Accounting Principles. "Successor Securities" has the meaning specified in Section 9.5(a). "Tax Event" has the meaning specified in Section 1.1 of the Indenture. "Trust" means the Delaware statutory trust known as "NP Capital Trust I," which was created on February 21, 2006 under the Delaware Statutory Trust Act pursuant to the Original Trust Agreement and the filing of the Certificate of Trust, and continued pursuant to this Trust Agreement. "Trust Agreement" means this Amended and Restated Trust Agreement, as the same may be modified, amended or supplemented from time to time in accordance with the applicable provisions hereof, including all Schedules and Exhibits (other than Exhibit D). "Trustees" means the Administrative Trustees, the Property Trustee and the Delaware Trustee, each as defined in this Article I. "Trust Property" means (a) the Notes, (b) any cash on deposit in, or owing to, the Payment Account and (c) all proceeds and rights in respect of the foregoing and any other property and assets for the time being held or deemed to be held by the Property Trustee pursuant to the trusts of this Trust Agreement. "Trust Security" means any one of the Common Securities or the Preferred Securities. ARTICLE II. THE TRUST SECTION 2.1. Name. The trust continued hereby shall be known as "NP Capital Trust I", as such name may be modified from time to time by the Administrative Trustees following written notice to the Holders of Trust Securities and the other Trustees, in which name the Trustees may conduct the business of the Trust, make and execute contracts and other instruments on behalf of the Trust and sue and be sued. SECTION 2.2. Office of the Delaware Trustee; Principal Place of Business. The address of the Delaware Trustee in the State of Delaware is Christiana Bank & Trust Company, 1314 King Street, Wilmington, Delaware 19801, Attention: Corporate Trust Administration, or such other address in the State of Delaware as the Delaware Trustee may designate by written notice to the Holders, the Depositor, the Property Trustee and the Administrative Trustees. The principal executive office of the Trust is 28819 Franklin Road, 11 Southfield, MI 48034, Attention: Brian J. Roney, as such address may be changed from time to time by the Administrative Trustees following written notice to the Holders and the other Trustees. SECTION 2.3. Initial Contribution of Trust Property; Fees, Costs and Expenses. The Property Trustee acknowledges receipt from the Depositor in connection with the Original Trust Agreement of the sum of ten dollars ($10), which constituted the initial Trust Property. The Depositor shall pay all fees, costs and expenses of the Trust (except with respect to the Trust Securities) as they arise or shall, upon request of any Trustee, promptly reimburse such Trustee for any such fees, costs and expenses paid by such Trustee. The Depositor shall make no claim upon the Trust Property for the payment of such fees, costs or expenses. SECTION 2.4. Purposes of Trust. (a) The exclusive purposes and functions of the Trust are to (i) issue and sell Trust Securities and use the proceeds from such sale to acquire the Notes and (ii) engage in only those activities necessary or incidental thereto. The Delaware Trustee, the Property Trustee and the Administrative Trustees are trustees of the Trust, and have all the rights, powers and duties to the extent set forth herein. The Trustees hereby acknowledge that they are trustees of the Trust. (b) So long as this Trust Agreement remains in effect, the Trust (or the Trustees acting on behalf of the Trust) shall not undertake any business, activities or transaction except as expressly provided herein or contemplated hereby. In particular, the Trust (or the Trustees acting on behalf of the Trust) shall not (i) acquire any investments or engage in any activities not authorized by this Trust Agreement, (ii) sell, assign, transfer, exchange, mortgage, pledge, set-off or otherwise dispose of any of the Trust Property or interests therein, including to Holders, except as expressly provided herein, (iii) incur any indebtedness for borrowed money or issue any other debt, (iv) take or consent to any action that would result in the placement of a Lien on any of the Trust Property, (v) take or consent to any action that would reasonably be expected to cause (in the case of the Property Trustee, to the actual knowledge of a Responsible Officer would cause) the Trust to become taxable as a corporation or classified as other than a grantor trust for United States federal income tax purposes, (vi) take or consent to any action that would cause (in the case of the Property Trustee, to the actual knowledge of a Responsible Officer would cause) the Notes to be treated as other than indebtedness of the Depositor for United States federal income tax purposes, (vii) take or consent to any action that would cause (in the case of the Property Trustee, to the actual knowledge of a Responsible Officer would cause) the Trust to be deemed to be an "investment company" required to be registered under the Investment Company Act, (viii) take or consent to any action that would cause (in the case of the Property Trustee, to the actual knowledge of a Responsible Officer would cause) the Trust to be deemed to be an "investment company" required to be registered under the Investment Company Act, and (ix) have any power to, or agree to any action by the Depositor that (in the case of the Property Trustee, to the actual knowledge of a Responsible Officer) would, vary the investment (within the meaning of Treasury Regulation Section 301.7701-4(c)) of the Trust or of the Security Holders. 12 SECTION 2.5. Authorization to Enter into Certain Transactions. (a) The Trustees shall conduct the affairs of the Trust in accordance with and subject to the terms of this Trust Agreement. In accordance with the following provisions (i) and (ii), the Trustees shall have the authority to enter into all transactions and agreements determined by the Trustees to be appropriate in exercising the authority, express or implied, otherwise granted to the Trustees, under this Trust Agreement, and to perform all acts in furtherance thereof, including the following: (i) As among the Trustees, each Administrative Trustee shall severally have the power, authority and authorization to act on behalf of the Trust with respect to the following matters: (A) the issuance and sale of the Trust Securities; (B) to cause the Trust to enter into, and to execute, deliver and perform on behalf of the Trust, such agreements, documents, instruments, certificates and other writings as may be necessary or desirable in connection with the purposes and function of the Trust, including, without limitation, a common securities subscription agreement, a junior subordinated note purchase agreement and the Purchase Agreement; (C) assisting in the sale of the Preferred Securities in one or more transactions exempt from registration under the Securities Act, and in compliance with applicable state securities or blue sky laws; (D) assisting in the sending of notices (other than notices of default) and other information regarding the Trust Securities and the Notes to the Holders in accordance with this Trust Agreement; (E) the appointment of a Paying Agent and Securities Registrar in accordance with this Trust Agreement; (F) execution and delivery of the Trust Securities on behalf of the Trust in accordance with this Trust Agreement; (G) execution and delivery of closing certificates, if any, pursuant to the Purchase Agreement and application for a taxpayer identification number for the Trust; (H) preparation and filing of all applicable tax returns and tax information reports that are required to be filed on behalf of the Trust; (I) establishing a record date with respect to all actions to be taken hereunder that require a record date to be established, except as provided in Section 6.10(a); 13 (J) unless otherwise required by the Delaware Statutory Trust Act to execute on behalf of the Trust (either acting alone or together with the other Administrative Trustees) any documents and other writings that such Administrative Trustee has the power to execute pursuant to this Trust Agreement; and (K) the taking of any action incidental to the foregoing as such Administrative Trustee may from time to time determine is necessary or advisable to give effect to the terms of this Trust Agreement. (ii) As among the Trustees, the Property Trustee shall have the power, authority and authorization to act on behalf of the Trust with respect to the following matters: (A) the receipt and holding of legal title of the Notes; (B) the establishment of the Payment Account; (C) the receipt of interest, principal and any other payments made in respect of the Notes and the holding of such amounts in the Payment Account; (D) the distribution through the Paying Agent of amounts distributable to the Holders in respect of the Trust Securities; (E) the exercise of all of the rights, powers and privileges of a holder of the Notes in accordance with the terms of this Trust Agreement; (F) the sending of notices of default and other information regarding the Trust Securities and the Notes to the Holders in accordance with this Trust Agreement; (G) the distribution of the Trust Property in accordance with the terms of this Trust Agreement; (H) to the extent provided in this Trust Agreement, the winding up of the affairs of and liquidation of the Trust, provided that the Administrative Trustees shall have the power, duty and authority to act on behalf of the Trust with respect to the preparation, execution and filing of the certificate of cancellation of the Trust with the Secretary of State of the State of Delaware; (I) the authentication of the Preferred Securities as provided in this Trust Agreement; and (J) the taking of any action incidental to the foregoing as the Property Trustee may from time to time determine is necessary or advisable to give effect to the terms of this Trust Agreement and protect and conserve the Trust Property for the benefit of the Holders (without consideration of the effect of any such action on any particular Holder). 14 (b) In connection with the issue and sale of the Preferred Securities, the Depositor shall have the right and responsibility to assist the Trust with respect to, or effect on behalf of the Trust, the following (and any actions taken by the Depositor in furtherance of the following prior to the date of this Trust Agreement are hereby ratified and confirmed in all respects): (i) the negotiation of the terms of, and the execution and delivery of, the Purchase Agreement providing for the sale of the Preferred Securities in one or more transactions exempt from registration under the Securities Act, and in compliance with applicable state securities or blue sky laws; and (ii) the taking of any other actions necessary or desirable to carry out any of the foregoing activities. (c) Notwithstanding anything herein to the contrary, the Administrative Trustees are authorized and directed to conduct the affairs of the Trust and authorized to operate the Trust so that the Trust will not be taxable as a corporation or classified as other than a grantor trust for United States federal income tax purposes, so that the Notes will be treated as indebtedness of the Depositor for United States federal income tax purposes and so that the Trust will not be deemed to be an "investment company" required to be registered under the Investment Company Act. In respect thereof, each Administrative Trustee is authorized to take any action, not inconsistent with applicable law, the Certificate of Trust or this Trust Agreement, that such Administrative Trustee determines in his or her discretion to be necessary or desirable for such purposes, as long as such action does not adversely affect in any material respect the interests of the Holders of the Outstanding Preferred Securities. In no event shall the Administrative Trustees be liable to the Trust or the Holders for any failure to comply with this Section 2.5 to the extent that such failure results solely from a change in law or regulation or in the interpretation thereof. (d) Any action taken by a Trustee in accordance with its powers shall constitute the act of and serve to bind the Trust. In dealing with any Trustee acting on behalf of the Trust, no Person shall be required to inquire into the authority of such Trustee to bind the Trust. Persons dealing with the Trust are entitled to rely conclusively on the power and authority of any Trustee as set forth in this Trust Agreement. SECTION 2.6. Assets of Trust. The assets of the Trust shall consist of the Trust Property. SECTION 2.7. Title to Trust Property. (a) Legal title to all Trust Property shall be vested at all times in the Property Trustee and shall be held and administered by the Property Trustee in trust for the benefit of the Trust and the Holders in accordance with this Trust Agreement. (b) The Holders shall not have any right or title to the Trust Property other than the undivided beneficial interest in the assets of the Trust conferred by their Trust Securities and they shall have no right to call for any partition or division of property, profits or rights of the 15 Trust except as described below. The Trust Securities shall be personal property giving only the rights specifically set forth therein and in this Trust Agreement. ARTICLE III. PAYMENT ACCOUNT; PAYING AGENTS SECTION 3.1. Payment Account. (a) On or prior to the Closing Date, the Property Trustee shall establish the Payment Account. The Property Trustee and the Paying Agent shall have exclusive control and sole right of withdrawal with respect to the Payment Account for the purpose of making deposits in and withdrawals from the Payment Account in accordance with this Trust Agreement. All monies and other property deposited or held from time to time in the Payment Account shall be held by the Property Trustee in the Payment Account for the exclusive benefit of the Holders and for Distribution as herein provided. (b) The Property Trustee shall deposit in the Payment Account, promptly upon receipt, all payments of principal of or interest on, and any other payments with respect to, the Notes. Amounts held in the Payment Account shall not be invested by the Property Trustee pending distribution thereof. SECTION 3.2. Appointment of Paying Agents. The Property Trustee is appointed as the initial Paying Agent and hereby accepts such appointment. The Paying Agent shall make Distributions to Holders from the Payment Account and shall report the amounts of such Distributions to the Property Trustee and the Administrative Trustees. Any Paying Agent shall have the revocable power to withdraw funds from the Payment Account solely for the purpose of making the Distributions referred to above. The Administrative Trustees may revoke such power and remove the Paying Agent in their sole discretion. Any Person acting as Paying Agent shall be permitted to resign as Paying Agent upon thirty (30) days' written notice to the Administrative Trustees and the Property Trustee. If the Property Trustee shall no longer be the Paying Agent or a successor Paying Agent shall resign or its authority to act be revoked, the Administrative Trustees shall appoint a successor (which shall be a bank or trust company) to act as Paying Agent. Such successor Paying Agent appointed by the Administrative Trustees shall execute and deliver to the Trustees an instrument in which such successor Paying Agent shall agree with the Trustees that as Paying Agent, such successor Paying Agent will hold all sums, if any, held by it for payment to the Holders in trust for the benefit of the Holders entitled thereto until such sums shall be paid to such Holders. The Paying Agent shall return all unclaimed funds to the Property Trustee and upon removal of a Paying Agent such Paying Agent shall also return all funds in its possession to the Property Trustee. The provisions of Article VIII shall apply to the Property Trustee also in its role as Paying Agent, for so long as the Property Trustee shall act as Paying Agent and, to the extent applicable, to any other Paying Agent appointed hereunder. Any reference in this Trust Agreement to the Paying Agent shall include any co-paying agent unless the context requires otherwise. 16 ARTICLE IV. DISTRIBUTIONS; REDEMPTION SECTION 4.1. Distributions. (a) The Trust Securities represent undivided beneficial interests in the Trust Property, and Distributions (including any Additional Interest Amounts) will be made on the Trust Securities at the rate and on the dates that payments of interest (including any Additional Interest) are made on the Notes. Accordingly: (i) Distributions on the Trust Securities shall be cumulative, and shall accumulate whether or not there are funds of the Trust available for the payment of Distributions. Distributions shall accumulate from February 22, 2006, and, except as provided in clause (ii) below, shall be payable quarterly in arrears on March 15, June 15, September 15 and December 15 of each year, commencing on March 15, 2006. If any date on which a Distribution is otherwise payable on the Trust Securities is not a Business Day, then the payment of such Distribution shall be made on the next succeeding Business Day (and additional interest shall accrue in respect of the amounts whose payment is so delayed for the period from and after each such date until the next succeeding Business Day), except that, if such Business Day falls in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case, with the same force and effect as if made on such date (each date on which Distributions are payable in accordance with this Section 4.1(a)(i), a "Distribution Date"); (ii) in the event (and to the extent) that the Depositor exercises its right under the Indenture to defer the payment of interest on the Notes, Distributions on the Trust Securities shall be deferred. Under the Indenture, so long as no Note Event of Default has occurred and is continuing, the Depositor shall have the right, at any time and from time to time during the term of the Notes, to defer the payment of interest on the Notes for a period of up to twenty (20) consecutive quarterly interest payment periods (each such extended interest payment period, an "Extension Period"), during which Extension Period no interest on the Notes shall be due and payable (except any Additional Tax Sums that may be due and payable). No interest on the Notes shall be due and payable during an Extension Period, except at the end thereof, but each installment of interest that would otherwise have been due and payable during such Extension Period shall bear Additional Interest (to the extent payment of such interest would be legally enforceable) at a fixed rate equal to 8.70% per annum through the interest payment date in March 2011 and thereafter at a variable rate equal to LIBOR plus 3.64% per annum, compounded quarterly, from the dates on which amounts would have otherwise been due and payable until paid or until funds for the payment thereof have been made available for payment. If Distributions are deferred, the deferred Distributions (including Additional Interest Amounts) shall be paid on the date that the related Extension Period terminates, to Holders of the Trust Securities as they appear on the books and records of the Trust on the record date immediately preceding such termination date. 17 (iii) Distributions shall accumulate in respect of the Trust Securities at a fixed rate equal to 8.70% per annum through the interest payment date in March 2011 and thereafter at a variable rate equal to LIBOR plus 3.64% per annum of the Liquidation Amount of the Trust Securities, such rate being the rate of interest payable on the Notes. LIBOR shall be determined by the Calculation Agent in accordance with Schedule A. The amount of Distributions payable for any period less than a full Distribution period shall be computed on the basis of a 360-day year and the actual number of days elapsed in the relevant Distribution period. The amount of Distributions payable for any period shall include any Additional Interest Amounts in respect of such period; and (iv) Distributions on the Trust Securities shall be made by the Paying Agent from the Payment Account and shall be payable on each Distribution Date only to the extent that the Trust has funds then on hand and available in the Payment Account for the payment of such Distributions. (b) Distributions on the Trust Securities with respect to a Distribution Date shall be payable to the Holders thereof as they appear on the Securities Register for the Trust Securities at the close of business on the relevant record date, which shall be at the close of business on the fifteenth day (whether or not a Business Day) preceding the relevant Distribution Date. Distributions payable on any Trust Securities that are not punctually paid on any Distribution Date as a result of the Depositor having failed to make an interest payment under the Notes will cease to be payable to the Person in whose name such Trust Securities are registered on the relevant record date, and such defaulted Distributions and any Additional Interest Amounts will instead be payable to the Person in whose name such Trust Securities are registered on the special record date, or other specified date for determining Holders entitled to such defaulted Distribution and Additional Interest Amount, established in the same manner, and on the same date, as such is established with respect to the Notes under the Indenture. SECTION 4.2. Redemption. (a) On each Note Redemption Date and on the stated maturity (or any date of principal repayment upon early maturity) of the Notes and on each other date on (or in respect of) which any principal on the Notes is repaid, the Trust will be required to redeem a Like Amount of Trust Securities at the Redemption Price. (b) Notice of redemption shall be given by the Property Trustee by first-class mail, postage prepaid, mailed not less than thirty (30) nor more than sixty (60) days prior to the Redemption Date to each Holder of Trust Securities to be redeemed, at such Holder's address appearing in the Securities Register. All notices of redemption shall state: (i) the Redemption Date; (ii) the Redemption Price or, if the Redemption Price cannot be calculated prior to the time the notice is required to be sent, the estimate of the Redemption Price provided pursuant to the Indenture, as calculated by the Depositor, together with a statement that it is an estimate and that the actual Redemption Price will be calculated by the Calculation Agent on the fifth Business Day prior to the Redemption Date (and if an 18 estimate is provided, a further notice shall be sent of the actual Redemption Price on the date that such Redemption Price is calculated); (iii) if less than all the Outstanding Trust Securities are to be redeemed, the identification (and, in the case of partial redemption, the respective amounts) and Liquidation Amounts of the particular Trust Securities to be redeemed; (iv) that on the Redemption Date, the Redemption Price will become due and payable upon each such Trust Security, or portion thereof, to be redeemed and that Distributions thereon will cease to accumulate on such Trust Security or such portion, as the case may be, on and after said date, except as provided in Section 4.2(d); (v) the place or places where the Trust Securities are to be surrendered for the payment of the Redemption Price; and (vi) such other provisions as the Property Trustee deems relevant. (c) The Trust Securities (or portion thereof) redeemed on each Redemption Date shall be redeemed at the Redemption Price with the proceeds from the contemporaneous redemption or payment at maturity of Notes. Redemptions of the Trust Securities (or portion thereof) shall be made and the Redemption Price shall be payable on each Redemption Date only to the extent that the Trust has funds then on hand and available in the Payment Account for the payment of such Redemption Price. Under the Indenture, the Notes may be redeemed by the Depositor on any Interest Payment Date, at the Depositor's option, on or after March 15, 2011, in whole or in part, from time to time at the Optional Note Redemption Price; provided, that the Depositor shall have received the prior approval of any Applicable Insurance Regulatory Authority then required. The Notes may also be redeemed by the Depositor, at its option pursuant to the terms of the Indenture, in whole but not in part, upon the occurrence and during the continuation of an Investment Company Event or a Tax Event, at the Special Note Redemption Price; provided, that the Depositor shall have received the prior approval of any Applicable Insurance Regulatory Authority then required. (d) If the Property Trustee gives a notice of redemption in respect of any Preferred Securities, then on the Business Day prior to the Redemption Date, the Depositor shall deposit sufficient funds with the Property Trustee to pay the Redemption Price. If such deposit has been made by such time, then by 12:00 noon, New York City time, on the Redemption Date, the Property Trustee will, with respect to Book-Entry Preferred Securities, irrevocably deposit with the Depositary for such Book-Entry Preferred Securities, to the extent available therefor, funds sufficient to pay the applicable Redemption Price and will give such Depositary irrevocable instructions and authority to pay the Redemption Price to the Holders of the Preferred Securities. With respect to Preferred Securities that are not Book-Entry Preferred Securities, the Property Trustee will irrevocably deposit with the Paying Agent, to the extent available therefor, funds sufficient to pay the applicable Redemption Price and will give the Paying Agent irrevocable instructions and authority to pay the Redemption Price to the Holders of the Preferred Securities upon surrender of their Preferred Securities Certificates. Notwithstanding the foregoing, Distributions payable on or prior to the Redemption Date for any Trust Securities (or portion thereof) called for redemption shall be payable to the Holders of such Trust Securities as they 19 appear on the Securities Register on the relevant record dates for the related Distribution Dates. If notice of redemption shall have been given and funds deposited as required, then upon the date of such deposit, all rights of Holders holding Trust Securities (or portion thereof) so called for redemption will cease, except the right of such Holders to receive the Redemption Price and any Distribution payable in respect of the Trust Securities on or prior to the Redemption Date, but without interest, and, in the case of a partial redemption, the right of such Holders to receive a new Trust Security or Securities of authorized denominations, in aggregate Liquidation Amount equal to the unredeemed portion of such Trust Security or Securities, and such Securities (or portion thereof) called for redemption will cease to be Outstanding. In the event that any date on which any Redemption Price is payable is not a Business Day, then payment of the Redemption Price payable on such date will be made on the next succeeding Business Day (and additional interest shall accrue in respect of the amounts whose payment is so delayed for the period from and after each such date until the next succeeding Business Day), except that, if such Business Day falls in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case, with the same force and effect as if made on such date. In the event that payment of the Redemption Price in respect of any Trust Securities (or portion thereof) called for redemption is improperly withheld or refused and not paid either by the Trust or by the Depositor pursuant to the Guarantee Agreement, Distributions on such Trust Securities (or portion thereof) will continue to accumulate, as set forth in Section 4.1, from the Redemption Date originally established by the Trust for such Trust Securities (or portion thereof) to the date such Redemption Price is actually paid, in which case the actual payment date will be the date fixed for redemption for purposes of calculating the Redemption Price. (e) Subject to Section 4.3(a), if less than all the Outstanding Trust Securities are to be redeemed on a Redemption Date, then the aggregate Liquidation Amount of Trust Securities to be redeemed shall be allocated pro rata to the Common Securities and the Preferred Securities based upon the relative aggregate Liquidation Amounts of the Common Securities and the Preferred Securities. The Preferred Securities to be redeemed shall be selected on a pro rata basis based upon their respective Liquidation Amounts not more than sixty (60) days prior to the Redemption Date by the Property Trustee from the Outstanding Preferred Securities not previously called for redemption; provided, that with respect to Holders that would be required to hold less than one hundred (100) but more than zero (0) Trust Securities as a result of such redemption, the Trust shall redeem Trust Securities of each such Holder so that after such redemption such Holder shall hold either one hundred (100) Trust Securities or such Holder no longer holds any Trust Securities, and shall use such method (including, without limitation, by lot) as the Trust shall deem fair and appropriate; and provided, further, that so long as the Preferred Securities are Book-Entry Preferred Securities, such selection shall be made in accordance with the Applicable Depositary Procedures for the Preferred Securities by such Depositary. The Property Trustee shall promptly notify the Securities Registrar in writing of the Preferred Securities (or portion thereof) selected for redemption and, in the case of any Preferred Securities selected for partial redemption, the Liquidation Amount thereof to be redeemed. For all purposes of this Trust Agreement, unless the context otherwise requires, all provisions relating to the redemption of Preferred Securities shall relate, in the case of any Preferred Securities redeemed or to be redeemed only in part, to the portion of the aggregate Liquidation Amount of Preferred Securities that has been or is to be redeemed. 20 (f) The Trust in issuing the Trust Securities may use "CUSIP" numbers (if then generally in use), and, if so, the Property Trustee shall indicate the "CUSIP" numbers of the Trust Securities in notices of redemption and related materials as a convenience to Holders; provided, that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Trust Securities or as contained in any notice of redemption and related materials. SECTION 4.3. Subordination of Common Securities. (a) Payment of Distributions (including any Additional Interest Amounts) on, the Redemption Price of and the Liquidation Distribution in respect of, the Trust Securities, as applicable, shall be made, pro rata among the Common Securities and the Preferred Securities based on the Liquidation Amount of the respective Trust Securities; provided, that if on any Distribution Date, Redemption Date or Liquidation Date an Event of Default shall have occurred and be continuing, no payment of any Distribution (including any Additional Interest Amounts) on, Redemption Price of or Liquidation Distribution in respect of, any Common Security, and no other payment on account of the redemption, liquidation or other acquisition of Common Securities, shall be made unless payment in full in cash of all accumulated and unpaid Distributions (including any Additional Interest Amounts) on all Outstanding Preferred Securities for all Distribution periods terminating on or prior thereto, or in the case of payment of the Redemption Price the full amount of such Redemption Price on all Outstanding Preferred Securities then called for redemption, or in the case of payment of the Liquidation Distribution the full amount of such Liquidation Distribution on all Outstanding Preferred Securities, shall have been made or provided for, and all funds immediately available to the Property Trustee shall first be applied to the payment in full in cash of all Distributions (including any Additional Interest Amounts) on, or the Redemption Price of or the Liquidation Distribution in respect of, the Preferred Securities then due and payable. (b) In the case of the occurrence of any Event of Default, the Holders of the Common Securities shall have no right to act with respect to any such Event of Default under this Trust Agreement until all such Events of Default with respect to the Preferred Securities have been cured, waived or otherwise eliminated. Until all such Events of Default under this Trust Agreement with respect to the Preferred Securities have been so cured, waived or otherwise eliminated, the Property Trustee shall act solely on behalf of the Holders of the Preferred Securities and not on behalf of the Holders of the Common Securities, and only the Holders of all the Preferred Securities will have the right to direct the Property Trustee to act on their behalf. SECTION 4.4. Payment Procedures. Payments of Distributions (including any Additional Interest Amounts), the Redemption Price, Liquidation Amount or any other amounts in respect of the Preferred Securities shall be made by wire transfer at such place and to such account at a banking institution in the United States as may be designated in writing at least ten (10) Business Days prior to the date for payment by the Person entitled thereto unless proper written transfer instructions have not been received by the relevant record date, in which case such payments shall be made by check mailed to the address of such Person as such address shall appear in the Securities Register. If any Preferred Securities are held by a Depositary, such Distributions thereon shall be made to the 21 Depositary in immediately available funds. Payments in respect of the Common Securities shall be made in such manner as shall be mutually agreed between the Property Trustee and the Holder of all the Common Securities. SECTION 4.5. Withholding Tax. (a) The Trust and the Administrative Trustees shall comply with all withholding and backup withholding tax requirements under United States federal, state and local law. The Administrative Trustees on behalf of the Trust shall request, and the Holders shall provide to the Trust, such forms or certificates as are necessary to establish an exemption from withholding and backup withholding tax with respect to each Holder and any representations and forms as shall reasonably be requested by the Administrative Trustees on behalf of the Trust to assist it in determining the extent of, and in fulfilling, its withholding and backup withholding tax obligations. The Administrative Trustees shall file required forms with applicable jurisdictions and, unless an exemption from withholding and backup withholding tax is properly established by a Holder, shall remit amounts withheld with respect to the Holder to applicable jurisdictions. To the extent that the Trust is required to withhold and pay over any amounts to any jurisdiction with respect to Distributions or allocations to any Holder, the amount withheld shall be deemed to be a Distribution in the amount of the withholding to the Holder. In the event of any claimed overwithholding, Holders shall be limited to an action against the applicable jurisdiction. If the amount required to be withheld was not withheld from actual Distributions made, the Administrative Trustees on behalf of the Trust may reduce subsequent Distributions by the amount of such required withholding. SECTION 4.6. Tax Returns and Other Reports. (a) The Administrative Trustees shall prepare (or cause to be prepared) at the principal office of the Trust in the United States, as defined for purposes of Treasury regulations section 301.7701-7, at the Depositor's expense, and timely file, all United States federal, state and local tax and information returns and reports required to be filed by or in respect of the Trust. The Administrative Trustees shall prepare at the principal office of the Trust in the United States, as defined for purposes of Treasury regulations section 301.7701-7, and furnish (or cause to be prepared and furnished), by January 31 in each taxable year of the Trust to each Holder all Internal Revenue Service forms and returns required to be provided by the Trust. The Administrative Trustees shall provide the Depositor, Cohen Bros. Financial Management LLC and the Property Trustee with a copy of all such returns and reports promptly after such filing or furnishing. (b) So long as the Property Trustee for the benefit of the Trust is the holder of the Notes, the Administrative Trustees will cause any Statutory Financial Statements to be delivered to the Property Trustee and to each Holder and Cohen Bros. Financial Management LLC promptly following the filing of each such document with the relevant Applicable Insurance Regulatory Authority. The delivery requirement set forth in the preceding sentence may be satisfied by submitting the required Statutory Financial Statements pursuant to Section 8.16(b) hereof. 22 SECTION 4.7. Payment of Taxes, Duties, Etc. of the Trust. Upon receipt under the Notes of Additional Tax Sums and upon the written direction of the Administrative Trustees, the Property Trustee shall promptly pay, solely out of monies on deposit pursuant to this Trust Agreement, any Additional Taxes imposed on the Trust by the United States or any other taxing authority. SECTION 4.8. Payments under Indenture or Pursuant to Direct Actions. Any amount payable hereunder to any Holder of Preferred Securities shall be reduced by the amount of any corresponding payment such Holder (or any Owner with respect thereto) has directly received pursuant to Section 5.8 of the Indenture or Section 6.10(b) of this Trust Agreement. SECTION 4.9. Exchanges. (a) If at any time the Depositor or any of its Affiliates (in either case, a "Depositor Affiliate") is the Owner or Holder of any Preferred Securities, such Depositor Affiliate shall have the right to deliver to the Property Trustee all or such portion of its Preferred Securities as it elects and, subject to compliance with Sections 2.2 and 3.5 of the Indenture, receive, in exchange therefor, a Like Amount of Notes. Such election shall be exercisable effective on any Distribution Date by such Depositor Affiliate delivering to the Property Trustee (i) at least ten (10) Business Days prior to the Distribution Date on which such exchange is to occur, the registration instructions and the documentation, if any, required pursuant to Sections 2.2 and 3.5 of the Indenture to enable the Indenture Trustee to issue the requested Like Amount of Notes, (ii) a written notice of such election specifying the Liquidation Amount of Preferred Securities with respect to which such election is being made and the Distribution Date on which such exchange shall occur, which Distribution Date shall be not less than ten (10) Business Days after the date of receipt by the Property Trustee of such election notice and (iii) shall be conditioned upon such Depositor Affiliate having delivered or caused to be delivered to the Property Trustee or its designee the Preferred Securities that are the subject of such election by 10:00 A.M. New York time, on the Distribution Date on which such exchange is to occur. After the exchange, such Preferred Securities will be canceled and will no longer be deemed to be Outstanding and all rights of the Depositor Affiliate with respect to such Preferred Securities will cease. (b) In the case of an exchange described in Section 4.9(a), the Property Trustee on behalf of the Trust will, on the date of such exchange, exchange Notes having a principal amount equal to a proportional amount of the aggregate Liquidation Amount of the Outstanding Common Securities, based on the ratio of the aggregate Liquidation Amount of the Preferred Securities exchanged pursuant to Section 4.9(a) divided by the aggregate Liquidation Amount of the Preferred Securities Outstanding immediately prior to such exchange, for such proportional amount of Common Securities held by the Depositor (which contemporaneously shall be canceled and no longer be deemed to be Outstanding); provided, that the Depositor delivers or causes to be delivered to the Property Trustee or its designee the required amount of Common Securities to be exchanged by 10:00 A.M. New York time, on the Distribution Date on which such exchange is to occur. 23 SECTION 4.10. Calculation Agent. (a) The Property Trustee shall initially, and, subject to the immediately following sentence, for so long as it holds any of the Notes, be the Calculation Agent for purposes of determining LIBOR for each Distribution Date. The Calculation Agent may be removed by the Administrative Trustees at any time. If the Calculation Agent is unable or unwilling to act as such or is removed by the Administrative Trustees, the Administrative Trustees will promptly appoint as a replacement Calculation Agent the London office of a leading bank which is engaged in transactions in six-month Eurodollar deposits in the international Eurodollar market and which does not control or is not controlled by or under common control with the Administrative Trustee or its Affiliates. The Calculation Agent may not resign its duties without a successor having been duly appointed. (b) The Calculation Agent shall be required to agree that, as soon as possible after 11:00 a.m. (London time) on each LIBOR Determination Date, but in no event later than 11:00 a.m. (London time) on the Business Day immediately following each LIBOR Determination Date, the Calculation Agent will calculate the interest rate (rounded to the nearest cent, with half a cent being rounded upwards) for the related Distribution Date, and will communicate such rate and amount to the Depositor, the Administrative Trustees, the Note Trustee, each Paying Agent and the Depositary. The Calculation Agent will also specify to the Administrative Trustees the quotations upon which the foregoing rates and amounts are based and, in any event, the Calculation Agent shall notify the Administrative Trustees before 5:00 p.m. (London time) on each LIBOR Determination Date that either: (i) it has determined or is in the process of determining the foregoing rates and amounts or (ii) it has not determined and is not in the process of determining the foregoing rates and amounts, together with its reasons therefor. The Calculation Agent's determination of the foregoing rates and amounts for any Distribution Date will (in the absence of manifest error) be final and binding upon all parties. For the sole purpose of calculating the interest rate for the Trust Securities, "Business Day" shall be defined as any day on which dealings in deposits in Dollars are transacted in the London interbank market. SECTION 4.11. Certain Accounting Matters. (a) At all times during the existence of the Trust, the Administrative Trustees shall keep, or cause to be kept at the principal office of the Trust in the United States, as defined for purposes of Treasury Regulations section 301.7701-7, full books of account, records and supporting documents, which shall reflect in reasonable detail each transaction of the Trust. The books of account shall be maintained on the accrual method of accounting, in accordance with generally accepted accounting principles, consistently applied. (b) The Administrative Trustees shall either (i) if the Depositor is then subject to such reporting requirements, cause each Form 10-K and Form 10-Q prepared by the Depositor and filed with the Commission in accordance with the Exchange Act to be delivered to each Holder, with a copy to the Property Trustee, within thirty (30) days after the filing thereof or (ii) cause to be prepared at the principal office of the Trust in the United States, as defined for purposes of Treasury Regulations section 301.7701-7, and delivered to each of the Holders, with a copy to the Property Trustee, within ninety (90) days after the end of each Fiscal Year, annual financial 24 statements of the Trust, including a balance sheet of the Trust as of the end of such Fiscal Year, and the related statements of income or loss. (c) If the Depositor intends to file its annual and quarterly information with the Commission in electronic form pursuant to Regulation S-T of the Commission using the Commission's Electronic Data Gathering, Analysis and Retrieval ("EDGAR") system, the Administrative Trustees shall notify the Property Trustee in the manner prescribed herein of each such annual and quarterly filing. The Property Trustee is hereby authorized and directed to access the EDGAR system for purposes of retrieving the financial information so filed. Compliance with the foregoing shall constitute delivery by the Administrative Trustees of its financial statements to the Property Trustee in compliance with the provisions of Section 314(a) of the Trust Indenture Act, if applicable. The Property Trustee shall have no duty to search for or obtain any electronic or other filings that the Depositor makes with the Commission, regardless of whether such filings are periodic, supplemental or otherwise. Delivery of reports, information and documents to the Property Trustee pursuant to this Section 4.11(c) shall be solely for purposes of compliance with this Section 4.11 and, if applicable, with Section 314(a) of the Trust Indenture Act. The Property Trustee's receipt of such reports, information and documents shall not constitute notice to it of the content thereof or any matter determinable from the content thereof, including the Depositor's compliance with any of its covenants hereunder, as to which the Property Trustee is entitled to rely upon Officers' Certificates. (d) The Trust shall maintain one or more bank accounts in the United States, as defined for purposes of Treasury Regulations section 301.7701-7, in the name and for the sole benefit of the Trust; provided, however, that all payments of funds in respect of the Notes held by the Property Trustee shall be made directly to the Payment Account and no other funds of the Trust shall be deposited in the Payment Account. The sole signatories for such accounts (including the Payment Account) shall be designated by the Property Trustee. ARTICLE V. SECURITIES SECTION 5.1. Initial Ownership. Upon the creation of the Trust and the contribution by the Depositor referred to in Section 2.3 and until the issuance of the Trust Securities, and at any time during which no Trust Securities are Outstanding, the Depositor shall be the sole beneficial owner of the Trust. SECTION 5.2. Authorized Trust Securities. The Trust shall be authorized to issue one series of Preferred Securities having an aggregate Liquidation Amount of $20,000,000 and one series of Common Securities having an aggregate Liquidation Amount of $620,000. 25 SECTION 5.3. Issuance of the Common Securities; Subscription and Purchase of Notes. On the Closing Date, an Administrative Trustee, on behalf of the Trust, shall execute and deliver to the Depositor Common Securities Certificates, registered in the name of the Depositor, evidencing an aggregate of Six Hundred Twenty (620) Common Securities having an aggregate Liquidation Amount of Six Hundred Twenty Thousand Dollars ($620,000), against receipt by the Trust of the aggregate purchase price of such Common Securities of Six Hundred Twenty Thousand Dollars ($620,000). Contemporaneously therewith and with the sale by the Trust to the Holders of an aggregate of Twenty Thousand (20,000) Preferred Securities having an aggregate Liquidation Amount of Twenty Million Dollars ($20,000,000), an Administrative Trustee, on behalf of the Trust, shall purchase from the Depositor Notes, to be registered in the name of the Property Trustee on behalf of the Trust and having an aggregate principal amount equal to Twenty Million Six Hundred Twenty Thousand Dollars ($20,620,000), and, in satisfaction of the purchase price for such Notes, the Property Trustee, on behalf of the Trust, shall deliver to the Depositor the sum of Twenty Million Six Hundred Twenty Thousand Dollars ($20,620,000) (being the aggregate amount paid by the Holders for the Preferred Securities, and the amount paid by the Depositor for the Common Securities). SECTION 5.4. The Securities Certificates. (a) The Preferred Securities Certificates shall be issued in minimum denominations of $100,000 Liquidation Amount and integral multiples of $1,000 in excess thereof, and the Common Securities Certificates shall be issued in minimum denominations of $10,000 Liquidation Amount and integral multiples of $1,000 in excess thereof. The Securities Certificates shall be executed on behalf of the Trust by manual or facsimile signature of at least one Administrative Trustee. Securities Certificates bearing the signatures of individuals who were, at the time when such signatures shall have been affixed, authorized to sign such Securities Certificates on behalf of the Trust shall be validly issued and entitled to the benefits of this Trust Agreement, notwithstanding that such individuals or any of them shall have ceased to be so authorized prior to the delivery of such Securities Certificates or did not have such authority at the date of delivery of such Securities Certificates. (b) On the Closing Date, upon the written order of an authorized officer of the Depositor, the Administrative Trustees shall cause Securities Certificates to be executed on behalf of the Trust and delivered, without further corporate action by the Depositor, in authorized denominations. (c) The Preferred Securities issued to QIBs shall be, except as provided in Section 5.6, Book-Entry Preferred Securities issued in the form of one or more Global Preferred Securities registered in the name of the Depositary, or its nominee and deposited with the Depositary or the Property Trustee as custodian for the Depositary for credit by the Depositary to the respective accounts of the Depositary Participants thereof (or such other accounts as they may direct). The Preferred Securities issued to a Person other than a QIB shall be issued in the form of Definitive Preferred Securities Certificates. 26 (d) A Preferred Security shall not be valid until authenticated by the manual signature of an authorized signatory of the Property Trustee. Such signature shall be conclusive evidence that the Preferred Security has been authenticated under this Trust Agreement. Upon written order of the Trust signed by one Administrative Trustee, the Property Trustee shall authenticate the Preferred Securities for original issue. The Property Trustee may appoint an authenticating agent that is a U.S. Person acceptable to the Trust to authenticate the Preferred Securities. A Common Security need not be so authenticated and shall be valid upon execution by one or more Administrative Trustees. The form of this certificate of authentication can be found in Section 5.13. (e) Upon issuance of the Trust Securities as provided in this Trust Agreement, the Trust Securities so issued shall be deemed to be validly issued, fully paid and nonassessable, and each Holder thereof shall be entitled to the benefits provided by this Trust Agreement. SECTION 5.5. Rights of Holders. The Trust Securities shall have no, and the issuance of the Trust Securities is not subject to, preemptive or similar rights and when issued and delivered to Holders against payment of the purchase price therefor, the Trust Securities will be fully paid and non-assessable by the Trust. Except as provided in Section 5.11(b), the Holders of the Trust Securities, in their capacities as such, shall be entitled to the same limitation of personal liability extended to stockholders of private corporations for profit organized under the General Corporation Law of the State of Delaware. SECTION 5.6. Book-Entry Preferred Securities. (a) A Global Preferred Security may be exchanged, in whole or in part, for Definitive Preferred Securities Certificates registered in the names of the Owners only if such exchange complies with Section 5.7 and (i) the Depositary advises the Administrative Trustees and the Property Trustee in writing that the Depositary is no longer willing or able properly to discharge its responsibilities with respect to the Global Preferred Security, and no qualified successor is appointed by the Administrative Trustees within ninety (90) days of receipt of such notice, (ii) the Depositary ceases to be a clearing agency registered under the Exchange Act and the Administrative Trustees fail to appoint a qualified successor within ninety (90) days of obtaining knowledge of such event, (iii) the Administrative Trustees at their option advise the Property Trustee in writing that the Trust elects to terminate the book-entry system through the Depositary or (iv) a Note Event of Default has occurred and is continuing. Upon the occurrence of any event specified in clause (i), (ii), (iii) or (iv) above, the Administrative Trustees shall notify the Depositary and approve the instructions at the Depositary to notify all Owners of Book-Entry Preferred Securities, the Delaware Trustee and the Property Trustee of the occurrence of such event and of the availability of the Definitive Preferred Securities Certificates to Owners of the Preferred Securities requesting the same. Upon the issuance of Definitive Preferred Securities Certificates, the Trustees shall recognize the Holders of the Definitive Preferred Securities Certificates as Holders. Notwithstanding the foregoing, if an Owner of a beneficial interest in a Global Preferred Security wishes at any time to transfer an interest in such Global Preferred Security to a Person other than a QIB, such transfer shall be effected, subject to the Applicable Depositary Procedures, in accordance with the provisions of this Section 5.6 and Section 5.7, and 27 the transferee shall receive a Definitive Preferred Securities Certificate in connection with such transfer. A holder of a Definitive Preferred Securities Certificate that is a QIB may, upon request and in accordance with the provisions of this Section 5.6 and Section 5.7, exchange such Definitive Preferred Securities Certificate for a beneficial interest in a Global Preferred Security. (b) If any Global Preferred Security is to be exchanged for Definitive Preferred Securities Certificates or canceled in part, or if any Definitive Preferred Securities Certificate is to be exchanged in whole or in part for any Global Preferred Security, then either (i) such Global Preferred Security shall be so surrendered for exchange or cancellation as provided in this Article V or (ii) the aggregate Liquidation Amount represented by such Global Preferred Security shall be reduced, subject to Section 5.4, or increased by an amount equal to the Liquidation Amount represented by that portion of the Global Preferred Security to be so exchanged or canceled, or equal to the Liquidation Amount represented by such Definitive Preferred Securities Certificates to be so exchanged for any Global Preferred Security, as the case may be, by means of an appropriate adjustment made on the records of the Securities Registrar, whereupon the Property Trustee, in accordance with the Applicable Depositary Procedures, shall instruct the Depositary or its authorized representative to make a corresponding adjustment to its records. Upon any such surrender to the Administrative Trustees or the Securities Registrar of any Global Preferred Security or Securities by the Depositary, accompanied by registration instructions, the Administrative Trustees, or any one of them, shall execute the Definitive Preferred Securities Certificates in accordance with the instructions of the Depositary, and the Property Trustee, upon receipt thereof, shall authenticate and deliver such Definitive Preferred Securities Certificates. None of the Securities Registrar or the Trustees shall be liable for any delay in delivery of such instructions and may conclusively rely on, and shall be fully protected in relying on, such instructions. (c) Every Definitive Preferred Securities Certificate executed and delivered upon registration or transfer of, or in exchange for or in lieu of, a Global Preferred Security or any portion thereof shall be executed and delivered in the form of, and shall be, a Global Preferred Security, unless such Definitive Preferred Securities Certificate is registered in the name of a Person other than the Depositary for such Global Preferred Security or a nominee thereof. (d) The Depositary or its nominee, as registered owner of a Global Preferred Security, shall be the Holder of such Global Preferred Security for all purposes under this Trust Agreement and the Global Preferred Security, and Owners with respect to a Global Preferred Security shall hold such interests pursuant to the Applicable Depositary Procedures. The Securities Registrar and the Trustees shall be entitled to deal with the Depositary for all purposes of this Trust Agreement relating to the Global Preferred Securities (including the payment of the Liquidation Amount of and Distributions on the Book-Entry Preferred Securities represented thereby and the giving of instructions or directions by Owners of Book-Entry Preferred Securities represented thereby and the giving of notices) as the sole Holder of the Book-Entry Preferred Securities represented thereby and shall have no obligations to the Owners thereof. None of the Trustees nor the Securities Registrar shall have any liability in respect of any transfers effected by the Depositary. (e) The rights of the Owners of the Book-Entry Preferred Securities shall be exercised only through the Depositary and shall be limited to those established by law, the 28 Applicable Depositary Procedures and agreements between such Owners and the Depositary and/or the Depositary Participants; provided, solely for the purpose of determining whether the Holders of the requisite amount of Preferred Securities have voted on any matter provided for in this Trust Agreement, to the extent that Preferred Securities are represented by a Global Preferred Security, the Trustees may conclusively rely on, and shall be fully protected in relying on, any written instrument (including a proxy) delivered to the Property Trustee by the Depositary setting forth the Owners' votes or assigning the right to vote on any matter to any other Persons either in whole or in part. To the extent that Preferred Securities are represented by a Global Preferred Security, the initial Depositary will make book-entry transfers among the Depositary Participants and receive and transmit payments on the Preferred Securities that are represented by a Global Preferred Security to such Depositary Participants, and none of the Depositor or the Trustees shall have any responsibility or obligation with respect thereto. (f) To the extent that a notice or other communication to the Holders is required under this Trust Agreement, for so long as Preferred Securities are represented by a Global Preferred Security, the Trustees shall give all such notices and communications to the Depositary, and shall have no obligations to the Owners. SECTION 5.7. Registration of Transfer and Exchange of Preferred Securities Certificates. (a) The Property Trustee shall keep or cause to be kept, at the Corporate Trust Office, a register or registers (the "Securities Register") in which the registrar and transfer agent with respect to the Trust Securities (the "Securities Registrar"), subject to such reasonable regulations as it may prescribe, shall provide for the registration of Preferred Securities Certificates and Common Securities Certificates and registration of transfers and exchanges of Preferred Securities Certificates as herein provided. The Property Trustee shall at all times also be the Securities Registrar. The provisions of Article VIII shall apply to the Property Trustee in its role as Securities Registrar. (b) Subject to Section 5.7(d), upon surrender for registration of transfer of any Preferred Securities Certificate at the office or agency maintained pursuant to Section 5.7(f), the Administrative Trustees or any one of them shall execute by manual or facsimile signature and deliver to the Property Trustee, and upon receipt thereof the Property Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Preferred Securities Certificates in authorized denominations of a like aggregate Liquidation Amount as may be required by this Trust Agreement dated the date of execution by such Administrative Trustee or Trustees. At the option of a Holder, Preferred Securities Certificates may be exchanged for other Preferred Securities Certificates in authorized denominations and of a like aggregate Liquidation Amount upon surrender of the Preferred Securities Certificate to be exchanged at the office or agency maintained pursuant to Section 5.7(f). Whenever any Preferred Securities Certificates are so surrendered for exchange, the Administrative Trustees or any one of them shall execute by manual or facsimile signature and deliver to the Property Trustee, and the Property Trustee shall authenticate and deliver, the Preferred Securities Certificates that the Holder making the exchange is entitled to receive. 29 (c) The Securities Registrar shall not be required, (i) to issue, register the transfer of or exchange any Preferred Security during a period beginning at the opening of business fifteen (15) days before the day of selection for redemption of such Preferred Securities pursuant to Article IV and ending at the close of business on the day of mailing of the notice of redemption or (ii) to register the transfer of or exchange any Preferred Security so selected for redemption in whole or in part, except, in the case of any such Preferred Security to be redeemed in part, any portion thereof not to be redeemed. (d) Every Preferred Securities Certificate presented or surrendered for registration of transfer or exchange shall be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Securities Registrar duly executed by the Holder or such Holder's attorney duly authorized in writing and (i) if such Preferred Securities Certificate is being transferred to a QIB, accompanied by a certificate of the transferor substantially in the form set forth as Exhibit E hereto or (ii) if such Preferred Securities Certificate is being transferred otherwise than to a QIB, accompanied by a certificate of the transferee substantially in the form set forth as Exhibit F hereto. (e) No service charge shall be made for any registration of transfer or exchange of Preferred Securities Certificates, but the Property Trustee on behalf of the Trust may require payment of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any transfer or exchange of Preferred Securities Certificates. (f) The Administrative Trustees shall designate an office or offices or agency or agencies where Preferred Securities Certificates may be surrendered for registration of transfer or exchange and initially designate the Corporate Trust Office as its office and agency for such purposes. The Administrative Trustees shall give prompt written notice to the Depositor, the Property Trustee and to the Holders of any change in the location of any such office or agency. SECTION 5.8. Mutilated, Destroyed, Lost or Stolen Securities Certificates. (a) If any mutilated Securities Certificate shall be surrendered to the Securities Registrar together with such security or indemnity as may be required by the Securities Registrar to save each of the Trustees harmless, the Administrative Trustees, or any one of them, on behalf of the Trust, shall execute and make available for delivery and, with respect to Preferred Securities, the Property Trustee shall authenticate, in exchange therefor a new Securities Certificate of like class, tenor and denomination. (b) If the Securities Registrar shall receive evidence to its satisfaction of the destruction, loss or theft of any Securities Certificate and there shall be delivered to the Securities Registrar such security or indemnity as may be required by it to save each of the Trustees harmless, then in the absence of notice that such Securities Certificate shall have been acquired by a protected purchaser, the Administrative Trustees, or any one of them, on behalf of the Trust, shall execute and make available for delivery, and, with respect to Preferred Securities, the Property Trustee shall authenticate, in exchange for or in lieu of any such destroyed, lost or stolen Securities Certificate, a new Securities Certificate of like class, tenor and denomination. 30 (c) In connection with the issuance of any new Securities Certificate under this Section 5.8, the Administrative Trustees or the Securities Registrar may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection therewith. (d) Any duplicate Securities Certificate issued pursuant to this Section 5.8 shall constitute conclusive evidence of an undivided beneficial interest in the assets of the Trust corresponding to that evidenced by the mutilated, lost, stolen or destroyed Securities Certificate, as if originally issued, whether or not the lost, stolen or destroyed Securities Certificate shall be found at any time. (e) If any such mutilated, destroyed, lost or stolen Securities Certificate has become or is about to become due and payable, the Depositor in its discretion may provide the Administrative Trustees with the funds to pay such Trust Security and upon receipt of such funds, the Administrative Trustees shall pay such Trust Security instead of issuing a new Securities Certificate. (f) The provisions of this Section 5.8 are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement of mutilated, destroyed, lost or stolen Securities Certificates. SECTION 5.9. Persons Deemed Holders. The Trustees and the Securities Registrar shall each treat the Person in whose name any Securities Certificate shall be registered in the Securities Register as the owner of the Trust Securities evidenced by such Securities Certificate for the purpose of receiving Distributions and for all other purposes whatsoever, and none of the Trustees and the Securities Registrar shall be bound by any notice to the contrary. SECTION 5.10. Cancellation. All Preferred Securities Certificates surrendered for registration of transfer or exchange or for payment shall, if surrendered to any Person other than the Property Trustee, be delivered to the Property Trustee, and any such Preferred Securities Certificates and Preferred Securities Certificates surrendered directly to the Property Trustee for any such purpose shall be promptly canceled by it. The Administrative Trustees may at any time deliver to the Property Trustee for cancellation any Preferred Securities Certificates previously delivered hereunder that the Administrative Trustees may have acquired in any manner whatsoever, and all Preferred Securities Certificates so delivered shall be promptly canceled by the Property Trustee. No Preferred Securities Certificates shall be executed and delivered in lieu of or in exchange for any Preferred Securities Certificates canceled as provided in this Section 5.10, except as expressly permitted by this Trust Agreement. All canceled Preferred Securities Certificates shall be retained by the Property Trustee in accordance with its customary practices. SECTION 5.11. Ownership of Common Securities by Depositor. (a) On the Closing Date, the Depositor shall acquire, and thereafter shall retain, beneficial and record ownership of the Common Securities. Neither the Depositor nor any 31 successor Holder of the Common Securities may transfer less than all the Common Securities, and the Depositor or any such successor Holder may transfer the Common Securities only (i) in connection with a consolidation or merger of the Depositor into another Person, or any conveyance, transfer or lease by the Depositor of its properties and assets substantially as an entirety to any Person (in which event such Common Securities will be transferred to such surviving entity, transferee or lessee, as the case may be), pursuant to Section 8.1 of the Indenture or (ii) to the Depositor or an Affiliate of the Depositor, in each such case in compliance with applicable law (including the Securities Act, and applicable state securities and blue sky laws). To the fullest extent permitted by law, any attempted transfer of the Common Securities other than as set forth in the immediately preceding sentence shall be void. The Administrative Trustees shall cause each Common Securities Certificate issued to the Depositor to contain a legend stating substantially "THIS CERTIFICATE IS NOT TRANSFERABLE EXCEPT IN COMPLIANCE WITH APPLICABLE LAW AND SECTION 5.11 OF THE TRUST AGREEMENT." (b) Any Holder of the Common Securities shall be liable for the debts and obligations of the Trust in the manner and to the extent set forth with respect to the Depositor and agrees that it shall be subject to all liabilities to which the Depositor may be subject and, prior to becoming such a Holder, shall deliver to the Administrative Trustees an instrument of assumption satisfactory to such Trustees. SECTION 5.12. Restricted Legends. (a) Each Preferred Security Certificate shall bear a legend in substantially the following form: "[IF THIS SECURITY IS A GLOBAL SECURITY INSERT: THIS PREFERRED SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE TRUST AGREEMENT HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF THE DEPOSITORY TRUST COMPANY ("DTC") OR A NOMINEE OF DTC. THIS PREFERRED SECURITY IS EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN DTC OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE TRUST AGREEMENT, AND NO TRANSFER OF THIS PREFERRED SECURITY (OTHER THAN A TRANSFER OF THIS PREFERRED SECURITY AS A WHOLE BY DTC TO A NOMINEE OF DTC OR BY A NOMINEE OF DTC TO DTC OR ANOTHER NOMINEE OF DTC) MAY BE REGISTERED EXCEPT IN LIMITED CIRCUMSTANCES. UNLESS THIS PREFERRED SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF DTC TO NP CAPITAL TRUST I OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY PREFERRED SECURITY ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE 32 HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.] THE PREFERRED SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND SUCH PREFERRED SECURITIES OR ANY INTEREST THEREIN, MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF ANY PREFERRED SECURITIES IS HEREBY NOTIFIED THAT THE SELLER OF THE PREFERRED SECURITIES MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A UNDER THE SECURITIES ACT. THE HOLDER OF THE PREFERRED SECURITIES REPRESENTED BY THIS CERTIFICATE AGREES FOR THE BENEFIT OF THE TRUST AND THE DEPOSITOR THAT (A) SUCH PREFERRED SECURITIES MAY BE OFFERED, RESOLD OR OTHERWISE TRANSFERRED ONLY (I) TO THE TRUST, (II) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (III) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (a) (1), (2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF AN "ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, (IV) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR (V) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT, IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND, IN THE CASE OF (III) OR (V), SUBJECT TO THE RIGHT OF THE TRUST AND THE DEPOSITOR TO REQUIRE AN OPINION OF COUNSEL AND OTHER INFORMATION SATISFACTORY TO EACH OF THEM AND (B) THE HOLDER WILL NOTIFY ANY PURCHASER OF ANY PREFERRED SECURITIES FROM IT OF THE RESALE RESTRICTIONS REFERRED TO IN (A) ABOVE. THE PREFERRED SECURITIES WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN BLOCKS HAVING AN AGGREGATE LIQUIDATION AMOUNT OF NOT LESS THAN $100,000. TO THE FULLEST EXTENT PERMITTED BY LAW, ANY ATTEMPTED TRANSFER OF PREFERRED SECURITIES, OR ANY INTEREST THEREIN, IN A BLOCK HAVING AN AGGREGATE LIQUIDATION AMOUNT OF LESS THAN $100,000 AND MULTIPLES OF $1,000 IN EXCESS THEREOF SHALL BE DEEMED TO BE VOID AND OF NO LEGAL EFFECT WHATSOEVER. TO THE 33 FULLEST EXTENT PERMITTED BY LAW, ANY SUCH PURPORTED TRANSFEREE SHALL BE DEEMED NOT TO BE THE HOLDER OF SUCH PREFERRED SECURITIES FOR ANY PURPOSE, INCLUDING, BUT NOT LIMITED TO, THE RECEIPT OF LIQUIDATION AMOUNT OF OR DISTRIBUTIONS ON SUCH PREFERRED SECURITIES, OR ANY INTEREST THEREIN, AND SUCH PURPORTED TRANSFEREE SHALL BE DEEMED TO HAVE NO INTEREST WHATSOEVER IN SUCH PREFERRED SECURITIES. THE HOLDER OF THIS SECURITY, OR ANY INTEREST THEREIN, BY ITS ACCEPTANCE HEREOF OR THEREOF ALSO AGREES, REPRESENTS AND WARRANTS THAT IT IS NOT AN EMPLOYEE BENEFIT, INDIVIDUAL RETIREMENT ACCOUNT OR OTHER PLAN OR ARRANGEMENT SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") (EACH A "PLAN"), OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE "PLAN ASSETS" BY REASON OF ANY PLAN'S INVESTMENT IN THE ENTITY, AND NO PERSON INVESTING "PLAN ASSETS" OF ANY PLAN MAY ACQUIRE OR HOLD THIS PREFERRED SECURITY OR ANY INTEREST THEREIN. ANY PURCHASER OR HOLDER OF THE PREFERRED SECURITIES OR ANY INTEREST THEREIN WILL BE DEEMED TO HAVE REPRESENTED BY ITS PURCHASE AND HOLDING THEREOF THAT IT IS NOT AN EMPLOYEE BENEFIT PLAN WITHIN THE MEANING OF SECTION 3(3) OF ERISA, OR A PLAN TO WHICH SECTION 4975 OF THE CODE IS APPLICABLE, A TRUSTEE OR OTHER PERSON ACTING ON BEHALF OF AN EMPLOYEE BENEFIT PLAN OR PLAN, OR ANY OTHER PERSON OR ENTITY USING THE ASSETS OF ANY EMPLOYEE BENEFIT PLAN OR PLAN TO FINANCE SUCH PURCHASE. THE HOLDER OF THE PREFERRED SECURITIES REPRESENTED BY THIS CERTIFICATE AGREES TO TREAT THE TRUST AS A GRANTOR TRUST FOR UNITED STATES FEDERAL, STATE AND LOCAL TAX PURPOSES, AND TO TREAT THE TRUST SECURITIES (INCLUDING ALL PAYMENTS AND PROCEEDS WITH RESPECT TO SUCH TRUST SECURITIES) AS UNDIVIDED BENEFICIAL OWNERSHIP INTERESTS IN THE TRUST PROPERTY (AND PAYMENTS AND PROCEEDS THEREFROM, RESPECTIVELY) FOR UNITED STATES FEDERAL, STATE AND LOCAL TAX PURPOSES AND TO TREAT THE NOTES AS INDEBTEDNESS OF THE DEPOSITOR FOR UNITED STATES FEDERAL, STATE AND LOCAL TAX PURPOSES." (b) The above legend shall not be removed from any of the Preferred Securities Certificates unless there is delivered to the Property Trustee and the Depositor satisfactory evidence, which may include an opinion of counsel, as may be reasonably required to ensure that any future transfers thereof may be made without restriction under the provisions of the Securities Act and other applicable law. Upon provision of such satisfactory evidence, one or more of the Administrative Trustees on behalf of the Trust shall execute and deliver to the Property Trustee, and the Property Trustee shall authenticate and deliver, at the written direction 34 of the Administrative Trustees and the Depositor, Preferred Securities Certificates that do not bear the legend. SECTION 5.13. Form of Certificate of Authentication. The Property Trustee's certificate of authentication shall be in substantially the following form: This represents Preferred Securities referred to in the within-mentioned Trust Agreement. Dated: LASALLE BANK NATIONAL ASSOCIATION, not ------------------ in its individual capacity, but solely as Property Trustee By: ------------------------------------ Authorized signatory ARTICLE VI. MEETINGS; VOTING; ACTS OF HOLDERS SECTION 6.1. Notice of Meetings. Notice of all meetings of the Holders of the Preferred Securities, stating the time, place and purpose of the meeting, shall be given by the Property Trustee pursuant to Section 10.8 to each Holder of Preferred Securities, at such Holder's registered address, at least fifteen (15) days and not more than ninety (90) days before the meeting. At any such meeting, any business properly before the meeting may be so considered whether or not stated in the notice of the meeting. Any adjourned meeting may be held as adjourned without further notice. SECTION 6.2. Meetings of Holders of the Preferred Securities. (a) No annual meeting of Holders is required to be held. The Property Trustee, however, shall call a meeting of the Holders of the Preferred Securities to vote on any matter upon the written request of the Holders of at least twenty five percent (25%) in aggregate Liquidation Amount of the Outstanding Preferred Securities and the Administrative Trustees or the Property Trustee may, at any time in their discretion, call a meeting of the Holders of the Preferred Securities to vote on any matters as to which such Holders are entitled to vote. (b) The Holders of at least a Majority in Liquidation Amount of the Preferred Securities, present in person or by proxy, shall constitute a quorum at any meeting of the Holders of the Preferred Securities. (c) If a quorum is present at a meeting, an affirmative vote by the Holders present, in person or by proxy, holding Preferred Securities representing at least a Majority in Liquidation Amount of the Preferred Securities held by the Holders present, either in person or by proxy, at 35 such meeting shall constitute the action of the Holders of the Preferred Securities, unless this Trust Agreement requires a lesser or greater number of affirmative votes. SECTION 6.3. Voting Rights. Holders shall be entitled to one vote for each $10,000 of Liquidation Amount represented by their Outstanding Trust Securities in respect of any matter as to which such Holders are entitled to vote. SECTION 6.4. Proxies, Etc. At any meeting of Holders, any Holder entitled to vote thereat may vote by proxy, provided, that no proxy shall be voted at any meeting unless it shall have been placed on file with the Administrative Trustees, or with such other officer or agent of the Trust as the Administrative Trustees may direct, for verification prior to the time at which such vote shall be taken. Pursuant to a resolution of the Property Trustee, proxies may be solicited in the name of the Property Trustee or one or more officers of the Property Trustee. Only Holders of record shall be entitled to vote. When Trust Securities are held jointly by several Persons, any one of them may vote at any meeting in person or by proxy in respect of such Trust Securities, but if more than one of them shall be present at such meeting in person or by proxy, and such joint owners or their proxies so present disagree as to any vote to be cast, such vote shall not be received in respect of such Trust Securities. A proxy purporting to be executed by or on behalf of a Holder shall be deemed valid unless challenged at or prior to its exercise, and the burden of proving invalidity shall rest on the challenger. No proxy shall be valid more than three years after its date of execution. SECTION 6.5. Holder Action by Written Consent. Any action that may be taken by Holders at a meeting may be taken without a meeting and without prior notice if Holders holding at least a Majority in Liquidation Amount of all Preferred Securities entitled to vote in respect of such action (or such lesser or greater proportion thereof as shall be required by any other provision of this Trust Agreement) shall consent to the action in writing; provided, that notice of such action is promptly provided to the Holders of Preferred Securities that did not consent to such action. Any action that may be taken by the Holders of all the Common Securities may be taken without a meeting and without prior notice if such Holders shall consent to the action in writing. SECTION 6.6. Record Date for Voting and Other Purposes. Except as provided in Section 6.10(a), for the purposes of determining the Holders who are entitled to notice of and to vote at any meeting or to act by written consent, or to participate in any distribution on the Trust Securities in respect of which a record date is not otherwise provided for in this Trust Agreement, or for the purpose of any other action, the Administrative Trustees may from time to time fix a date, not more than ninety (90) days prior to the date of any meeting of Holders or the payment of a Distribution or other action, as the case may be, as a record date for the determination of the identity of the Holders of record for such purposes. 36 SECTION 6.7. Acts of Holders. (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided or permitted by this Trust Agreement to be given, made or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by an agent thereof duly appointed in writing; and, except as otherwise expressly provided herein, such action shall become effective when such instrument or instruments are delivered to an Administrative Trustee. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the Holders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Trust Agreement and conclusive in favor of the Trustees, if made in the manner provided in this Section 6.7. (b) The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by a certificate of a notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him the execution thereof. Where such execution is by a signer acting in a capacity other than such signer's individual capacity, such certificate or affidavit shall also constitute sufficient proof of such signer's authority. The fact and date of the execution of any such instrument or writing, or the authority of the Person executing the same, may also be proved in any other manner that any Trustee receiving the same deems sufficient. (c) The ownership of Trust Securities shall be proved by the Securities Register. (d) Any request, demand, authorization, direction, notice, consent, waiver or other Act of the Holder of any Trust Security shall bind every future Holder of the same Trust Security and the Holder of every Trust Security issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Trustees, the Administrative Trustees or the Trust in reliance thereon, whether or not notation of such action is made upon such Trust Security. (e) Without limiting the foregoing, a Holder entitled hereunder to take any action hereunder with regard to any particular Trust Security may do so with regard to all or any part of the Liquidation Amount of such Trust Security or by one or more duly appointed agents each of which may do so pursuant to such appointment with regard to all or any part of such Liquidation Amount. (f) If any dispute shall arise among the Holders or the Trustees with respect to the authenticity, validity or binding nature of any request, demand, authorization, direction, notice, consent, waiver or other Act of such Holder or Trustee under this Article VI, then the determination of such matter by the Property Trustee shall be conclusive with respect to such matter. 37 SECTION 6.8. Inspection of Records. Upon reasonable written notice to the Administrative Trustees and the Property Trustee, the records of the Trust shall be open to inspection by any Holder during normal business hours for any purpose reasonably related to such Holder's interest as a Holder. SECTION 6.9. Limitations on Voting Rights. (a) Except as expressly provided in this Trust Agreement and in the Indenture and as otherwise required by law, no Holder of Preferred Securities shall have any right to vote or in any manner otherwise control the administration, operation and management of the Trust or the obligations of the parties hereto, nor shall anything herein set forth, or contained in the terms of the Securities Certificates, be construed so as to constitute the Holders from time to time as partners or members of an association. (b) So long as any Notes are held by the Property Trustee on behalf of the Trust, the Property Trustee shall not (i) direct the time, method and place of conducting any proceeding for any remedy available to the Note Trustee, or exercise any trust or power conferred on the Property Trustee with respect to the Notes, (ii) waive any past default that may be waived under Section 5.13 of the Indenture or waive compliance with any covenant or condition under Section 10.7 of the Indenture, (iii) exercise any right to rescind or annul a declaration that the principal of all the Notes shall be due and payable or (iv) consent to any amendment, modification or termination of the Indenture or the Notes, where such consent shall be required, without, in each case, obtaining the prior approval of the Holders of at least a Majority in Liquidation Amount of the Preferred Securities; provided, that where a consent under the Indenture would require the consent of each holder of Notes (or each Holder of Preferred Securities) affected thereby, no such consent shall be given by the Property Trustee without the prior written consent of each Holder of Preferred Securities. The Property Trustee shall not revoke any action previously authorized or approved by a vote of the Holders of the Preferred Securities, except by a subsequent vote of the Holders of the Preferred Securities. In addition to obtaining the foregoing approvals of the Holders of the Preferred Securities, prior to taking any of the foregoing actions, the Property Trustee shall, at the expense of the Depositor, obtain an Opinion of Counsel experienced in such matters to the effect that such action shall not cause the Trust to be taxable as a corporation or classified as other than a grantor trust for United States federal income tax purposes. (c) If any proposed amendment to the Trust Agreement provides for, or the Trustees otherwise propose to effect, (i) any action that would adversely affect in any material respect the powers, preferences or special rights of the Preferred Securities, whether by way of amendment to the Trust Agreement or otherwise or (ii) the dissolution, winding-up or termination of the Trust, other than pursuant to the terms of this Trust Agreement, then the Holders of Outstanding Preferred Securities as a class will be entitled to vote on such amendment or proposal and such amendment or proposal shall not be effective except with the approval of the Holders of at least a Majority in Liquidation Amount of the Preferred Securities. Notwithstanding any other provision of this Trust Agreement, no amendment to this Trust Agreement may be made if, as a result of such amendment, it would cause the Trust to be taxable as a corporation or classified as other than a grantor trust for United States federal income tax purposes. 38 SECTION 6.10. Acceleration of Maturity; Rescission of Annulment; Waivers of Past Defaults. (a) For so long as any Preferred Securities remain Outstanding, if, upon a Note Event of Default, the Note Trustee fails or the holders of not less than twenty five percent (25%) in principal amount of the outstanding Notes fail to declare the principal of all of the Notes to be immediately due and payable, the Holders of at least twenty five percent (25%) in Liquidation Amount of the Preferred Securities then Outstanding shall have the right to make such declaration by a notice in writing to the Property Trustee, the Depositor and the Note Trustee. At any time after a declaration of acceleration with respect to the Notes has been made and before a judgment or decree for payment of the money due has been obtained by the Note Trustee as provided in the Indenture, the Holders of at least a Majority in Liquidation Amount of the Preferred Securities, by written notice to the Property Trustee, the Depositor and the Note Trustee, may rescind and annul such declaration and its consequences if: (i) the Depositor has paid or deposited with the Note Trustee a sum sufficient to pay: (A) all overdue installments of interest on all of the Notes; (B) any accrued Additional Interest on all of the Notes; (C) the principal of and any premium, if any, on any Notes that have become due otherwise than by such declaration of acceleration and interest and Additional Interest thereon at the rate borne by the Notes; and (D) all sums paid or advanced by the Note Trustee under the Indenture and the reasonable compensation, expenses, disbursements and advances of the Note Trustee, the Property Trustee and their agents and counsel; and (ii) all Note Events of Default, other than the non-payment of the principal of the Notes that has become due solely by such acceleration, have been cured or waived as provided in Section 5.13 of the Indenture. Upon receipt by the Property Trustee of written notice requesting such an acceleration, or rescission and annulment thereof, by Holders of any part of the Preferred Securities, a record date shall be established for determining Holders of Outstanding Preferred Securities entitled to join in such notice, which record date shall be at the close of business on the day the Property Trustee receives such notice. The Holders on such record date, or their duly designated proxies, and only such Persons, shall be entitled to join in such notice, whether or not such Holders remain Holders after such record date; provided, that, unless such declaration of acceleration, or rescission and annulment, as the case may be, shall have become effective by virtue of the requisite percentage having joined in such notice prior to the day that is ninety (90) days after such record date, such notice of declaration of acceleration, or rescission and annulment, as the case may be, shall automatically and without further action by any Holder be canceled and of no further effect. Nothing in this paragraph shall prevent a Holder, or a proxy of a Holder, from giving, after expiration of such ninety (90)-day period, a new written notice of declaration of acceleration, or rescission and annulment thereof, as the case may be, that is identical to a written 39 notice that has been canceled pursuant to the proviso to the preceding sentence, in which event a new record date shall be established pursuant to the provisions of this Section 6.10(a). (b) For so long as any Preferred Securities remain Outstanding, to the fullest extent permitted by law and subject to the terms of this Trust Agreement and the Indenture, upon a Note Event of Default specified in paragraph (a) or (b) of Section 5.1 of the Indenture, any Holder of Preferred Securities shall have the right to institute a proceeding directly against the Depositor, pursuant to Section 5.8 of the Indenture, for enforcement of payment to such Holder of any amounts payable in respect of Notes having an aggregate principal amount equal to the aggregate Liquidation Amount of the Preferred Securities of such Holder. Except as set forth in Section 6.10(a) and this Section 6.10(b), the Holders of Preferred Securities shall have no right to exercise directly any right or remedy available to the holders of, or in respect of, the Notes. (c) Notwithstanding paragraphs (a) and (b) of this Section 6.10, the Holders of at least a Majority in Liquidation Amount of the Preferred Securities may, on behalf of the Holders of all the Preferred Securities, waive any Note Event of Default, except any Note Event of Default arising from the failure to pay any principal of or any premium, if any, or interest on (including any Additional Interest) the Notes (unless such Note Event of Default has been cured and a sum sufficient to pay all matured installments of interest and all principal and premium, if any, on all Notes due otherwise than by acceleration has been deposited with the Note Trustee) or a Note Event of Default in respect of a covenant or provision that under the Indenture cannot be modified or amended without the consent of the holder of each outstanding Note. Upon any such waiver, such Note Event of Default shall cease to exist and any Note Event of Default arising therefrom shall be deemed to have been cured for every purpose of the Indenture; but no such waiver shall affect any subsequent Note Event of Default or impair any right consequent thereon. (d) Notwithstanding paragraphs (a) and (b) of this Section 6.10, the Holders of at least a Majority in Liquidation Amount of the Preferred Securities may, on behalf of the Holders of all the Preferred Securities, waive any past Event of Default and its consequences. Upon such waiver, any such Event of Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Trust Agreement, but no such waiver shall extend to any subsequent or other Event of Default or impair any right consequent thereon. (e) The Holders of a Majority in Liquidation Amount of the Preferred Securities shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Property Trustee in respect of this Trust Agreement or the Notes or exercising any trust or power conferred upon the Property Trustee under this Trust Agreement; provided, that, subject to Sections 8.5 and 8.7, the Property Trustee shall have the right to decline to follow any such direction if the Property Trustee being advised by counsel determines that the action so directed may not lawfully be taken, or if the Property Trustee in good faith shall, by an officer or officers of the Property Trustee, determine that the proceedings so directed would be illegal or involve it in personal liability or be unduly prejudicial to the rights of Holders not party to such direction, and provided, further, that nothing in this Trust Agreement shall impair the right of the Property Trustee to take any action deemed proper by the Property Trustee and which is not inconsistent with such direction. 40 (f) It is expressly understood and agreed by the parties hereto that insofar as any document, agreement or certificate is executed on behalf of the Trust by any Trustee (i) such document, agreement or certificate is executed and delivered by such Trustee, not in its individual capacity but solely as Trustee under this Trust Agreement in the exercise of the powers and authority conferred and vested in it, (ii) each of the representations, undertakings and agreements made on the part of the Trust is made and intended not as representations, warranties, covenants, undertakings and agreements by any Trustee in its individual capacity but is made and intended for the purpose of binding only the Trust and (iii) under no circumstances shall any Trustee in its individual capacity be personally liable for the payment of any indebtedness or expenses of the Trust or be liable for the breach or failure of any obligation, representation, warranty or covenant made or undertaken by the Trust under this Trust Agreement or any other document, agreement or certificate. ARTICLE VII. REPRESENTATIONS AND WARRANTIES SECTION 7.1. Representations and Warranties of the Property Trustee and the Delaware Trustee. The Property Trustee and the Delaware Trustee, each severally on behalf of and as to itself only, hereby represents and warrants for the benefit of the Depositor and the Holders that: (a) the Property Trustee is a national banking association, duly organized and validly existing under the laws of the United States; (b) the Property Trustee has full corporate power, authority and legal right to execute, deliver and perform its obligations under this Trust Agreement and has taken all necessary action to authorize the execution, delivery and performance by it of this Trust Agreement; (c) the Delaware Trustee is a Delaware banking corporation, duly formed and validly existing under the laws of the State of Delaware; (d) the Delaware Trustee has full corporate power, authority and legal right to execute, deliver and perform its obligations under this Trust Agreement and has taken all necessary action to authorize the execution, delivery and performance by it of this Trust Agreement; (e) this Trust Agreement has been duly authorized, executed and delivered by the Property Trustee and the Delaware Trustee and constitutes the legal, valid and binding agreement of each of the Property Trustee and the Delaware Trustee enforceable against each of them in accordance with its terms, subject to applicable bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws affecting creditors' rights generally and to general principles of equity; 41 (f) the execution, delivery and performance of this Trust Agreement have been duly authorized by all necessary corporate or other action on the part of the Property Trustee and the Delaware Trustee and do not require any approval of stockholders of the Property Trustee and the Delaware Trustee and such execution, delivery and performance will not (i) violate the Articles of Association or Articles of Organization, as applicable, or By-laws of the Property Trustee or the Delaware Trustee, (ii) violate any provision of, or constitute, with or without notice or lapse of time, a default under, or result in the imposition of any lien on any properties included in the Trust Property pursuant to the provisions of any indenture, mortgage, credit agreement, license or other agreement or instrument (other than the Operative Documents) to which the Property Trustee or the Delaware Trustee is a party or by which it is bound, or (iii) violate any applicable law, governmental rule or regulation of the United States or the State of Delaware, as the case may be, governing the banking, trust or general powers of the Property Trustee or the Delaware Trustee or any order, judgment or decree applicable to the Property Trustee or the Delaware Trustee; (g) neither the authorization, execution or delivery by the Property Trustee or the Delaware Trustee of this Trust Agreement nor the consummation of any of the transactions by the Property Trustee or the Delaware Trustee contemplated herein requires the consent or approval of, the giving of notice to, the registration with or the taking of any other action with respect to any governmental authority or agency under any existing law of the United States or the State of Delaware governing the banking, trust or general powers of the Property Trustee or the Delaware Trustee, as the case may be; and (h) to the best of each of the Property Trustee's and the Delaware Trustee's knowledge, there are no proceedings pending or threatened against or affecting the Property Trustee or the Delaware Trustee in any court or before any governmental authority, agency or arbitration board or tribunal that, individually or in the aggregate, would materially and adversely affect the Trust or would question the right, power and authority of the Property Trustee or the Delaware Trustee, as the case may be, to enter into or perform its obligations as one of the Trustees under this Trust Agreement. SECTION 7.2. Representations and Warranties of Depositor. The Depositor hereby represents and warrants for the benefit of the Holders that: (a) the Depositor is a corporation duly organized, validly existing and in good standing under the laws of its state of incorporation; (b) the Depositor has full corporate power, authority and legal right to execute, deliver and perform its obligations under this Trust Agreement and has taken all necessary action to authorize the execution, delivery and performance by it of this Trust Agreement; (c) this Trust Agreement has been duly authorized, executed and delivered by the Depositor and constitutes the legal, valid and binding agreement of the Depositor 42 enforceable against the Depositor in accordance with its terms, subject to applicable bankruptcy, insolvency and similar laws affecting creditors' rights generally and to general principles of equity; (d) the Securities Certificates issued at the Closing Date on behalf of the Trust have been duly authorized and will have been duly and validly executed, issued and delivered by the applicable Trustees pursuant to the terms and provisions of, and in accordance with the requirements of, this Trust Agreement and the Holders will be, as of such date, entitled to the benefits of this Trust Agreement; (e) the execution, delivery and performance of this Trust Agreement have been duly authorized by all necessary corporate or other action on the part of the Depositor and do not require any approval of stockholders of the Depositor and such execution, delivery and performance will not (i) violate the articles or certificate of incorporation or by-laws (or other organizational documents) of the Depositor or (ii) violate any applicable law, governmental rule or regulation governing the Depositor or any material portion of its property or any order, judgment or decree applicable to the Depositor or any material portion of its property; (f) neither the authorization, execution or delivery by the Depositor of this Trust Agreement nor the consummation of any of the transactions by the Depositor contemplated herein requires the consent or approval of, the giving of notice to, the registration with or the taking of any other action with respect to any governmental authority or agency under any existing law governing the Depositor or any material portion of its property; and (g) there are no proceedings pending or, to the best of the Depositor's knowledge, threatened against or affecting the Depositor or any material portion of its property in any court or before any governmental authority, agency or arbitration board or tribunal that, individually or in the aggregate, would materially and adversely affect the Trust or would question the right, power and authority of the Depositor, as the case may be, to enter into or perform its obligations under this Trust Agreement. ARTICLE VIII. THE TRUSTEES SECTION 8.1. Number of Trustees. The number of Trustees shall be FOUR (4); provided, that the Property Trustee and the Delaware Trustee may be the same Person, in which case the number of Trustees shall be three (3). The number of Trustees may be increased or decreased by Act of the Holder of the Common Securities subject to Sections 8.2, 8.3, and 8.4. The death, resignation, retirement, removal, bankruptcy, incompetence or incapacity to perform the duties of a Trustee shall not operate to annul, dissolve or terminate the Trust. 43 SECTION 8.2. Property Trustee Required. There shall at all times be a Property Trustee hereunder with respect to the Trust Securities. The Property Trustee shall be a corporation organized and doing business under the laws of the United States or of any state thereof, authorized to exercise corporate trust powers, having a combined capital and surplus of at least fifty million dollars ($50,000,000), subject to supervision or examination by federal or state authority and having an office within the United States. If any such Person publishes reports of condition at least annually pursuant to law or to the requirements of its supervising or examining authority, then for the purposes of this Section 8.2, the combined capital and surplus of such Person shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Property Trustee shall cease to be eligible in accordance with the provisions of this Section 8.2, it shall resign immediately in the manner and with the effect hereinafter specified in this Article VIII. SECTION 8.3. Delaware Trustee Required. (a) If required by the Delaware Statutory Trust Act, there shall at all times be a Delaware Trustee with respect to the Trust Securities. The Delaware Trustee shall either be (i) a natural person who is at least 21 years of age and a resident of the State of Delaware or (ii) a legal entity that has its principal place of business in the State of Delaware, otherwise meets the requirements of applicable Delaware law and shall act through one or more persons authorized to bind such entity. If at any time the Delaware Trustee shall cease to be eligible in accordance with the provisions of this Section 8.3, it shall resign immediately in the manner and with the effect hereinafter specified in this Article VIII. The Delaware Trustee shall have the same rights, privileges and immunities as the Property Trustee. (b) The Delaware Trustee shall not be entitled to exercise any powers, nor shall the Delaware Trustee have any of the duties and responsibilities, of the Property Trustee or the Administrative Trustees set forth herein. The Delaware Trustee shall be one of the trustees of the Trust for the sole and limited purpose of fulfilling the requirements of Section 3807 of the Delaware Statutory Trust Act and for taking such actions as are required to be taken by a Delaware trustee under the Delaware Statutory Trust Act. The duties (including fiduciary duties), liabilities and obligations of the Delaware Trustee shall be limited to (a) accepting legal process served on the Trust in the State of Delaware and (b) the execution of any certificates required to be filed with the Secretary of State of the State of Delaware that the Delaware Trustee is required to execute under Section 3811 of the Delaware Statutory Trust Act and there shall be no other duties (including fiduciary duties) or obligations, express or implied, at law or in equity, of the Delaware Trustee. SECTION 8.4. Appointment of Administrative Trustees. (a) There shall at all times be one or more Administrative Trustees hereunder with respect to the Trust Securities. Each Administrative Trustee shall be either a natural person who is at least 21 years of age or a legal entity that shall act through one or more persons authorized to bind that entity. Each of the individuals identified as an "Administrative Trustee" in the preamble of this Trust Agreement hereby accepts his or her appointment as such. 44 (b) Except where a requirement for action by a specific number of Administrative Trustees is expressly set forth in this Trust Agreement, any act required or permitted to be taken by, and any power of the Administrative Trustees may be exercised by, or with the consent of, any one such Administrative Trustee. Whenever a vacancy in the number of Administrative Trustees shall occur, until such vacancy is filled by the appointment of an Administrative Trustee in accordance with Section 8.11, the Administrative Trustees in office, regardless of their number (and notwithstanding any other provision of this Trust Agreement), shall have all the powers granted to the Administrative Trustees and shall discharge all the duties imposed upon the Administrative Trustees by this Trust Agreement. SECTION 8.5. Duties and Responsibilities of the Trustees. (a) The rights, immunities, duties and responsibilities of the Trustees shall be as provided by this Trust Agreement and there shall be no other duties (including fiduciary duties) or obligations, express or implied, at law or in equity, of the Trustees; provided, however, that if an Event of Default known to the Property Trustee has occurred and is continuing, the Property Trustee shall, prior to the receipt of directions, if any, from the Holders of at least a Majority in Liquidation Amount of the Preferred Securities, exercise such of the rights and powers vested in it by this Trust Agreement, and use the same degree of care and skill in its exercise, as a prudent person would exercise or use under the circumstances in the conduct of such person's own affairs. Notwithstanding the foregoing, no provision of this Trust Agreement shall require any of the Trustees to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its or their rights or powers, if it or they shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. Whether or not herein expressly so provided, every provision of this Trust Agreement relating to the conduct or affecting the liability of or affording protection to the Trustees shall be subject to the provisions of this Section 8.5. Nothing in this Trust Agreement shall be construed to release any Administrative Trustee from liability for his or her own negligent action, negligent failure to act; or his or her own willful misconduct. To the extent that, at law or in equity, a Trustee has duties and liabilities relating to the Trust or to the Holders, such Trustee shall not be liable to the Trust or to any Holder for such Trustee's good faith reliance on the provisions of this Trust Agreement. The provisions of this Trust Agreement, to the extent that they restrict the duties and liabilities of the Trustees otherwise existing at law or in equity, are agreed by the Depositor and the Holders to replace such other duties and liabilities of the Trustees. (b) All payments made by the Property Trustee or a Paying Agent in respect of the Trust Securities shall be made only from the revenue and proceeds from the Trust Property and only to the extent that there shall be sufficient revenue or proceeds from the Trust Property to enable the Property Trustee or a Paying Agent to make payments in accordance with the terms hereof. Each Holder, by its acceptance of a Trust Security, agrees that it will look solely to the revenue and proceeds from the Trust Property to the extent legally available for distribution to it as herein provided and that the Trustees are not personally liable to it for any amount distributable in respect of any Trust Security or for any other liability in respect of any Trust Security. This Section 8.5(b) does not limit the liability of the Trustees expressly set forth elsewhere in this Trust Agreement. 45 (c) No provisions of this Trust Agreement shall be construed to relieve the Property Trustee from liability with respect to matters that are within the authority of the Property Trustee under this Trust Agreement for its own negligent action, negligent failure to act or willful misconduct, except that: (i) the Property Trustee shall not be liable for any error or judgment made in good faith by an authorized officer of the Property Trustee, unless it shall be proved that the Property Trustee was negligent in ascertaining the pertinent facts; (ii) the Property 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 direction of the Holders of at least a Majority in Liquidation Amount of the Preferred Securities relating to the time, method and place of conducting any proceeding for any remedy available to the Property Trustee hereunder or under the Indenture, or exercising any trust or power conferred upon the Property Trustee under this Trust Agreement; (iii) the Property Trustee's sole duty with respect to the custody, safe keeping and physical preservation of the Notes and the Payment Account shall be to deal with such Property in a similar manner as the Property Trustee deals with similar property for its own account, subject to the protections and limitations on liability afforded to the Property Trustee under this Trust Agreement; (iv) the Property Trustee shall not be liable for any interest on any money received by it; and money held by the Property Trustee need not be segregated from other funds held by it except in relation to the Payment Account maintained by the Property Trustee pursuant to Section 3.1 and except to the extent otherwise required by law; and (v) the Property Trustee shall not be responsible for monitoring the compliance by the Administrative Trustees or the Depositor with their respective duties under this Trust Agreement, nor shall the Property Trustee be liable for the default or misconduct of any other Trustee or the Depositor. SECTION 8.6. Notices of Defaults and Extensions. (a) Within ninety (90) days after the occurrence of a default actually known to the Property Trustee, the Property Trustee shall transmit notice of such default to the Holders, the Administrative Trustees and the Depositor, unless such default shall have been cured or waived. For the purpose of this Section 8.6, the term "default" means any event that is, or after notice or lapse of time or both would become, an Event of Default. (b) Within five (5) Business Days after the receipt of written notice of the Depositor's exercise of its right to defer the payment of interest on the Notes pursuant to the Indenture, the Property Trustee shall transmit, in the manner and to the extent provided in Section 10.8, notice of such exercise to the Holders and the Administrative Trustees, unless such exercise shall have been revoked. (c) The Property Trustee shall not be charged with knowledge of any default or Event of Default unless either (i) a Responsible Officer of the Property Trustee shall have actual 46 knowledge or (ii) the Property Trustee shall have received written notice thereof from the Depositor, an Administrative Trustee or a Holder. (d) The Property Trustee shall notify all Holders of the Preferred Securities of any notice of default received with respect to the Notes. SECTION 8.7. Certain Rights of Property Trustee. Subject to the provisions of Section 8.5: (a) the Property Trustee may conclusively rely and shall be protected in acting or refraining from acting in good faith and in accordance with the terms hereof upon any resolution, Opinion of Counsel, certificate, written representation of a Holder or transferee, certificate of auditors or any other resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, appraisal, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties; (b) if (i) in performing its duties under this Trust Agreement the Property Trustee is required to decide between alternative courses of action, (ii) in construing any of the provisions of this Trust Agreement the Property Trustee finds a provision ambiguous or inconsistent with any other provisions contained herein or (iii) the Property Trustee is unsure of the application of any provision of this Trust Agreement, then, except as to any matter as to which the Holders of the Preferred Securities are entitled to vote under the terms of this Trust Agreement, the Property Trustee shall deliver a notice to the Depositor requesting the Depositor's written instruction as to the course of action to be taken and the Property Trustee shall take such action, or refrain from taking such action, as the Property Trustee shall be instructed in writing to take, or to refrain from taking, by the Depositor; provided, that if the Property Trustee does not receive such instructions of the Depositor within ten (10) Business Days after it has delivered such notice or such reasonably shorter period of time set forth in such notice, the Property Trustee may, but shall be under no duty to, take such action, or refrain from taking such action, as the Property Trustee shall deem advisable and in the best interests of the Holders, in which event the Property Trustee shall have no liability except for its own negligence, bad faith or willful misconduct; (c) any direction or act of the Depositor contemplated by this Trust Agreement shall be sufficiently evidenced by an Officers' Certificate unless otherwise expressly provided herein; (d) any direction or act of an Administrative Trustee contemplated by this Trust Agreement shall be sufficiently evidenced by a certificate executed by such Administrative Trustee and setting forth such direction or act; (e) the Property Trustee shall have no duty to see to any recording, filing or registration of any instrument (including any financing or continuation statement or any filing under tax or securities laws) or any re-recording, re-filing or re-registration thereof; 47 (f) the Property Trustee may consult with counsel (which counsel may be counsel to the Property Trustee, the Depositor or any of its Affiliates, and may include any of its employees) and the advice of such counsel 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 reliance thereon and in accordance with such advice; the Property Trustee shall have the right at any time to seek instructions concerning the administration of this Trust Agreement from any court of competent jurisdiction; (g) the Property Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Trust Agreement at the request or direction of any of the Holders pursuant to this Trust Agreement, unless such Holders shall have offered to the Property Trustee reasonable security or indemnity against the costs, expenses (including reasonable attorneys' fees and expenses) and liabilities that might be incurred by it in compliance with such request or direction, including reasonable advances as may be requested by the Property Trustee; provided, however, that nothing contained in this Section 8.7(g) shall be construed to relieve the Property Trustee, upon the occurrence of an Event of Default, of its obligation to exercise the rights and powers in it vested by this Trust Agreement; provided, further, that nothing contained in this Section 8.7(g) shall prevent the Property Trustee from exercising its rights under Section 8.11 hereof; (h) the Property Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, approval, bond, debenture, note or other evidence of indebtedness or other paper or document, unless requested in writing to do so by one or more Holders, but the Property Trustee may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Property Trustee shall determine to make such inquiry or investigation, it shall be entitled to examine the books, records and premises of the Depositor, personally or by agent or attorney; (i) the Property Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through its agents, attorneys, custodians or nominees and the Property Trustee shall not be responsible for any negligence or misconduct on the part of any such agent, attorney, custodian or nominee appointed with due care by it hereunder; (j) whenever in the administration of this Trust Agreement the Property Trustee shall deem it desirable to receive instructions with respect to enforcing any remedy or right hereunder, the Property Trustee (i) may request instructions from the Holders (which instructions may only be given by the Holders of the same proportion in Liquidation Amount of the Trust Securities as would be entitled to direct the Property Trustee under this Trust Agreement in respect of such remedy, right or action), (ii) may refrain from enforcing such remedy or right or taking such other action until such instructions are received and (iii) shall be protected in acting in accordance with such instructions; 48 (k) except as otherwise expressly provided by this Trust Agreement, the Property Trustee shall not be under any obligation to take any action that is discretionary under the provisions of this Trust Agreement; (l) without prejudice to any other rights available to the Property Trustee under applicable law, when the Property Trustee incurs expenses or renders services in connection with a Bankruptcy Event, such expenses (including legal fees and expenses of its agents and counsel) and the compensation for such services are intended to constitute expenses of administration under any bankruptcy law or law relating to creditors rights generally; and (m) whenever in the administration of this Trust Agreement the Property Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Property Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, request and rely on an Officers' Certificate which, upon receipt of such request, shall be promptly delivered by the Depositor. No provision of this Trust Agreement shall be deemed to impose any duty or obligation on any Trustee to perform any act or acts or exercise any right, power, duty or obligation conferred or imposed on it, in any jurisdiction in which it shall be illegal, or in which such Person shall be unqualified or incompetent in accordance with applicable law, to perform any such act or acts, or to exercise any such right, power, duty or obligation. SECTION 8.8. Delegation of Power. Any Trustee may, by power of attorney consistent with applicable law, delegate to any other Person its, his or her power for the purpose of executing any documents contemplated in Section 2.5. The Trustees shall have power to delegate from time to time to such of their number or to the Depositor the doing of such things and the execution of such instruments either in the name of the Trust or the names of the Trustees or otherwise as the Trustees may deem expedient, to the extent such delegation is not prohibited by applicable law or contrary to the provisions of this Trust Agreement. SECTION 8.9. May Hold Securities. Any Trustee or any other agent of any Trustee or the Trust, in its individual or any other capacity, may become the owner or pledgee of Trust Securities and except as provided in the definition of the term "Outstanding" in Article I, may otherwise deal with the Trust with the same rights it would have if it were not an Trustee or such other agent. SECTION 8.10. Compensation; Reimbursement; Indemnity. The Depositor agrees: (a) to pay to the Trustees from time to time such reasonable compensation for all services rendered by them hereunder as may be agreed by the Depositor and the 49 Trustees from time to time (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); (b) to reimburse the Trustees upon request for all reasonable expenses, disbursements and advances incurred or made by the Trustees in accordance with any provision of this Trust Agreement (including the reasonable compensation and the expenses and disbursements of their agents and counsel), except any such expense, disbursement or advance as may be attributable to their gross negligence, bad faith or willful misconduct; and (c) to the fullest extent permitted by applicable law, to indemnify and hold harmless (i) each Trustee (including in its individual capacity), (ii) any Affiliate of any Trustee, (iii) any officer, director, shareholder, employee, representative or agent of any Trustee or any Affiliate of any Trustee and (iv) any employee or agent of the Trust (referred to herein as an "Indemnified Person") from and against any loss, damage, liability, tax (other than income, franchise or other taxes imposed on amounts paid pursuant to Section 8.10(a) or (b) hereof), penalty, expense or claim of any kind or nature whatsoever incurred without negligence, bad faith or willful misconduct on its part, arising out of or in connection with the acceptance or administration of the Trust hereunder, including the advancement of funds to cover the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. The Trust shall have no payment, reimbursement or indemnity obligations to the Trustees under this Section 8.10. The provisions of this Section 8.10 shall survive the termination of this Trust Agreement and the earlier removal or resignation of any Trustee. No Trustee may claim any Lien on any Trust Property whether before or after termination of the Trust as a result of any amount due pursuant to this Section 8.10. To the fullest extent permitted by law, in no event shall the Property Trustee and the Delaware Trustee be liable for any indirect, special, punitive or consequential loss or damage of any kind whatsoever, including, but not limited to, lost profits, even if the Trustee has been advised of the likelihood of such loss or damage and regardless of the form of action. In no event shall the Property Trustee and the Delaware Trustee be liable for any failure or delay in the performance of its obligations hereunder because of circumstances beyond its control, including, but not limited to, acts of God, flood, war (whether declared or undeclared), terrorism, fire, riot, embargo, government action, including any laws, ordinances, regulations, governmental action or the like which delay, restrict or prohibit the providing of the services contemplated by this Trust Agreement. SECTION 8.11. Resignation and Removal; Appointment of Successor. (a) No resignation or removal of any Trustee and no appointment of a successor Trustee pursuant to this Article VIII shall become effective until the acceptance of appointment by the successor Trustee in accordance with the applicable requirements of Section 8.12. 50 (b) A Trustee may resign at any time by giving written notice thereof to the Depositor and, in the case of the Property Trustee and the Delaware Trustee, to the Holders. (c) Unless an Event of Default shall have occurred and be continuing, the Property Trustee or the Delaware Trustee, or both of them, may be removed (with or without cause) at any time by Act of the Holder of Common Securities. If an Event of Default shall have occurred and be continuing, the Property Trustee or the Delaware Trustee, or both of them, may be removed (with or without cause) at such time by Act of the Holders of at least a Majority in Liquidation Amount of the Preferred Securities, delivered to the removed Trustee (in its individual capacity and on behalf of the Trust). An Administrative Trustee may be removed (with or without cause) only by Act of the Holder of the Common Securities at any time. (d) If any Trustee shall resign, be removed or become incapable of acting as Trustee, or if a vacancy shall occur in the office of any Trustee for any reason, at a time when no Event of Default shall have occurred and be continuing, the Holder of the Common Securities, by Act of the Holder of the Common Securities, shall promptly appoint a successor Trustee or Trustees, and such successor Trustee and the retiring Trustee shall comply with the applicable requirements of Section 8.12. If the Property Trustee or the Delaware Trustee shall resign, be removed or become incapable of continuing to act as the Property Trustee or the Delaware Trustee, as the case may be, at a time when an Event of Default shall have occurred and be continuing, the Holders of the Preferred Securities, by Act of the Holders of a Majority in Liquidation Amount of the Preferred Securities, shall promptly appoint a successor Property Trustee or Delaware Trustee, and such successor Property Trustee or Delaware Trustee and the retiring Property Trustee or Delaware Trustee shall comply with the applicable requirements of Section 8.12. If an Administrative Trustee shall resign, be removed or become incapable of acting as Administrative Trustee, at a time when an Event of Default shall have occurred and be continuing, the Holder of the Common Securities by Act of the Holder of Common Securities shall promptly appoint a successor Administrative Trustee and such successor Administrative Trustee and the retiring Administrative Trustee shall comply with the applicable requirements of Section 8.12. If no successor Trustee shall have been so appointed by the Holder of the Common Securities or Holders of the Preferred Securities, as the case may be, and accepted appointment in the manner required by Section 8.12 within thirty (30) days after the giving of a notice of resignation by a Trustee, the removal of a Trustee, or a Trustee becoming incapable of acting as such Trustee, any Holder who has been a Holder of Preferred Securities for at least six (6) months may, on behalf of himself and all others similarly situated, and any resigning Trustee may, in each case, at the expense of the Depositor, petition any court of competent jurisdiction for the appointment of a successor Trustee. (e) The Depositor shall give notice of each resignation and each removal of the Property Trustee or the Delaware Trustee and each appointment of a successor Property Trustee or Delaware Trustee to all Holders in the manner provided in Section 10.8. Each notice shall include the name of the successor Property Trustee or Delaware Trustee and the address of its Corporate Trust Office if it is the Property Trustee. (f) Notwithstanding the foregoing or any other provision of this Trust Agreement, in the event any Administrative Trustee or a Delaware Trustee who is a natural person dies or becomes, in the opinion of the Holder of Common Securities, incompetent or incapacitated, the 51 vacancy created by such death, incompetence or incapacity may be filled by (i) the unanimous act of the remaining Administrative Trustees if there are at least two of them or (ii) otherwise by the Holder of the Common Securities (with the successor in each case being a Person who satisfies the eligibility requirement for Administrative Trustees or Delaware Trustee, as the case may be, set forth in Sections 8.3 and 8.4). (g) Upon the appointment of a successor Delaware Trustee, such successor Delaware Trustee shall file a Certificate of Amendment to the Certificate of Trust in accordance with Section 3810 of the Delaware Statutory Trust Act. SECTION 8.12. Acceptance of Appointment by Successor. (a) In case of the appointment hereunder of a successor Trustee, each successor Trustee shall execute and deliver to the Depositor and to the retiring Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and each such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee; but, on request of the Trust or any successor Trustee such retiring Trustee shall, upon payment of its charges, duly assign, transfer and deliver to such successor Trustee all Trust Property, all proceeds thereof and money held by such retiring Trustee hereunder with respect to the Trust Securities and the Trust. (b) Upon request of any such successor Trustee, the Trust (or the retiring Trustee if requested by the Depositor) shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Trustee all such rights, powers and trusts referred to in the preceding paragraph. (c) No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be qualified and eligible under this Article VIII. SECTION 8.13. Merger, Conversion, Consolidation or Succession to Business. Any Person into which the Property Trustee or the Delaware Trustee may be merged or converted or with which it may be consolidated, or any Person resulting from any merger, conversion or consolidation to which such Trustee shall be a party, or any Person succeeding to all or substantially all the corporate trust business of such Trustee, shall be the successor of such Trustee hereunder, without the execution or filing of any paper or any further act on the part of any of the parties hereto, provided, that such Person shall be otherwise qualified and eligible under this Article VIII. SECTION 8.14. Not Responsible for Recitals or Issuance of Securities. The recitals contained herein and in the Securities Certificates shall be taken as the statements of the Trust and the Depositor, and the Trustees do not assume any responsibility for their correctness. The Trustees make no representations as to the title to, or value or condition of, the property of the Trust or any part thereof, nor as to the validity or sufficiency of this Trust Agreement, the Notes or the Trust Securities. The Trustees shall not be accountable for the use or application by the Depositor of the proceeds of the Notes. 52 SECTION 8.15. Property Trustee May File Proofs of Claim. (a) In case of any Bankruptcy Event (or event that with the passage of time would become a Bankruptcy Event) relative to the Trust or any other obligor upon the Trust Securities or the property of the Trust or of such other obligor or their creditors, the Property Trustee (irrespective of whether any Distributions on the Trust Securities shall then be due and payable and irrespective of whether the Property Trustee shall have made any demand on the Trust for the payment of any past due Distributions) shall be entitled and empowered, to the fullest extent permitted by law, by intervention in such proceeding or otherwise: (i) to file and prove a claim for the whole amount of any Distributions owing and unpaid in respect of the Trust Securities and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Property Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Property Trustee, its agents and counsel) and of the Holders allowed in such judicial proceeding; and (ii) to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same; and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such proceeding is hereby authorized by each Holder to make such payments to the Property Trustee and, in the event the Property Trustee shall consent to the making of such payments directly to the Holders, to pay to the Property Trustee first any amount due it for the reasonable compensation, expenses, disbursements and advances of the Property Trustee, its agents and counsel, and any other amounts due the Property Trustee. (b) Nothing herein contained shall be deemed to authorize the Property Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or compensation affecting the Trust Securities or the rights of any Holder thereof or to authorize the Property Trustee to vote in respect of the claim of any Holder in any such proceeding. SECTION 8.16. Reports to the Property Trustee. (a) The Depositor and the Administrative Trustees shall deliver to the Property Trustee, not later than one hundred and twenty days after the end of each calendar year of the Trust ending after the date of this Trust Agreement, a certificate (substantially in the form attached hereto as Exhibit H) covering the preceding calendar year, stating whether or not to the knowledge of the signers thereof the Depositor and the Trust are in default in the performance or observance of any of the terms, provisions and conditions of this Trust Agreement (without regard to any period of grace or requirement of notice provided hereunder) and, if the Depositor or the Trust shall be in default, specifying all such defaults and the nature and status thereof of which they have knowledge. (b) The Depositor shall furnish (i) to the Property Trustee; (ii) Cohen Bros. Financial Management LLC,1818 Market Street, 28th Floor, Philadelphia, Pennsylvania 19103 or such other address as designated by Cohen Bros. Financial Management LLC); and (iii) any Owner of 53 the Preferred Securities reasonably identified to the Depositor and the Trust (which identification may be made either by such Owner or by Cohen Bros. Financial Management LLC) a duly completed and executed certificate substantively and substantially in the form attached hereto as Exhibit G, including the financial statements referenced in such Exhibit, which certificate and financial statements shall be so furnished by the Depositor not later than forty five (45) days after the end of each of the first three fiscal quarters of each fiscal year of the Depositor and not later than ninety (90) days after the end of each fiscal year of the Depositor. The Property Trustee shall receive all reports, certificates and information, which it is entitled to receive under each of the Operative Documents. ARTICLE IX. TERMINATION, LIQUIDATION AND MERGER SECTION 9.1. Dissolution Upon Expiration Date. Unless earlier dissolved, the Trust shall automatically dissolve on March 15, 2041 (the "Expiration Date"), and the Trust Property shall be liquidated in accordance with Section 9.4. SECTION 9.2. Early Termination. The first to occur of any of the following events is an "Early Termination Event", upon the occurrence of which the Trust shall be dissolved: (a) the occurrence of a Bankruptcy Event in respect of, or the dissolution or liquidation of, the Depositor, in its capacity as the Holder of the Common Securities, unless the Depositor shall have transferred the Common Securities as provided by Section 5.11, in which case this provision shall refer instead to any such successor Holder of the Common Securities; (b) the written direction to the Property Trustee from the Holder of the Common Securities at any time to dissolve the Trust and, after satisfaction of any liabilities of the Trust as required by applicable law, to distribute the Notes to Holders in exchange for the Preferred Securities (which direction is optional and wholly within the discretion of the Holder of the Common Securities), provided, that the Holder of the Common Securities shall have received the prior approval of all necessary Applicable Insurance Regulatory Authorities then required; (c) the redemption of all of the Preferred Securities in connection with the payment at maturity or redemption of all the Notes; and (d) the entry of an order for dissolution of the Trust by a court of competent jurisdiction. 54 SECTION 9.3. Termination. (a) The respective obligations and responsibilities of the Trustees and the Trust shall terminate upon the latest to occur of the following: (a) the distribution by the Property Trustee to Holders of all amounts required to be distributed hereunder upon the liquidation of the Trust pursuant to Section 9.4, or upon the redemption of all of the Trust Securities pursuant to Section 4.2; (b) the satisfaction of any expenses owed by the Trust; and (c) the discharge of all administrative duties of the Administrative Trustees, including the performance of any tax reporting obligations with respect to the Trust or the Holders. (b) As soon as practicable thereafter, and after satisfaction of liabilities to creditors of the Trust as required by applicable law, including Section 3808 of the Statutory Trust Act, any Administrative Trustee, upon completion of the winding up of the Trust in accordance with the Delaware Statutory Trust Act, shall terminate the Trust by filing, at the expense of the Depositor, a certificate of cancellation with the Secretary of State of the State of Delaware. SECTION 9.4. Liquidation. (a) If an Early Termination Event specified in Section 9.2(a), (b) or (d) occurs or upon the Expiration Date, the Trust shall be liquidated by the Property Trustee as expeditiously as the Property Trustee shall determine to be possible by distributing, after satisfaction of liabilities to creditors of the Trust as provided by applicable law, to each Holder a Like Amount of Notes, subject to Section 9.4(d). Notice of liquidation shall be given by the Property Trustee not less than thirty (30) nor more than sixty (60) days prior to the Liquidation Date to each Holder of Trust Securities at such Holder's address appearing in the Securities Register. All such notices of liquidation shall: (i) state the Liquidation Date; (ii) state that from and after the Liquidation Date, the Trust Securities will no longer be deemed to be Outstanding and (subject to Section 9.4(d)) any Securities Certificates not surrendered for exchange will be deemed to represent a Like Amount of Notes; and (iii) provide such information with respect to the mechanics by which Holders may exchange Securities Certificates for Notes, or if Section 9.4(d) applies, receive a Liquidation Distribution, as the Property Trustee shall deem appropriate. (b) Except where Section 9.2(c) or 9.4(d) applies, in order to effect the liquidation of the Trust and distribution of the Notes to Holders, the Property Trustee, either itself acting as exchange agent or through the appointment of a separate exchange agent, shall establish a record date for such distribution (which shall not be more than forty five (45) days prior to the Liquidation Date nor prior to the date on which notice of such liquidation is given to the Holders) and establish such procedures as it shall deem appropriate to effect the distribution of Notes in exchange for the Outstanding Securities Certificates. 55 (c) Except where Section 9.2(c) or 9.4(d) applies, after the Liquidation Date, (i) the Trust Securities will no longer be deemed to be Outstanding, (ii) certificates representing a Like Amount of Notes will be issued to Holders of Securities Certificates, upon surrender of such Certificates to the exchange agent for exchange, (iii) the Depositor shall use its best efforts to have the Notes listed on the New York Stock Exchange or on such other exchange, interdealer quotation system or self-regulatory organization on which the Preferred Securities are then listed, if any, (iv) Securities Certificates not so surrendered for exchange will be deemed to represent a Like Amount of Notes bearing accrued and unpaid interest in an amount equal to the accumulated and unpaid Distributions on such Securities Certificates until such certificates are so surrendered (and until such certificates are so surrendered, no payments of interest or principal will be made to Holders of Securities Certificates with respect to such Notes) and (v) all rights of Holders holding Trust Securities will cease, except the right of such Holders to receive Notes upon surrender of Securities Certificates. (d) Notwithstanding the other provisions of this Section 9.4, if distribution of the Notes in the manner provided herein is determined by the Property Trustee not to be permitted or practical, the Trust Property shall be liquidated, and the Trust shall be wound up by the Property Trustee in such manner as the Property Trustee determines. In such event, Holders will be entitled to receive out of the assets of the Trust available for distribution to Holders, after satisfaction of liabilities to creditors of the Trust as provided by applicable law, an amount equal to the Liquidation Amount per Trust Security plus accumulated and unpaid Distributions thereon to the date of payment (such amount being the "Liquidation Distribution"). If, upon any such winding up the Liquidation Distribution can be paid only in part because the Trust has insufficient assets available to pay in full the aggregate Liquidation Distribution, then, subject to the next succeeding sentence, the amounts payable by the Trust on the Trust Securities shall be paid on a pro rata basis (based upon Liquidation Amounts). The Holder of the Common Securities will be entitled to receive Liquidation Distributions upon any such winding up pro rata (based upon Liquidation Amounts) with Holders of all Trust Securities, except that, if an Event of Default has occurred and is continuing, the Preferred Securities shall have a priority over the Common Securities as provided in Section 4.3. SECTION 9.5. Mergers, Consolidations, Amalgamations or Replacements of Trust. The Trust may not merge with or into, consolidate, amalgamate, or be replaced by, or convey, transfer or lease its properties and assets substantially as an entirety to, any Person except pursuant to this Article IX. At the request of the Holders of the Common Securities, without the consent of the Holders of the Preferred Securities, the Trust may merge with or into, consolidate, amalgamate, or be replaced by or convey, transfer or lease its properties and assets substantially as an entirety to a trust organized as such under the laws of any State; provided, that: (a) such successor entity either (i) expressly assumes all of the obligations of the Trust under this Trust Agreement with respect to the Preferred Securities or (ii) substitutes for the Preferred Securities other securities having substantially the same terms as the Preferred Securities (such other Securities, the "Successor Securities") so long as the Successor Securities have the same priority as the Preferred Securities with respect to distributions and payments upon liquidation, redemption and otherwise; 56 (b) a trustee of such successor entity possessing substantially the same powers and duties as the Property Trustee is appointed to hold the Notes; (c) if the Preferred Securities or the Notes are rated, such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease does not cause the Preferred Securities or the Notes (including any Successor Securities) to be downgraded by any nationally recognized statistical rating organization that then assigns a rating to the Preferred Securities or the Notes; (d) the Preferred Securities are listed, or any Successor Securities will be listed upon notice of issuance, on any national securities exchange or interdealer quotation system on which the Preferred Securities are then listed, if any; (e) such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease does not adversely affect the rights, preferences and privileges of the Holders of the Preferred Securities (including any Successor Securities) in any material respect; (f) such successor entity has a purpose substantially identical to that of the Trust; (g) prior to such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease, the Depositor has received an Opinion of Counsel to the effect that (i) such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease does not adversely affect the rights, preferences and privileges of the Holders of the Preferred Securities (including any Successor Securities) in any material respect; (ii) following such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease, neither the Trust nor such successor entity will be required to register as an "investment company" under the Investment Company Act and (iii) following such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease, the Trust (or the successor entity) will continue to be classified as a grantor trust and not as an entity taxable as a corporation for U.S. federal income tax purposes; and (h) the Depositor or its permitted transferee owns all of the common securities of such successor entity and guarantees the obligations of such successor entity under the Successor Securities at least to the extent provided by the Guarantee Agreement. Notwithstanding the foregoing, the Trust shall not, except with the consent of Holders of all of the Preferred Securities, consolidate, amalgamate, merge with or into, or be replaced by or convey, transfer or lease its properties and assets substantially as an entirety to any other Person or permit any other entity to consolidate, amalgamate, merge with or into, or replace, the Trust if such consolidation, amalgamation, merger, replacement, conveyance, transfer or lease would cause the Trust or the successor entity to be taxable as a corporation or classified as other than a grantor trust for United States federal income tax purposes or cause the Notes to be treated as other than indebtedness of the Depositor for United States federal income tax purposes. 57 ARTICLE X. MISCELLANEOUS PROVISIONS SECTION 10.1. Limitation of Rights of Holders. Except as set forth in Section 9.2, the death, bankruptcy, termination, dissolution or incapacity of any Person having an interest, beneficial or otherwise, in Trust Securities shall not operate to terminate this Trust Agreement, nor annul, dissolve or terminate the Trust nor entitle the legal representatives or heirs of such Person or any Holder for such Person, to claim an accounting, take any action or bring any proceeding in any court for a partition or winding up of the arrangements contemplated hereby, nor otherwise affect the rights, obligations and liabilities of the parties hereto or any of them. SECTION 10.2. Agreed Tax Treatment of Trust and Trust Securities. The parties hereto and, by its acceptance or acquisition of a Trust Security or a beneficial interest therein, the Holder of, and any Person that acquires a beneficial interest in, such Trust Security intend and agree to treat the Trust as a grantor trust for United States federal, state and local tax purposes, and to treat the Trust Securities (including all payments and proceeds with respect to such Trust Securities) as undivided beneficial ownership interests in the Trust Property (and payments and proceeds therefrom, respectively) for United States federal, state and local tax purposes and to treat the Notes as indebtedness of the Depositor for United States federal, state and local tax purposes. The provisions of this Trust Agreement shall be interpreted to further this intention and agreement of the parties. SECTION 10.3. Amendment. (a) This Trust Agreement may be amended from time to time by the Property Trustee, the Administrative Trustees and the Holder of all the Common Securities, without the consent of any Holder of the Preferred Securities, (i) to cure any ambiguity, correct or supplement any provision herein that may be defective or inconsistent with any other provision herein, or to make or amend any other provisions with respect to matters or questions arising under this Trust Agreement, which shall not be inconsistent with the other provisions of this Trust Agreement, (ii) to modify, eliminate or add to any provisions of this Trust Agreement to such extent as shall be necessary to ensure that the Trust will neither be taxable as a corporation nor be classified as other than a grantor trust for United States federal income tax purposes at all times that any Trust Securities are Outstanding or to ensure that the Notes are treated as indebtedness of the Depositor for United States federal income tax purposes, or to ensure that the Trust will not be required to register as an "investment company" under the Investment Company Act or (iii) to add to the covenants, restrictions or obligations of the Depositor; provided, that in the case of clauses (i), (ii) or (iii), such action shall not adversely affect in any material respect the interests of any Holder. (b) Except as provided in Section 10.3(c), any provision of this Trust Agreement may be amended by the Property Trustee, the Administrative Trustees and the Holder of all of the Common Securities and with (i) the consent of Holders of at least a Majority in Liquidation 58 Amount of the Preferred Securities and (ii) receipt by the Trustees of an Opinion of Counsel to the effect that such amendment or the exercise of any power granted to the Trustees in accordance with such amendment will not cause the Trust to be taxable as a corporation or classified as other than a grantor trust for United States federal income tax purposes or affect the treatment of the Notes as indebtedness of the Depositor for United States federal income tax purposes or affect the Trust's exemption from status (or from any requirement to register) as an "investment company" under the Investment Company Act. (c) Notwithstanding any other provision of this Trust Agreement, without the consent of each Holder, this Trust Agreement may not be amended to (i) change the accrual rate, amount, currency or timing of any Distribution on or the redemption price of the Trust Securities or otherwise adversely affect the amount of any Distribution or other payment required to be made in respect of the Trust Securities as of a specified date, (ii) restrict or impair the right of a Holder to institute suit for the enforcement of any such payment on or after such date, (iii) reduce the percentage of aggregate Liquidation Amount of Outstanding Preferred Securities, the consent of whose Holders is required for any such amendment, or the consent of whose Holders is required for any waiver of compliance with any provision of this Trust Agreement or of defaults hereunder and their consequences provided for in this Trust Agreement; (iv) impair or adversely affect the rights and interests of the Holders in the Trust Property, or permit the creation of any Lien on any portion of the Trust Property; or (v) modify the definition of "Outstanding," this Section 10.3(c), Sections 4.1, 4.2, 4.3, 6.10(e) or Article IX. (d) Notwithstanding any other provision of this Trust Agreement, no Trustee shall enter into or consent to any amendment to this Trust Agreement that would cause the Trust to be taxable as a corporation or to be classified as other than a grantor trust for United States federal income tax purposes or that would cause the Notes to fail or cease to be treated as indebtedness of the Depositor for United States federal income tax purposes or that would cause the Trust to fail or cease to qualify for the exemption from status (or from any requirement to register) as an "investment company" under the Investment Company Act. (e) If any amendment to this Trust Agreement is made, the Administrative Trustees or the Property Trustee shall promptly provide to the Depositor and the Note Trustee a copy of such amendment. (f) No Trustee shall be required to enter into any amendment to this Trust Agreement that affects its own rights, duties or immunities under this Trust Agreement. The Trustees shall be entitled to receive an Opinion of Counsel and an Officers' Certificate stating that any amendment to this Trust Agreement is in compliance with this Trust Agreement and all conditions precedent herein provided for relating to such action have been met. (g) No amendment or modification to this Trust Agreement that adversely affects in any material respect the rights, duties, liabilities, indemnities or immunities of the Delaware Trustee hereunder shall be permitted without the prior written consent of the Delaware Trustee. 59 SECTION 10.4. Separability. If any provision in this Trust Agreement or in the Securities Certificates shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby, and there shall be deemed substituted for the provision at issue a valid, legal and enforceable provision as similar as possible to the provision at issue. SECTION 10.5. Governing Law. THIS TRUST AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF EACH OF THE HOLDERS, THE TRUST, THE DEPOSITOR AND THE TRUSTEES WITH RESPECT TO THIS TRUST AGREEMENT AND THE TRUST SECURITIES SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF DELAWARE WITHOUT REFERENCE TO ITS CONFLICTS OF LAWS PROVISIONS. SECTION 10.6. Successors. This Trust Agreement shall be binding upon and shall inure to the benefit of any successor to the Depositor, the Trust and any Trustee, including any successor by operation of law. Except in connection with a transaction involving the Depositor that is permitted under Article VIII of the Indenture and pursuant to which the assignee agrees in writing to perform the Depositor's obligations hereunder, the Depositor shall not assign its obligations hereunder. SECTION 10.7. Headings. The Article and Section headings are for convenience only and shall not affect the construction of this Trust Agreement SECTION 10.8. Reports, Notices and Demands. (a) Any report, notice, demand or other communication that by any provision of this Trust Agreement is required or permitted to be given or served to or upon any Holder or the Depositor may be given or served in writing delivered in person, or by reputable, overnight courier, by telecopy or by deposit thereof, first-class postage prepaid, in the United States mail, addressed, (a) in the case of a Holder of Preferred Securities, to such Holder as such Holder's name and address may appear on the Securities Register; and (b) in the case of the Holder of all the Common Securities or the Depositor, to North Pointe Holdings Corporation, 28819 Franklin Road, Southfield, MI 48034, Attention: Brian J. Roney, or to such other address as may be specified in a written notice by the Holder of all the Common Securities or the Depositor, as the case may be, to the Property Trustee. Such report, notice, demand or other communication to or upon a Holder or the Depositor shall be deemed to have been given when received in person, within one (1) Business Day following delivery by overnight courier, when telecopied with receipt confirmed, or within three (3) Business Days following delivery by mail, except that if a notice or other document is refused delivery or cannot be delivered because of a changed address of which no notice was given, such notice or other document shall be deemed to have been delivered on the date of such refusal or inability to deliver. 60 (b) Any notice, demand or other communication that by any provision of this Trust Agreement is required or permitted to be given or served to or upon the Property Trustee, the Delaware Trustee, the Administrative Trustees or the Trust shall be given in writing by deposit thereof, first-class postage prepaid, in the U.S. mail, personal delivery or facsimile transmission, addressed to such Person as follows: (i) with respect to the Property Trustee to LaSalle Bank National Association, 135 South LaSalle Street, Suite 1511, Chicago, Illinois 60603, Attention: CDO Trust Services Group-- NP Capital Trust I, facsimile no. (312) 904-0524, (ii) with respect to the Delaware Trustee, to Christiana Bank & Trust Company, 1314 King Street, Wilmington, Delaware 19801, Attention: Corporate Trust Administration-- NP Capital Trust I, facsimile no. (302) 421-9015; (iii) with respect to the Administrative Trustees, to them at the address above for notices to the Depositor, marked "Attention: Administrative Trustees of NP Capital Trust I", and (iv) with respect to the Trust, to its principal executive office specified in Section 2.2, with a copy to the Property Trustee. Such notice, demand or other communication to or upon the Trust, the Property Trustee, the Delaware Trustee or the Administrative Trustees shall be deemed to have been sufficiently given or made only upon actual receipt of the writing by the Trust, the Property Trustee, the Delaware Trustee or the Administrative Trustees. SECTION 10.9. Agreement Not to Petition. Each of the Trustees and the Depositor agree for the benefit of the Holders that, until at least one year and one day after the Trust has been terminated in accordance with Article IX, they shall not file, or join in the filing of, a petition against the Trust under any Bankruptcy Law or otherwise join in the commencement of any proceeding against the Trust under any Bankruptcy Law. If the Depositor takes action in violation of this Section 10.9, the Property Trustee agrees, for the benefit of Holders, that at the expense of the Depositor, it shall file an answer with the applicable bankruptcy court or otherwise properly contest the filing of such petition by the Depositor against the Trust or the commencement of such action and raise the defense that the Depositor has agreed in writing not to take such action and should be estopped and precluded therefrom and such other defenses, if any, as counsel for the Property Trustee or the Trust may assert. SECTION 10.10. Counterparts. This instrument may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] 61 IN WITNESS WHEREOF, the parties hereto have executed this Amended and Restated Trust Agreement as of the day and year first above written. NORTH POINTE HOLDINGS CORPORATION, as Depositor By: /s/ James G. Petcoff ------------------------------------ Name: James G. Petcoff Title: Chairman, President and Chief Executive Officer LASALLE BANK NATIONAL ASSOCIATION, CHRISTIANA BANK & TRUST COMPANY, not in its individual capacity but as Delaware Trustee solely as Property Trustee By: /s/ Koren E. Sumser By: /s/ James M. Young --------------------------------- ------------------------------------- Name: Koren E. Sumser Name: James M. Young Title: First Vice President Title: Assistant Vice President /s/ John H. Berry /s/ Harold Meloche - ------------------------------------- ---------------------------------------- Administrative Trustee Administrative Trustee Name: John Berry Name: Harold Meloche Exhibit A CERTIFICATE OF TRUST OF NP CAPITAL TRUST I This Certificate of Trust of NP Capital Trust I (the "Trust"), is being duly executed and filed by the undersigned, as trustee, to form a statutory trust under the Delaware Statutory Trust Act (12 Del. C. Section 3801, et seq.) (the "Act"). 1. Name. The name of the statutory trust formed by this Certificate of Trust is: NP Capital Trust I. 2. Delaware Trustee. The name and business address of the trustee of the Trust with its principal place of business in the State of Delaware are Christiana Bank & Trust Company, 1314 King Street, Wilmington, Delaware 19801. 3. Effective Date. This Certificate of Trust shall be effective upon filing with the Secretary of State of the State of Delaware. IN WITNESS WHEREOF, the undersigned has executed this Certificate of Trust in accordance with Section 3811(a)(1) of the Act. CHRISTIANA BANK & TRUST COMPANY, not in its individual capacity, but solely as Delaware Trustee By: ------------------------------------ Name: ---------------------------------- Title: --------------------------------- A-1 Exhibit B [FORM OF COMMON SECURITIES CERTIFICATE] THIS COMMON SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS OR ANY OTHER APPLICABLE SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EXEMPTION FROM REGISTRATION. THIS CERTIFICATE IS NOT TRANSFERABLE EXCEPT IN COMPLIANCE WITH APPLICABLE LAW AND SECTION 5.11 OF THE TRUST AGREEMENT. THE HOLDER OF THE COMMON SECURITIES REPRESENTED BY THIS CERTIFICATE AGREES TO TREAT THE TRUST AS A GRANTOR TRUST FOR UNITED STATES FEDERAL, STATE AND LOCAL TAX PURPOSES, AND TO TREAT THE TRUST SECURITIES (INCLUDING ALL PAYMENTS AND PROCEEDS WITH RESPECT TO SUCH TRUST SECURITIES) AS UNDIVIDED BENEFICIAL OWNERSHIP INTERESTS IN THE TRUST PROPERTY (AND PAYMENTS AND PROCEEDS THEREFROM, RESPECTIVELY) FOR UNITED STATES FEDERAL, STATE AND LOCAL TAX PURPOSES AND TO TREAT THE NOTES AS INDEBTEDNESS OF THE DEPOSITOR FOR UNITED STATES FEDERAL, STATE AND LOCAL TAX PURPOSES.
CERTIFICATE NUMBER NUMBER OF COMMON SECURITIES - ------------------ --------------------------- ~~C-1 620~~
CERTIFICATE EVIDENCING COMMON SECURITIES OF NP CAPITAL TRUST I FLOATING RATE COMMON SECURITIES (LIQUIDATION AMOUNT $1,000 PER COMMON SECURITY) NP Capital Trust I, a statutory trust created under the laws of the State of Delaware (the "Trust"), hereby certifies that North Pointe Holdings Corporation, a Michigan corporation (the "Holder") is the registered owner of Six Hundred Twenty (620) common securities of the Trust representing undivided common beneficial interests in the assets of the Trust and designated the NP Capital Trust I Floating Rate Common Securities (liquidation amount $1,000 per Common Security) (the "Common Securities"). Except in accordance with Section 5.11 of the Trust Agreement (as defined below), the Common Securities are not transferable and, to the fullest extent permitted by law, any attempted transfer hereof other than in accordance therewith shall be void. The designations, rights, privileges, restrictions, preferences and other terms and provisions of the Common Securities are set forth in, and this certificate and the Common Securities represented hereby are issued and shall in all respects be subject to the terms and B-1 provisions of, the Amended and Restated Trust Agreement of the Trust, dated as of February 22, 2006 as the same may be amended from time to time (the "Trust Agreement"), among the Holder, as Depositor, LaSalle Bank National Association, as Property Trustee, Christiana Bank & Trust Company, as Delaware Trustee, the Administrative Trustees named therein and the Holders, from time to time, of Trust Securities. The Trust will furnish a copy of the Trust Agreement to the Holder without charge upon written request to the Trust at its principal place of business or registered office. Upon receipt of this certificate, the Holder is bound by the Trust Agreement and is entitled to the benefits thereunder. This Common Securities Certificate shall be governed by and construed in accordance with the laws of the State of Delaware. Terms used but not defined herein have the meanings set forth in the Trust Agreement. IN WITNESS WHEREOF, one of the Administrative Trustees of the Trust has executed on behalf of the Trust this certificate this __ day of _______________, 200__. NP CAPITAL TRUST I By: ------------------------------------ Name: ---------------------------------- Administrative Trustee B-2 Exhibit C [FORM OF PREFERRED SECURITIES CERTIFICATE] "[IF THIS SECURITY IS A GLOBAL SECURITY INSERT: THIS PREFERRED SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE TRUST AGREEMENT HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF THE DEPOSITORY TRUST COMPANY ("DTC") OR A NOMINEE OF DTC. THIS PREFERRED SECURITY IS EXCHANGEABLE FOR PREFERRED SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN DTC OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE TRUST AGREEMENT, AND NO TRANSFER OF THIS PREFERRED SECURITY (OTHER THAN A TRANSFER OF THIS PREFERRED SECURITY AS A WHOLE BY DTC TO A NOMINEE OF DTC OR BY A NOMINEE OF DTC TO DTC OR ANOTHER NOMINEE OF DTC) MAY BE REGISTERED EXCEPT IN LIMITED CIRCUMSTANCES. UNLESS THIS PREFERRED SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF DTC TO NP CAPITAL TRUST I OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY PREFERRED SECURITY ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.] THE PREFERRED SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND SUCH PREFERRED SECURITIES OR ANY INTEREST THEREIN MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF ANY PREFERRED SECURITIES IS HEREBY NOTIFIED THAT THE SELLER OF THE PREFERRED SECURITIES MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A UNDER THE SECURITIES ACT. THE HOLDER OF THE PREFERRED SECURITIES REPRESENTED BY THIS CERTIFICATE AGREES FOR THE BENEFIT OF THE TRUST AND THE DEPOSITOR THAT (A) SUCH PREFERRED SECURITIES MAY BE OFFERED, RESOLD OR OTHERWISE TRANSFERRED ONLY (I) TO THE TRUST, (II) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (III) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (a) (1), (2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF AN "ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR C-1 OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, (IV) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR (V) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT, IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND, IN THE CASE OF (III) OR (V), SUBJECT TO THE RIGHT OF THE TRUST AND THE DEPOSITOR TO REQUIRE AN OPINION OF COUNSEL AND OTHER INFORMATION SATISFACTORY TO EACH OF THEM AND (B) THE HOLDER WILL NOTIFY ANY PURCHASER OF ANY PREFERRED SECURITIES FROM IT OF THE RESALE RESTRICTIONS REFERRED TO IN (A) ABOVE. THE PREFERRED SECURITIES WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN BLOCKS HAVING AN AGGREGATE LIQUIDATION AMOUNT OF NOT LESS THAN $100,000. TO THE FULLEST EXTENT PERMITTED BY LAW, ANY ATTEMPTED TRANSFER OF PREFERRED SECURITIES, OR ANY INTEREST THEREIN, IN A BLOCK HAVING AN AGGREGATE LIQUIDATION AMOUNT OF LESS THAN $100,000 AND MULTIPLES OF $1,000 IN EXCESS THEREOF SHALL BE DEEMED TO BE VOID AND OF NO LEGAL EFFECT WHATSOEVER. TO THE FULLEST EXTENT PERMITTED BY LAW, ANY SUCH PURPORTED TRANSFEREE SHALL BE DEEMED NOT TO BE THE HOLDER OF SUCH PREFERRED SECURITIES FOR ANY PURPOSE, INCLUDING, BUT NOT LIMITED TO, THE RECEIPT OF LIQUIDATION AMOUNT OF OR DISTRIBUTIONS ON SUCH PREFERRED SECURITIES, OR ANY INTEREST THEREIN, AND SUCH PURPORTED TRANSFEREE SHALL BE DEEMED TO HAVE NO INTEREST WHATSOEVER IN SUCH PREFERRED SECURITIES. THE HOLDER OF THIS SECURITY, OR ANY INTEREST THEREIN, BY ITS ACCEPTANCE HEREOF OR THEREOF ALSO AGREES, REPRESENTS AND WARRANTS THAT IT IS NOT AN EMPLOYEE BENEFIT, INDIVIDUAL RETIREMENT ACCOUNT OR OTHER PLAN OR ARRANGEMENT SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") (EACH A "PLAN"), OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE "PLAN ASSETS" BY REASON OF ANY PLAN'S INVESTMENT IN THE ENTITY, AND NO PERSON INVESTING "PLAN ASSETS" OF ANY PLAN MAY ACQUIRE OR HOLD THIS PREFERRED SECURITY OR ANY INTEREST THEREIN. ANY PURCHASER OR HOLDER OF THE PREFERRED SECURITIES OR ANY INTEREST THEREIN WILL BE DEEMED TO HAVE REPRESENTED BY ITS PURCHASE AND HOLDING THEREOF THAT IT IS NOT AN EMPLOYEE BENEFIT PLAN WITHIN THE MEANING OF SECTION 3(3) OF ERISA, OR A PLAN TO WHICH SECTION 4975 OF THE CODE IS APPLICABLE, A TRUSTEE OR OTHER PERSON ACTING ON BEHALF OF AN EMPLOYEE BENEFIT PLAN OR PLAN, OR ANY OTHER PERSON OR ENTITY USING THE ASSETS OF ANY EMPLOYEE BENEFIT PLAN OR PLAN TO FINANCE SUCH PURCHASE. THE HOLDER OF THE PREFERRED SECURITIES REPRESENTED BY THIS CERTIFICATE AGREES TO TREAT THE TRUST AS A GRANTOR TRUST FOR UNITED C-2 STATES FEDERAL, STATE AND LOCAL TAX PURPOSES, AND TO TREAT THE TRUST SECURITIES (INCLUDING ALL PAYMENTS AND PROCEEDS WITH RESPECT TO SUCH TRUST SECURITIES) AS UNDIVIDED BENEFICIAL OWNERSHIP INTERESTS IN THE TRUST PROPERTY (AND PAYMENTS AND PROCEEDS THEREFROM, RESPECTIVELY) FOR UNITED STATES FEDERAL, STATE AND LOCAL TAX PURPOSES AND TO TREAT THE NOTES AS INDEBTEDNESS OF THE DEPOSITOR FOR UNITED STATES FEDERAL, STATE AND LOCAL TAX PURPOSES. C-3
CERTICATE NUMBER AGGREGATE LIQUIDATION AMOUNT - ---------------- ---------------------------- ~~PREFERRED SECURITIES~~
CUSIP NO. 62937J AA 4 CERTIFICATE EVIDENCING PREFERRED SECURITIES OF NP CAPITAL TRUST I FLOATING RATE PREFERRED SECURITIES (LIQUIDATION AMOUNT $1,000 PER PREFERRED SECURITY) NP Capital Trust I, a statutory trust created under the laws of the State of Delaware (the "Trust"), hereby certifies that _____________, a _________ (the "Holder") is the registered owner of [AMOUNT (#)] Preferred Securities [if the Preferred Security is a Global Security, then insert - or such other number of Preferred Securities represented hereby as may be set forth in the records of the Securities Registrar hereinafter referred to in accordance with the Trust Agreement (as defined below)] of the Trust representing an undivided preferred beneficial interest in the assets of the Trust and designated the NP Capital Trust I Floating Rate Preferred Securities, (liquidation amount $1,000 per Preferred Security) (the "Preferred Securities"). Subject to the terms of the Trust Agreement (as defined below), the Preferred Securities are transferable on the books and records of the Trust, in person or by a duly authorized attorney, upon surrender of this certificate duly endorsed and in proper form for transfer as provided in Section 5.7 of the Trust Agreement (as defined below). The designations, rights, privileges, restrictions, preferences and other terms and provisions of the Preferred Securities are set forth in, and this certificate and the Preferred Securities represented hereby are issued and shall in all respects be subject to the terms and provisions of, the Amended and Restated Trust Agreement of the Trust, dated as of February 22, 2006, as the same may be amended from time to time (the "Trust Agreement"), among North Pointe Holdings Corporation, as Depositor, LaSalle Bank National Association, as Property Trustee, Christiana Bank & Trust Company, as Delaware Trustee, the Administrative Trustees named therein and the Holders, from time to time, of Trust Securities. The Holder is entitled to the benefits of the Guarantee Agreement entered into by North Pointe Holdings Corporation, a Michigan corporation, and LaSalle Bank National Association, as Guarantee Trustee, dated as of February 22, 2006, as the same may be amended from time to time (the "Guarantee Agreement"), to the extent provided therein. The Trust will furnish a copy of each of the Trust Agreement and the Guarantee Agreement to the Holder without charge upon written request to the Property Trustee at its Corporate Trust Office. Upon receipt of this certificate, the Holder is bound by the Trust Agreement and is entitled to the benefits thereunder. C-4 This Preferred Securities Certificate shall be governed by and construed in accordance with the laws of the State of Delaware. All capitalized terms used but not defined in this Preferred Securities Certificate are used with the meanings specified in the Trust Agreement, including the Schedules and Exhibits thereto. IN WITNESS WHEREOF, one of the Administrative Trustees of the Trust has executed on behalf of the Trust this certificate this __ day of __________, 2006. NP CAPITAL TRUST I By: ------------------------------------ Name: ---------------------------------- Administrative Trustee This represents Preferred Securities referred to in the within-mentioned Trust Agreement. Dated: LASALLE BANK NATIONAL ASSOCIATION, not in its individual capacity, but solely as Property Trustee By: ------------------------------------ Authorized signatory C-5 [FORM OF REVERSE OF SECURITY] The Trust promises to pay Distributions from February 22, 2006, or from the most recent Distribution Date to which Distributions have been paid or duly provided for, quarterly (subject to deferral as set forth herein) in arrears on March 15, June 15, September 15 and December 15 of each year, commencing on March 15, 2006, at a fixed rate equal to 8.70% per annum through the interest payment date in March 2011 and thereafter at a variable rate per annum equal to LIBOR plus 3.64% of the Liquidation Amount of the Preferred Securities represented by this Preferred Securities Certificate, together with any Additional Interest Amounts, in respect to such period. Distributions on the Trust Securities shall be made by the Paying Agent from the Payment Account and shall be payable on each Distribution Date only to the extent that the Trust has funds then on hand and available in the Payment Account for the payment of such Distributions. In the event (and to the extent) that the Depositor exercises its right under the Indenture to defer the payment of interest on the Notes, Distributions on the Preferred Securities shall be deferred. Under the Indenture, so long as no Note Event of Default has occurred and is continuing, the Depositor shall have the right, at any time and from time to time during the term of the Notes, to defer the payment of interest on the Notes for a period of up to twenty (20) consecutive quarterly interest payment periods (each such extended interest payment period, an "Extension Period"), during which Extension Period no interest shall be due and payable (except any Additional Tax Sums that may be due and payable). No interest on the Notes shall be due and payable during an Extension Period, except at the end thereof, but each installment of interest that would otherwise have been due and payable during such Extension Period shall bear Additional Interest (to the extent payment of such interest would be legally enforceable) at a fixed rate equal to 8.70% per annum through the interest payment date in March 2011 and thereafter at a variable rate equal to LIBOR plus 3.64% per annum compounded quarterly, from the dates on which amounts would have otherwise been due and payable until paid or until funds for the payment thereof have been made available for payment. If Distributions are deferred, the deferred Distributions (including Additional Interest Amounts) shall be paid on the date that the related Extension Period terminates to Holders (as defined in the Trust Agreement) of the Trust Securities as they appear on the books and records of the Trust on the record date immediately preceding such termination date. Distributions on the Securities must be paid on the dates payable (after giving effect to any Extension Period) to the extent that the Trust has funds available for the payment of such Distributions in the Payment Account of the Trust. The Trust's funds available for Distribution to the Holders of the Preferred Securities will be limited to payments received from the Depositor. The payment of Distributions out of moneys held by the Trust is guaranteed by the Depositor pursuant to the Guarantee Agreement. During any such Extension Period, the Depositor shall not (i) declare or pay any dividends or distributions on, or redeem, purchase, acquire or make a liquidation payment with C-6 respect to, any of the Depositor's capital stock or (ii) make any payment of principal of or any interest or premium, if any, on or repay, repurchase or redeem any debt securities of the Depositor that rank pari passu in all respects with or junior in interest to the Notes (other than (a) repurchases, redemptions or other acquisitions of shares of capital stock of the Depositor in connection with (1) any employment contract, benefit plan or other similar arrangement with or for the benefit of any one or more employees, officers, directors or consultants, (2) a dividend reinvestment or stockholder stock purchase plan or (3) the issuance of capital stock of the Depositor (or securities convertible into or exercisable for such capital stock) as consideration in an acquisition transaction entered into prior to the applicable Extension Period, (b) as a result of an exchange or conversion of any class or series of the Depositor's capital stock (or any capital stock of a Subsidiary (as defined in the Indenture) of the Depositor) for any class or series of the Depositor's capital stock or of any class or series of the Depositor's indebtedness for any class or series of the Depositor's capital stock, (c) the purchase of fractional interests in shares of the Depositor's capital stock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged, (d) any declaration of a dividend in connection with any Rights Plan (as defined in the Indenture), the issuance of rights, stock or other property under any Rights Plan, or the redemption or repurchase of rights pursuant thereto or (e) any dividend in the form of stock, warrants, options or other rights where the dividend stock or the stock issuable upon exercise of such warrants, options or other rights is the same stock as that on which the dividend is being paid or ranks pari passu with or junior to such stock). On each Note Redemption Date, on the stated maturity (or any date of principal repayment upon early maturity) of the Notes and on each other date on (or in respect of) which any principal on the Notes is repaid, the Trust will be required to redeem a Like Amount of Trust Securities at the Redemption Price. Under the Indenture, the Notes may be redeemed by the Depositor on any Interest Payment Date, at the Depositor's option, on or after March 15, 2011 in whole or in part from time to time at the Optional Note Redemption Price of the principal amount thereof or the redeemed portion thereof, as applicable, together, in the case of any such redemption, with accrued interest, including any Additional Interest, to but excluding the date fixed for redemption; provided, that the Depositor shall have received the prior approval of any Applicable Insurance Regulatory Authority then required. The Notes may also be redeemed by the Depositor, at its option, at any time, in whole but not in part, upon the occurrence of an Investment Company Event or a Tax Event at the Special Note Redemption Price; provided, that the Depositor shall have received the prior approval of any Applicable Insurance Regulatory Authority then required; and provided, further, that such Investment Company Event or a Tax Event is continuing on the Redemption Date. The Trust Securities redeemed on each Redemption Date shall be redeemed at the Redemption Price with the proceeds from the contemporaneous redemption or payment at maturity of Notes. Redemptions of the Trust Securities (or portion thereof) shall be made and the Redemption Price shall be payable on each Redemption Date only to the extent that the Trust has funds then on hand and available in the Payment Account for the payment of such Redemption Price. Payments of Distributions (including any Additional Interest Amounts), the Redemption Price, Liquidation Amount or any other amounts in respect of the Preferred Securities shall be made by wire transfer at such place and to such account at a banking institution in the United C-7 States as may be designated in writing at least ten (10) Business Days prior to the date for payment by the Person entitled thereto unless proper written transfer instructions have not been received by the relevant record date, in which case such payments shall be made by check mailed to the address of such Person as such address shall appear in the Security Register. If any Preferred Securities are held by a Depositary, such Distributions shall be made to the Depositary in immediately available funds. The indebtedness evidenced by the Notes is, to the extent provided in the Indenture, subordinate and junior in right of payment to the prior payment in full of all Senior Debt (as defined in the Indenture), and this Security is issued subject to the provisions of the Indenture with respect thereto. C-8 ASSIGNMENT FOR VALUE RECEIVED, the undersigned assigns and transfers this Preferred Securities Certificate to: ________________________________________________________________ (Insert assignee's social security or tax identification number) ________________________________________________________________ (Insert address and zip code of assignee) and irrevocably appoints agent to transfer this Preferred Securities Certificate on the books of the Trust. The agent may substitute another to act for him or her. Date: ------------------------------- Signature: --------------------------------------------------------------------- (Sign exactly as your name appears on the other side of this Preferred Securities Certificate) The signature(s) should be guaranteed by an eligible guarantor institution (banks, stockbrokers, savings and loan associations and credit unions with membership in an approved signature guarantee medallion program), pursuant to S.E.C. Rule 17Ad-15. C-9 Exhibit D JUNIOR SUBORDINATED INDENTURE D-1 Exhibit E FORM OF TRANSFEREE CERTIFICATE TO BE EXECUTED BY QIBS __________, [ ] LaSalle Bank National Association 135 South LaSalle Street Suite 1511 Chicago, Illinois 60603 Attention: CDO Trust Services Group North Pointe Holdings Corporation NP Capital Trust I 28819 Franklin Road Southfield, MI 48034 Re: Purchase of $1,000 stated liquidation amount of Floating Rate Preferred Securities (the "Preferred Securities") of NP Capital Trust I Reference is hereby made to the Amended and Restated Trust Agreement of NP Capital Trust I, dated as of February 22, 2006 (the "Trust Agreement"), among John Berry and Harold Meloche, as Administrative Trustees, Christiana Bank & Trust Company, as Delaware Trustee, LaSalle Bank National Association, as Property Trustee, North Pointe Holdings Corporation, as Depositor, and the holders from time to time of undivided beneficial interests in the assets of NP Capital Trust I. Capitalized terms used but not defined herein shall have the meanings given them in the Trust Agreement. This letter relates to $________________________ aggregate liquidation amount of Preferred Securities which are held in the name of [name of transferor] (the "Transferor"). In accordance with Article V of the Trust Agreement, the Transferor hereby certifies that such Preferred Securities are being transferred in accordance with (i) the transfer restrictions set forth in the Preferred Securities and (ii) Rule 144A under the Securities Act ("Rule 144A"), to a transferee that the Transferor reasonably believes is purchasing the Preferred Securities for its own account or an account with respect to which the transferee exercises sole investment discretion and the transferee and any such account is a "qualified institutional buyer" within the meaning of Rule 144A, in a transaction meeting the requirements of Rule 144A and in accordance with applicable securities laws of any state of the United States or any other jurisdiction. You are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceeding or official inquiry with respect to the matters covered hereby. E-1 (Name of Transferor) By: ------------------------------------ Name: ---------------------------------- Title: --------------------------------- Date: ------------------------------- E-2 Exhibit F FORM OF TRANSFEREE CERTIFICATE TO BE EXECUTED BY TRANSFEREES OTHER THAN QIBS __________, [ ] LaSalle Bank National Association 135 South LaSalle Street Suite 1511 Chicago, Illinois 60603 Attention: CDO Trust Services Group North Pointe Holdings Corporation NP Capital Trust I 28819 Franklin Road Southfield, MI 48034 Re: Purchase of $____________ stated liquidation amount of Floating Rate Preferred Securities (the "Preferred Securities") of NP Capital Trust I Ladies and Gentlemen: In connection with our purchase of the Preferred Securities we confirm that: 1. We understand that the Floating Rate Preferred Securities (the "Preferred Securities") of NP Capital Trust I (the "Trust") (including the guarantee (the "Guarantee") of North Pointe Holdings Corporation (the "Company") executed in connection therewith) and the Floating Rate Junior Subordinated Notes due 2036 of the Company (the "Subordinated Notes") (the entire amount of the Trust's outstanding Preferred Securities, the Guarantee and the Subordinated Notes together being referred to herein as the "Offered Securities"), have not been registered under the Securities Act of 1933, as amended (the "Securities Act"), and may not be offered or sold except as permitted in the following sentence. We agree on our own behalf and on behalf of any investor account for which we are purchasing the Offered Securities that, if we decide to offer, sell or otherwise transfer any such Offered Securities, (i) such offer, sale or transfer will be made only (a) to the Trust, (b) to a person we reasonably believe is a "qualified institutional buyer" (a "QIB") (as defined in Rule 144 under the Securities Act) in a transaction meeting the requirements of Rule 144A, (c) to an institutional "accredited investor" within the meaning of subparagraph (a) (1), (2), (3) or (7) of Rule 501 under the Securities Act that is acquiring Offered Securities for its own account, or for the account of such an "accredited investor," for investment purposes and not with a view to, or for offer or sale in connection with, any distribution thereof in violation of the Securities Act, (d) pursuant to an effective registration statement under the Securities Act, or (e) pursuant to an exemption from the Securities Act, in each case in accordance with any applicable securities laws of any state of the United States or any other applicable jurisdiction and, in the case of (c) or (e), subject to the right of the Trust and F-1 the depositor to require an opinion of counsel and other information satisfactory to each of them. The foregoing restrictions on resale will not apply subsequent to the date on which, in the written opinion of counsel, the Preferred Securities are not "restricted securities" within the meaning of Rule 144 under the Securities Act. If any resale or other transfer of the Offered Securities is proposed to be made pursuant to clause (c) or (e) above, the transferor shall deliver a letter from the transferee substantially in the form of this letter to the Property Trustee as Securities Registrar, which shall provide as applicable, among other things, that the transferee is an "accredited investor" within the meaning of subparagraph (a) (1), (2), (3) or (7) of Rule 501 under the Securities Act that is acquiring such Securities for investment purposes and not for distribution in violation of the Securities Act. We acknowledge on our behalf and on behalf of any investor account for which we are purchasing Securities that the Trust and the Company reserve the right prior to any offer, sale or other transfer pursuant to clause (c) or (e) to require the delivery of any opinion of counsel, certifications and/or other information satisfactory to the Trust and the Company. We understand that the certificates for any Offered Security that we receive will bear a legend substantially to the effect of the foregoing. 2. We are an "accredited investor" within the meaning of subparagraph (a) (1), (2), (3) or (7) of Rule 501 under the Securities Act purchasing for our own account or for the account of such an "accredited investor," and we are acquiring the Offered Securities for investment purposes and not with view to, or for offer or sale in connection with, any distribution in violation of the Securities Act, and we have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of our investment in the Offered Securities, and we and any account for which we are acting are each able to bear the economic risks of our or its investment. 3. We are acquiring the Offered Securities purchased by us for our own account (or for one or more accounts as to each of which we exercise sole investment discretion and have authority to make, and do make, the statements contained in this letter) and not with a view to any distribution of the Offered Securities, subject, nevertheless, to the understanding that the disposition of our property will at all times be and remain within our control. 4. In the event that we purchase any Preferred Securities or any Subordinated Notes, we will acquire such Preferred Securities having an aggregate stated liquidation amount of not less than $100,000 or such Subordinated Notes having an aggregate principal amount not less than $100,000, for our own account and for each separate account for which we are acting. 5. We acknowledge that we are not a fiduciary of (i) an employee benefit, individual retirement account or other plan or arrangement subject to Title I of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or Section 4975 of the Internal Revenue Code of 1986, as amended (the "Code") (each a "Plan"); or (ii) an entity whose underlying assets include "plan assets" by reason of any Plan's investment in the entity, and are not purchasing any of the Offered Securities on behalf of or with "plan assets" by reason of any Plan's investment in the entity. 6. We acknowledge that the Trust and the Company and others will rely upon the truth and accuracy of the foregoing acknowledgments, representations, warranties and agreements and agree that if any of the acknowledgments, representations, warranties and F-2 agreements deemed to have been made by our purchase of any of the Offered Securities are no longer accurate, we shall promptly notify the Company. If we are acquiring any Offered Securities as a fiduciary or agent for one or more investor accounts, we represent that we have sole discretion with respect to each such investor account and that we have full power to make the foregoing acknowledgments, representations and agreement on behalf of each such investor account. 7. We acknowledge that we have agreed to treat the Trust as a grantor trust for United States federal, state and local tax purposes, and to treat the Trust Securities (including all payments and proceeds with respect to such Trust Securities) as undivided beneficial ownership interest in the Trust Property (and payments and proceeds therefrom, respectively) for United States federal, state and local tax purposes and to treat the Notes as indebtedness of the Depositor for United States federal, state and local tax purposes. ---------------------------------------- (Name of Purchaser) By: ------------------------------------ Date: ---------------------------------- Upon transfer, the Preferred Securities (having a stated liquidation amount of $_____________) would be registered in the name of the new beneficial owner as follows. Name: ------------------------------- Address: ---------------------------- Taxpayer ID Number: ----------------- F-3 Exhibit G OFFICER'S FINANCIAL CERTIFICATE The undersigned, the [Chairman/Vice Chairman/Chief Executive Officer/President/Vice President/Chief Financial Officer/Treasurer/Assistant Treasurer], hereby certifies pursuant to Section 8.16(b) of the Amended and Restated Trust Agreement, dated as of February 22 (the "Trust Agreement"), among North Pointe Holdings Corporation (the "Company"), LaSalle Bank National Association, as property trustee, Christiana Bank & Trust Company, as Delaware trustee, and the administrative trustees named therein, that, as of [date], [20__], the Company, if applicable, and its Subsidiary Insurance Companies (as defined below) had the following ratios and balances: [For the Company, if applicable, and each Subsidiary Insurance Company (as defined below) provide:] [INSURANCE COMPANY] As of [Quarterly/Annual Financial Date], 20__ NAIC Risk Based Capital Ratio (authorized control level) _____% 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, also provide:] [Expense Ratio _____% Loss and LAE Ratio _____% Combined Ratio _____% Net Premiums Written (annualized) to Policyholders' Surplus _____%]

* A table describing the officer's financial certificate calculation procedures is provided on page 3 G-1 The following is a complete list as of [Quarterly/Annual Financial Date] of the Company's companies which are authorized to write insurance business or otherwise conduct insurance or reinsurance business (the "Subsidiary Insurance Companies"): [List of Subsidiary Insurance Companies] [FOR FISCAL YEAR END: Attached hereto are the audited consolidated financial statements (including the balance sheet, income statement and statement of cash flows, and notes thereto, together with the report of the independent accountants thereon) of the Company and its consolidated subsidiaries for the three years ended _______, 20___] and the Statutory Financial Statements (as defined in the Trust Agreement) for the year ended [date] 20__.] [FOR FISCAL QUARTER END: Attached hereto are the unaudited consolidated and consolidating financial statements (including the balance sheet and income statement) of the Company and its consolidated subsidiaries and the Statutory Financial Statements (as defined in the Trust Agreement) for the fiscal quarter ended [date], 20__.] The financial statements fairly present in all material respects, in accordance with U.S. generally accepted accounting principles ("GAAP"), the financial position of the Company and its consolidated subsidiaries, and the results of operations and changes in financial condition as of the date, and for the [quarter] [annual] period ended [date], 20__, and such financial statements have been prepared in accordance with GAAP consistently applied throughout the period involved (expect as otherwise noted therein). The Statutory Financial Statements fairly present in all material respects in accordance with Applicable Accounting Principles (as defined in the Trust Agreement) the financial position of the subject insurance company and have been prepared in accordance with Applicable Accounting Principles consistently applied throughout the period involved. IN WITNESS WHEREOF, the undersigned has executed this Officer's Financial Certificate as of this _____ day of _____________, 20__. North Pointe Holdings Corporation By: ------------------------------------ Name: ---------------------------------- 28819 Franklin Road Southfield, MI 48034 (248) 359-9945 G-2 EXHIBIT H FORM OF OFFICERS' CERTIFICATE UNDER SECTION 8.16(A) Pursuant to Section 8.16(a) of the Amended and Restated Trust Agreement, dated as of February 22 (as modified, supplemented or amended from time to time, the "Trust Agreement") of NP Capital Trust I, a Delaware statutory trust (the "Trust"), Section 2.2 of the Guarantee Agreement, and Section 10.3 of the Indenture, each of the undersigned hereby certifies that, to the knowledge of the undersigned, none of the Depositor and the Trust are in default in the performance of observance of any of the terms, provisions and conditions of the Trust Agreement, the Guarantee Agreement and the Indenture (without regard to any period of grace or requirement of notice provided under such agreements) for the calendar year ending on December 31, 20[__] [, except as follows: specify each such default and the nature and status thereof]. Capitalized terms used herein, and not otherwise defined herein, have the respective meanings assigned thereto in the Trust Agreement. [signatures appear on the next page] G-3 IN WITNESS WHEREOF, the undersigned have executed this Officers' Certificate as of __________, 20__. ---------------------------------------- Name: ---------------------------------- Title: [Must be the Chief Executive Officer, the President, or an Executive Vice President of Depositor] ---------------------------------------- Name: ---------------------------------- Title: [Must be the Chief Financial Officer, the Treasurer, or an Assistant Treasurer of Depositor] ---------------------------------------- Administrative Trustee of NP Capital Trust I Name: John Berry ---------------------------------------- Administrative Trustee of NP Capital Trust I Name: Harold Meloche G-4 DEFINITIONS FOR OFFICER'S FINANCIAL CERTIFICATE INSURANCE COMPANY
REPORT ITEM DESCRIPTION OF CALCULATION ----------- -------------------------- NAIC RISK BASED CAPITAL Total Adjusted Capital/Authorized Control Level RATIO-P&C Risk-Based Capital NAIC RISK BASED CAPITAL (Total Adjusted Capital-Asset Valuation RATIO-LIFE Reserve)/Authorized Control Level Risk-Based Capital TOTAL CAPITAL AND Common Capital Stock + Preferred Capital Stock + SURPLUS-LIFE 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 Aggregate Write-Ins for Special Surplus Funds + SURPLUS-P&C Common Capital Stock + Preferred Capital Stock + Aggregate Write Ins for other than special surplus funds + Surplus Notes + Gross Paid-In and Contributed Surplus + Unassigned Funds (Surplus) - Treasury Stock TOTAL CLASS 1 & 2 RATED (Total Class 1 + Total Class 2 Rated INVESTMENTS TO TOTAL Investments)/Total Fixed Income Investments FIXED INCOME INVESTMENTS TOTAL CLASS 1 & 2 RATED (Total Class 1 + Total Class 2 Rated INVESTMENTS TO TOTAL Investments)/Total Investments INVESTMENTS TOTAL ASSETS Total Assets RETURN ON POLICYHOLDERS' Net Income/Policyholders' Surplus 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 Net Premiums Written/Policyholders' Surplus (ANNUALIZED) TO POLICYHOLDERS' SURPLUS
G-5 SCHEDULE A DETERMINATION OF LIBOR With respect to the Trust Securities, the London interbank offered rate ("LIBOR") shall be determined by the Calculation Agent in accordance with the following provisions (in each case rounded to the nearest .000001%): (1) On the second LIBOR Business Day (as defined below) prior to a Distribution Date (each such day, a "LIBOR Determination Date"), LIBOR for any given security shall for the following interest payment period equal the rate, as obtained by the Calculation Agent from Bloomberg Financial Markets Commodities News, for three-month Eurodollar deposits that appears on Dow Jones Telerate Page 3750 (as defined in the International Swaps and Derivatives Association, Inc. 1991 Interest Rate and Currency Exchange Definitions), or such other page as may replace such Page 3750, as of 11:00 a.m. (London time) on such LIBOR Determination Date. (2) If, on any LIBOR Determination Date, such rate does not appear on Dow Jones Telerate Page 3750 or such other page as may replace such Page 3750, the Calculation Agent shall determine the arithmetic mean of the offered quotations of the Reference Banks (as defined below) to leading banks in the London interbank market for three-month Eurodollar deposits in an amount determined by the Calculation Agent by reference to requests for quotations as of approximately 11:00 a.m. (London time) on the LIBOR Determination Date made by the Calculation Agent to the Reference Banks. If, on any LIBOR Determination Date, at least two of the Reference Banks provide such quotations, LIBOR shall equal such arithmetic mean of such quotations. If, on any LIBOR Determination Date, only one or none of the Reference Banks provide such quotations, LIBOR shall be deemed to be the arithmetic mean of the offered quotations that leading banks in the City of New York selected by the Calculation Agent are quoting on the relevant LIBOR Determination Date for three-month Eurodollar deposits in an amount determined by the Calculation Agent by reference to the principal London offices of leading banks in the London interbank market; provided, that if the Calculation Agent is required but is unable to determine a rate in accordance with at least one of the procedures provided above, LIBOR shall be LIBOR as determined on the previous LIBOR Determination Date. (3) As used herein: "Reference Banks" means four major banks in the London interbank market selected by the Calculation Agent; and "LIBOR Business Day" means a day on which commercial banks are open for business (including dealings in foreign exchange and foreign currency deposits) in London. EX-10.29 12 k02899exv10w29.txt GUARANTEE AGREEMENT, DATED FEBRUARY 22, 2006 EXHIBIT 10.29 EXECUTION COPY ================================================================================ GUARANTEE AGREEMENT between NORTH POINTE HOLDINGS CORPORATION, as Guarantor, and LASALLE BANK NATIONAL ASSOCIATION, as Guarantee Trustee Dated as of February 22, 2006 NP CAPITAL TRUST I ================================================================================ GUARANTEE AGREEMENT, dated as of February 22, 2006, executed and delivered by NORTH POINTE HOLDINGS CORPORATION, a Michigan corporation (the "Guarantor") having its principal office at 28819 Franklin Road, Southfield, MI 48034, and LASALLE BANK NATIONAL ASSOCIATION, a national banking association, as trustee (in such capacity, the "Guarantee Trustee"), for the benefit of the Holders (as defined herein) from time to time of the Preferred Securities (as defined herein) of NP CAPITAL TRUST I, a Delaware statutory trust (the "Issuer"). WITNESSETH: WHEREAS, pursuant to an Amended and Restated Trust Agreement, dated as of the date hereof (the "Trust Agreement"), among the Guarantor, as Depositor, the Property Trustee, the Delaware Trustee and the Administrative Trustees named therein and the holders from time to time of the Preferred Securities (as hereinafter defined), the Issuer is issuing Twenty Million Dollars ($20,000,000) aggregate Liquidation Amount (as defined in the Trust Agreement) of its Floating Rate Preferred Securities (Liquidation Amount $1,000 per preferred security) (the "Preferred Securities") representing preferred undivided beneficial interests in the assets of the Issuer and having the terms set forth in the Trust Agreement; WHEREAS, the Preferred Securities will be issued by the Issuer and the proceeds thereof, together with the proceeds from the issuance of the Issuer's Common Securities (as defined below), will be used to purchase the Notes (as defined in the Trust Agreement) of the Guarantor; and WHEREAS, as incentive for the Holders to purchase Preferred Securities the Guarantor desires irrevocably and unconditionally to agree, to the extent set forth herein, to pay to the Holders of the Preferred 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 Preferred Securities, which purchase the Guarantor hereby agrees shall benefit the Guarantor, the Guarantor executes and delivers this Guarantee Agreement to provide as follows for the benefit of the Holders from time to time of the Preferred Securities: ARTICLE I INTERPRETATION AND DEFINITIONS SECTION 1.1. Interpretation. In this Guarantee Agreement, unless the context otherwise requires: (a) capitalized terms used in this Guarantee Agreement but not defined in the preamble hereto have the respective meanings assigned to them in Section 1.2; (b) the words "include", "includes" and "including" shall be deemed to be followed by the phrase "without limitation"; (c) all references to "the Guarantee Agreement" or "this Guarantee Agreement" are to this Guarantee Agreement as modified, supplemented or amended from time to time; (d) all references in this Guarantee Agreement to Articles and Sections are to Articles and Sections of this Guarantee Agreement unless otherwise specified; (e) the words "hereby", "herein", "hereof" and "hereunder" and other words of similar import refer to this Guarantee Agreement as a whole and not to any particular Article, Section or other subdivision; (f) a reference to the singular includes the plural and vice versa; and (g) the masculine, feminine or neuter genders used herein shall include the masculine, feminine and neuter genders. SECTION 1.2. Definitions. As used in this Guarantee Agreement, the terms set forth below shall, unless the context otherwise requires, have the following meanings: "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person; provided, that the Issuer shall not be deemed to be an Affiliate of the Guarantor. For the purposes of this definition, "control" when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Beneficiaries" means any Person to whom the Issuer is or hereafter becomes indebted or liable. "Board of Directors" means either the board of directors of the Guarantor or any duly authorized committee of that board. "Common Securities" means the securities representing common undivided beneficial interests in the assets of the Issuer. "Debt" means with respect to any Person, whether recourse is to all or a portion of the assets of such Person, whether currently existing or hereafter incurred, and whether or not contingent and without duplication, (i) every obligation of such Person for money borrowed; (ii) every obligation of such Person evidenced by bonds, debentures, notes or other similar instruments, including obligations incurred in connection with the acquisition of property, assets or businesses; (iii) every reimbursement obligation of such Person with respect to letters of credit, bankers' acceptances or similar facilities issued for the account of such Person; (iv) every obligation of such Person issued or assumed as the deferred purchase price of property or services (but excluding trade accounts payable 2 arising in the ordinary course of business); (v) every capital lease obligation of such Person; (vi) all indebtedness of such Person, whether incurred on or prior to the date of this Guarantee Agreement or thereafter incurred, for claims in respect of derivative products, including interest rate, foreign exchange rate and commodity forward contracts, options, swaps and similar arrangements; (vii) every obligation of the type referred to in clauses (i) through (vi) of another Person and all dividends of another Person the payment of which, in either case, such Person has guaranteed or is responsible or liable for, directly or indirectly, as obligor or otherwise; and (viii) any renewals, extensions, refundings, amendments or modifications of any obligation of the type referred to in clauses (i) through (vii). "Event of Default" means a default by the Guarantor on any of its payment or other obligations under this Guarantee Agreement; provided, that except with respect to a default in payment of any Guarantee Payments, the Guarantor shall have received notice of default from the Guarantee Trustee and shall not have cured such default within thirty (30) days after receipt of such notice. "Guarantee Payments" means the following payments or distributions, without duplication, with respect to the Preferred Securities, to the extent not paid or made by or on behalf of the Issuer: (i) any accumulated and unpaid Distributions (as defined in the Trust Agreement) required to be paid on the Preferred Securities, to the extent the Issuer shall have funds on hand available therefor at such time, (ii) the Redemption Price with respect to any Preferred Securities to the extent the Issuer shall have funds on hand available therefor at such time, and (iii) upon a voluntary or involuntary termination, winding up or liquidation of the Issuer, unless Notes are distributed to the Holders, the lesser of (a) the aggregate of the Liquidation Amount of $1,000 per Preferred Security plus accumulated and unpaid Distributions on the Preferred Securities to the date of payment, to the extent that the Issuer shall have funds available therefor at such time and (b) the amount of assets of the Issuer remaining available for distribution to Holders in liquidation of the Issuer after satisfaction of liabilities to creditors of the Issuer in accordance with applicable law (in either case, the "Liquidation Distribution"). "Guarantee Trustee" means LaSalle Bank National Association, until a Successor Guarantee Trustee, as defined below, has been appointed and has accepted such appointment pursuant to the terms of this Guarantee Agreement, and thereafter means each such Successor Guarantee Trustee. "Guarantor" means North Pointe Holdings Corporation and each of its successors and assigns. "Issuer" has the meaning set forth herein above. "Holder" means any holder, as registered on the books and records of the Issuer, of any Preferred Securities; provided, that, in determining whether the holders of the requisite percentage of Preferred Securities have given any request, notice, consent or waiver hereunder, "Holder" shall not include the Guarantor, the Guarantee Trustee or any Affiliate of the Guarantor or the Guarantee Trustee. 3 "Indenture" means the Junior Subordinated Indenture, dated as of the date hereof, as supplemented and amended, between the Guarantor and LaSalle Bank National Association, as trustee. "List of Holders" has the meaning specified in Section 2.1. "Majority in Liquidation Amount of the Preferred Securities" means a vote by the Holder(s), voting separately as a class, of more than fifty percent (50%) of the aggregate Liquidation Amount of all then outstanding Preferred Securities issued by the Issuer. "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. "Officers' Certificate" means, with respect to any Person, a certificate signed by the Chief Executive Officer, Chief Financial Officer, President or a Vice President of such Person, and by the Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary of such Person, and delivered to the Guarantee Trustee. Any Officers' Certificate delivered with respect to compliance with a condition or covenant provided for in this Guarantee Agreement (other than the certificate provided pursuant to Section 2.2) shall include: (a) a statement that each officer signing the Officers' 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 each officer in rendering the Officers' Certificate; (c) a statement that each officer has made such examination or investigation as, in such officer's opinion, is necessary to enable such officer to express an informed opinion as to whether or not such covenant or condition has been complied with; and (d) a statement as to whether, in the opinion of each officer, such condition or covenant has been complied with. "Person" means a legal person, including any individual, corporation, estate, partnership, joint venture, association, joint stock company, limited liability company, trust, unincorporated association, government or any agency or political subdivision thereof or any other entity of whatever nature. "Preferred Securities" has the meaning set forth in the first recital hereof. "Responsible Officer" means, with respect to the Guarantee Trustee, the officer in the CDO Trust Services Group of the Trustee having direct responsibility for the administration of this Guarantee Agreement. 4 "Senior Debt" means the principal of and any premium, if any, and interest on (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to the Guarantor whether or not such claim for post-petition interest is allowed in such proceeding) all Debt of the Guarantor, whether incurred on or prior to the date of the Indenture or thereafter incurred, unless it is provided in the instrument creating or evidencing the same or pursuant to which the same is outstanding, that such obligations are not superior in right of payment to the Preferred Securities; provided, that if the Guarantor is subject to the regulation and supervision of an insurance regulatory authority, the Guarantor shall have received the approval of such appropriate insurance regulatory authority prior to issuing any such obligation; and provided, further, that Senior Debt shall not include any other debt securities and guarantees in respect of such debt securities issued to any trust other than the Trust (or a trustee of any such trust), partnership or other entity affiliated with the Guarantor that is a financing vehicle of the Guarantor (a "financing entity") in connection with the issuance by such financing entity of equity securities or other securities that are treated as equity capital for regulatory capital purposes guaranteed by the Guarantor pursuant to an instrument that ranks pari passu with or junior in right of payment to the Indenture. "Trust Indenture Act" means the Trust Indenture Act of 1939, as amended and as in effect on the date of this Guarantee Agreement. "Successor Guarantee Trustee" means a successor Guarantee Trustee possessing the qualifications to act as Guarantee Trustee under Section 4.1. Capitalized or otherwise defined terms used but not otherwise defined herein shall have the meanings assigned to such terms in the Trust Agreement as in effect on the date hereof. ARTICLE II REPORTS SECTION 2.1. List of Holders. The Guarantor shall furnish or cause to be furnished to the Guarantee Trustee at such times as the Guarantee Trustee may request in writing, within thirty (30) days after the receipt by the Guarantor of any such request, a list, in such form as the Guarantee Trustee may reasonably require, of the names and addresses of the Holders (the "List of Holders") as of a date not more than fifteen (15) days prior to the time such list is furnished, in each case to the extent such information is in the possession or control of the Guarantor and is not identical to a previously supplied list of Holders or has not otherwise been received by the Guarantee Trustee in its capacity as such. The Guarantee Trustee may destroy any List of Holders previously given to it on receipt of a new List of Holders. 5 SECTION 2.2. Periodic Reports to the Guarantee Trustee. The Guarantor shall deliver to the Guarantee Trustee, within one hundred and twenty (120) days after the end of each calendar year of the Guarantor ending after the date of this Guarantee Agreement, an Officers' Certificate covering the preceding calendar year, stating whether or not to the knowledge of the signers thereof the Guarantor is in default in the performance or observance of any of the terms or provisions or any of the conditions of this Guarantee Agreement (without regard to any period of grace or requirement of notice provided hereunder) and, if the Guarantor shall be in default thereof, specifying all such defaults and the nature and status thereof of which they have knowledge. The delivery requirements of this Section 2.2 may be satisfied by compliance with Section 8.16(a) of the Trust Agreement. SECTION 2.3. Event of Default; Waiver. The Holders of a Majority in Liquidation Amount of the Preferred Securities may, on behalf of the Holders, waive any past Event of Default and its consequences. Upon such waiver, any such Event of Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Guarantee Agreement, but no such waiver shall extend to any subsequent or other default or Event of Default or impair any right consequent therefrom. SECTION 2.4. Event of Default; Notice. (a) The Guarantee Trustee shall, within ninety (90) days after the occurrence of a default, transmit to the Holders notices of all defaults actually known to the Guarantee Trustee, unless such defaults have been cured or waived before the giving of such notice. For the purpose of this Section 2.4, the term "default" means any event that is, or after notice or lapse of time or both would become, an Event of Default. (b) The Guarantee Trustee shall not be deemed to have knowledge of any default or Event of Default unless the Guarantee Trustee shall have received written notice, or a Responsible Officer charged with the administration of this Guarantee Agreement shall have received written notice, of such default or Event of Default from the Guarantor or a Holder. 6 ARTICLE III POWERS, DUTIES AND RIGHTS OF THE GUARANTEE TRUSTEE SECTION 3.1. Powers and Duties of the Guarantee Trustee. (a) This Guarantee Agreement shall be held by the Guarantee Trustee for the benefit of the Holders, and the Guarantee Trustee shall not transfer this Guarantee Agreement to any Person except a Holder exercising its rights pursuant to Section 5.4(d) or to a Successor Guarantee Trustee upon 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, upon acceptance by such Successor Guarantee Trustee of its appointment hereunder, and such vesting and succession 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) The rights, immunities, duties and responsibilities of the Guarantee Trustee shall be as provided by this Guarantee Agreement and there shall be no other duties or obligations, express or implied, of the Guarantee Trustee. Notwithstanding the foregoing, no provisions of this Guarantee Agreement shall require the Guarantee Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. Whether or not herein expressly so provided, every provision of this Guarantee Agreement relating to the conduct or affecting the liability of or affording protection to the Guarantee Trustee shall be subject to the provisions of this Section 3.1. To the extent that, at law or in equity, the Guarantee Trustee has duties and liabilities relating to the Guarantor or the Holders, the Guarantee Trustee shall not be liable to any Holder for the Guarantee Trustee's good faith reliance on the provisions of this Guarantee Agreement. The provisions of this Guarantee Agreement, to the extent that they restrict the duties and liabilities of the Guarantee Trustee otherwise existing at law or in equity, are agreed by the Guarantor and the Holders to replace such other duties and liabilities of the Guarantee Trustee. (c) No provision of this Guarantee Agreement shall be construed to relieve the Guarantee Trustee from liability for its own negligent action, negligent failure to act or own willful misconduct, except that: (i) 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 the Guarantee Trustee was negligent in ascertaining the pertinent facts upon which such judgment was made; and (ii) 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 direction of the Holders of not less than a Majority in Liquidation Amount of the Preferred Securities relating to the time, method and place of conducting any proceeding for any remedy available to the 7 Guarantee Trustee, or exercising any trust or power conferred upon the Guarantee Trustee under this Guarantee Agreement. SECTION 3.2. Certain Rights of the Guarantee Trustee. (a) Subject to the provisions of Section 3.1: (i) the Guarantee Trustee may conclusively rely and shall be fully protected in acting or refraining from acting in good faith and in accordance with the terms hereof 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 reasonably 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 Agreement shall be sufficiently evidenced by an Officers' Certificate unless otherwise prescribed herein; (iii) the Guarantee Trustee may consult with counsel, and the advice of such counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted to be taken by it hereunder in good faith and in reliance thereon and in accordance with such advice. Such counsel may be counsel to the Guarantee Trustee, the Guarantor or any of its Affiliates and may be one of its employees. The Guarantee Trustee shall have the right at any time to seek instructions concerning the administration of this Guarantee Agreement from any court of competent jurisdiction; (iv) the Guarantee Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Guarantee Agreement at the request or direction of any Holder, unless such Holder shall have provided to the Guarantee Trustee reasonable security or indemnity against the costs, expenses (including reasonable attorneys' fees and expenses) and liabilities that might be incurred by it in complying with such request or direction, including such reasonable advances as may be requested by the Guarantee Trustee; provided, that, nothing contained in this Section 3.2(a)(iv) shall be taken to relieve the Guarantee Trustee, upon the occurrence of an Event of Default, of its obligation to exercise the rights and powers vested in it by this Guarantee Agreement; provided, further, that nothing contained in this Section 3.2(a)(iv) shall prevent the Guarantee Trustee from exercising its rights under Section 4.2 hereof.; (v) the Guarantee Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Guarantee Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and if the Guarantee Trustee shall determine to make such inquiry or investigation, it shall be entitled to examine the books, records and premises of the Guarantor, personally or by agent or attorney; 8 (vi) the Guarantee Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through its agents, attorneys, custodians or nominees and the Guarantee Trustee shall not be responsible for any misconduct or negligence on the part of any such agent, attorney, custodian or nominee appointed with due care by it hereunder; (vii) whenever in the administration of this Guarantee Agreement the Guarantee Trustee shall deem it desirable to receive instructions with respect to enforcing any remedy or right hereunder, the Guarantee Trustee (A) may request instructions from the Holders of a Majority in Liquidation Amount of the Preferred Securities, (B) may refrain from enforcing such remedy or right or taking such other action until such instructions are received and (C) shall be protected in acting in accordance with such instructions; (viii) except as otherwise expressly provided by this Guarantee Agreement, the Guarantee Trustee shall not be under any obligation to take any action that is discretionary under the provisions of this Guarantee Agreement; (ix) whenever, in the administration of this Guarantee Agreement, the Guarantee Trustee shall deem it desirable that a matter be proved or established before taking, suffering or omitting to take 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 rely upon an Officers' Certificate which, upon receipt of such request from the Guarantee Trustee, shall be promptly delivered by the Guarantor; and (x) the Guarantee Trustee shall have no duty to cause any recording, filing or registration of any instrument or other writing (or any rerecording, refiling or reregistration thereof). (b) No provision of this Guarantee Agreement shall be deemed to impose any duty or obligation on the Guarantee Trustee to perform any act or acts or exercise any right, power, duty or obligation conferred or imposed on it in any jurisdiction in which it shall be illegal, or in which the Guarantee Trustee shall be unqualified or incompetent in accordance with applicable law, to perform any such act or acts or to exercise any such right, power, duty or obligation. No permissive power or authority available to the Guarantee Trustee shall be construed to be a duty to act in accordance with such power and authority. SECTION 3.3. Compensation. The Guarantor agrees to pay to the Guarantee Trustee from time to time reasonable compensation for all services rendered by it hereunder (which compensation shall not be limited by any provisions of law in regard to the compensation of a trustee of an express trust) and to reimburse the Guarantee Trustee upon request for all reasonable expenses, disbursements and advances (including the reasonable fees and expenses of its attorneys and agents) incurred or made by the Guarantee Trustee in accordance with any provisions of this Guarantee Agreement. 9 SECTION 3.4. Indemnity. The Guarantor agrees to indemnify and hold harmless the Guarantee Trustee (including in its individual capacity) and any of its Affiliates and any of their officers, directors, shareholders, employees, representatives or agents from and against any loss, damage, liability, tax (other than income, franchise or other taxes imposed on amounts paid pursuant to Section 3.3), penalty, expense or claim of any kind or nature whatsoever incurred without negligence, bad faith or willful misconduct on its part, arising out of or in connection with the acceptance or administration of this Guarantee Agreement, including the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. The Guarantee Trustee will not claim or exact any lien or charge on any Guarantee Payments as a result of any amount due to it under this Guarantee Agreement. This indemnity shall survive the termination of this Agreement or the resignation or removal of the Guarantee Trustee. In no event shall the Guarantee Trustee be liable for any indirect, special, punitive or consequential loss or damage of any kind whatsoever, including, but not limited to, lost profits, even if the Guarantee Trustee has been advised of the likelihood of such loss or damage and regardless of the form of action. In no event shall the Guarantee Trustee be liable for any failure or delay in the performance of its obligations hereunder because of circumstances beyond its control, including, but not limited to, acts of God, flood, war (declared or undeclared), terrorism, fire, riot, embargo, government action, including any laws, ordinances, regulations, governmental action or the like which delay, restrict or prohibit the providing of the services contemplated by this Guarantee Agreement. SECTION 3.5. Securities. The Guarantee Trustee or any other agent of the Guarantee Trustee, in its individual or any other capacity, may become the owner or pledgee of Common or Preferred Securities. ARTICLE IV GUARANTEE TRUSTEE SECTION 4.1. Guarantee Trustee; Eligibility. (a) There shall at all times be a Guarantee Trustee which shall: (i) not be an Affiliate of the Guarantor; and (ii) be a corporation organized and doing business under the laws of the United States or of any State thereof, authorized to exercise corporate trust powers, having a combined capital and surplus of at least fifty million dollars ($50,000,000), subject to supervision or examination by Federal or State authority and having an office 10 within the United States. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of such supervising or examining authority, then, for the purposes of this Section 4.1, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. (b) If at any time the Guarantee Trustee shall cease to be eligible to so act under Section 4.1(a), the Guarantee Trustee shall immediately resign in the manner and with the effect set out in Section 4.2(c). (c) If the Guarantee Trustee has or shall acquire any "conflicting interest" within the meaning of Section 310(b) of the Trust Indenture Act, the Guarantee Trustee shall either eliminate such interest or resign in the manner and with the effect set out in Section 4.2(c). SECTION 4.2. Appointment, Removal and Resignation of the Guarantee Trustee. (a) Subject to Section 4.2(b), the Guarantee Trustee may be appointed or removed without cause at any time by the Guarantor, except during an Event of Default. (b) The Guarantee Trustee shall not be removed until a Successor Guarantee Trustee has been appointed and has accepted such appointment by written instrument executed by such Successor Guarantee Trustee and delivered to the Guarantor. (c) The Guarantee Trustee appointed hereunder shall hold office until a Successor Guarantee Trustee shall have been appointed or until its removal or resignation. The Guarantee Trustee may resign from office (without need for prior or subsequent accounting) by an instrument in writing executed by the Guarantee Trustee and delivered to the Guarantor, which resignation shall not take effect until a Successor Guarantee Trustee has been appointed and has accepted such appointment by instrument in writing executed by such Successor Guarantee Trustee and delivered to the Guarantor and the resigning Guarantee Trustee. (d) If no Successor Guarantee Trustee shall have been appointed and accepted appointment as provided in this Section 4.2 within thirty (30) days after delivery to the Guarantor of an instrument of resignation, the resigning Guarantee Trustee may petition, at the expense of the Guarantor, any court of competent jurisdiction for appointment of a Successor Guarantee Trustee. Such court may thereupon, after prescribing such notice, if any, as it may deem proper, appoint a Successor Guarantee Trustee. ARTICLE V GUARANTEE SECTION 5.1. Guarantee. (a) The Guarantor irrevocably and unconditionally agrees to pay in full to the Holders the Guarantee Payments (without duplication of amounts theretofore paid by or on behalf of the 11 Issuer), as and when due, regardless of any defense (except for the defense of payment by the Issuer), right of set-off or counterclaim which the Issuer may have or assert. The Guarantor's obligation to make a Guarantee Payment may be satisfied by direct payment of the required amounts by the Guarantor to the Holders or by causing the Issuer to pay such amounts to the Holders. The Guarantor shall give prompt written notice to the Guarantee Trustee in the event it makes any direct payment to the Holders hereunder. (b) The Guarantor hereby also agrees to assume any and all Obligations of the Issuer, and, in the event any such Obligation is not so assumed, subject to the terms and conditions hereof, the Guarantor hereby irrevocably and unconditionally guarantees to each Beneficiary the full payment, when and as due, of any and all Obligations to such Beneficiaries. This Guarantee is intended to be for the Beneficiaries who have received notice hereof. SECTION 5.2. Waiver of Notice and Demand. The Guarantor hereby waives notice of acceptance of the Guarantee Agreement and of any liability to which it applies or may apply, presentment, demand for payment, any right to require a proceeding first against the Guarantee Trustee, Issuer or any other Person before proceeding against the Guarantor, protest, notice of nonpayment, notice of dishonor, notice of redemption and all other notices and demands. SECTION 5.3. Obligations Not Affected. The obligations, covenants, agreements and duties of the Guarantor under this Guarantee Agreement shall in no way be affected or impaired by reason of the happening from time to time of any of the following: (a) the release or waiver, by operation of law or otherwise, of the performance or observance by the Issuer of any express or implied agreement, covenant, term or condition relating to the Preferred Securities to be performed or observed by the Issuer; (b) the extension of time for the payment by the Issuer of all or any portion of the Distributions (other than an extension of time for payment of Distributions that results from the extension of any interest payment period on the Notes as provided in the Indenture), Redemption Price, Liquidation Distribution or any other sums payable under the terms of the Preferred Securities or the extension of time for the performance of any other obligation under, arising out of, or in connection with, the Preferred Securities; (c) any failure, omission, delay or lack of diligence on the part of the Holders to enforce, assert or exercise any right, privilege, power or remedy conferred on the Holders pursuant to the terms of the Preferred Securities, or any action on the part of the Issuer granting indulgence or extension of any kind; (d) the voluntary or involuntary liquidation, dissolution, sale of any collateral, receivership, insolvency, bankruptcy, assignment for the benefit of creditors, reorganization, arrangement, composition or readjustment of debt of, or other similar proceedings affecting, the Issuer or any of the assets of the Issuer; 12 (e) any invalidity of, or defect or deficiency in, the Preferred Securities; (f) the settlement or compromise of any obligation guaranteed hereby or hereby incurred; or (g) any other circumstance whatsoever that might otherwise constitute a legal or equitable discharge or defense of a guarantor, it being the intent of this Section 5.3 that the obligations of the Guarantor hereunder shall be absolute and unconditional under any and all circumstances. There shall be no obligation of the Holders to give notice to, or obtain the consent of, the Guarantor with respect to the happening of any of the foregoing. SECTION 5.4. Rights of Holders. The Guarantor expressly acknowledges that: (a) this Guarantee Agreement will be deposited with the Guarantee Trustee to be held for the benefit of the Holders; (b) the Guarantee Trustee has the right to enforce this Guarantee Agreement on behalf of the Holders; (c) the Holders of a Majority in Liquidation Amount of the Preferred Securities have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Guarantee Trustee in respect of this Guarantee Agreement or exercising any trust or power conferred upon the Guarantee Trustee under this Guarantee Agreement; and (d) any Holder may institute a legal proceeding directly against the Guarantor to enforce its rights under this Guarantee Agreement, without first instituting a legal proceeding against the Guarantee Trustee, the Issuer or any other Person. SECTION 5.5. Guarantee of Payment. This Guarantee Agreement creates a guarantee of payment and not of collection. This Guarantee Agreement will not be discharged except by payment of the Guarantee Payments in full (without duplication of amounts theretofore paid by the Issuer) or upon distribution of Notes to Holders as provided in the Trust Agreement. SECTION 5.6. Subrogation. The Guarantor shall be subrogated to all (if any) rights of the Holders against the Issuer in respect of any amounts paid to the Holders by the Guarantor under this Guarantee Agreement and shall have the right to waive payment by the Issuer pursuant to Section 5.1; provided, that, the Guarantor shall not (except to the extent required by mandatory provisions of law) be entitled to enforce or exercise any rights it may acquire by way of subrogation or any indemnity, reimbursement or other agreement, in all cases as a result of payment under this Guarantee Agreement, if, at the time of any such payment, any amounts are due and unpaid under this Guarantee Agreement. If any amount shall be paid to the Guarantor in violation of the preceding sentence, the Guarantor agrees to hold such amount in trust for the Holders and to pay over such amount to the Holders. SECTION 5.7. Independent Obligations. 13 The Guarantor acknowledges that its obligations hereunder are independent of the obligations of the Issuer with respect to the Preferred Securities and that the Guarantor shall be liable as principal and as debtor hereunder to make Guarantee Payments pursuant to the terms of this Guarantee Agreement notwithstanding the occurrence of any event referred to in subsections (a) through (g), inclusive, of Section 5.3. SECTION 5.8. Enforcement. A Beneficiary may enforce the Obligations of the Guarantor contained in Section 5.1(b) directly against the Guarantor, and the Guarantor waives any right or remedy to require that any action be brought against the Issuer or any other person or entity before proceeding against the Guarantor. ARTICLE VI COVENANTS AND SUBORDINATION SECTION 6.1. Dividends, Distributions and Payments. So long as any Preferred Securities remain outstanding, if there shall have occurred and be continuing an Event of Default or the Guarantor shall have entered into an Extension Period as provided for in the Indenture and such period, or any extension thereof, shall have commenced and be continuing, then the Guarantor may not (a) declare or pay any dividends or distributions on, or redeem, purchase, acquire or make liquidation payment with respect to, any of the Guarantor's capital stock or (b) make any payment of principal of or any interest or premium, if any, on or repay, repurchase or redeem any debt securities of the Guarantor that rank pari passu in all respects with or junior in interest to the Notes (other than (i) repurchases, redemptions or other acquisitions of shares of capital stock of the Guarantor in connection with any employment contract, benefit plan or other similar arrangement with or for the benefit of any one or more employees, officers, directors or consultants, in connection with a dividend reinvestment or stockholder stock purchase plan or in connection with the issuance of capital stock of the Guarantor (or securities convertible into or exercisable for such capital stock) as consideration in an acquisition transaction entered into prior to the occurrence of such Event of Default or the applicable Extension Period, (ii) as a result of an exchange or conversion of any class or series of the Guarantor's capital stock (or any capital stock of a subsidiary of the Guarantor) for any class or series of the Guarantor's capital stock or any class of series of the Guarantor's indebtedness for any class or series of the Guarantor's capital stock, (iii) the purchase of fractional interests in shares of the Guarantor's capital stock pursuant to the conversions or exchange provisions of such capital stock or the security being converted or exchanged, (iv) any declaration of a dividend in connection with any rights plan, the issuance of rights, stock or other property under any rights plan or the redemption or repurchase of rights pursuant thereto, or (v) any dividend in the form of stock, warrants, options or other rights where the dividend stock or the stock issuable upon exercise of such warrants, options or other rights is the same stock as that on which the dividend is being paid or ranks pari passu with or junior to such stock). 14 SECTION 6.2. Subordination. The obligations of the Guarantor under this Guarantee Agreement will constitute unsecured obligations of the Guarantor and will rank subordinate and junior in right of payment to all Senior Debt of the Guarantor. SECTION 6.3. Pari Passu Guarantees. (a) The obligations of the Guarantor under this Guarantee Agreement shall rank pari passu with the obligations of the Guarantor under any similar guarantee agreements issued by the Guarantor with respect to preferred securities (if any) similar to the Preferred Securities, issued by trusts other than the Issuer established or to be established by the Guarantor (if any), in each case similar to the Issuer. (b) The right of the Guarantor to participate in any distribution of assets of any of its subsidiaries upon any such subsidiary's liquidation or reorganization or otherwise is subject to the prior claims of creditors of that subsidiary, except to the extent the Guarantor may itself be recognized as a creditor of that subsidiary. Accordingly, the Guarantor's obligations under this Guarantee will be effectively subordinated to all existing and future liabilities of the Guarantor's subsidiaries, and claimants should look only to the assets of the Guarantor for payments thereunder. This Guarantee does not limit the incurrence or issuance of other secured or unsecured debt of the Guarantor, including Senior Debt of the Guarantor, under any indenture or agreement that the Guarantor may enter into in the future or otherwise. ARTICLE VII TERMINATION SECTION 7.1. Termination. This Guarantee Agreement shall terminate and be of no further force and effect upon (a) full payment of the Redemption Price of all Preferred Securities, (b) the distribution of Notes to the Holders in exchange for all of the Preferred Securities or (c) full payment of the amounts payable in accordance with the Trust Agreement upon liquidation of the Issuer. Notwithstanding the foregoing, this Guarantee Agreement will continue to be effective or will be reinstated, as the case may be, if at any time any Holder must restore payment of any sums paid with respect to Preferred Securities or this Guarantee Agreement. The obligations of the Guarantor under Sections 3.3 and 3.4 shall survive any such termination or the resignation and removal of the Guarantee Trustee. 15 ARTICLE VIII MISCELLANEOUS SECTION 8.1. Successors and Assigns. All guarantees and agreements contained in this Guarantee Agreement shall bind the successors, assigns, receivers, trustees and representatives of the Guarantor and shall inure to the benefit of the Holders of the Preferred Securities then outstanding. Except in connection with a consolidation, merger or sale involving the Guarantor that is permitted under Article VIII of the Indenture and pursuant to which the successor or assignee agrees in writing to perform the Guarantor's obligations hereunder, the Guarantor shall not assign its rights or delegate its obligations hereunder without the prior approval of the Holders of a Majority in Liquidation Amount of the Preferred Securities. SECTION 8.2. Amendments. Except with respect to any changes that do not adversely affect the rights of the Holders in any material respect (in which case no consent of the Holders will be required), this Guarantee Agreement may only be amended with the prior approval of the Guarantor, the Guarantee Trustee and the Holders of not less than a Majority in Liquidation Amount of the Preferred Securities. The provisions of Article VI of the Trust Agreement concerning meetings or consents of the Holders shall apply to the giving of such approval. SECTION 8.3. Notices. Any notice, request or other communication required or permitted to be given hereunder shall be in writing, duly signed by the party giving such notice, and delivered, telecopied or mailed by first class mail as follows: (a) if given to the Guarantor, to the address or facsimile number set forth below or such other address, facsimile number or to the attention of such other Person as the Guarantor may give notice to the Guarantee Trustee and the Holders: North Pointe Holdings Corporation 28819 Franklin Road Southfield, MI 48034 Facsimile No.: (248) 358-3041 Attention: Brian J. Roney (b) if given to the Issuer, at the Issuer's address or facsimile number set forth below or such other address, facsimile number or to the attention of such other Person as the Issuer may give notice to the Guarantee Trustee and the Holders: NP Capital Trust I 28819 Franklin Road 16 Southfield, MI 48034 Facsimile No.: (248) 358-3041 Attention: Brian J. Roney (c) if given to the Guarantee Trustee, at the address or facsimile number set forth below or such other address, facsimile number or to the attention of such other Person as the Guarantee Trustee may give notice to the Guarantor and the Holders: LaSalle Bank National Association 135 South LaSalle Street Suite 1511 Chicago, Illinois 60603 Facsimile No.: (312) 904-0524 Attention: CDO Trust Services Group--NP Capital Trust I (d) if given to any Holder, at the address set forth on the books and records of the Issuer. All notices hereunder shall be deemed to have been given when received in person, telecopied with receipt confirmed, or mailed by first class mail, postage prepaid, except that if a notice or other document is refused delivery or cannot be delivered because of a changed address of which no notice was given, such notice or other document shall be deemed to have been delivered on the date of such refusal or inability to deliver. SECTION 8.4. Benefit. This Guarantee Agreement is solely for the benefit of the Holders and is not separately transferable from the Preferred Securities. SECTION 8.5. Governing Law. THIS GUARANTEE AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF EACH PARTY HERETO, SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO ITS CONFLICT OF LAWS PROVISIONS (OTHER THAN SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW). SECTION 8.6. Submission to Jurisdiction. ANY LEGAL ACTION OR PROCEEDING BY OR AGAINST ANY PARTY HERETO OR WITH RESPECT TO OR ARISING OUT OF THIS GUARANTEE AGREEMENT MAY BE BROUGHT IN OR REMOVED TO THE COURTS OF THE STATE OF NEW YORK, IN AND FOR THE COUNTY OF NEW YORK, OR OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK (IN EACH CASE SITTING IN THE BOROUGH OF MANHATTAN). BY EXECUTION AND DELIVERY OF THIS GUARANTEE AGREEMENT, EACH PARTY ACCEPTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS (AND COURTS OF APPEALS THEREFROM) FOR LEGAL PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS GUARANTEE AGREEMENT. 17 SECTION 8.7. Counterparts. This instrument may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. SECTION 8.8. Severability. In the event that one or more of the provisions contained in this Guarantee Agreement shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions of this Guarantee, but this Guarantee shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein. [Signature pages follow.] 18 IN WITNESS WHEREOF, the undersigned have executed this Guarantee Agreement as of the date first above written. NORTH POINTE HOLDINGS CORPORATION By: /s/ James G. Petcoff ------------------------------------ Name: James G. Petcoff Title: Chairman, President and Chief Executive Officer LASALLE BANK NATIONAL ASSOCIATION, as Guarantee Trustee By: /s/ Koren E. Sumser ------------------------------------ Name: Koren E. Sumser Title: First Vice President TABLE OF CONTENTS ARTICLE I INTERPRETATION AND DEFINITIONS................................... 2 Section 1.1. Interpretation............................................. 2 Section 1.2. Definitions................................................ 2 ARTICLE II REPORTS......................................................... 5 Section 2.1. List of Holders............................................ 6 Section 2.2. Periodic Reports to the Guarantee Trustee.................. 6 Section 2.3. Event of Default; Waiver................................... 6 Section 2.4. Event of Default; Notice................................... 6 ARTICLE III POWERS, DUTIES AND RIGHTS OF THE GUARANTEE TRUSTEE............. 7 Section 3.1. Powers and Duties of the Guarantee Trustee................. 7 Section 3.2. Certain Rights of the Guarantee Trustee.................... 8 Section 3.3. Compensation............................................... 9 Section 3.4. Indemnity.................................................. 9 Section 3.5. Securities................................................. 10 ARTICLE IV GUARANTEE TRUSTEE............................................... 10 Section 4.1. Guarantee Trustee; Eligibility............................. 10 Section 4.2. Appointment, Removal and Resignation of the Guarantee Trustee.................................................... 11 ARTICLE V GUARANTEE........................................................ 11 Section 5.1. Guarantee.................................................. 11 Section 5.2. Waiver of Notice and Demand................................ 12 Section 5.3. Obligations Not Affected................................... 12 Section 5.4. Rights of Holders.......................................... 13 Section 5.5. Guarantee of Payment....................................... 13 Section 5.6. Subrogation................................................ 13 Section 5.7. Independent Obligations.................................... 13 Section 5.8. Enforcement................................................ 13 ARTICLE VI COVENANTS AND SUBORDINATION..................................... 14 Section 6.1. Dividends, Distributions and Payments...................... 14 Section 6.2. Subordination.............................................. 14 Section 6.3. Pari Passu Guarantees...................................... 14

i TABLE OF CONTENTS (continued) ARTICLE VII TERMINATION.................................................... 15 Section 7.1. Termination................................................ 15 ARTICLE VIII MISCELLANEOUS................................................. 15 Section 8.1. Successors and Assigns..................................... 15 Section 8.2. Amendments................................................. 15 Section 8.3. Notices.................................................... 16 Section 8.4. Benefit.................................................... 17 Section 8.5. Governing Law.............................................. 17 Section 8.6. Submission to Jurisdiction................................. 17 Section 8.7. Counterparts............................................... 17 Section 8.8. Severability............................................... 17

ii EX-10.30 13 k02899exv10w30.txt PURCHASE AGREEMENT, DATED AS OF FEBRUARY 22, 2006 EXHIBIT 10.30 EXECUTION COPY ================================================================================ PURCHASE AGREEMENT among NORTH POINTE HOLDINGS CORPORATION, NP CAPITAL TRUST I and MERRILL LYNCH INTERNATIONAL ---------- Dated as of February 22, 2006 ---------- ================================================================================ PURCHASE AGREEMENT ($20,000,000 Trust Preferred Securities) THIS PURCHASE AGREEMENT, dated as of February 22, 2006 (this "Purchase Agreement"), is entered into among North Pointe Holdings Corporation, a Michigan corporation (the "Company"), and NP Capital Trust I, a Delaware statutory trust (the "Trust", and together with the Company, the "Sellers"), and Merrill Lynch International or its assignee. (the "Purchaser"). WITNESSETH: WHEREAS, the Sellers propose to issue and sell 20,000 Floating Rate Preferred Securities of the Trust, having a stated liquidation amount of $1,000 per security, bearing a fixed rate of 8.70% per annum through the interest payment date in March 2011 and a variable rate, reset quarterly, equal to LIBOR (as defined in the Indenture (as defined below)) plus 3.64% thereafter (the "Preferred Securities"); WHEREAS, the Preferred Securities will be guaranteed by the Company (the "Guarantee") pursuant to the Guarantee Agreement (the "Guarantee Agreement"), dated as of the Closing Date (defined below), and executed and delivered by the Company and LaSalle Bank National Association, a national banking association, as trustee (in such capacity, the "Guarantee Trustee"), for the benefit of the holders from time to time of the Preferred Securities; WHEREAS, the entire proceeds from the sale of the Preferred Securities will be combined with the entire proceeds from the sale by the Trust to the Company of its common securities (the "Common Securities"), and will be used by the Trust to purchase Twenty Million Six Hundred Twenty Thousand Dollars ($20,620,000) in principal amount of the unsecured junior subordinated deferrable interest notes of the Company (the "Junior Subordinated Notes"); WHEREAS, the Preferred Securities and the Common Securities for the Trust will be issued pursuant to the Amended and Restated Trust Agreement (the "Trust Agreement"), dated as of the Closing Date, among the Company, as depositor, LaSalle Bank National Association, a national banking association, as property trustee (in such capacity, the "Property Trustee"), Christiana Bank & Trust Company, a Delaware banking corporation, as Delaware trustee (in such capacity, the "Delaware Trustee"), the Administrative Trustees named therein (in such capacities, the "Administrative Trustees") and the holders from time to time of undivided beneficial interests in the assets of the Trust; and WHEREAS, the Junior Subordinated Notes will be issued pursuant to a Junior Subordinated Indenture, dated as of the Closing Date (the "Indenture"), between the Company and LaSalle Bank National Association, a national banking association, as indenture trustee (in such capacity, the "Indenture Trustee"). NOW, THEREFORE, in consideration of the mutual agreements and subject to the terms and conditions herein set forth, the parties hereto agree as follows: 1. DEFINITIONS. The Preferred Securities, the Common Securities and the Junior Subordinated Notes are collectively referred to herein as the "Securities." This Purchase Agreement, the Indenture, the Trust Agreement, the Guarantee Agreement and the Securities are collectively referred to herein as the "Operative Documents." All other capitalized terms used but not defined in this Purchase Agreement shall have the respective meanings ascribed thereto in the Indenture. 2. PURCHASE AND SALE OF THE PREFERRED SECURITIES. (a) The Sellers agree to sell to the Purchaser, and the Purchaser agrees to purchase from the Sellers the Preferred Securities for an amount (the "Purchase Price") equal to Twenty Million Dollars ($20,000,000). The Purchaser shall be responsible for the rating agency costs and expenses. The Sellers shall use the Purchase Price, together with the proceeds from the sale of the Common Securities, to purchase the Junior Subordinated Notes. (b) Delivery or transfer of, and payment for, the Preferred Securities shall be made at 10:00 A.M. Chicago time (11:00 A.M. New York time), on February 22, 2006 or such later date (not later than 30 days later) as the parties may designate (such date and time of delivery and payment for the Preferred Securities being herein called the "Closing Date"). The Preferred Securities shall be transferred and delivered to the Purchaser against the payment of the Purchase Price to the Sellers made by wire transfer in immediately available funds on the Closing Date to a U.S. account designated in writing by the Company at least two business days prior to the Closing Date. (c) Delivery of the Preferred Securities shall be made at such location, and in such names and denominations, as the Purchaser shall designate at least two business days in advance of the Closing Date. The Company and the Trust agree to have the Preferred Securities available for inspection and checking by the Purchaser in Chicago, Illinois, not later than 1:00 P.M., Chicago time (2:00 P.M. New York time), on the business day prior to the Closing Date. The closing for the purchase and sale of the Preferred Securities shall occur at the offices of Mayer, Brown, Rowe & Maw LLP, 71 South Wacker, Chicago, Illinois 60606, or such other place as the parties hereto shall agree. 3. CONDITIONS. The obligations of the parties under this Purchase Agreement are subject to the following conditions: (a) The representations and warranties contained herein shall be accurate as of the date of delivery of the Preferred Securities. (b) [Reserved.] (c) Honigman Miller Schwartz and Cohn LLP, counsel for the Company and the Trust (the "Company Counsel"), shall have delivered an opinion, dated the Closing Date, addressed to the Purchaser and LaSalle Bank National Association, in substantially the form set 3 out in Annex A-I hereto and (ii) the Company shall have furnished to the Purchaser the opinion of the Company's General Counsel or a certificate signed by the Company's Chief Executive Officer, President, an Executive Vice President, Chief Financial Officer, Treasurer or Assistant Treasurer, dated the Closing Date, addressed to the Purchaser, in substantially the form set out in Annex A-II hereto. In rendering their opinion, the Company Counsel may rely as to factual matters upon certificates or other documents furnished by officers, directors and trustees of the Company and the Trust and by government officials (provided, however, that copies of any such certificates or documents are delivered to the Purchaser) and by and upon such other documents as such counsel may, in their reasonable opinion, deem appropriate as a basis for the Company Counsel's opinion. The Company Counsel 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 Company Counsel is not admitted to practice in the State of New York, the opinion of the Company 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 Company Counsel Opinion 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). (d) The Purchaser shall have been furnished the opinion of Honigman Miller Schwartz and Cohn LLP, special tax counsel, dated the Closing Date, addressed to the Purchaser and LaSalle Bank National Association, in substantially the form set out in Annex B hereto. (e) The Purchaser shall have received the opinion of Morris, James, Hitchens & Williams LLP, special Delaware counsel for the Trust, dated the Closing Date, addressed to the Purchaser, LaSalle Bank National Association, the Delaware Trustee and the Company, in substantially the form set out in Annex C hereto. (f) The Purchaser shall have received the opinion of Morris, James, Hitchens & Williams LLP, special Delaware counsel for the Property Trustee, the Guarantee Trustee and the Indenture Trustee, dated the Closing Date, addressed to the Purchaser, in substantially the form set out in Annex D hereto. (g) The Purchaser shall have received the opinion of Morris, James, Hitchens & Williams LLP, special Delaware counsel for the Delaware Trustee, dated the Closing Date, addressed to the Purchaser and LaSalle Bank National Association, in substantially the form set out in Annex E hereto. (h) The Company shall have furnished to the Purchaser a certificate of the Company, signed by the Chief Executive Officer, President or an Executive Vice President, and Chief Financial Officer, Treasurer or Assistant Treasurer of the Company, and the Trust shall have furnished to the Purchaser a certificate of the Trust, signed by an Administrative Trustee of the Trust, in each case dated the Closing Date, and, in the case of the Company, as to (i) and (ii) below and, in the case of the Trust, as to (i) below. 4 (i) the representations and warranties in this Purchase Agreement are true and correct on and as of the Closing Date with the same effect as if made on the Closing Date, and the Company and the Trust have complied with all the agreements and satisfied all the conditions on either of their part to be performed or satisfied at or prior to the Closing Date; and (ii) since the date of the Interim Financial Statements (as defined below), there has been no material adverse change in the condition (financial or other), earnings, business, assets or business prospects of the Company and its subsidiaries, whether or not arising from transactions occurring in the ordinary course of business. (i) Subsequent to the execution of this Purchase Agreement, there shall not have been any change, or any development involving a prospective change, in or affecting the condition (financial or other), earnings, business, assets or business prospects of the Company and its subsidiaries, whether or not occurring in the ordinary course of business, the effect of which is, in the Purchaser's judgment, so material and adverse as to make it impractical or inadvisable to proceed with the purchase of the Preferred Securities. (j) Prior to the Closing Date, the Company and the Trust shall have furnished to the Purchaser and its counsel such further information, certificates and documents as the Purchaser or its counsel may reasonably request. If any of the conditions specified in this Section 3 shall not have been fulfilled when and as provided in this Purchase Agreement, or if any of the opinions, certificates and documents mentioned above or elsewhere in this Purchase Agreement shall not be reasonably satisfactory in form and substance to the Purchaser or its counsel, this Purchase Agreement and all the Purchaser's obligations hereunder may be canceled at, or at any time prior to, the Closing Date by the Purchaser. Notice of such cancellation shall be given to the Company and the Trust in writing or by telephone or facsimile confirmed in writing. Each certificate signed by any trustee of the Trust or any officer of the Company and delivered to the Purchaser or the Purchaser's counsel in connection with the Operative Documents and the transactions contemplated hereby and thereby shall be deemed to be a representation and warranty of the Trust and/or the Company, as the case may be, and not by such trustee or officer in any individual capacity. 4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE TRUST. The Company and the Trust jointly and severally represent and warrant to, and agree with the Purchaser, as follows: (a) Neither the Company nor the Trust, nor any of their "Affiliates" (as defined in Rule 501(b) of Regulation D ("Regulation D") under the Securities Act (as defined below)), nor any person acting on its or 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 of any of the Securities under the Securities Act of 1933, as amended (the "Securities Act"). 5 (b) Neither the Company nor the Trust, nor any of their Affiliates, nor any person acting on its or their behalf, has engaged in any form of 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 (i) are not and have not been listed on a national securities exchange registered under section 6 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or quoted on a U.S. automated inter-dealer quotation system and (ii) are not of an open-end investment company, unit investment trust or face-amount certificate company that are, or are required to be, registered under section 8 of the Investment Company Act of 1940, as amended (the "Investment Company Act"), and the Securities otherwise satisfy the eligibility requirements of Rule 144A(d)(3) promulgated pursuant to the Securities Act ("Rule 144A(d)(3)"). (d) Neither the Company nor the Trust, nor any of their Affiliates, nor any person acting on its or their behalf, has engaged, or will engage, in any "directed selling efforts" within the meaning of Regulation S under the Securities Act with respect to the Securities. (e) Neither the Company nor the Trust is, and, immediately following consummation of the transactions contemplated hereby and the application of the net proceeds therefrom, will not 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. (f) Neither the Company nor the Trust has paid or agreed to pay to any person any compensation for soliciting another to purchase any of the Securities, except for the Preferred Securities Commission and/or the sales commission the Company has agreed to pay to Cohen Bros. & Company (or to the Company's introducing agent on their behalf)" pursuant to the letter agreement between the Company and Cohen Bros. & Company, dated December 22, 2005. (g) The Trust has been duly created and is validly existing in good standing as a statutory trust under the Delaware Statutory Trust Act, 12 Del. C. Section 3801, et seq. (the "Statutory Trust Act") with all requisite 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 to which it is a party. 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 condition (financial or otherwise), earnings, business, assets or business prospects of the Trust, whether or not occurring in the ordinary course of business. The Trust is not a party to or otherwise bound by any agreement other than the Operative Documents. The Trust is and will be, under current law, classified for federal income tax purposes as a grantor trust and not as an association or publicly traded partnership taxable as a corporation. (h) The Trust Agreement has been duly authorized by the Company and, on the Closing Date specified in Section 2(b), will have been duly executed and delivered by the Company and the Administrative Trustees of the Trust, and, assuming due authorization, 6 execution and delivery by the Property Trustee and the Delaware Trustee, will be a legal, valid and binding obligation of the Company and the Administrative Trustees, enforceable against them in accordance with its terms, subject to applicable bankruptcy, insolvency and similar laws affecting creditors' rights generally and to general principles of equity. Each of the Administrative Trustees of the Trust is an employee of the Company or one of its subsidiary insurance companies and has been duly authorized by the Company to execute and deliver the Trust Agreement. (i) Each of the Guarantee Agreement 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 Agreement, and by the Indenture Trustee in the case of the Indenture, will be a legal, valid and binding obligation of the Company enforceable against it in accordance with its terms, subject to applicable bankruptcy, insolvency and similar laws affecting creditors' rights generally and to general principles of equity. (j) The Preferred Securities and the Common Securities have been duly authorized by the Trust and, when issued and delivered against payment therefor on the Closing Date in accordance with this Purchase Agreement, in the case of the Preferred Securities, and in accordance with the Common Securities Subscription Agreement, in the case of the Common Securities, will be validly issued, fully paid and non-assessable and will represent undivided beneficial interests in the assets of the Trust entitled to the benefits of the Trust Agreement, enforceable against the Trust in accordance with their terms, subject to applicable bankruptcy, insolvency and similar laws affecting creditors' rights generally and to general principles of equity. The issuance of the Securities is not subject to any 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 of any kind (each, a "Lien"). (k) The Junior Subordinated Notes have been duly authorized by the Company and, on 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 to the Trust against payment therefor in accordance with the Junior Subordinated Note Purchase Agreement, will constitute legal, 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 applicable bankruptcy, insolvency and similar laws affecting creditors' rights generally and to general principles of equity. (l) This Purchase Agreement has been duly authorized, executed and delivered by the Company and the Trust. (m) Neither the issue and sale of the Common Securities, the Preferred Securities or the Junior Subordinated Notes, nor the purchase of the Junior Subordinated Notes by the Trust, nor the execution and delivery of and compliance with the Operative Documents by the Company or the Trust, nor the consummation of the transactions contemplated herein or 7 therein, (i) will conflict with or constitute a violation or breach of the Trust Agreement or the charter or bylaws of the Company or any subsidiary of the Company or any applicable law, statute, rule, regulation, judgment, order, writ or decree of any government, governmental authority, agency or instrumentality or court, domestic or foreign, having jurisdiction over the Trust or the Company or any of its subsidiaries or their respective properties or assets (collectively, the "Governmental Entities"), (ii) will conflict with or constitute a violation or breach of, or a default or Repayment Event (as defined below) under, or result in the creation or imposition of any Lien upon any property or assets of the Trust, the Company or any of the Company's subsidiaries pursuant to, any contract, indenture, mortgage, loan agreement, note, lease or other agreement or instrument to which (A) the Trust, the Company or any of its subsidiaries is a party or by which it or any of them may be bound, or (B) to which any of the property or assets of any of them is subject, or any judgment, order or decree of any court, governmental authority or arbitrator, except, in the case of this clause (ii), for such conflicts, breaches, violations, defaults, Repayment Events (as defined below) or Liens which (X) would not, singly or in the aggregate, adversely affect the consummation of the transactions contemplated by the Operative Documents and (Y) would not, singly or in the aggregate, have a material adverse effect on the condition (financial or otherwise), earnings, business or business prospects, liabilities and assets (taken as a whole) or business prospects of the Company and its subsidiaries taken as a whole, whether or not occurring in the ordinary course of business (a "Material Adverse Effect") or (iii) require the consent, approval, authorization or order of any court or Governmental Entity. As used herein, a "Repayment Event" means any event or condition which gives the holder of any note, debenture or other evidence of indebtedness (or any person acting on such holder's behalf) the right to require the repurchase, redemption or repayment of all or a portion of such indebtedness by the Trust or the Company or any of its subsidiaries prior to its scheduled maturity. (n) The Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of Michigan, with all requisite corporate power and authority to own, lease and operate 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. (o) The Company has no subsidiaries that are material to its business, financial condition or earnings other than those subsidiaries listed in Schedule 1 attached hereto (collectively, the "Significant Subsidiaries"). Each Significant Subsidiary has been duly incorporated and is validly existing as a corporation in good standing under the laws of the jurisdiction in which it is chartered or organized, with all requisite corporate power and authority to own, lease and operate its properties and conduct the business it transacts and proposes to transact. Each Significant Subsidiary 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 to be so qualified would not, singly or in the aggregate, have a Material Adverse Effect. 8 (p) Each of the Trust, the Company and each of the Company's subsidiaries hold all necessary approvals, authorizations, orders, licenses, consents, registrations, qualifications, certificates and permits (including, without limitation, insurance licenses from the insurance departments of the various states and jurisdictions where the Company's insurance subsidiaries write insurance business or otherwise conduct insurance or reinsurance business, as the case may be, or as may be required by any applicable insurance statutes of such states or other jurisdictions (collectively, the "Insurance Licenses")) (collectively, including the Insurance Licenses, the "Governmental Licenses") of and from Governmental Entities necessary to conduct their respective businesses as now being conducted, and neither the Trust, the Company nor any of the Company's subsidiaries has received any notice of proceedings relating to the revocation or modification of any such Government License, except where the failure to be so licensed or approved or the receipt of an unfavorable decision, ruling or finding, would not, singly or in the aggregate, have a Material Adverse Effect; all of the Governmental Licenses are valid and in full force and effect, except where the invalidity or the failure of such Governmental Licenses to be in full force and effect, would not, singly or in the aggregate, have a Material Adverse Effect; and the Company and its subsidiaries are in compliance with all applicable laws, rules, regulations, judgments, orders, decrees and consents, except where the failure to be in compliance would not, singly or in the aggregate, have a Material Adverse Effect. (q) All of the issued and outstanding shares of capital stock of the Company and each of its subsidiaries are validly issued, fully paid and non-assessable; all of the issued and outstanding capital stock of each subsidiary of the Company is owned by the Company, directly or through subsidiaries, free and clear of any Lien, claim or equitable right; and none of the issued and outstanding capital stock of the Company or any subsidiary was issued in violation of any preemptive or similar rights arising by operation of law, under the charter or by-laws of such entity or under any agreement to which the Company or any of its subsidiaries is a party. (r) Neither the Company nor any of its subsidiaries is (i) in violation of its respective charter or by-laws or similar organizational documents or (ii) 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 the Company or any such subsidiary 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, in the case of clause (ii), where such violation or default would not, singly or in the aggregate, have a Material Adverse Effect. (s) There is no action, suit or proceeding before or by any Governmental Entity, arbitrator or court, domestic or foreign, now pending or, to the knowledge of the Company or the Trust after due inquiry, threatened against or affecting the Trust or the Company or any of the Company's subsidiaries, except for such actions, suits or proceedings that, if adversely determined, would not, singly or in the aggregate, adversely affect the consummation of the transactions contemplated by the Operative Documents or have a Material Adverse Effect; and the aggregate of all pending legal or governmental proceedings to which the Trust or the Company or any of its subsidiaries is a party or of which any of their respective properties or assets is subject, including ordinary routine litigation incidental to the business, are not expected to result in a Material Adverse Effect. 9 (t) The accountants of the Company who certified the Financial Statements (as defined below) are independent public accountants of the Company and its subsidiaries within the meaning of the Securities Act, and the rules and regulations of the Securities and Exchange Commission (the "Commission") thereunder. (u) The audited consolidated financial statements (including the notes thereto) and schedules of the Company and its consolidated subsidiaries for the fiscal year ended September 30, 2005 (the "Financial Statements") and the interim unaudited consolidated financial statements of the Company and its consolidated subsidiaries for the quarter ended December 31, 2005 (the "Interim Financial Statements") provided to the Purchaser are the most recent available audited and unaudited consolidated financial statements of the Company and its consolidated subsidiaries, respectively, and fairly present in all material respects, in accordance with U.S. generally accepted accounting principles, the financial position of the Company and its consolidated subsidiaries, and the results of operations and changes in financial condition as of the dates and for the periods therein specified, subject, in the case of Interim Financial Statements, to year-end adjustments (which are expected to consist solely of normal recurring adjustments). Such consolidated financial statements and schedules have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP")consistently applied throughout the periods involved (except as otherwise noted therein). (v) The statutory financial statements dated as of September 30, 2005 (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 principles ("SAP") prescribed or permitted by the National Association of Insurance Commissioners, and with respect to each insurance company subsidiary, each the appropriate insurance department of the state of domicile of such insurance company subsidiary, and such accounting practices have been applied on a consistent basis throughout the periods involved (whether GAAP or SAP, as applicable, the "Applicable Accounting Principles"). (w) None of the Trust, the Company nor any of its 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 subsidiaries that could give rise to any such liability), except for (i) liabilities set forth in the Financial Statements or the Interim Financial Statements and (ii) normal fluctuations in the amount of the liabilities referred to in clause (i) above occurring in the ordinary course of business of the Trust, the Company and all of its subsidiaries since the date of the most recent balance sheet included in such Financial Statements. (x) The reports required by Governmental Entities, regulators, insurance commissioners or similar entities of the states of incorporation of the Company or its insurance subsidiaries, if any, (the "Regulatory Reports"), provided to the Purchaser are the most recently available such report, and the information therein fairly presents in all material respects the financial position of the Company and its subsidiaries. None of the Company or any of its 10 subsidiaries has been requested by a Governmental Entity to republish, restate, or refile any regulatory or financial report (y) Since the respective dates of the Financial Statements, Interim Financial Statements, Statutory Financial Statements and the Regulatory Reports, there has not been (A) any material adverse change or development with respect to the condition (financial or otherwise), earnings, business, assets or business prospects of the Company and its subsidiaries, taken as a whole, whether or not occurring in the ordinary course of business or (B) any dividend or distribution of any kind declared, paid or made by the Company on any class of its capital stock other than regular quarterly dividends on the Company's common stock. (z) The authorized capitalization of the Company and its subsidiary insurance companies are as set forth in the Financial Statements, the Interim Financial Statements, the Statutory Financial Statements and the Regulatory Reports and meet all applicable regulatory requirements with respect thereto. (aa) The documents of the Company filed with the Commission in accordance with 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 (collectively, the "1934 Act Reports"), complied and will comply in all material respects with the requirements of the Exchange Act and the rules and regulations of the Commission thereunder (the "1934 Act Regulations"), and, at the date of this Purchase 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, 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. The Company is in compliance with all currently applicable requirements of the Exchange Act that were added by the Sarbanes-Oxley Act of 2002. (bb) None of the Trust, the Company nor any of its subsidiaries, or any of their respective officers, directors, employees or representatives, is subject or is party to, or has received any notice from any Regulatory Agency (as defined below) that any of them will become subject or party to any investigation with respect to, any cease-and-desist order, agreement, civil monetary penalty, 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 a recipient of any supervisory letter from, or has adopted any board resolutions at the request of, any Regulatory Agency that, in any such case, currently restricts in any material respect the conduct of their business or that in any material manner relates to their capital adequacy, capital reserves, their marketing or sales practices, 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 Action"), nor has the Trust, the Company or 11 any of its subsidiaries been advised by any Regulatory Agency that it is considering issuing or requesting any such Regulatory Action; and there is no unresolved violation, criticism or exception by any Regulatory Agency with respect to any report or statement relating to any examinations of the Trust, the Company or any of its subsidiaries, except where such unresolved violation, criticism or exception would not, singly or in the aggregate, have a Material Adverse Effect. As used herein, the term "Regulatory Agency" means any federal or state agency charged with the supervision or regulation of insurance companies or holding companies of insurance companies, or engaged in the insurance of insurance company reserves, or any court, administrative agency or commission or other governmental agency, authority or instrumentality having supervisory or regulatory authority with respect to the Trust, the Company or any of its subsidiaries. (cc) No labor dispute with the employees of the Trust, the Company or any of its subsidiaries exists or, to the knowledge of the executive officers of the Trust or the Company, is imminent, except those which would not, singly or in the aggregate, have a Material Adverse Effect. (dd) No filing with, or authorization, approval, consent, license, order, registration, qualification or decree of, any Governmental Entity, other than those that have been made or obtained, is necessary or required for the performance by the Trust or the Company of their respective obligations under the Operative Documents, as applicable, or the consummation by the Trust and the Company of the transactions contemplated by the Operative Documents. (ee) Each of the Trust, the Company and each subsidiary of the Company has good and marketable title to all of its respective real and personal properties, in each case free and clear of all Liens and defects, except for those that would not, singly or in the aggregate, have a Material Adverse Effect; and all of the leases and subleases under which the Trust, the Company or any subsidiary of the Company holds properties are in full force and effect, except where the failure of such leases and subleases to be in full force and effect would not, singly or in the aggregate, have a Material Adverse Effect, and none of the Trust, the Company or any subsidiary of the Company has any notice of any claim of any sort that has been asserted by anyone adverse to the rights of the Trust, the Company or any subsidiary of the Company under any such leases or subleases, or affecting or questioning the rights of such entity to the continued possession of the leased or subleased premises under any such lease or sublease, except for such claims that would not, singly or in the aggregate, have a Material Adverse Effect. (ff) The Company has no present intention to exercise its option to defer payments of interest on the Junior Subordinated Notes as provided in the Indenture. The Company believes that the likelihood that it would exercise its rights to defer payments of interest on the Junior Subordinated Notes as provided in the Indenture at any time during which the Junior Subordinated Notes 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, if any, 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 Junior Subordinated Notes. 12 (gg) The information provided by the Company and the Trust pursuant to this Purchase Agreement does not, as of the date hereof, and will not, as of the Closing Date, contain any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. 5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The Purchaser represents and warrants to, and agrees with, the Company and the Trust as follows: (a) The Purchaser is aware that the Securities and the guarantee by the Company set forth in the Guaranty Agreement have not been and will not be registered under the Securities Act and may not be offered or sold within the United States or to "U.S. persons" (as defined in Regulation S under the Securities Act) except in accordance with Rule 903 of Regulation S under the Securities Act or pursuant to an exemption from the registration requirements of the Securities Act. (b) The Purchaser is an "accredited investor," as such term is defined in Rule 501(a) of Regulation D under the Securities Act. (c) Neither the Purchaser, nor any of the Purchaser's affiliates, nor any person acting on the Purchaser's or the Purchaser's Affiliate's behalf has engaged, or will engage, in any form of "general solicitation or general advertising" (within the meaning of Regulation D under the Securities Act) in connection with any offer or sale of the Preferred Securities. (d) The Purchaser understands and acknowledges that (i) no public market exists for any of the Securities and that it is unlikely that a public market will ever exist for the Securities, (ii) the Purchaser is purchasing the 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 Securities pursuant to an effective registration statement under the Securities Act or pursuant to an exemption therefrom or in a transaction not subject thereto, and the Purchaser agrees to the legends and transfer restrictions applicable to the Securities contained in the Indenture, and (iii) the Purchaser has had the opportunity to ask questions of, and receive answers and request additional information from, the Company and is aware that it may be required to bear the economic risk of an investment in the Securities. (e) The Purchaser is a company with limited liability duly incorporated, validly existing and in good standing under the laws of the jurisdiction in which it is organized with all requisite (i) power and authority to execute, deliver and perform the Operative Documents to which it is a party, to make the representations and warranties specified herein and therein and to consummate the transactions contemplated herein and (ii) right and power to purchase the Securities. (f) This Purchase Agreement has been duly authorized, executed and delivered by the Purchaser and no filing with, or authorization, approval, consent, license, order registration, qualification or decree of, any governmental body, agency or court having 13 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 Purchase Agreement or to consummate the transactions contemplated herein. 6. AGREEMENTS OF THE COMPANY AND THE TRUST. The Company and the Trust jointly and severally agree with the Purchaser as follows: (a) During the period from the date of this Agreement to the Closing Date, the Company and the Trust shall use their best efforts and take all action necessary or appropriate to cause their representations and warranties contained in Section 4 hereof to be true as of the Closing Date, after giving effect to the transactions contemplated by this Purchase Agreement, as if made on and as of the Closing Date. (b) The Company and the Trust will arrange for the qualification of the Preferred Securities for sale under the laws of such jurisdictions as the Purchaser may designate and will maintain such qualifications in effect so long as required for the sale of the Preferred Securities. The Company or the Trust, as the case may be, will promptly advise the Purchaser of the receipt by the Company or the Trust, as the case may be, of any notification with respect to the suspension of the qualification of the Preferred Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose. (c) Neither the Company nor the Trust will, nor will either of them permit any of its Affiliates to, nor will either of them permit any person acting on its or their behalf (other than the Purchaser) to, resell any Preferred Securities that have been acquired by any of them. (d) Neither the Company nor the Trust will, nor will either of them permit any of their Affiliates or any person acting on their behalf to, engage in any "directed selling efforts" within the meaning of Regulation S under the Securities Act with respect to the Securities. (e) Neither the Company nor the Trust will, nor will either of them permit any of their Affiliates or any person acting on their behalf to, directly or indirectly, make offers or sales of any security, or solicit offers to buy any security, under circumstances that would require the registration of any of the Securities under the Securities Act. (f) Neither the Company nor the Trust will, nor will either of them permit any of its Affiliates or any person acting on their behalf to, engage in any form of "general solicitation or general advertising" (within the meaning of Regulation D) in connection with any offer or sale of the any of the Securities. (g) So long as any of the Securities are outstanding, (i) the Securities shall not be listed on a national securities exchange registered under section 6 of the Exchange Act or quoted in a U.S. automated inter-dealer quotation system and (ii) neither the Company nor the Trust shall be an open-end investment company, unit investment trust or face-amount certificate company that is, or is required to be, registered under section 8 of the Investment Company Act, and, the Securities shall otherwise satisfy the eligibility requirements of Rule 144A(d)(3). 14 (h) Each of the Company and the Trust shall furnish to (i) the holders, and subsequent holders of the Preferred Securities, (ii) Cohen Bros. Financial Management LLC (at 1818 Market Street, 28th Floor, Philadelphia, Pennsylvania 19013, or such other address as designated by Cohen Bros. Financial Management LLC) and (iii) any beneficial owner of the Securities reasonably identified to the Company and the Trust (which identification may be made by either such beneficial owner or by Cohen Bros. Financial Management LLC), a duly completed and executed certificate in the form attached hereto as Annex F, including the financial statements referenced in such Annex, which certificate and financial statements shall be so furnished by the Company and the Trust at the times set forth in the Trust Agreement and/or the Indenture. To the extent that the parties identified in this Section 6(h) receive such certificates and statements pursuant to the Trust Agreement and/or the Indenture, delivery of such certificates and statements to such party pursuant to the Trust Agreement and/or the Indenture shall satisfy the obligation of the Company and the Trust under this Section 6(h). (i) Each of the Company and the Trust will, during any period in which it is not subject to and in compliance with section 13 or 15(d) of the Exchange Act, or it is not exempt from such reporting requirements pursuant to and in compliance with Rule 12g3-2(b) under the Exchange Act, shall provide to each holder of the Securities and to each prospective purchaser (as designated by such holder) of the Securities, upon the request of such holder or prospective purchaser, any information required to be provided by Rule 144A(d)(4) under the Securities Act. If the Company and the Trust are required to register under the Exchange Act, such reports filed in compliance with Rule 12g3-2(b) shall be sufficient information as required above. This covenant is intended to be for the benefit of the Purchaser, the holders of the Securities, and the prospective purchasers designated by the Purchaser and such holders, from time to time, of the Securities. (j) Neither the Company nor the Trust will, until one hundred eighty (180) days following the Closing Date, without the Purchaser's prior written consent, offer, sell, contract to sell, grant any option to purchase or otherwise dispose of, directly or indirectly, (i) any Preferred Securities or other securities substantially similar to the Preferred Securities other than as contemplated by this Purchase Agreement or (ii) any other securities convertible into, or exercisable or exchangeable for, any Preferred Securities or other securities substantially similar to the Preferred Securities. 7. PAYMENT OF EXPENSES. The Company, as depositor of the Trust, agrees to pay all costs and expenses incident to the performance of the obligations of the Company and the Trust under this Purchase Agreement, whether or not the transactions contemplated herein are consummated or this Purchase Agreement is terminated, including all costs and expenses incident to (i) the authorization, issuance, sale and delivery of the Preferred Securities and any taxes payable in connection therewith; (ii) the fees and expenses of qualifying the Preferred Securities under the securities laws of the several jurisdictions as provided in Section 6(b); (iii) the fees and expenses of the counsel, the accountants and any other experts or advisors retained by the Company or the Trust; (iv) the fees and all reasonable expenses of the Guarantee Trustee, the Property Trustee, the Delaware Trustee, the Indenture Trustee and any other trustee or paying agent appointed under the Operative Documents, including the fees and disbursements of counsel for such trustees, which fees shall not exceed a $2,000 acceptance fee, $3,500 for the 15 fees and expenses of Morris James Hitchens & Williams LLP, special Delaware counsel retained by the Delaware Trustee in connection with the Closing, and $4,000 in administrative fees annually; and (vi) $20,000 for the fees and expenses of Mayer, Brown, Rowe & Maw LLP, special counsel retained by the Purchaser. If the sale of the Preferred Securities provided for in this Purchase Agreement is not consummated because any condition set forth in Section 3 hereof to be satisfied by either the Company or the Trust is not satisfied, because this Purchase Agreement is terminated pursuant to Section 9 or because of any failure, refusal or inability on the part of the Company or the Trust to perform all obligations and satisfy all conditions on its part to be performed or satisfied hereunder other than by reason of a default by the Purchaser, the Company will reimburse the Purchaser upon demand for all reasonable out-of-pocket expenses (including the fees and expenses of each of the Purchaser's counsel specified in subparagraphs (v) and (vi) of the immediately preceding paragraph) that shall have been incurred by the Purchaser in connection with the proposed purchase and sale of the Preferred Securities. The Company shall not in any event be liable to the Purchaser for the loss of anticipated profits from the transactions contemplated by this Purchase Agreement. 8. INDEMNIFICATION. (a) The Company and the Trust agree jointly and severally to indemnify and hold harmless the Purchaser, the Purchaser's affiliates, Cohen Bros. & Company and Merrill Lynch & Co. (collectively, the "Indemnified Parties") and the Indemnified Parties' respective directors, officers, employees and agents and each person who "controls" the Indemnified Parties within the meaning of either the Securities Act or the Exchange Act against any and all losses, claims, damages or liabilities, joint or several, to which they or any of them may become subject under the Securities Act, the Exchange Act or other federal or state statutory law or regulation, at common law or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon (i) any untrue statement or alleged untrue statement of a material fact contained in any information or documents furnished or made available to the Purchaser by or on behalf of the Company, (ii) the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading or (iii) the breach or alleged breach of any representation, warranty or agreement of either Seller contained herein, and agrees to reimburse each such Indemnified Party, as incurred, for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action. This indemnity agreement will be in addition to any liability which the Company or the Trust may otherwise have. (b) The Company agrees to indemnify the Trust against all loss, liability, claim, damage and expense whatsoever due from the Trust under paragraph (a) above. (c) Promptly after receipt by an Indemnified Party under this Section 8 of notice of the commencement of any action, such Indemnified Party will, if a claim in respect thereof is to be made against the indemnifying party under this Section 8, promptly notify the indemnifying party in writing of the commencement thereof; but the failure so to notify the indemnifying party (i) will not relieve the indemnifying party from liability under paragraph (a) above unless and to the extent that such failure results in the forfeiture by the indemnifying party 16 of material rights and defenses and (ii) will not, in any event, relieve the indemnifying party from any obligations to any Indemnified Party other than the indemnification obligation provided in paragraph (a) above. Purchaser shall be entitled to appoint counsel to represent the Indemnified Party in any action for which indemnification is sought. An indemnifying party may participate at its own expense in the defense of any such action; provided, that counsel to the indemnifying party shall not (except with the consent of the Indemnified Party) also be counsel to the Indemnified Party. In no event shall the indemnifying parties be liable for fees and expenses of more than one counsel (in addition to any local counsel) separate from their own counsel for all Indemnified Parties in connection with any one action or separate but similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances. An indemnifying party will not, without the prior written consent of the Indemnified Parties, settle or compromise or consent to the entry of any judgment with respect to any pending or threatened claim, action, suit or proceeding in respect of which indemnification may be sought hereunder (whether or not the Indemnified Parties are actual or potential parties to such claim, action, suit or proceeding) unless such settlement, compromise or consent includes an unconditional release of each Indemnified Party from all liability arising out of such claim, action, suit or proceeding. 9. TERMINATION. This Purchase Agreement shall be subject to termination in the absolute discretion of the Purchaser, by notice given to the Company and the Trust prior to delivery of and payment for the Preferred Securities, if prior to such time (i) a downgrading shall have occurred in the rating accorded the Company's debt securities or preferred stock by any "nationally recognized statistical rating organization," as that term is used by the Commission in Rule 15c3-1(c)(2)(vi)(F) under the Exchange Act, or such organization shall have publicly announced that it has under surveillance or review, with possible negative implications, its rating of the Company's debt securities or preferred stock, (ii) the Trust shall be unable to sell and deliver to the Purchaser at least $20,000,000 stated liquidation value of Preferred Securities, (iii) the Company or any of its subsidiaries that is an insurance company shall cease to be "adequately-capitalized" under the statutes, rules, regulations, codes or ordinances of any Regulatory Agency within the meaning of any applicable regulations of any Regulatory Agency, or any formal administrative or judicial action is taken by any appropriate state or federal insurance regulator against the Company or of its subsidiary insurance companies for unsafe and unsound insurance practices, or violations of law, (iv) a suspension or material limitation in trading in securities generally shall have occurred on the New York Stock Exchange, (v) a suspension or material limitation in trading in any of the Company's securities shall have occurred on the exchange or quotation system upon which the Company' securities are traded, if any, (vi) a general moratorium on commercial insurance activities shall have been declared either by federal or Michigan authorities or (vii) there shall have occurred any outbreak or escalation of hostilities, or declaration by the United States of a national emergency or war or other calamity or crisis the effect of which on financial markets is such as to make it, in the Purchaser's judgment, impracticable or inadvisable to proceed with the offering or delivery of the Preferred Securities. 10. REPRESENTATIONS AND INDEMNITIES TO SURVIVE. The respective agreements, representations, warranties, indemnities and other statements of the Company and the Trust or their respective officers or trustees and of the Purchaser set forth in or made pursuant to this Purchase Agreement will remain in full force and effect, regardless of any investigation 17 made by or on behalf of the Purchaser, the Company or the Trust or any of the their respective officers, directors, trustees or controlling persons, and will survive delivery of and payment for the Preferred Securities. The provisions of Sections 7 and 8 shall survive the termination or cancellation of this Purchase Agreement. 11. AMENDMENTS. This Purchase Agreement may not be modified, amended, altered or supplemented, except upon the execution and delivery of a written agreement by each of the parties hereto. 12. NOTICES. All communications hereunder will be in writing and effective only on receipt, and, if sent to the Purchaser, will be mailed, delivered by hand or courier or sent by facsimile and confirmed to the Purchaser, c/o Merrill Lynch, Pierce, Fenner & Smith Incorporated, 250 Vesey Street, New York, New York 10080, Attention: Phil Kostrowicki, Telephone: (212) 449-5113, Facsimile: (212) 449-3695; with a copy to Cohen Bros. & Company, 1818 Market Street, Philadelphia, PA 19103, Attention: Matthew T. Mueller, Facsimile (215) 861-7868 and a copy to Mayer, Brown, Rowe & Maw LLP, 71 South Wacker, Chicago, Illinois 60606, Attention: J. Paul Forrester, Facsimile: (312) 701-7711 or other address as the Purchaser shall designate for such purpose in a notice to the Company and the Trust; and if sent to the Company or the Trust, will be mailed, delivered by hand or courier or sent by facsimile and confirmed to it at North Pointe Holdings Corporation, 28819 Franklin Road, Southfield, MI 48034, Attention: Brian J. Roney, Facsimile: (248) 358-3041. 13. SUCCESSORS AND ASSIGNS. This Purchase Agreement will inure to the benefit of and be binding upon the parties hereto and their respective successors and permitted assigns. Nothing expressed or mentioned in this Purchase Agreement is intended or shall be construed to give any person other than the parties hereto and the affiliates, directors, officers, employees, agents and controlling persons referred to in Section 8 hereof and their successors, assigns, heirs and legal representatives, any right or obligation hereunder. None of the rights or obligations of the Company or the Trust under this Purchase Agreement may be assigned, whether by operation of law or otherwise, without the Purchaser's prior written consent. The rights and obligations of the Purchaser under this Purchase Agreement may be assigned by the Purchaser without the Company's or the Trust's consent; provided that the assignee assumes the obligations of the Purchaser under this Purchase Agreement. 14. APPLICABLE LAW. THIS PURCHASE AGREEMENT WILL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK WITHOUT REFERENCE TO PRINCIPLES OF CONFLICTS OF LAW (OTHER THAN SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW). 15. SUBMISSION TO JURISDICTION. ANY LEGAL ACTION OR PROCEEDING BY OR AGAINST ANY PARTY HERETO OR WITH RESPECT TO OR ARISING OUT OF THIS PURCHASE AGREEMENT MAY BE BROUGHT IN OR REMOVED TO THE COURTS OF THE STATE OF NEW YORK, IN AND FOR THE COUNTY OF NEW YORK, OR OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK (IN EACH CASE SITTING IN THE BOROUGH OF 18 MANHATTAN). BY EXECUTION AND DELIVERY OF THIS PURCHASE AGREEMENT, EACH PARTY ACCEPTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS (AND COURTS OF APPEALS THEREFROM) FOR LEGAL PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS PURCHASE AGREEMENT. 16. COUNTERPARTS AND FACSIMILE. This Purchase Agreement may be executed by any one or more of the parties hereto in any number of counterparts, each of which shall be deemed to be an original, but all such counterparts shall together constitute one and the same instrument. This Purchase Agreement may be executed by any one or more of the parties hereto by facsimile. 19 IN WITNESS WHEREOF, this Purchase Agreement has been entered into as of the date first written above. NORTH POINTE HOLDINGS CORPORATION By: /s/ James G. Petcoff ------------------------------------ Name: James G. Petcoff Title: Chairman, President & Chief Executive Officer NP CAPITAL TRUST I By: NORTH POINTE HOLDINGS CORPORATION, as Depositor By: /s/ James G. Petcoff ------------------------------------ Name: James G. Petcoff Title: Chairman, President & Chief Executive Officer 20 MERRILL LYNCH INTERNATIONAL By: /s/ R. A. Bellis ------------------------------------ Name: R. A. Bellis ---------------------------------- Title: --------------------------------- 21 SCHEDULE 1 LIST OF SIGNIFICANT SUBSIDIARIES NORTH POINTE INSURANCE COMPANY NORTH POINTE CASUALTY INSURANCE COMPANY HOME POINTE INSURANCE COMPANY MIDFIELD INSURANCE COMPANY NORTH POINTE FINANCIAL SERVICES, INC. 22 ANNEX A-I Pursuant to Section 3(c)(i) of the Purchase Agreement, Honigman Miller Schwartz and Cohn LLP, counsel for the Company, shall deliver an opinion to the effect that: (i) The Company is validly existing as a corporation in good standing under the Laws of the State of Michigan and each of the Company and the Significant Subsidiaries has the requisite corporate power and authority to own or lease its properties, and to conduct its business as such business is currently conducted, each as described in the Company's registration statement on Form S-1, as amended, and the Company's periodic reports filed with the Securities and Exchange Commission (together, the Company's "SEC Filings"). Based solely on our review of the organization documents, minute books and stock ledgers of the Companies, all outstanding shares of capital stock of the Significant Subsidiaries have been duly authorized and validly issued and are, to our Actual Knowledge, fully paid and nonassessable and owned of record and beneficially, directly or indirectly, by the Company. For purposes of the opinions set forth in this paragraph 1 with respect to the Significant Subsidiaries organized under Florida Law, we have assumed, with your permission, that the Florida Insurance Code is the same as the Michigan Insurance Code of 1956. (ii) The Company has the requisite corporate power and authority to (i) execute and deliver, and to perform its obligations under, the Operative Documents to which it is a party and (ii) issue and perform its obligations under the Junior Subordinated Notes. Neither the issue and sale of the Common Securities, the Preferred Securities or the Junior Subordinated Notes, nor the execution and delivery of and compliance with the Operative Documents by the Company nor the consummation of the transactions contemplated thereby will constitute a breach or violation of the Trust Agreement or the articles of incorporation or bylaws of the Company. (iii) The execution, delivery and performance by the Company of the Operative Documents to which the Company is a party has been duly authorized by all necessary corporate action on the part of the Company, and each of such Operative Documents has been duly executed and delivered by the Company. (iv) Each of the Guarantee Agreement and the Indenture constitutes a legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms, subject to applicable bankruptcy, reorganization, insolvency, fraudulent conveyance, moratorium or similar laws affecting creditors' rights generally and to general principles of equity (regardless of whether enforcement is considered in a proceeding of law or equity). (v) The Junior Subordinated Notes, when authenticated in accordance with the provisions of the Indenture and delivered to the Trust against payment therefor, will constitute legal, valid and binding obligations of the Company entitled to the benefits of the Indenture and enforceable against the Company in accordance with their terms, subject to applicable bankruptcy, reorganization, insolvency, fraudulent conveyance, moratorium or and similar laws A-I-1 affecting creditors' rights generally and to general principles of equity (regardless of whether enforcement is considered in a proceeding of law or equity). (vi) The Trust is not, and, following the issuance of the Preferred Securities and the consummation of the transactions contemplated by the Operative Documents and the application of the proceeds therefrom, the Trust will not be, an "investment company" or, to our Actual Knowledge, an entity "controlled" by an "investment company," in each case within the meaning of Section 3(a) of the Investment Company Act. (vii) Assuming the truth and accuracy of the representations and warranties of the Purchaser in the Purchase Agreement, it is not necessary in connection with the offer, sale and delivery of the Common Securities, the Preferred Securities, the Junior Subordinated Notes and the Guarantee Agreement or the Guarantee, under the circumstances contemplated in the Purchase Agreement and the Trust Agreement, to register the same under the Securities Act of 1933, as amended, or to require qualification of the Indenture under the Trust Indenture Act of 1939, as amended. (viii) The Purchase Agreement constitutes a legal, valid and binding obligation of the Company and the Trust enforceable against the Company and the Trust in accordance with its terms, subject to applicable bankruptcy, reorganization, insolvency, fraudulent conveyance, moratorium or similar laws affecting creditors' rights generally and to general principles of equity (regardless of whether enforcement is considered in a proceeding of law or equity). A-I-2 ANNEX A-II Pursuant to Section 3(c)(ii) of the Purchase Agreement, General Counsel for the Company shall deliver an opinion to the effect that: (i) all of the issued and outstanding shares of capital stock of each Significant Subsidiary are owned of record by the Company, and the issuance of the Preferred Securities and the Common Securities is not subject to any contractual preemptive rights known to such counsel; (ii) no consent, approval, authorization or order of any court or governmental authority is required for the issue and sale of the Common Securities, the Preferred Securities or the Junior Subordinated Notes, the purchase by the Trust of the Junior Subordinated Notes, the execution and delivery of and compliance with the Operative Documents by the Company or the Trust or the consummation of the transactions contemplated in the Operative Documents, except such approvals (specified in such opinion) as have been obtained; (iii) to the knowledge of such counsel, there is no action, suit or proceeding before or by any government, governmental instrumentality, arbitrator or court, domestic or foreign, now pending or threatened against or affecting the Trust or the Company or any Significant Subsidiary that could adversely affect the consummation of the transactions contemplated by the Operative Documents or could have a Material Adverse Effect. (iv) the Company is duly registered as an insurance holding company under the Insurance Code of the State of Michigan and the regulations thereunder of the Office of Financial and Insurance Services, and the capital reserves accounts of the Company and its insurance subsidiaries are in compliance with all applicable regulatory authorities with jurisdiction over such entities; (v) The execution, delivery and performance of the Operative Documents, as applicable, by the Company and the Trust and the consummation by the Company and the Trust of the transactions contemplated by the Operative Documents, as applicable, (i) will not result in any violation of the charter or bylaws of the Company, the charter or bylaws of the Company's subsidiaries, the Trust Agreement or the Certificate of Trust of the Trust, and (ii) will not conflict with, or result in a breach of any of the terms or provisions of, or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, or result in the creation or imposition of any lien, charge and encumbrance upon any assets or properties of the Company or any Significant Subsidiary under, (a) any agreement, indenture, mortgage or instrument that the Company or any Significant Subsidiary of the Company is a party to or by which it may be bound or to which any of its assets or properties may be subject, or (b) any existing applicable law, rule or administrative regulation [FOR GENERAL COUNSEL ONLY: EXCEPT THAT I EXPRESS NO OPINION WITH RESPECT TO THE SECURITIES LAWS OF THE STATE OF DELAWARE] of any court or governmental agency or authority having jurisdiction over A-II-1 the Company or any Significant Subsidiary of the Company or any of their respective assets or properties, except in case of (ii), where any such violation, conflict, breach, default, lien, charge or encumbrance, would not have a material adverse effect on the assets, properties, business, results of operations or financial condition of the Company and its subsidiaries, taken as whole. A-II-2 ANNEX B Pursuant to Section 3(d) of the Purchase Agreement, Honigman Miller Schwartz and Cohn LLP, special tax counsel, shall deliver an opinion to the effect that: (i) the Trust will be classified for United States federal income tax purposes as a grantor trust and not as an association or a publicly traded partnership taxable as a corporation; and (ii) for United States federal income tax purposes, the Junior Subordinated Notes will constitute indebtedness of the Company. In rendering such opinions, such counsel may (A) state that its opinion is limited to the federal laws of the United States and (B) rely as to matters of fact, to the extent deemed proper, on certificates of responsible officers of the Company and public officials. B-1 ANNEX C Pursuant to Section 3(e) of the Purchase Agreement, Morris, James, Hutchins & Williams LLP, special Delaware counsel for the Delaware Trustee, shall deliver an opinion to the effect that: 1. (i) The Trust has been duly created and is validly existing in good standing as a statutory trust under the Delaware Statutory Trust Act, and all filings required under the laws of the State of Delaware with respect to the creation and valid existence of the Trust as a statutory trust have been made. 2. Under the Delaware Statutory Trust Act and the Trust Agreement, the Trust has the trust power and authority (i) to own property and conduct its business, all as described in the Trust Agreement, (ii) to execute and deliver, and to perform its obligations under, each of the Purchase Agreement, the Common Securities Subscription Agreement and the Junior Subordinated Note Purchase Agreement, (iii) to issue and perform its obligations under the Preferred Securities and the Common Securities, and (iv) to acquire and hold the Junior Subordinated Notes. 3. The Trust Agreement constitutes a valid and binding obligation of the Company and the Trustees, enforceable against the Company and the Trustees in accordance with its terms. 4. Under the Delaware Statutory Trust Act and the Trust Agreement, the execution and delivery by the Trust of the Purchase Agreement, the Common Securities Subscription Agreement and the Junior Subordinated Note Purchase Agreement, and the performance by the Trust of its obligations thereunder, have been duly authorized by all necessary trust action on the part of the Trust. 5. Under the Delaware Statutory Trust Act, the certificate attached to the Trust Agreement as Exhibit C is an appropriate form of certificate to evidence ownership of the Preferred Securities; the Preferred Securities have been duly authorized by the Trust Agreement and, when issued in accordance with the Trust Agreement and delivered against payment therefor in accordance with the Trust Agreement and the Purchase Agreement, the Preferred Securities will be validly issued and (subject to the qualifications set forth in this paragraph) fully paid and nonassessable and will represent undivided beneficial interests in the assets of the Trust. The holders of the Preferred Securities will be entitled to the benefits of the Trust Agreement and, as beneficial owners of the Trust, will be entitled to the same limitation of personal liability extended to stockholders of private corporations for profit organized under the General Corporation Law of the State of Delaware, except that the holders of the Preferred Securities may be obligated to make payments or provide indemnity or security as set forth in the Trust Agreement. 6. The Common Securities have been duly authorized by the Trust Agreement and, when issued in accordance with the Trust Agreement and delivered against payment therefor in accordance with the Trust Agreement and the Common Securities C-1 Subscription Agreement, will be validly issued and fully paid and will represent undivided beneficial interests in the assets of the Trust, and the holder of the Common Securities will be entitled to the benefits of the Trust Agreement. 7. Under the Delaware Statutory Trust Act and the Trust Agreement, the issuance of the Preferred Securities and the Common Securities is not subject to preemptive rights. 8. No authorization, approval or other action by, and no notice to or filing with, any governmental authority or regulatory body of the State of Delaware is required solely in connection with the issuance and sale by the Trust of the Preferred Securities and the Common Securities, the acquisition by the Trust of the Junior Subordinated Notes, the execution, delivery and performance by the Trust of the Purchase Agreement, the Common Securities Subscription Agreement and the Junior Subordinated Note Purchase Agreement, or the consummation by the Trust of the transaction contemplated by the Purchase Agreement, the Common Securities Subscription Agreement and the Junior Subordinated Note Purchase Agreement. 9. The issuance and sale by the Trust of the Preferred Securities and the Common Securities, the execution, delivery and performance by the Trust of the Purchase Agreement, the Common Securities Subscription Agreement and the Junior Subordinated Note Purchase Agreement, and the consummation by the Trust of the transactions contemplated by the Purchase Agreement, the Common Securities Subscription Agreement and the Junior Subordinated Note Purchase Agreement, are not prohibited by (i) the Certificate of Trust or the Trust Agreement, or (ii) any statute, rule or regulation of the State of Delaware applicable to the Trust. 10. The holders of the Preferred Securities (other than those holders of the Preferred Securities who reside or are domiciled in the State of Delaware) will have no liability for income taxes imposed by the State of Delaware solely as a result of their participation in the Trust and the Trust will not be liable for any income tax imposed by the State of Delaware. In rendering such opinions, such counsel may (A) state that its opinion is limited to the laws of the State of Delaware, (B) rely as to matters of fact, to the extent deemed proper, on certificates of responsible officers of the Company and public officials and (C) take customary assumptions and exceptions as to enforceability and other matters. C-2 ANNEX D Pursuant to Section 3(f) of the Purchase Agreement, , Morris, James, Hutchins & Williams LLP, special counsel for the Guarantee Trustee, the Property Trustee and the Indenture Trustee, shall deliver an opinion to the effect that: 1. LaSalle Bank National Association is validly existing as a national banking association with trust powers under the laws of the United States of America. 2. LaSalle Bank National Association has requisite corporate power and authority to execute and deliver, and to perform its obligations under, the Trust Agreement, the Guarantee Agreement and the Indenture and to authenticate and deliver the Preferred Securities and the Junior Subordinated Notes. 3. The execution, delivery, and performance by LaSalle Bank National Association of the Trust Agreement, the Guarantee Agreement and the Indenture, including the authentication and delivery by LaSalle Bank National Association of the Preferred Securities pursuant to the Trust Order and the Junior Subordinated Notes pursuant to the Company Order, have been duly authorized by all necessary corporate action on the part of LaSalle Bank National Association, and the Trust Agreement, the Guarantee Agreement and the Indenture have been duly executed and delivered by LaSalle Bank National Association. 4. The execution, delivery and performance by LaSalle Bank National Association of the Trust Agreement, the Guarantee Agreement and the Indenture, including the authentication and delivery by LaSalle Bank National Association of the Preferred Securities pursuant to the Trust Order and the Junior Subordinated Notes pursuant to the Company Order, are not prohibited by (i) the charter or By-laws of LaSalle Bank National Association, or (ii) any law or regulation of the State of Delaware or the United States of America governing the trust powers of LaSalle Bank National Association. 5. No approval, authorization or other action by, or filing with, any governmental authority or agency under any law or regulation of the State of Delaware or the United States of America governing the trust powers of LaSalle Bank National Association is required solely in connection with the execution, delivery and performance by LaSalle Bank National Association of the Trust Agreement, the Guarantee Agreement and the Indenture, including the authentication and delivery by LaSalle Bank National Association of the Preferred Securities pursuant to the Trust Order or the Junior Subordinated Notes pursuant to the Company Order. 6. The Junior Subordinated Notes delivered on the date hereof have been authenticated by due execution thereof and delivered by LaSalle Bank National Association, as Indenture Trustee, in accordance with the Company Order. The Preferred Securities delivered on the date hereof have been authenticated by due execution thereof and delivered by LaSalle Bank National Association, as Property Trustee, in accordance with the Trust Order. D-1 In rendering such opinions, such counsel may (A) state that its opinion is limited to the laws of the State of Delaware or the United States of America and (B) rely as to matters of fact, to the extent deemed proper, on certificates of responsible officers of LaSalle Bank National Association, the Company and public officials. C-2 ANNEX E Pursuant to Section 3(g) of the Purchase Agreement, , Morris, James, Hutchins & Williams LLP, counsel for the Delaware Trustee, shall deliver an opinion to the effect that: 1. Christiana Bank & Trust Company is duly incorporated and validly existing as a Delaware banking corporation in good standing under the laws of the State of Delaware. 2. Christiana Bank & Trust Company has requisite corporate power and authority to execute and deliver, and to perform its obligations under, the Trust Agreement. 3. The execution, delivery, and performance by Christiana Bank & Trust Company of the Trust Agreement has been duly authorized by all necessary corporate action on the part of Christiana Bank & Trust Company, and the Trust Agreement has been duly executed and delivered by Christiana Bank & Trust Company. 4. The execution, delivery and performance by Christiana Bank & Trust Company of the Trust Agreement are not prohibited by (i) the charter or bylaws of Christiana Bank & Trust Company, or (ii) any law or regulation of the State of Delaware or the United States of America governing the trust powers of Christiana Bank & Trust Company. 5. No approval, authorization or other action by, or filing with, any governmental authority or agency under any law or regulation of the State of Delaware or the United States of America governing the trust powers of Christiana Bank & Trust Company is required solely in connection with the execution, delivery and performance by Christiana Bank & Trust Company of the Trust Agreement, except for the filing of the Certificate of Trust with the Secretary of State of the State of Delaware, which Certificate of Trust has been duly filed with the Secretary of State of the State of Delaware In rendering such opinions, such counsel may (A) state that its opinion is limited to the laws of the State of Delaware and the federal laws of the United States governing the trust powers of Christiana Bank & Trust Company, (B) rely as to matters of fact, to the extent deemed proper, on certificates of responsible officers of the Company and public officials and (C) take customary assumptions and exceptions. E-1 ANNEX F OFFICER'S FINANCIAL CERTIFICATE The undersigned, the [Chairman/Vice Chairman/Chief Executive Officer/President/ Vice President/Chief Financial Officer/Treasurer/Assistant Treasurer], hereby certifies, pursuant to Section 6(h) of the Purchase Agreement, dated as of February 22, 2006, among North Pointe Holdings Corporation (the "Company"), NP Capital Trust I (the "Trust") and Merrill Lynch International, that, as of [date], [20__], the Company and its Subsidiary Insurance Companies (as defined below) had the following ratios and balances: [For the Company, if applicable, and each Subsidiary Insurance Company (as defined below) provide:] [INSURANCE COMPANY] As of [Quarterly/Annual Financial Date], 20__ NAIC Risk Based Capital Ratio (authorized control level) _____% 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 also provide:] [Expense Ratio] _____% Loss and LAE Ratio _____% Combined Ratio _____% Net Premiums Written (annualized) to Policyholders' Surplus _____%]

* A table describing the quarterly report calculation procedures is provided on page __ The following is a complete list as of [Quarterly/Annual Financial Date] of the Company's subsidiaries which are authorized to write insurance business or otherwise conduct insurance or reinsurance business (the "Subsidiary Insurance Companies"): [List of Subsidiary Insurance Companies] F-1 [FOR FISCAL YEAR END: Attached hereto are the audited consolidated financial statements (including the balance sheet, income statement and statement of cash flows, and notes thereto, together with the report of the independent accountants thereon) of the Company and its consolidated subsidiaries for the three years ended [date], 20__ and all required Statutory Financial Statements (as defined in the Purchase Agreement) for the year ended [date], 20__] [FOR FISCAL QUARTER END: Attached hereto are the unaudited consolidated and consolidating financial statements (including the balance sheet and income statement) of the Company and its consolidated subsidiaries and all required Statutory Financial Statements (as defined in the Purchase Agreement) for the year ended [date], 20__] for the fiscal quarter ended [date], 20__.] The financial statements fairly present in all material respects, in accordance with U.S. generally accepted accounting principles ("GAAP"), the financial position of the Company and its consolidated subsidiaries, and the results of operations and changes in financial condition as of the date, and for the [___ quarter interim] [annual] period ended [date], 20__, and such financial statements have been prepared in accordance with GAAP consistently applied throughout the period involved (expect as otherwise noted therein). The Statutory Financial Statements fairly present in all material respects in accordance with Applicable Accounting Principles as defined in the Indenture) the financial position of the subject insurance company and have been prepared in accordance with Applicable Accounting Principles. IN WITNESS WHEREOF, the undersigned has executed this Officer's Financial Certificate as of this _____ day of _____________, 20__. North Pointe Holdings Corporation By: ------------------------------------ Name: ---------------------------------- 28819 Franklin Road Southfield, MI 48034 (248) 359-9945 F-2 DEFINITIONS FOR QUARTERLY OFFICER'S FINANCIAL CERTIFICATE
ITEM DEFINITION/FORMULA ---- ------------------ NAIC RISK BASED CAPITAL RATIO-P&C Total Adjusted Capital/Authorized Control Level Risk-Based Capital NAIC RISK BASED CAPITAL RATIO-LIFE (Total Adjusted Capital-Asset Valuation Reserve)/Authorized Control Level Risk-Based Capital 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 Write Ins for other than special surplus funds + Surplus Notes +Gross Paid-In and Contributed Surplus + Unassigned Funds (Surplus) - Treasury Stock TOTAL CLASS 1 & 2 RATED (Total Class 1 + Total Class 2 Rated INVESTMENTS TO TOTAL FIXED INCOME Investments)/Total Fixed Income Investments INVESTMENTS TOTAL CLASS 1 & 2 RATED (Total Class 1 + Total Class 2 Rated INVESTMENTS TO TOTAL INVESTMENTS 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) Net Premiums Written/Policyholders' Surplus TO POLICYHOLDERS' SURPLUS
F-3 EX-10.31 14 k02899exv10w31.txt JUNIOR SUBORDINATED NOTE PURCHASE AGREEMENT, DATED AS OF FEBRUARY 22, 2006 EXHIBIT 10.31 JUNIOR SUBORDINATED NOTE PURCHASE AGREEMENT THIS JUNIOR SUBORDINATED NOTE PURCHASE AGREEMENT, dated as of February 22, 2006 (this "Agreement"), between North Pointe Holdings Corporation, a Michigan corporation (the "Company"), and NP Capital Trust I, a statutory trust created under the laws of the State of Delaware (the "Trust"), relating to the Junior Subordinated Notes due 2036 (the "Notes"), issuable pursuant to an Indenture, dated the Closing Date (as defined in the Purchase Agreement identified below), between the Company and LaSalle Bank National Association, as Trustee (the "Indenture"). Capitalized terms used herein and not otherwise defined herein have the respective meanings ascribed thereto in the Purchase Agreement (as defined below). WHEREAS, the Company, the Trust and the Purchaser named therein have entered into a Purchase Agreement, dated February 22, 2006 (the "Purchase Agreement"), in connection with the issuance and sale of Preferred Securities (liquidation amount of $1,000 per security) (the "Preferred Securities") by the Trust; and WHEREAS, the Company and the Trust have entered into a Common Securities Subscription Agreement, dated the Closing Date (the "Common Securities Subscription Agreement"), in connection with the issuance and sale of common securities (liquidation amount of $1,000 per security) (the "Common Securities") by the Trust; and WHEREAS, in connection with the Purchase Agreement and the Common Securities Subscription Agreement and the issuance and sale of the Preferred Securities and the Common Securities, respectively, pursuant thereto, the Trust desires to purchase from the Company, and the Company desires to sell to the Trust, all of the Notes. NOW, THEREFORE, in consideration of the foregoing premises and the conditions and agreements hereinafter set forth, the parties hereto agree as follows: 1. The Trust hereby offers to purchase from the Company, and the Company hereby accepts such offer and agrees to issue and sell to the Trust, contemporaneous with the Closing Date, Twenty Million Six Hundred Twenty Thousand Dollars ($20,620,000) aggregate principal amount of Notes, in consideration of the payment on or before the date hereof of Twenty Million Six Hundred Twenty Thousand Dollars ($20,620,000)in immediately available funds. 2. The Company represents and warrants that the Notes have been duly authorized and executed by the Company, and, when duly authenticated and delivered to the Trust in accordance with the terms hereof and of the Indenture, will constitute the valid and binding obligations of the Company entitled to the benefits of the Indenture, enforceable against the Company in accordance with their terms, except to the extent that enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors' rights generally or by general principles of equity (regardless of whether considered in a proceeding in equity or at law). 3. This Agreement and the rights and obligations of each of the parties hereto shall be construed and enforced in accordance with and governed by the laws of the State of New York without reference to its conflict of laws provisions (other than Section 5-1401 of the General Obligations Law). 4. ANY LEGAL ACTION OR PROCEEDING BY OR AGAINST ANY PARTY HERETO OR WITH RESPECT TO OR ARISING OUT OF THIS AGREEMENT MAY BE BROUGHT IN OR REMOVED TO THE COURTS OF THE STATE OF NEW YORK, IN AND FOR THE COUNTY OF NEW YORK, OR OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK (IN EACH CASE SITTING IN THE BOROUGH OF MANHATTAN). BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH PARTY ACCEPTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS (AND COURTS OF APPEALS THEREFROM) FOR LEGAL PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT. 5. This Agreement may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. [REMAINDER OF PAGE LEFT INTENTIONALLY BLANK] IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first written above. NORTH POINTE HOLDINGS CORPORATION By: /s/ James G. Petcoff ------------------------------------ James G. Petcoff Chairman, President and Chief Executive Officer NP CAPITAL TRUST I By: /s/ John Berry ------------------------------------ John Berry Administrative Trustee By: /s/ Harold Meloche ------------------------------------ Harold Meloche Administrative Trustee EX-10.32 15 k02899exv10w32.txt WAIVER AND CONSENT LETTER DATED FEBRUARY 21, 2005 EXHIBIT 10.32 WAIVER AND CONSENT LETTER February 21, 2006 North Pointe Holdings Corporation 28819 Franklin Road Suite 300 Southfield, Michigan 48057 Attention: James B. Petcoff Re: Amended and Restated Credit Agreement (the "Credit Agreement") dated as of January 26, 2004 by and among North Pointe Holdings Corporation ("Company"), Comerica Bank, as Agent ("Agent") and the Lenders party to the Credit Agreement ("Banks"), as amended Dear Mr. Petcoff: The Company has advised the Agent and the Banks that the Company intends to: (i) form a Delaware statutory trust called NP Capital Trust I (the "Trust"); (ii) purchase all of the Trust's common interests for the sum of $620,000; (iii) cause the Trust to sell $20,000,000 of preferred interests to an unrelated third party; and (iv) sell to the Trust, for $20,620,000, junior subordinated notes of the Company in substantially the form attached as Exhibit A (all of such steps, the "Offering"). The Company will pay the expenses associated with the Offering, and is expected to receive approximately $19,000,000 of net proceeds from the Offering, The Offering would violate certain provisions of the Credit Agreement, including Section 7.1, as to the purchase by the Company of equity interests in the Trust and Section 7.3, as to the guaranty by the Company of the payment of amounts owed by the Trust to holders of the Trust's preferred interests, and would require that the junior subordinated notes be deemed Subordinated Debt by the Banks as set forth in Section 7.4. The Company has requested that the Agent and the Banks consent to the Offering and waive any Event of Default which would arise under the Credit Agreement as a result of the Offering. Based on the Agent's receipt of the approval of the Majority Banks and subject to the terms of this letter, the Banks consent to the Offering and waive any Event of Default under the Credit Agreement resulting from the Offering, including without limitation any Event of Default which would arise under the provisions of Section 7.1 (relating to the issuance of Equity Investments and relating to creation of the Trust as a subsidiary), Section 7.3 (relating to the guaranty of certain payment obligations of the Trust and Section 7.4 (relating to the issuance of Subordinated Debt). This Waiver and Consent shall not be deemed to amend or alter in any respect the terms and conditions of the Credit Agreement, the Notes or any of the other Loan Documents, or to constitute a waiver or release by any of the Banks of any right, remedy or Event of Default under the Credit Agreement, the Notes or any of the other Loan Documents, except to the extent expressly set forth above. Furthermore, this Waiver and Consent shall not affect in any manner whatsoever any rights or remedies of the Banks with respect to any other non-compliance by the Company with the Credit Agreement or the other Loan Documents whether in the nature of an Event of Default or otherwise, and whether now in existence or subsequently arising. Except as specifically defined to the contrary herein, capitalized terms used in this Waiver shall have the meanings given them in the Credit Agreement. Very truly yours, COMERICA BANK, AS AGENT By: /s/ Michael Wooder ------------------------------------ Its: Vice President cc: Larry R. Shulman, Esq. CONSENT TO WAIVER The undersigned hereby approves and consents to the foregoing waiver on the terms set forth in the Waiver and Consent Letter to which this Consent to Waiver is attached and, assuming approval by the requisite lenders, authorizes the Agent to execute and deliver the Waiver and Consent Letter to the Company. FIFTH THIRD BANK By: /s/ John Bebb ------------------------------------ Its: V.P. Dated: February 22, 2006 CONSENT TO WAIVER The undersigned hereby approves and consents to the foregoing waiver on the terms set forth in the Waiver and Consent Letter to which this Consent to Waiver is attached and, assuming approval by the requisite lenders, authorizes the Agent to execute and deliver the Waiver and Consent Letter to the Company. JPMORGAN CHASE BANK NA, SUCCESSOR BY MERGER TO BANK ONE, N.A. By: /s/ Rick Ellis ------------------------------------ Its: SVP Dated: February 22, 2006 EXHIBIT A FLOATING RATE JUNIOR SUBORDINATED NOTE DUE 2036 THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF THE DEPOSITORY TRUST COMPANY ("DTC") OR A NOMINEE OF DTC. THIS SECURITY IS EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN DTC OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER OF THIS SECURITY (OTHER THAN A TRANSFER OF THIS SECURITY AS A WHOLE BY DTC TO A NOMINEE OF DTC OR BY A NOMINEE OF DTC TO DTC OR ANOTHER NOMINEE OF DTC) MAY BE REGISTERED EXCEPT IN LIMITED CIRCUMSTANCES. UNLESS THIS SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF DTC TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY SECURITY ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND SUCH SECURITIES, AND ANY INTEREST THEREIN, MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF ANY SECURITIES IS HEREBY NOTIFIED THAT THE SELLER OF THE SECURITIES MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A UNDER THE SECURITIES ACT. THE HOLDER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH SECURITIES MAY BE OFFERED, RESOLD OR OTHERWISE TRANSFERRED ONLY (I) TO THE COMPANY, (II) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (III) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (A) (1), (2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF AN "ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, (IV) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR (V) PURSUANT TO AN EXEMPTION FROM THE SECURITIES ACT, IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND, IN THE CASE OF (III) OR (V), SUBJECT TO THE RIGHT OF THE COMPANY TO REQUIRE AN OPINION OF COUNSEL AND OTHER INFORMATION SATISFACTORY TO IT AND (B) THE HOLDER WILL NOTIFY ANY PURCHASER OF ANY SECURITIES FROM IT OF THE RESALE RESTRICTIONS REFERRED TO IN (A) ABOVE. THE SECURITIES WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN BLOCKS HAVING AN AGGREGATE PRINCIPAL AMOUNT OF NOT LESS THAN $100,000, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY ATTEMPTED TRANSFER OF SECURITIES, OR ANY INTEREST THEREIN, IN A BLOCK HAVING AN AGGREGATE PRINCIPAL AMOUNT OF LESS THAN $100,000 AND MULTIPLES OF $1,000 IN EXCESS THEREOF SHALL BE DEEMED TO BE VOID AND OF NO LEGAL EFFECT WHATSOEVER. TO THE FULLEST EXTENT PERMITTED BY LAW, ANY SUCH PURPORTED TRANSFEREE SHALL BE DEEMED NOT TO BE THE HOLDER OF SUCH SECURITIES FOR ANY PURPOSE, INCLUDING, BUT NOT LIMITED TO, THE RECEIPT OF PRINCIPAL OF OR INTEREST ON SUCH SECURITIES, OR ANY INTEREST THEREIN, AND SUCH PURPORTED TRANSFEREE SHALL BE DEEMED TO HAVE NO INTEREST WHATSOEVER IN SUCH SECURITIES. THE HOLDER OF THIS SECURITY, OR ANY INTEREST THEREIN, BY ITS ACCEPTANCE HEREOF OR THEREOF ALSO AGREES, REPRESENTS AND WARRANTS THAT IT IS NOT AN EMPLOYEE BENEFIT, INDIVIDUAL RETIREMENT ACCOUNT OR OTHER PLAN OR ARRANGEMENT SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") (EACH A "PLAN" OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE "PLAN ASSETS" BY REASON OF ANY PLAN'S INVESTMENT IN THE ENTITY, AND NO PERSON INVESTING "PLAN ASSETS" OF ANY PLAN MAY ACQUIRE OR HOLD THIS SECURITY OR ANY INTEREST THEREIN. ANY PURCHASER OR HOLDER OF THE SECURITIES OR ANY INTEREST THEREIN WILL BE DEEMED TO HAVE REPRESENTED BY ITS PURCHASE AND HOLDING THEREOF THAT IT IS NOT AN EMPLOYEE BENEFIT PLAN WITHIN THE MEANING OF SECTION 3(3) OF ERISA, OR A PLAN TO WHICH SECTION 4975 OF THE CODE IS APPLICABLE, A TRUSTEE OR OTHER PERSON ACTING ON BEHALF OF AN EMPLOYEE BENEFIT PLAN OR PLAN, OR ANY OTHER PERSON OR ENTITY USING THE ASSETS OF ANY EMPLOYEE BENEFIT PLAN OR PLAN TO FINANCE SUCH PURCHASE. NORTH POINTE HOLDINGS CORPORATION FLOATING RATE JUNIOR SUBORDINATED NOTE DUE 2036 No. 1 $20,620,000 North Pointe Holdings Corporation, a corporation organized and existing under the laws of Michigan (hereinafter called the "Company" which term includes any successor Person under the Indenture hereinafter referred to), for value received, hereby promises to pay to LaSalle Bank National Association, not in its individual capacity, but solely as Property Trustee for NP Capital Trust I, a Delaware statutory trust (the "Holder"), or registered assigns, the principal sum of Twenty Million Six Hundred Twenty Thousand Dollars ($20,620,000) or such other principal amount represented hereby as may be set forth in the records of the Securities Registrar hereinafter referred to in accordance with the Indenture on March 15, 2036. The Company further promises to pay interest on said principal sum from February [___________], 2006, or from the most recent Interest Payment Date to which interest has been paid or duly provided for, quarterly (subject to deferral as set forth herein) in arrears on March 15, June 15, September 15 and December 15 of each year, commencing March 15, 2006, or if any such day is not a Business Day, on the next succeeding Business Day (and additional interest shall accrue in respect of the amounts whose payment is so delayed for the period from and after such, Interest Payment Date until such next succeeding Business Day), except that, if such Business Day fells in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case, with the same force and effect as if made on the Interest Payment Date, at a fixed rate equal to [ ___________]% per annum through the interest payment date in March 2011 and thereafter at a variable rate equal to LIBOR plus [3.60]% per annum, together with Additional Tax Sums, if any, as provided in Section 10.5 of the Indenture, until the principal hereof is paid or duly provided for or made available for payment; provided, further, that any overdue principal, premium, if any, or Additional Tax Sums and any overdue installment of interest shall bear Additional Interest at a fixed rate equal to [__________]% per annum through the interest payment date in March 2011 and thereafter at a variable rate equal to LIBOR plus [3.60]% per annum (to the extent that the payment of such interest shall be legally enforceable), compounded quarterly, from the dates such amounts are due until they are paid or made available for payment, and such interest shall be payable on demand. The amount of interest payable shall be computed on the basis of a 360-day year and the actual number of days elapsed in the relevant interest period. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date shall, as provided in the Indenture, be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest installment. Any such interest not so punctually paid or duly provided for shall forthwith cease to be payable to the Holder on such Regular Record Date and may either be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to Holders of Securities not less than ten (10) days prior to such Special Record Date, or be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities may be listed, and upon such notice as may be required by such exchange, all as more fully provided in the Indenture. So long as no Event of Default has occurred and is continuing, the Company shall have the right, at any time and from time to time during the term of this Security, to defer the payment of interest on this Security for a period of up to twenty (20) consecutive quarterly interest payment periods (each such period, an "Extension Period"), during which Extension Period(s), no interest shall be due and payable (except any Additional Tax Sums that may be due and payable). No Extension Period shall end on a date other than an Interest Payment Date, and no Extension Period shall extend beyond the Stated Maturity of the principal of this Security. No interest shall be due and payable during an Extension Period (except any Additional Tax Sums that may be due and payable), except at the end thereof, but each installment of interest that would otherwise have been due and payable during such Extension Period shall bear Additional Interest (to the extent payment of such interest would be legally enforceable) at a fixed rate equal to [_________________]% per annum through the Interest Payment Date in March 2011 and thereafter at a variable rate equal to LIBOR plus [3.60]% per annum, compounded quarterly, from the dates on which amounts would have otherwise been due and payable until paid or made available for payment. At the end of any such Extension Period, the Company shall pay all interest then accrued and unpaid on this Security, together with such Additional Interest. Prior to the termination of any such Extension Period, the Company may further defer the payment of interest; provided, that (i) all such previous and further extensions comprising such Extension Period do not exceed twenty (20) quarterly interest payment periods, (ii) no Extension Period shall end on a date other than an Interest Payment Date and (iii) no Extension Period shall extend beyond the Stated Maturity of the principal of this Security. Upon the termination of any such Extension Period and upon the payment of all accrued and unpaid interest and any Additional Interest then due on any Interest Payment Dates the Company may elect to begin a new Extension Period; provided, that (i) such Extension Period does not exceed twenty (20) quarterly interest payment periods, (ii) no Extension Period shall end on a date other than an Interest Payment Date and (iii) no Extension Period shall extend beyond the Stated Maturity of the principal of this Security. The Company shall give the Holder of this Security and the Trustee written notice of its election to begin any such Extension Period at least one Business Day prior to the next succeeding Interest Payment Date on which interest on this Security would be payable but for such deferral or, so long as this Security is held by the Trust, at least one Business Day prior to the earlier of (i) the next succeeding date on which Distributions on the Preferred Securities of NP Capital Trust I would be payable but for such deferral and (ii) the date on, which the Property Trustee of such Trust is required to give notice to any securities exchange or other applicable self-regulatory organization or to holders of such Preferred Securities of the record date for the payment of such Distributions. During any such Extension Period, the Company shall not (i) declare or pay any dividends or distributions on, or redeem, purchase, acquire or make a liquidation payment with respect to, any of the Company's capital stock or (ii) make any payment of principal of or any interest or premium, if any, on or repay, repurchase or redeem any debt securities of the Company that rank pari passu in all respects with or junior in interest to this Security (other than (a) repurchases, redemptions or other acquisitions of shares of capital stock of the Company in connection with (1) any employment contract, benefit plan or other similar arrangement with or for the benefit of any one or more employees, officers, directors or consultants. (2) a dividend reinvestment or stockholder stock purchase plan and (3) the issuance of capital stock of the Company (or securities convertible into or exercisable for such capital stock) as consideration in an acquisition transaction entered into prior to the applicable Extension Period, (b) as a result of an exchange or conversion of any class or series of the Company's capital stock (or any capital stock of a Subsidiary of the Company) for any class or series of the Company's capital stock or of any class or series of the Company's indebtedness for any class or series of the Company's capital stock, (c) the purchase of fractional interests in shares of the Company's capital stock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged, (d) any declaration of a dividend in connection with any Rights Plan, the issuance of rights, stock or other property under any Rights Plan, or the redemption or repurchase of rights pursuant thereto or (e) any dividend in the form of stock, warrants, options or other rights where the dividend stock or the stock issuable upon exercise of such warrants, options or other rights is the same stock as that on which the dividend is being paid or ranks pari passu with or junior to such stock). Payment of principal of, premium, if any, and interest on this Security shall be made in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. Payments of principal, premium, if any, and interest due at the Maturity of this Security shall be made at the Place of Payment upon surrender of such Securities to the Paying Agent, and payments of interest shall be made, subject to such surrender where applicable, by wire transfer at such place and to such account at a banking institution in the United States as may be designated in writing to the Paying Agent at least ten (10) Business Days prior to the date for payment by the Person entitled thereto unless proper written transfer instructions have not been received by the relevant record date, in which case such payments shall be made by check mailed to the address of such Person as such address shall appear in the Security Register. Notwithstanding the foregoing, so long as the Holder of this Security is the Property Trustee, the payment of the principal of (and premium, if any) and interest (including any overdue installment of interest and Additional Tax Sums, if any) on this Security will be made at such place and to such account as may be designated by the Property Trustee. The indebtedness evidenced by this Security is, to the extent provided in the Indenture, subordinate and junior in right of payment to the prior payment in full of all Senior Debt, and this Security is issued subject to the provisions of the Indenture with respect thereto. Each Holder of this Security, by accepting the same, (a) agrees to and shall be bound by such provisions, (b) authorizes and directs the Trustee on his or her behalf to take such actions as may be necessary or appropriate to effectuate the subordination so provided and (c) appoints the Trustee his or her attorney-in-fact for any and all such purposes. Each Holder hereof, by his or her acceptance hereof, waives all notice of the acceptance of the subordination provisions contained herein and in the Indenture by each holder of Senior Debt, whether now outstanding or hereafter incurred, and waives reliance by each such holder upon said provisions. Unless the certificate of authentication hereon has been executed by the Trustee by manual signature, this Security shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose. IN WITNESS WHEREOF, the Company has duly executed this certificate on this ______ day of _______________, 2006. NORTH POINTE HOLDINGS CORPORATION, By: ------------------------------------ Name: James G. Petcoff Title: Chairman, President & Chief Executive Officer This represents Securities referred to in the within mentioned Indenture. Dated: 2006 ---------------, LASALLE BANK NATIONAL ASSOCIATION, as Trustee By: ------------------------------------ Authorized Signatory REVERSE OF SECURITY This Security is one of a duly authorized issue of securities of the Company (the "Securities") issued under the Junior Subordinated Indenture, dated as of February [____], 2006 (the "Indenture"), between the Company and LaSalle Bank National Association, as Trustee (in such capacity, the "Trustee" which term includes any successor trustee under the Indenture), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Company, the Trustee, the holders of Senior Debt, the Holders of the Securities and the holders of the Preferred Securities, and of the terms upon which the Securities are, and are to be, authenticated and delivered. All terms used in this Security that are defined in the Indenture or in the Amended and Restated Trust Agreement, dated as of February [_____], 2006 (as modified, amended or supplemented from time to time, the "Trust Agreement"), relating to the NP Capital Trust I (the "Trust") among the Company, as Depositor, the Trustees named therein and the Holders from time to time of the Trust Securities issued pursuant thereto, shall have the meanings assigned to them in the Indenture or the Trust Agreement, as the case may be. The Company may, on any Interest Payment Date, at its option and in accordance with the Indenture, on or after March 15, 2011 and subject to the terms and conditions of Article XI of the Indenture, redeem this Security in whole at any time or in part from time to time at a Redemption Price equal to one hundred percent (100%) of the principal amount hereof, together, in the case of any such redemption, with accrued interest, including any Additional Interest, through but excluding the date fixed as the Redemption Date; provided, that the Company shall have received the prior approval of any Applicable Insurance Regulatory Authority then required. In addition, upon the occurrence and during the continuation of a Special Event, the Company may, at its option and in accordance with the Indenture, redeem this Security, in whole but not in part, subject to the terms and conditions of Article XI of the Indenture at a Redemption Price equal to one hundred seven and one half percent (107.5%) of the principal amount hereof, together, in the case of any such redemption, with accrued interest, including any Additional Interest, through but excluding the date fixed as the Redemption Date; provided, that the Company shall have received the prior approval of any Applicable Insurance Regulatory Authority then required. In the event of redemption of this Security in part only, a new Security or Securities for the unredeemed portion hereof will be issued in the name of the Holder hereof upon the cancellation hereof. If less than all the Securities are to be redeemed, the particular Securities to be redeemed shall be selected not more than sixty (60) days prior to the Redemption Date by the Trustee from the Outstanding Securities not previously called for redemption, by such method as the Trustee shall deem fair and appropriate and which may provide for the selection for redemption of a portion of the principal amount of any Security. North Pointe Holdings Corporation February 21, 2006 Page 16 The Indenture permits, with certain exceptions as therein provided, the Company and the Trustee at any time to enter into a supplemental indenture or indentures for the, purpose of modifying in any manner the rights and obligations of the Company and of the Holders of the Securities, with the consent of the Holders of not less than a majority in principal amount of the Outstanding Securities. The Indenture also contains provisions permitting Holders of specified percentages in principal amount of the Securities, on behalf of the Holders of all Securities, to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Security shall be conclusive and binding upon such Holder and upon all future Holders of this Security and of any Security issued upon the registration of transfer hereof or in exchange herefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this Security. No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of and any premium, if any, and interest, including any Additional Interest (to the extent legally enforceable), on this Security at the times, place and rate, and in the coin or currency, herein prescribed. As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Security is registrable in the Securities Register, upon surrender of this Security for registration of transfer at the office or agency of the Company maintained for such purpose, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Securities Registrar and duly executed by, the Holder hereof or such Holder's attorney duly authorized in writing, and thereupon one or more new Securities, of like tenor, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees. The Securities are issuable only in registered form without coupons in minimum denominations of $100,000 and any integral multiple of $1,000 in excess thereof. As provided in the Indenture and subject to certain limitations therein set forth. Securities are exchangeable for a like aggregate principal amount of Securities and of like tenor of a different authorized denomination, as requested by the Holder surrendering the same. No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. The Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name this Security is registered as the owner hereof for all purposes, whether or not this Security be overdue, and neither the Company, the Trustee nor any such agent shall be affected by notice to the contrary. North Pointe Holdings Corporation February 21, 2006 Page 17 The Company and, by its acceptance of this Security or a beneficial interest herein, the Holder of, and any Person that acquires a beneficial interest in, this Security agree that, for United States federal, state and local tax purposes, it is intended that this Security constitute indebtedness. THIS SECURITY SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAWS PROVISIONS (OTHER THAN SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW). EX-10.33 16 k02899exv10w33.txt WAIVER LETTER DATED FEBRUARY 28, 2005 TO THE AMENDED AND RESTATED CREDIT AGREEMENT EXHIBIT 10.33 WAIVER LETTER February 28, 2006 North Pointe Holdings Corporation 28819 Franklin Road Suite 300 Southfield, Michigan 48057 Attention: James B. Petcoff Re: Amended and Restated Credit Agreement (the "Credit Agreement") dated as of January 26, 2004 by and among North Pointe Holdings Corporation ("Company"), Comerica Bank, as Agent ("Agent") and the Lenders party to the Credit Agreement ("Banks"), as amended Dear Mr. Petcoff: The Company has advised the Agent and the Banks that the Company formed two new insurance subsidiaries during 2005. They are Home Pointe Insurance Company and Midfield Insurance Company ("New Insurance Subsidiaries"). Under Section 8.1(m) of the Credit Agreement it is an Event of Default if an insurance subsidiary does not have an A.M. Best rating of B+ or higher. The New Insurance Subsidiaries do not have an A.M. Best rating. The Company has requested that the Agent and the Banks waive any Event of Default which would arise under the Credit Agreement as a result of the failure of the New Insurance Subsidiaries to have the required A.M. Best rating. Based on the Agent's receipt of the approval of the Majority Banks and subject to the terms of this letter, the Banks waive any Event of Default under the Credit Agreement resulting from the failure of the New Insurance Subsidiaries to have the required A.M. Best rating. This Waiver is effective as of December 31, 2005 and shall remain effective through July 1, 2006, whereupon it shall terminate and be of no further force or effect. This Waiver shall not be deemed to amend or alter in any respect the terms and conditions of the Credit Agreement, the Notes or any of the other Loan Documents, or to constitute a waiver or release by any of the Banks of any right, remedy or Event of Default under the Credit Agreement, the Notes or any of the other Loan Documents, except to the extent expressly set forth above. Furthermore, this Waiver shall not affect in any manner whatsoever any rights or remedies of the Banks with respect to any other non-compliance by the Company with the Credit Agreement or the other Loan Documents whether in the nature of an Event of Default or otherwise, and whether now in existence or subsequently arising. Except as specifically defined to the contrary herein, capitalized terms used in this Waiver shall have the meanings given them in the Credit Agreement. Very truly yours, COMERICA BANK, as Agent By: /s/ Michael Wooder ------------------------------------ Michael Wooder Its: Vice President cc: Larry R. Shulman, Esq. 2 CONSENT TO WAIVER The undersigned hereby approves and consents to the foregoing waiver on the terms set forth in the Waiver Letter to which this Consent to Waiver is attached and, assuming approval by the requisite lenders, authorizes the Agent to execute and deliver the Waiver Letter to the Company. FIFTH THIRD BANK By: /s/ John Bebb ------------------------------------ Its: V.P. Dated: February 28, 2006 CONSENT TO WAIVER The undersigned hereby approves and consents to the foregoing waiver on the terms set forth in the Waiver Letter to which this Consent to Waiver is attached and, assuming approval by the requisite lenders, authorizes the Agent to execute and deliver the Waiver Letter to the Company. JPMORGAN CHASE BANK NA, successor by merger to Bank One, N.A. By: /s/ Rick Ellis ------------------------------------ Its: SVP Dated: February 28, 2006 EX-10.39 17 k02899exv10w39.txt ASSUMPTION OF MORTGAGE AGREEMENT FOR THE PURCHASE AGREEMENT, DATED 8/18/2005 EXHIBIT 10.39 CROSS REFERENCE NUMBERS: 199673 IN LIBER 23180, PAGE 242 (OAKLAND COUNTY) 199674 IN LIBER 23180, PAGE 279 (OAKLAND COUNTY) 91366ST, 2001-95016-1032, D808364 AND C359571 (UCC'S - SECRETARY OF STATE) 200086 IN LIBER 23183, PAGE 290 AND 080291 IN LIBER 11393, PAGE 1 (UCC'S - OAKLAND COUNTY) IDS Life Insurance Company Loan #694-001231 ASSUMPTION AND MODIFICATION AGREEMENT Property Address: 28819 Franklin Road Southfield, Michigan 48034 Tax Parcel Identification Number: 24-18-201-053 Prepared by and after recording, return to: Michael D. Moriarty, Esq. Locke Reynolds LLP 201 North Illinois Street Suite 1000 P.O. Box 44961 Indianapolis, IN 46244-0961 (317)237-3800 THIS ASSUMPTION AND MODIFICATION AGREEMENT ("Agreement") is made effective as of August 18, 2005 (the "Effective Date"), by and among IDS LIFE INSURANCE COMPANY, a Minnesota corporation ("Lender"), whose address is c/o RiverSource Investments, LLC, Real Estate Loan Management, 25540 Ameriprise Financial Center, Minneapolis, Minnesota 55474; NORTHWESTERN ZODIAC LIMITED PARTNERSHIP, a Michigan limited partnership ("Transferor"), whose address is c/o S. James Clarkson, 153 Muirfield Circle, Naples, Florida 34113; NORTH POINTE FINANCIAL SERVICES, INC., a Michigan corporation ("Transferee"), whose address is 28819 Franklin Road, P.O. Box 2223, Southfield, Michigan 49037-2223, Attention: B. Matthew Petcoff, and S. JAMES CLARKSON, individually ("Original Guarantor"), whose address is 153 Muirfield Circle, Naples, Florida 34113. RECITALS: A. Transferor is or was the owner of certain real and personal property (the "Property") located in the City of Southfield, Oakland County, Michigan, more fully described on EXHIBIT "A" attached hereto and by this reference, incorporated herein, which Property is encumbered or affected by, among other things: (i) that certain Amended and Restated Mortgage and Security Agreement and Fixture Financing Statement with Assignment of Leases and Rents (the "Mortgage"), from Transferor, as mortgagor, to Lender, as mortgagee, dated as of June 20, 2001, and recorded July 3, 2001 as DOCUMENT NO. 199673 in LIBER 23180, PAGE 242 in the Office of the Oakland County Clerk/Register of Deeds; (ii) that certain Amended and Restated Assignment of Leases and Rents (the "Assignment of Leases"), from Transferor, as assignor, to Lender, as assignee, dated June 20, 2001, and recorded July 3, 2001 as DOCUMENT NO. 199674 in LIBER 23180, PAGE 279 in the Office of the Oakland County Clerk/Register of Deeds; (iii) Form UCC-3 Financing Statement showing Transferor as debtor and Lender as secured party, as filed with the Michigan Secretary of State's Office on August 17, 2001 as FILE NO. 91366ST and 2001-95016-1032 and FILE NO. D808364 (with regard to UCC Financing Statement FILE NO. C359571 with a file date of May 31, 1990); and (iv) Form UCC-3 Financing Statement showing Transferor as debtor and Lender as secured party, as filed with the Oakland County Clerk/Register of Deeds on July 3, 2001 as FILE NO. 200086 in LIBER 23183, PAGE 290 (with regard to UCC Financing Statement FILE NO. 080291, in LIBER 11393, PAGE 1, with a file date of May 25, 1990) (FILE NOS. 91366ST, 2001-95016-1032, D808364, C359571, 200086 in LIBER 23183, PAGE 290, and 080291 in LIBER 11393, PAGE 1 hereinafter individually and collectively, the "UCC-1 Financing Statements"). The Mortgage, the Assignment of Leases and Rents and the UCC-1 Financing Statements are sometimes hereinafter collectively referred to as the "Security Documents." In addition to the Security Documents, the following documents were entered into and delivered in connection with the original Loan (as defined hereafter) which is subject to this Agreement: (v) that certain Hazardous Materials or Wastes Indemnity Agreement (the "Original Indemnity Agreement"), from Transferor and Original Guarantor to Lender, dated June 20, 2001; and (vi) that certain Guaranty Agreement (the "Original Guaranty") from Original Guarantor to Lender, dated as of June 20, 2001. The Original Indemnity Agreement and the Original Guaranty are sometimes hereinafter collectively referred to as the "Ancillary Documents." B. Lender is the holder for value of that certain Amended and Restated Promissory Note dated June 20, 2001, made by Transferor, to the order of Lender, in the original principal sum of Two Million Eight Hundred Thousand and 00/100 Dollars ($2,800,000.00) (the "Note"), which evidenced a loan (the "Loan") in the original principal sum of Two Million Eight Hundred Thousand and 00/100 Dollars ($2,800,000.00) from Lender to Transferor. The Note, the Security Documents and the Ancillary Documents are sometimes hereinafter collectively referred to as the "Loan Documents." C. The Note is secured by the Security Documents, the Original Indemnity Agreement and the Original Guaranty. D. All of the partnership interests in Transferor have been or upon the execution and subsequent closing of this Agreement are herewith being transferred to Transferee, at which time Transferor will cease to exist as a legal entity under Michigan law, and thus Transferee at such time will succeed to title to the Property subject to, and without assumption of, the Loan Documents. E. Transferor, Transferee, and Original Guarantor have requested Lender's consent to the transfer of the partnership interests in Transferor to Transferee, and as a result, the transfer of the Property to Transferee and the assumption by Transferee of the Loan and the Loan Documents, as modified hereby and as provided herein, and Lender's agreement to certain modifications to the Loan Documents, and Lender has agreed to so consent and modify certain provisions of the Loan Documents upon the terms and conditions set forth in this Agreement and that certain letter Consent to Transfer/Assumption from Lender to Partnership Transferor dated March 25, 2005, as accepted by Transferor (the "Commitment"), provided that, among other things: 1. Transferee enters into this Agreement and, as provided herein, expressly assumes certain obligations of Transferor under the Loan Documents; 2. Transferee executes and delivers to Lender contemporaneously herewith a certain Hazardous Materials or Wastes Indemnity Agreement (the "New Indemnity Agreement") in favor of Lender; 3. Original Guarantor reaffirms its continuing liability for certain of Transferor's and Original Guarantor's obligations under the Loan Documents pursuant to the terms, conditions and covenants of the Commitment and this Agreement. F. Transferee is willing to so enter into this Agreement and so assume the Loan and the Loan Documents, as modified hereby and as provided herein and Transferor, Transferee and Original Guarantor are willing to so execute and deliver said new agreements or confirm their continuing liability for obligations under the Loan Documents, as in each case required by Lender, as set forth herein. 2 NOW, THEREFORE, in order to induce Lender to give its consent to the herein described transfer of the partnership interests in Transferor to Transferee, and thus, the transfer of the Property to Transferee and the assumption of the Loan and the Loan Documents by Transferee, to modify certain provisions of the Loan Documents and enter into this Agreement, and to agree to such other matters as provided herein, and for the mutual covenants of the parties hereto and in consideration of the foregoing and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged by the parties hereto, the parties do hereby, jointly and severally, agree, or consent, as the case may be, as of the Effective Date, as follows: 1. The Recitals set forth in the beginning of this Agreement are true and accurate and are hereby incorporated as a material part of this Agreement. 2. The Mortgage shall be and hereby is amended and modified as follows: Section 2.10 TRANSFER PERMITTED on pages 10, 11 and 12 is deleted in its entirety. 3. Transferee hereby assumes and agrees to pay, perform, observe and be bound by the Note, the Mortgage and the other Loan Documents (except the Original Indemnity Agreement and the Original Guaranty), as amended and modified hereby, and all the terms, conditions, covenants, and agreements, stipulations, representations, warranties, obligations and liabilities thereunder and hereunder accruing and arising upon and after the Effective Date, and those under the New Indemnity Agreement (collectively, the "Obligations"), as if Transferee had executed the Note, the Mortgage and the other Loan Documents (except the Original Indemnity Agreement and the Original Guaranty) originally as, and upon and subject to the same terms and conditions as, Transferor; and the Note, the Mortgage and the Loan Documents (except for the Original Indemnity Agreement and the Original Guaranty) shall be and hereby are amended and modified as if Transferee were Transferor thereunder and as if Transferee had originally executed and delivered the Loan Documents as and in the capacity of Transferor (except for the Original Indemnity Agreement, the Original Guaranty and Original Guarantor's liability for Continuing Original Guarantor Obligations, as defined in paragraph 4 below, for which Transferee neither assumes nor otherwise shall have any liability or obligation). Transferee represents to Lender that Transferee possesses and has carefully reviewed complete and accurate copies of this Agreement, the Note, the Mortgage, the New Indemnity Agreement and the Loan Documents. 4. Each and all of those matters set forth and described in the Loan Documents, including, without limitation, those matters which are the subject of the indemnification provided under Article 9 of the Mortgage and under the Original Indemnity Agreement, in each case to the extent that any such matter or matters either arose before the Effective Date or arise upon or after the Effective Date as a result, directly or indirectly, partially or wholly, of occurrences or events prior to the Effective Date; those matters which are the subject of the indemnification provided under the Original Indemnity Agreement, and those matters which are the subject of the Original Guaranty and any matter arising out of the fraud or intentional misrepresentation of the Transferor or Original Guarantor, to the extent that any or all of foregoing matters either arose before the Effective Date or arise upon or after the Effective Date as a result, directly or 3 indirectly, partially or wholly, of occurrences or events prior to the Effective Date, shall be hereinafter referred to individually and collectively as "Continuing Original Guarantor Obligations." Except for Continuing Original Guarantor Obligations, Lender does hereby, as of the Effective Date, forever release and discharge Original Guarantor, from any and all claims, demands, controversies, actions, causes of action, obligations, liabilities, costs, expenses, attorney's fees and damages of whatsoever character, nature and kind, at law or in equity, arising from or related to the Property, the Loan and the Loan Documents, including without limitation, Original Guarantor's obligations under the Original Indemnity Agreement and the Original Guaranty (collectively, "Released Guarantor Liabilities") and Original Guarantor does hereby assume, reaffirm and ratify to Lender Original Guarantor's continuing liability and responsibility for all of such Continuing Original Guarantor Obligations. It is the intention of Lender, Transferor, and Original Guarantor that the foregoing release shall be effective as a bar against Lender to all Released Guarantor Liabilities. 5. Transferor, Transferee and Original Guarantor agree, each as to itself or himself, or as to any and all of its or his acts and deeds, as the case may be, that (a) this Agreement, the New Indemnity Agreement and the Loan Documents, as amended and modified hereby and to which the foregoing such parties are a party, respectively as may be applicable, are valid and binding agreements enforceable by Lender against it or him, as the case may be, in accordance with their respective terms, without right of offset, defense or counterclaim thereto; (b) the Security Documents, as amended and modified hereby, create a continuing first lien against, and security interest in, the Property, including, without limitation, the rents, issues, profits and proceeds, securing a monetary obligation, subject to no other encumbrances, except current taxes and assessments, if any, which may constitute a lien against the Property, but which are not due and payable at the present time, and such other exceptions as may be agreed to in writing by Lender (and/or reflected in Lender's Loan Policy of Title Insurance issued in connection with the Loan to Transferor and the endorsements to be issued thereto in connection herewith); (c) except as expressly provided herein, this Agreement shall not modify any of the Loan Documents or any other documentation in connection with the Note; (d) all of the property, both real and personal, described in the Security Documents shall remain in all respects subject to the lien, security interest or charge thereof; (e) nothing herein contained, and nothing done pursuant hereto, (i) shall affect or shall be construed as affecting the liens, security interests or charges of the Security Documents (as amended), or the priority thereof over other liens or charges, (ii) is intended to release or affect the liability of any party or parties who may now or hereafter be liable under or on account of the New Indemnity Agreement, and the Loan Documents, as amended and modified hereby, including, without limitation, Transferee and Original Guarantor, except as may otherwise be expressly provided therein or herein, or (iii) shall be construed as affecting any other collateral or security, if any, held by Lender as security for, or as further evidence of, the indebtedness evidenced by the Note and the Loan Documents; (f) Transferor, Transferee and Original Guarantor have no defenses or offsets against the indebtedness evidenced by the Note and the Loan Documents, as amended and modified hereby; (g) nothing contained herein shall alter, waive, amend, vary or affect any provision, condition or covenant contained in the Loan Documents, nor affect or impair any rights, powers or remedies as contained and set forth in the Loan Documents, except as expressly modified hereby, it being the intent of all parties that the Loan Documents, as amended and modified hereby are hereby 4 confirmed and ratified by the respective parties to each such Loan Document in all respects as of the Effective Date; and (h) Transferor, Transferee and Original Guarantor have disclosed all material financial information relating to such respective party, and have disclosed all material facts relating to the Property. 6. Original Guarantor, notwithstanding: (a) the transfer of the Property from Transferor to Transferee; (b) the assumption by Transferee of the Note, the Mortgage and the Loan Documents (except the Original Indemnity Agreement and the Original Guaranty), as amended and modified hereby, and the execution and delivery to Lender of the New Indemnity Agreement by Transferee; and (c) the modification of the Loan Documents as provided herein, hereby (i) reaffirms and ratifies Original Guarantor's continuing liability and responsibility for the Continuing Original Guarantor Obligations, and (ii) acknowledges and agrees that Original Guarantor shall remain personally and primarily liable, jointly and severally, with respect to the Continuing Original Guarantor Obligations, it being the express intention of Original Guarantor that Original Guarantor's liability under and for the Continuing Original Guarantor Obligations is and shall be that of a primary obligor and not that of a surety or guarantor, and in the event that Original Guarantor's liability is deemed to be that of a surety or guarantor, Original Guarantor hereby waives all defenses of a surety or guarantor, and agrees that Lender shall not be required to resort to any other remedy or security which it may have, including, without limitation, the Property, before seeking to enforce its remedies against Original Guarantor. 7. Transferee acknowledges that Transferee is or will be the successor in interest to Transferor under the Loan Documents to which Transferor is a party (except the Original Indemnity Agreement and the Original Guaranty), as amended and modified hereby, and upon such event, Transferee, in addition to its liability to Lender pursuant to the other provisions of this Agreement and the New Indemnity Agreement, shall be liable, and Transferee does hereby reaffirm and ratify its liability and responsibility to Lender for, the Obligations, subject, however, to any limitation of liability provisions set forth in the Loan Documents, as amended and modified hereby. 8. Transferor hereby represents and warrants to Lender, as follows: (a) Transferor is a limited partnership, duly formed and validly existing under the laws of the State of Michigan, with the requisite limited partnership power and authority to execute, deliver and perform the obligations of Transferor under this Agreement and to consummate the transactions contemplated hereunder and incident hereto; and further, the sole general partner of Transferor is Original Guarantor. (b) This Agreement, and any other document executed and delivered by Transferor to Lender concurrently herewith or incident hereto, were executed in accordance with the requirements of law and in accordance with any requirements of the Transferor Organizational Documents (as hereinafter defined) of Transferor. The term "Transferor Organizational Documents," as used in this paragraph 8, shall mean with respect to Transferor: (i) the Agreement of Limited Partnership of Transferor, dated May 18, 1987, as amended on April 21, 1989 and on May 1, 1990 and Certificate of Limited Partnership of Transferor dated October 11, 1989, as amended on May 14, 1996, 5 on May 16, 2001 and on April 4, 2002; (ii) the Certificate of Existence for Transferor issued by the Michigan Secretary of State on June 7, 2005; (iii) the Consents of the Partners of Transferor dated as of July 15 2005. Transferor's exact legal name is correctly set forth on the signature page hereof. Transferor's principal place of business and chief executive office, and the place where Transferor keeps its books and records, has been for the preceding four months as set forth in the introductory paragraph of this Agreement unless changed in accordance herewith. (c) The execution, delivery and performance of this Agreement by Transferor: (i) are authorized by the Transferor Organizational Documents; (ii) will not violate the Transferor Organizational Documents; and (iii) will not result in any breach of, or constitute a default under any law, statute, regulation, court order, administrative order, decree, indenture, mortgage, Mortgage, deed of trust, bank loan or credit agreement or other instrument, agreement, contract or document to which Transferor is a party or by which Transferor is bound. (d) Transferor has made no assignment for the benefit of creditors. (e) No application or petition has been filed or is intended to be filed by Transferor (or, to Transferor's knowledge, any other party) for the appointment of a custodian, trustee, receiver or agent to take possession of any property of Transferor. (f) Transferor is paying Transferor's debts as such debts become due. (g) Transferor has not filed and does not presently intend to file a petition with the bankruptcy court under the Bankruptcy Code, or commenced and does not intend to commence any proceeding relating to Transferor under any bankruptcy or reorganization statute or under any arrangement, insolvency, readjustment of debt, dissolution or liquidation law of any jurisdiction. (h) No petition or application of the type described in subparagraph (e) or (g) above, and no proceeding of the type described in subparagraph (e) above, has been filed or commenced against Transferor, in which: (i) Transferor or any custodian, trustee, receiver or agent has indicated or intends to indicate its approval thereof, consent thereto, or acquiescence therein; (ii) an order has been or is expected to be entered appointing any such custodian, trustee, receiver or agent, declaring Transferor bankrupt or insolvent, or approving such petition or application in any such proceeding; (iii) the bankruptcy court has ordered or is expected to order relief against Transferor under the Bankruptcy Code; or (iv) such petition or application was not dismissed within thirty (30) days of such filing or commencement. (i) Transferor has been separately represented by counsel in connection with the negotiation, execution and delivery of this Agreement, or if not so separately represented, has waived such representation by its respective signature hereto. 6 (j) There is no action or proceeding pending or, to the knowledge of Transferor, threatened against Transferor or the Property before any court or administrative agency which might result in any material adverse change in the business or financial condition of Transferor, or the Property, other than those matters disclosed in writing by Transferor to Lender. (k) No Default, default, Event of Default or event of default, nor event which with the giving of notice, the passage of time, or both, would become a Default, default, Event of Default or event of default, exists or has occurred hereunder or in connection with the Loan Documents. 9. Transferee hereby represents and warrants to Lender as follows: (a) Transferee is a corporation, duly formed and validly existing under the laws of the State of Michigan. Transferee possesses the requisite corporate power and authority to execute, deliver, perform and assume this Agreement, the New Indemnity Agreement and the Obligations and to consummate the transactions contemplated hereunder and incident hereto. (b) This Agreement, the New Indemnity Agreement and any other document executed and delivered by Transferee to Lender concurrently herewith or incident hereto, were executed in accordance with the requirements of law and in accordance with any requirements of the Transferee Organizational Documents (as hereinafter defined) of Transferee. The term "Transferee Organizational Documents," as used in this paragraph 9, shall mean with respect to Transferee: (i) the Articles of Incorporation and Bylaws of Transferee dated April 28, 1998 (as restated May 8, 2002) and April 28, 1998, respectively; (ii) the Certificates of Incorporation and Existence/Good Standing for Transferee issued by the Michigan Secretary of State dated April 28, 1998 and June 2, 2005, respectively; and (iii) Consents of the directors of Transferee dated July 13, 2005. Transferee covenants and agrees that it is and will continue to (x) be a duly organized and validly existing corporation in good standing under the laws of the State of Michigan, and (y) possess all requisite corporate power and authority to carry on its business. Transferee's exact legal name is correctly set forth on the signature page hereof. Transferee's principal place of business and chief executive office, and the place where Transferee keeps its books and records, has been for the preceding four months and will continue to be the address of Transferee set forth in the introductory paragraph of this Agreement unless changed in accordance herewith. Transferee shall notify Lender in writing of any change in Transferee's principal place of business or its chief executive office or the place where Transferee keeps its books and records at least thirty (30) days prior to the date of such change. Transferee's organizational identification number assigned by the State of Michigan is File No. 525-851 and Transferee's Federal Employer Identification Number is 38-3418631. Transferee shall promptly notify Lender of any change in its organizational identification number. (c) The execution, delivery, performance and assumption of this Agreement, the New Indemnity Agreement, the Obligations and any other document executed and 7 delivered by Transferee to Lender concurrently herewith or incident hereto: (i) are authorized by the Transferee Organizational Documents; (ii) will not violate the Transferee Organizational Documents; and (iii) will not result in any breach of, or constitute a default under any law, statute, regulation, any court order, decree, administrative order, indenture, mortgage, Mortgage, deed of trust, bank loan or credit agreement or other instrument to which Transferee is a party or by which Transferee is bound. (d) Transferee has made no assignment for the benefit of creditors. (e) No application or petition has been filed or is intended to be filed by Transferee (or, to Transferee's knowledge, any other party) for the appointment of a custodian, trustee, receiver or agent to take possession of any property of Transferee. (f) Transferee is paying its respective debts as such debts become due. (g) Transferee has not filed and does not presently intend to file a petition with the bankruptcy court under the Bankruptcy Code, or commenced and does not intend to commence any proceeding relating to Transferee under any bankruptcy or reorganization statute or under any arrangement, insolvency, readjustment of debt, dissolution or liquidation law of any jurisdiction. (h) No petition or application of the type described in subparagraph (e) or (g) above, and no proceeding of the type described in subparagraph (e) above, has been filed or commenced against Transferee, in which: (i) Transferee or any custodian, trustee, receiver or agent has indicated or intends to indicate its approval thereof, consent thereto, or acquiescence therein; (ii) an order has been or is expected to be entered appointing any such custodian, trustee, receiver or agent, declaring Transferee bankrupt or insolvent, or approving such petition or application in any such proceeding; (iii) the bankruptcy court has ordered or is expected to order relief against Transferee under the Bankruptcy Code; or (iv) such petition or application was not dismissed within thirty (30) days of such filing or commencement. (i) Transferee is experienced in the ownership, operation, management and financing of real property similar to the Property, and Transferee has been separately represented by counsel in connection with the negotiation, execution and delivery of this Agreement, or if not so separately represented, has waived such representation by its signature hereto. (j) There is no action or proceeding pending or, to the knowledge of Transferee, threatened against Transferee or the Property before any court or administrative agency which might result in any material adverse change in the business or financial condition of Transferee or the Property, other than those matters disclosed in writing by Transferee to Lender. 8 (k) No Default, default, Event of Default or event of default, nor event which with the giving of notice, the passage of time, or both, would become a Default, default, Event of Default or event of default, exists or has occurred hereunder or in connection with the Loan Documents to which Transferee is a party or the New Indemnity Agreement. 10. Original Guarantor hereby represents and warrants to Lender as follows: (a) Original Guarantor is of legal age and under no legal disability, with the requisite legal capacity to execute, deliver and perform and assume this Agreement, the Original Indemnity Agreement, the Original Guaranty and the Continuing Original Guarantor Obligations and to consummate the transactions contemplated hereunder and incident hereto, and further, Original Guarantor is a resident of the State of Florida. (b) This Agreement, the Original Indemnity Agreement, the Original Guaranty and any other document executed and delivered by Original Guarantor to Lender concurrently herewith or incident hereto were executed in accordance with the requirements of law. (c) The execution, delivery, performance and assumption of this Agreement, the Original Indemnity Agreement, the Original Guaranty, the Continuing Original Guarantor Obligations and any other document executed and delivered by Original Guarantor to Lender concurrently herewith or incident hereto will not result in any breach of, or constitute a default under any law, statute, regulation, any court order, decree, administrative order, indenture, mortgage, Mortgage, deed of trust, bank loan or credit agreement or other instrument to which Original Guarantor is a party or by which Original Guarantor is bound. (d) Original Guarantor has made no assignment for the benefit of creditors. (e) No application or petition has been filed or is intended to be filed by Original Guarantor (or, to Original Guarantor's knowledge, any other party) for the appointment of a custodian, trustee, receiver or agent to take possession of any property of Original Guarantor. (f) Original Guarantor is paying Original Guarantor's debts as such debts become due. (g) Original Guarantor has not filed and does not presently intend to file a petition with the bankruptcy court under the Bankruptcy Code, or commenced and does not intend to commence any proceeding relating to Original Guarantor under any bankruptcy or reorganization statute or under any arrangement, insolvency, readjustment of debt, dissolution or liquidation law of any jurisdiction. (h) No petition or application of the type described in subparagraph (e) or (g) above, and no proceeding of the type described in subparagraph (e) above, has been filed 9 or commenced against Original Guarantor, in which: (i) Original Guarantor or any custodian, trustee, receiver or agent has indicated or intends to indicate its approval thereof, consent thereto, or acquiescence therein; (ii) an order has been or is expected to be entered appointing any such custodian, trustee, receiver or agent, declaring Original Guarantor bankrupt or insolvent, or approving such petition or application in any such proceeding; (iii) the bankruptcy court has ordered or is expected to order relief against Original Guarantor under the Bankruptcy Code; or (iv) such petition or application was not dismissed within thirty (30) days of such filing or commencement. (i) Original Guarantor: (i) is experienced in the ownership, operation, management and financing of real property similar to the Property, and (ii) has been separately represented by counsel in connection with the negotiation, execution and delivery of this Agreement, or if not so separately represented, has waived such representation by Original Guarantor's signatures hereto. (j) There is no action or proceeding pending or, to the knowledge of Original Guarantor, threatened in writing against Original Guarantor or the Property before any court or administrative agency which might result in any material adverse change in the business or financial condition of Original Guarantor or the Property, other than those matters disclosed in writing by Original Guarantor to Lender. (k) To the best of its knowledge, no Default, default, Event of Default or event of default, nor event which with the giving of notice, the passage of time, or both, would become a Default, default, Event of Default or event of default, exists or has occurred hereunder or under the Loan Documents to which Original Guarantor is a party, or the New Indemnity Agreement. 11. In consideration of the mutual agreements herein contained, Transferor and Original Guarantor hereby consents to this Agreement and the transactions and the other documents contemplated hereunder and incident hereto, and further, as of the Effective Date, forever release and discharge Lender and any and all of its officers, directors, agents, servants, employees, attorneys, successors and assigns, jointly and severally, from any and all claims, demands, controversies, actions, causes of action, obligations, liabilities, costs, expenses, attorneys' fees and damages of whatsoever character, nature and kind, at law or in equity, arising from or related in any way to the Loan, the Loan Documents, as amended, or the Property, to the extent arising prior to or existing as of the Effective Date, or arising thereafter from or in any way related to any act or omission occurring or commencing prior to the Effective Date (individually and collectively, "Liabilities"). It is the intention of such parties that the foregoing release shall be effective as a bar against Transferor and Original Guarantor as to all Liabilities. 12. Transferor does hereby assign, convey and set over to Transferee all of Transferor's rights, title and interest to any and all real estate tax and insurance escrow accounts, security deposits, rents, insurance loss drafts, condemnation awards (including any proceeds received in exchange for a conveyance made in lieu of condemnation) and other monetary accounts and escrows used in and for the operation of the Property, including, without limitation, any and all accounts and any deposits therein currently being held by Lender. 10 13. In consideration of the mutual agreements herein contained, Transferee and Lender each hereby consent to this Agreement and the transactions and the other documents contemplated hereunder and incident hereto, and further, as of the Effective Date, Transferee forever releases and discharges Lender and any and all of its officers, directors, agents, servants, employees, attorneys, successors and assigns, jointly and severally, in each case from any and all Liabilities. It is the intention of such parties that the foregoing release shall be mutual and effective as a bar against Transferee as to all Liabilities of Lender. 14. Transferor's, Transferee's and Original Guarantor's addresses for notice purposes hereunder and under the Loan Documents, as amended and modified hereby, shall be as set forth in the introductory paragraph of this Agreement. 15. All of the Loan Documents shall be and hereby are modified only to the extent necessary to be consistent with and reflect the modifications set forth in this Agreement as well as the giving of additional collateral security of the New Indemnity Agreement. All references in the Loan Documents to the terms "Note," "Mortgage" (or any similar variation thereof) or to any of the other Loan Documents shall be deemed to refer to the Note and the Mortgage (or any similar variation thereof) or to any of the other Loan Documents, as the case may be, as amended and modified by this Agreement, and as any of such documents may be further modified, amended or extended. It is understood and agreed that the Mortgage, the Original Indemnity Agreement, the New Indemnity Agreement, the Original Guaranty and this Agreement secure, among other things, the payment and performance of the Note and the Mortgage, all of the foregoing as may be amended and modified by this Agreement. 16. This Agreement, to the extent it modifies the Loan Documents, is an amendment and modification only, and except as herein provided, all of the terms and conditions of the Loan Documents shall remain in full force and effect, and Transferee hereby reaffirms, ratifies and confirms the security and enforceability of the Loan Documents, as modified herein (other than the Original Guaranty and the Original Indemnity Agreement) and the New Indemnity Agreement and Original Guarantor ratify and confirm to Lender the enforceability of the Continuing Original Guarantor Obligations. 17. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective heirs, personal representatives, successors and assigns and the subsequent holders or owners of the Note and the Loan Documents. This Agreement may be executed in any number of counterparts, all of which shall constitute but one and the same document. This Agreement shall be governed by, construed and interpreted in accordance with the laws of the State of Michigan, without reference to its conflicts of laws principles. 18. Transferor, Transferee and Original Guarantor agree that if, and as often as this Agreement, any of the Loan Documents or the New Indemnity Agreement are placed in the hands of an attorney for collection or to defend or enforce any of Lender's rights hereunder or thereunder, Transferee and Original Guarantor (for and on behalf of Transferor and Original Guarantor), whichever is the applicable defendant or adverse party or potential defendant or adverse party, shall pay to Lender its reasonable attorney's fees and paralegal's fees, and costs, including, without limitation, all fees, and costs incurred in litigation, mediation, arbitration, 11 bankruptcy and administrative proceedings, and appeals therefrom, and all court costs and other expenses, including, without limitation, appraisal fees and costs of environmental review, incurred in connection herewith and therewith. 19. Transferee does hereby authorize Lender to file such financing statements or amendments on the national Uniform Commercial Code ("UCC") forms prescribed under, and in accordance with Article 9 of the UCC as now in effect in Michigan, in the Michigan Secretary of State's Office and the Oakland County Clerk/Register of Deeds Office, in either or both the real estate records and the UCC Financing Statement records), as may be applicable, and to take such other action as may be necessary to perfect, amend or continue Lender's security interest in the property described in the Loan Documents and herein and in which a security interest is granted and to effectuate the intentions of the parties hereunder. 20. The parties hereto authorize Security Union Title Insurance Company to fill in the blank in the first paragraph on the first page hereof (i.e. the Effective Date). 21. This Agreement shall not be effective unless it is recorded in the Office of the Clerk/Register of Deeds of Oakland County, Michigan. 22. By its execution hereof, Lender consents to the transactions described herein. Lender hereby confirms that as of the Effective Date the outstanding principal balance of the Loan is Two Million Five Hundred Five Thousand Two Hundred Nine and 98/100 Dollars ($2,505,209.98). Lender hereby confirms that as of the Effective Date, Lender has not advised Transferor of and has no knowledge of the occurrence of any default, Default, event of default or Event of Default or any event which with the passage of time or giving of notice or both would become a default, Default, event of default or Event of Default under the Loan Documents. 23. Any default or breach hereunder by Transferee shall constitute a default or Event of Default (as may be applicable) under the Loan Documents and the New Indemnity Agreement, and such documents are hereby further amended and modified to reflect and include such additional default or Event of Default (as may be applicable) provision. Any breach or default hereunder by Transferor or Original Guarantor shall constitute a default or Event of Default (as may be applicable) under the Original Indemnity Agreement and the Original Guaranty, but shall not constitute a default or Event of Default under the other Loan Documents, as amended hereby or the New Indemnity Agreement. 24. The representations and warranties of Transferor, Transferee and Original Guarantor contained herein are for the sole and exclusive benefit of Lender and may not be relied upon by any other party hereto or any third party. 12 IN WITNESS WHEREOF, this Assumption and Modification Agreement has been executed to be effective (although not necessarily executed) as of the Effective Date. LENDER IDS LIFE INSURANCE COMPANY, a Minnesota corporation By: /s/ Marilyn J. Vogel ------------------------------------- (Signature), Assistant Vice President Marilyn J. Vogel (Printed), Assistant Vice President and By: /s/ Elizabeth J. St. Julien ------------------------------------- (Signature), Assistant Secretary Elizabeth J. St. Julien (Printed), Assistant Secretary TRANSFEROR NORTHWESTERN ZODIAC LIMITED PARTNERSHIP, a Michigan limited partnership By: /s/ S. James Clarkson ------------------------------------- S. James Clarkson, its sole general partner STATE OF MINNESOTA ) ) SS: COUNTY OF HENNEPIN ) Before me, a Notary Public, in and for said county and state this 16 day of August, 2005, personally appeared IDS Life Insurance Company, a Minnesota corporation, by Marilyn J. Vogel, its Assistant Vice President and by Elizabeth J. St. Julien, its Assistant Secretary, who acknowledged for and on behalf of the corporation the execution of the foregoing Assumption and Modification Agreement as the free and voluntary act and deed of said corporation. Witness my hand and Notarial Seal. /s/ Nancy L. Bachmeier ---------------------------------------- Notary Public Nancy L. Bachmeier Printed Name My Commission Expires: (SEAL) 15 IN WITNESS WHEREOF, this Assumption and Modification Agreement has been executed to be effective (although not necessarily executed) as of the Effective Date. LENDER IDS LIFE INSURANCE COMPANY, a Minnesota corporation By: /s/ Marilyn J. Vogel ------------------------------------ (Signature), Assistant Vice President Marilyn J. Vogel ------------------------------------ (Printed), Assistant Vice President and By: /s/ Elizabeth J. St. Julien ------------------------------------ (Signature), Assistant Secretary Elizabeth J. St. Julien ------------------------------------ (Printed), Assistant Secretary TRANSFEROR NORTHWESTERN ZODIAC LIMITED PARTNERSHIP, a Michigan limited partnership By: /s/ S. James Clarkson ------------------------------------ S. James Clarkson, its sole general partner STATE OF Michigan ) ) SS: COUNTY OF Oakland ) Before me, a Notary Public, in and for said county and state this 15th day of August, 2005, personally appeared Northwestern Zodiac Limited Partnership, a Michigan limited partnership by S. James Clarkson, its sole general partner, who acknowledged for and on behalf of the limited partnership the execution of the foregoing Assumption and Modification Agreement as the free and voluntary act and deed of said limited partnership. Witness my hand and Notarial Seal. /s/ M. M. Bennett ---------------------------------------- Notary Public M. M. Bennett ---------------------------------------- Printed Name My Commission Expires: M. M. Bennett 6-1-08 Notary Public, Macomb County, MI My Commission Expires: 06-01-08 Acting in Oakland County, MI 16 TRANSFEREE NORTH POINTE FINANCIAL SERVICES, INC., a Michigan corporation By: /s/ John H. Berry CFO ------------------------------------ (Signature), (Title) JOHN H. BERRY CFO ---------------------------------------- (Printed), Title ORIGINAL GUARANTOR /s/ S. James Clarkson ---------------------------------------- S. James Clarkson, individually 14 STATE OF Michigan ) ) SS: COUNTY OF Oakland ) Before me, a Notary Public, in and for said county and state this 18th day of August, 2005, personally appeared North Pointe Financial Services, Inc., a Michigan corporation by John H. Berry, its Chief Financial Officer who acknowledged for and on behalf of the corporation the execution of the foregoing Assumption and Modification Agreement as the free and voluntary act and deed of said corporation. Witness my hand and Notarial Seal. /s/ Judith Wikman ---------------------------------------- Notary Public Judith Wikman ---------------------------------------- Printed Name My Commission Expires: ( JUDITH WIKMAN ) (NOTARY PUBLIC STATE OF MICHIGAN) ( OAKLAND COUNTY ) (MY COMMISSION EXP. NOV. 9, 2005) 17 STATE OF Michigan ) ) SS: COUNTY OF Oakland ) Before me, a Notary Public, in and for said county and state this 15th day of August, 2005, personally appeared S. James Clarkson, individually, who acknowledged the execution of the foregoing Assumption and Modification Agreement as his free and voluntary act and deed. Witness my hand and Notarial Seal. /s/ M. M. Bennett ---------------------------------------- Notary Public M. M. Bennett ---------------------------------------- Printed Name My Commission Expires: M. M. BENNETT 6-1-08 Notary Public, Macomb County, MI My Commission Expires: 06-01-08 Acting in Oakland County, MI 18 EXHIBIT "A" LEGAL DESCRIPTION LEGAL DESCRIPTION: City of Southfield, Oakland County, Michigan Lots 4 and 36, Supervisor's Plat No. 4, part of the West 1/2 of Northeast 1/4 of Section 18, Town 1 North, Range 10 East, City of Southfield, Oakland County, Michigan, as recorded in Liber 52 of Plats, Page 44, Oakland County Records, more particularly described as beginning at the Northeast corner of Lot 4, and proceeding thence South 49 degrees 03 minutes 50 seconds West, 597.00 feet; thence North 40 degrees 56 minutes 10 seconds West, 132.00 feet along the Northerly line of Wilhelm Avenue, 60 feet wide; thence North 49 degrees 03 minutes 50 seconds East, 597.00 feet; thence South 40 degrees 56 minutes 10 seconds East, 132.00 feet along the Southerly line of Franklin Road, 66 feet wide, to the point of beginning. 28819 FRANKLIN ROAD 24-18-201-053 19 EX-10.48 18 k02899exv10w48.txt AMENDMENT NO. 5 TO AMENDED AND RESTATED CREDIT AGREEMENT, DATED SEPTEMBER 22, 2005 EXHIBIT 10.48 AMENDMENT NO. 5 TO AMENDED AND RESTATED CREDIT AGREEMENT This Amendment No. 5 to Amended and Restated Credit Agreement ("Amendment") dated as of September 22, 2005 by and among the lenders signatories hereto ("Banks"), Comerica Bank as agent for the Banks (in such capacity, "Agent"), and North Pointe Holdings Corporation, a Michigan corporation ("Company"). RECITALS A. Company and Banks entered into that certain Amended and Restated Credit Agreement dated as of January 26, 2004, as amended by four amendments ("Agreement"). B. The parties desire to amend the Agreement. NOW, THEREFORE, the parties agree that the Agreement and the Term Notes are amended as follows: 1. The following definitions in Section 1 of the Agreement are amended to read in their entireties as follows: " 'Change of Control' shall mean the occurrence of either: (A) (i) any person or group of persons (within the meaning of Rule 13d-3 promulgated by the SEC under the Securities Exchange Act of 1934, as amended), other than the Investors or any Affiliates of the Investors or a person approved in advance by the Majority Banks (a "Permitted Transferee"), shall have acquired beneficial ownership (within the meaning of such Rule 13d-3) of 25% or more of the equity interests of the Company generally having the right to vote through the acquisition of such equity interests from the Investors or any Affiliates of the Investors; and (ii) the Investors and any Affiliates of the Investors shall, collectively, cease to be the beneficial owners (within the meaning of such Rule 13d-3) of at least 25% or more of the equity interests of the Company generally having the right to vote by virtue of the sale or other transfer of equity interests to any Person which is not an Investor, an Affiliate of the Investors or a Permitted Transferee of the Investors; or (B) Company shall cease to own directly or indirectly, at least 100% of the common equity interests of its Subsidiaries. 'Investor' shall mean any person or group of persons (within the meaning of Rule 13d-3 promulgated by the SEC under the Securities Exchange Act of 1934, as amended) who held beneficial ownership of at least 51% of the voting stock of the Company, or who was a director or employee of Company or its Subsidiaries on September 1, 2005, and any affiliate of any such person. " 2. Section 8.1(i) of the Agreement is amended to read in its entirety as follows: "(i) if a Change of Control shall occur;" 3. Company hereby represents and warrants that, after giving effect to the amendments contained herein, (a) execution, delivery and performance of this Amendment and any other documents and instruments required under this Amendment or the Agreement are within Company's powers, have been duly authorized, are not in contravention of law or the terms of the Company's Articles of Incorporation or Bylaws and do not require the consent or approval of any governmental body, agency, or authority; and this Amendment and any other documents and instruments required under this Amendment or the Agreement, will be valid and binding in accordance with their terms; (b) the representations and warranties of Company set forth in Sections 5.1 through 5.6 and 5.8 through 5.21 of the Agreement are true and correct in all material respects on and as of the date hereof with the same force and effect as if made on and as of the date hereof; (c) the representations and warranties of Company set forth in Section 5.7 of the Agreement are true and correct in all material respects as of the date hereof with respect to the most recent financial statements furnished to the Bank by Company in accordance with Section 6.1 of the Agreement; and (d) no Event of Default, or condition or event which, with the giving of notice or the running of time, or both, would constitute an Event of Default under the Agreement, has occurred and is continuing as of the date hereof. 4. This Amendment shall be effective upon (a) execution hereof by Company and Agent (for and on behalf of the Banks) and (b) execution by the Guarantors of a reaffirmation of Guaranty in the form attached hereto as Exhibit A. 5. This Amendment may be signed in any number of counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument. 6. Capitalized terms not defined herein shall have the meanings given to them in the Agreement. WITNESS the due execution hereof as of the day and year first above written. COMERICA BANK, AS AGENT NORTH POINTE HOLDINGS CORPORATION By: /s/ Michael P. Stapleton By: /s/ Bradford T. Lyons --------------------------------- ------------------------------------ Michael P. Stapleton Its: Senior V.P. Underwriting Its: First Vice President BANKS: COMMERICA BANK By: /s/ Michael P. Stapleton ------------------------------------ Its: F.V.P. FIFTH THIRD BANK By: /s/ John Bebb ------------------------------------ Its: V.P. JPMORGAN CHASE BANK N.A., SUCCESSOR BY MERGER TO BANK ONE N.A. By: /s/ Rick Ellis ------------------------------------ Its: Senior Vice President EXHIBIT A The undersigned previously executed and delivered to Comerica Bank, as Agent, a Guaranty dated January 26, 2004 ("Guaranty") with respect to the obligations and liabilities of North Pointe Holdings Corporation ("Borrower") to Comerica Bank, Fifth Third Bank and Bank One N.A. The undersigned acknowledge the foregoing amendment to the Amended and Restated Credit Agreement dated January 26, 2004 between Borrower, Comerica Bank as Agent and the lenders party to the Credit Agreement. The undersigned acknowledge and agree that the Guaranty remains in full force and effect in accordance with its terms and that the undersigned have no defense or setoff to their respective obligations under the Guaranty. Dated: September 22, 2005 NORTH POINTE FINANCIAL SERVICES, INC. By: /s/ Bradford T. Lyons ------------------------------------ Its: V.P. N.P. PREMIUM FINANCE COMPANY By: /s/ B. Matthew Petcoff ------------------------------------ Its: Executive Vice President 4 EX-21.1 19 k02899exv21w1.txt SUBSIDIARIES OF NORTH POINTE HOLDINGS CORPORATION . . . EXHIBIT 21.1 NORTH POINTE GROUP-CORPORATE ORGANIZATIONAL CHART James G. Petcoff Majority Shareholder MI 32.09% of issued shares | | | North Pointe Holdings Corporation Fed ID# 38-3615047 MI 100% | | | -------------------------------------------------------------------------------------- | | | | | | | | | | | | North Pointe Financial Midfield Insurance Company Alliance Surety Holdings Inc. NP Capital Trust I Services, Inc. Fed ID# 05-0614676 Fed ID# 52-2114969 DE 100% Fed ID# 38-3418631 DC 100% DE 100% MI 100% | | | --------------------------------------------------------------------------------------------------------------- | | | | | | | | | | | | | | | | | | North Pointe South Pointe Financial NP Premium Finance North Pointe Casualty Home Pointe Home Pointe Managing Insurance Company Services, Inc. Company Insurance Company Insurance Company General Agency, Inc. Fed ID# 38-2706529 Fed ID# 61-1451765 Fed ID# 38-2742963 Fed ID# 59-1993236 Fed ID# 56-2512990 Fed ID# 20-2496020 MI NAIC# 27740 100% MI 100% MI 100% FL NAIC# 39462 100% FL NAIC# 11072 100% FL 100%

EX-31.1 20 k02899exv31w1.txt CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO RULE 13A-14(A) EXHIBIT 31.1 CERTIFICATIONS I, James G. Petcoff, certify that: 1. I have reviewed this annual report on Form 10-K of North Pointe Holdings Corporation; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: March 21, 2006 /s/ James G. Petcoff ----------------------- James G. Petcoff, Chief Executive Officer 1 EX-31.2 21 k02899exv31w2.txt CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO RULE 13A-14(A) EXHIBIT 31.2 CERTIFICATIONS I, John H. Berry, certify that: 1. I have reviewed this annual report on Form 10-K of North Pointe Holdings Corporation; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect 1 the registrant's ability to record, process, summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: March 21, 2006 /s/ John H. Berry --------------------- John H. Berry, Chief Financial Officer 2 EX-32 22 k02899exv32.txt CERTIFICATION OF CHIEF EXECUTIVE OFFICER & CHIEF FINANCIAL OFFICER TO 18 U.S.C. SECTION 1350 EXHIBIT 32.1 CERTIFICATIONS OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report of North Pointe Holdings (the "Company") on Form 10-K for the year ended December 31, 2005 as filed with the Securities and Exchange Commission on the date hereof (the "Periodic Report"), we, James G. Petcoff, Chief Executive Officer of the Company, and John H. Berry, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: 1. the Periodic Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. the information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Dated: March 21, 2006 /s/ James G. Petcoff ----------------------------------------- James G. Petcoff, Chief Executive Officer Dated: March 21, 2006 /s/ John H. Berry ----------------------------------------- John H. Berry, Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----


þ		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

		For the fiscal year ended December 31, 2005

OR

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

		For the transition period from to


Michigan		38-3615047
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

28819 Franklin Road		48034
Southfield, Michigan (Address of principal executive offices)		(Zip Code)


Title of Each Class		Name of Each Exchange on Which Registered

Common Stock, No par value		Nasdaq Stock Market


		Part and Item Number of
Document		Form 10-K into Which Incorporated

North Pointe Holdings Corporation Notice of Annual Meeting of Shareholders and Proxy Statement for the Annual Meeting of Shareholders to be held June 21, 2006		Part III, Items 10 through 14


		PAGE
PART I:
Item 1.	Business		3
Item 1A.	Risk Factors		24
Item 2.	Properties		36
Item 3.	Legal Proceedings		36
Item 4.	Submission of Matters to a Vote of Security Holders		36
PART II:
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities		37
Item 6.	Selected Financial Data		38
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		41
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk		62
Item 8.	Financial Statements and Supplementary Data		64
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		66
Item 9A.	Controls and Procedures		66
PART III:
Item 10.	Directors and Executive Officers of the Registrant		67
Item 11.	Executive Compensation		67
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		67
Item 13.	Certain Relationships and Related Transactions		67
Item 14.	Principal Accountant Fees and Services		67
PART IV:
Item 15.	Exhibits, Financial Statement Schedules, and Reports on Form 8-K		67
Item 15(a)(1).	Financial Statements and Report of Independent Registered Public Accounting Firm		67
Item 15(a)(2).	Financial Statement Schedules		98
Item 15(a)(3).	Exhibit Index		109
Junior Subordinate Indenture, dated as of February 22, 2006
Form of Floating Rate Junior Subordinated Note Due 2036
Form of Preferred Securities Certificate of NP Capital Trust I
Form of Certificate Evidencing Common Securities of NP Capital Trust I
Line of Credit Loan Agreement, dated March 4, 2005
Line of Credit Note, dated March 4, 2005
Consulting Agreement, dated March 5, 2003
Consulting Agreement, dated September 30, 2005
Trust Agreement of NP Capital Trust I, dated as of February 21, 2006
Amended and Restated Trust Agreement, dated as of February 22, 2006
Guarantee Agreement, dated February 22, 2006
Purchase Agreement, dated as of February 22, 2006
Junior Subordinated Note Purchase Agreement, dated as of February 22, 2006
Waiver and Consent Letter Dated February 21, 2005
Waiver Letter Dated February 28, 2005 to the Amended and Restated Credit Agreement
Assumption of Mortgage Agreement for the Purchase Agreement, dated 8/18/2005
Amendment No. 5 to Amended and Restated Credit Agreement, dated September 22, 2005
Subsidiaries of North Pointe Holdings Corporation
Certification of Chief Executive Officer pursuant to Rule 13a-14(a)
Certification of Chief Financial Officer pursuant to Rule 13a-14(a)
Certification of Chief Executive Officer & Chief Financial Officer to 18 U.S.C. Section 1350


Large accelerated filer o	Accelerated filer o	Non-accelerated filer þ


		Years Ended December 31,

		2005				2004				2003

				% of				% of				% of
		Amount		Total		Amount		Total		Amount		Total

		(Dollars in thousands)
Commercial Lines:
Liquor liability		$	10,913		12.9%	$	10,818		14.1%	$	9,790		14.2%
General liability			12,807		15.1%		10,734		13.9%		8,005		11.6%

	Total liability		23,720		28.0%		21,552		28.0%		17,795		25.8%
Property			6,299		7.4%		7,129		9.3%		5,258		7.6%
Commercial multi-peril			22,230		26.2%		18,968		24.6%		13,313		19.4%
Commercial automobile			6,156		7.3%		5,412		7.0%		6,928		10.1%
Other			2,661		3.2%		2,274		3.0%		2,182		3.2%

	Total commercial lines		61,066		72.1%		55,335		71.9%		45,476		66.1%

Personal Lines:
Automobile			1,459		1.7%		15,109		19.6%		16,675		24.3%
Homeowners			22,211		26.2%		6,513		8.5%		6,589		9.6%

	Total personal lines		23,670		27.9%		21,622		28.1%		23,264		33.9%

Total net premiums earned		$	84,736		100.0%	$	76,957		100.0%	$	68,740		100.0%


	Years Ended December 31,

				2004(1)
State	2005			(Pro Forma)			2004			2003

Florida		60.6	%		45.1	%		36.3	%		28.6	%
Michigan		22.0	%		30.1	%		43.8	%		47.3	%
Indiana		5.2	%		8.4	%		6.8	%		6.3	%
Illinois		3.8	%		6.6	%		5.3	%		10.8	%
Ohio		2.4	%		3.3	%		2.7	%		2.7	%
New York		1.1	%		1.5	%		1.2	%		0.0	%
Pennsylvania		1.2	%		0.9	%		0.7	%		0.1	%
Iowa		0.8	%		1.2	%		1.0	%		1.4	%
New Jersey		0.6	%		1.0	%		0.8	%		0.4	%
South Dakota		0.6	%		0.7	%		0.5	%		0.4	%
All others		1.7	%		1.2	%		0.9	%		2.0	%

		100.0	%		100.0	%		100.0	%		100.0	%


(1)	After giving effect to the sale of the new and renewal policy rights relating to our non-standard personal automobile insurance line in October 2004, as if such transaction had occurred on January 1, 2004.


	Net Reserves at December 31, 2005

	Personal Lines		Commercial Lines
	Segment		Segment		Total

	(Dollars in thousands)
Low end of range	$	6,764	$	45,902	$	52,666
Carried reserves		7,356		50,388		57,744
High end of range		9,283		52,254		61,537


	(1)	Includes $6.1 million of net reserves acquired on February 28, 2004 as part of the North Pointe Casualty acquisition.


		Years Ended December 31,

		1995		1996		1997		1998		1999		2000		2001		2002		2003		2004			2005

		(Dollars in thousands)
Cumulative amount of net liability paid as of:
	One year later	$	6,847	$	5,130	$	5,821	$	14,070	$	17,508	$	17,896	$	20,687	$	20,472	$	18,778	$	22,334
	Two years later		11,653		10,233		10,099		22,802		28,730		28,100		32,798		32,000		30,453
	Three years later		13,327		12,112		12,881		29,385		34,019		33,796		39,098		38,680
	Four years later		13,892		13,323		13,909		32,219		36,259		36,000		42,443
	Five years later		14,554		13,750		14,290		33,462		36,969		36,653
	Six years later		14,829		13,941		14,589		33,724		37,068
	Seven years later		14,870		14,127		14,563		33,752
	Eight years later		14,995		14,170		14,571
	Nine years later		14,996		14,169
	Ten years later		15,002

Gross liability — end of year			22,365		22,504		24,556		60,595		66,561		70,749		87,201		82,949		76,319		96,561			117,778
Reinsurance recoverable on unpaid losses			3,190		3,160		3,846		14,555		16,449		20,544		30,497		28,446		22,681		36,544			60,034

Net liability — end of year			19,175		19,344		20,710		46,040		50,112		50,205		56,704		54,503		53,638		60,017			57,744
Gross liability re-estimated-latest			19,324		18,168		20,285		49,827		59,333		66,017		73,393		67,321		70,290		98,255
Reinsurance recoverable on unpaid losses re-estimated-latest			4,235		3,898		5,591		15,547		21,047		26,390		27,588		20,659		24,266		43,673

Net liability re-estimated-latest			15,089		14,270		14,694		34,280		38,286		39,627		45,805		46,662		46,024		54,582

Gross cumulative redundancy (deficiency)		$	3,041	$	4,336	$	4,271	$	10,768	$	7,228	$	4,732	$	13,808	$	15,628	$	6,029	$	(1,694	)


Net liability for losses and loss expenses		$	19,175	$	19,344	$	20,710	$	46,040	$	50,112	$	50,205	$	56,704	$	54,503	$	53,638	$	60,017		$	57,744
Liability re-estimated as of:
	One year later		17,959		15,831		18,388		42,782		47,575		46,431		51,548		48,871		50,172		54,582
	Two years later		16,207		15,643		16,287		38,995		43,018		44,734		46,998		47,605		46,029
	Three years later		15,480		14,350		16,401		36,634		40,967		41,084		46,204		46,662
	Four years later		15,010		14,829		15,124		35,457		39,092		39,888		45,805
	Five years later		15,557		14,272		15,065		34,912		38,572		39,627
	Six years later		15,196		14,407		15,094		34,535		38,286
	Seven years later		15,256		14,449		14,871		34,280
	Eight years later		15,257		14,380		14,694
	Nine years later		15,154		14,270
	Ten years later		15,089

Net cumulative redundancy		$	4,086	$	5,074	$	6,016	$	11,760	$	11,826	$	10,578	$	10,899	$	7,841	$	7,614	$	5,435


				As of December 31,

				2005		2004		2003

				(Dollars in thousands)
Case:
	Commercial lines products
		Liability		$	13,180	$	11,679	$	11,132
		Property			8,246		7,482		256
		Commercial multi-peril			19,942		15,507		5,150
		Commercial automobile			4,325		5,132		7,540
		Other			772		764		271

			Total commercial lines		46,465		40,564		24,349

	Personal lines products
		Personal automobile			6,128		9,830		11,195
		Homeowners			8,893		1,400		1,637

			Total personal lines		15,021		11,230		12,832

Total					61,486		51,794		37,181

IBNR:
	Commercial lines products
		Liability		$	13,742	$	15,380	$	13,993
		Property			3,868		825		574
		Commercial multi-peril			14,613		10,600		5,224
		Commercial automobile			2,622		3,117		4,619
		Other			805		2,082		940

			Total commercial lines		35,650		32,004		25,350

	Personal lines products
		Personal automobile			9,451		12,115		13,388
		Homeowners			11,191		648		400

			Total personal lines		20,642		12,763		13,788

Total					56,292		44,767		39,138

Total:
	Commercial lines products
		Liability		$	26,922	$	27,059	$	25,125
		Property			12,114		8,307		830
		Commercial multi-peril			34,555		26,107		10,374
		Commercial automobile			6,947		8,249		12,159
		Other			1,577		2,846		1,211

			Total commercial lines		82,115		72,568		49,699

	Personal lines products
		Personal automobile			15,579		21,945		24,583
		Homeowners			20,084		2,048		2,037

			Total personal lines		35,663		23,993		26,620

Total				$	117,778	$	96,561	$	76,319


			2005					2004

					Percent of					Percent of
			Amount		Portfolio			Amount		Portfolio

			(Dollars in thousands)
Fixed-income:
	U.S. governmental and agency securities		$	20,672		14.5	%	$	33,146		28.8	%
	Foreign government			561		0.4	%		—		—
	Corporate securities			31,509		22.0	%		19,795		17.2	%
	Mortgage-backed securities			32,847		23.0	%		23,127		20.0	%
	Asset-backed securities			12,429		8.7	%		—		—

		Total fixed-income		98,018		68.6	%		76,068		66.0	%

Cash and cash equivalents				34,319		24.0	%		29,878		25.9	%
Equity securities:
	Common shares			10,001		7.0	%		9,280		8.1	%

		Total equity securities		10,001		7.0	%		9,280		8.1	%

	Other investments			553		0.4	%		—		—

		Total	$	142,891		100.0	%	$	115,226		100.0	%


Treasury and Government Agency		43.8	%
“AAA”		25.0	%
“AA”		4.4	%
“A”		18.2	%
“BBB”		8.6	%

	Total	100.0	%


Item 1.	*BUSINESS.*


	*Commercial Insurance Products*


	*Personal Insurance Products*


	*Administrative Services*


	•	the length of time and extent to which fair value of the security has been less than cost;

	•	the financial condition and near-term prospects of the issuer of the security; and

	•	our ability and willingness to hold the security until the fair value is expected to recover.


Reinsurer		A.M. Best Rating		Gross Amount Due

				(Dollars in
				thousands)
Swiss Reinsurance American Corporation			“A+” (Superior)	$	16,779
MCCA			N/A(1)		11,196
Florida Hurricane Catastrophe Fund			N/A(1)		7,210
QBE Reinsurance Corporation			“A” (Excellent)		5,458
Folksamerica Reinsurance Company			“A” (Excellent)		4,353
General Reinsurance Corporation			“A++” (Superior)		3,533
Lloyds Syndicate 2001 AML			“A” (Excellent)		3,396
Platinum Reinsurance Company			“A” (Excellent)		2,672
Hannover Re Ltd			“A” (Excellent)		2,579
XL Reinsurance American, Inc.			“A+” (Superior)		2,533
Rosemont Reinsurance Ltd.			“B” (Very Good)		2,221
Axis Specialty Insurance Company			“A” (Excellent)		2,189
Everest Reinsurance Company			“A+” (Superior)		2,100
Shelter Mutual Insurance Company			“A” (Excellent)		1,864
Lloyds Syndicate 2010 MMX			“A” (Excellent)		1,782
Ace Tempest Reinsurance Ltd.			“A+” (Superior)		1,294
Catlin Insurance Company			“A” (Excellent)		1,293
Transatlantic Insurance Company			“A+” (Superior)		1,206
PXRE Reinsurance Company			“B+” (Very Good)		1,171
All Other			“B++” or better		10,054

	Total			$	84,883


(1)	The MCCA and the Florida Hurricane Catastrophe Fund do not receive A.M. Best ratings.


Line of Business	Company Policy Limit	Reinsurance Coverage

Property (all lines except Florida Homeowners)	Up to $10.0 million per occurrence	Up to $9.75 million (in excess of $250,000) per occurrence
Property (Florida Homeowners)	Up to $2.0 million per occurrence	Up to $1.5 million (in excess of $500,000) per occurrence
Primary Liability	Up to $1.0 million per occurrence	Up to $750,000 (in excess of $250,000) per occurrence
Liability — Excess and Umbrella	Up to $4.0 million per occurrence	95% of up to $3.0 million (in excess of first $1.0 million) per occurrence
Corporate Clash	Up to $4.0 million per occurrence	Up to $3.0 million (in excess of first $1.0 million) per occurrence


	•	prior approval of the change in control of our company or our insurance companies;

	•	approval of the policy forms and premium rates of our insurance companies;

	•	standards of solvency, including statutory and risk-based capital requirements establishing the minimum amount of capital and surplus that must be maintained by our insurance companies;

	•	restrictions concerning which assets of our insurance companies are admissible for purposes of calculating their capital and surplus;

	•	licensing of insurers, their agents and various other insurance-related entities;

	•	advertising and marketing practices;

	•	restrictions on the nature, quality and concentration of the investments of our insurance companies;

	•	assessments by guaranty associations;

	•	restrictions on the ability of our insurance companies to pay dividends to North Pointe Financial, our stock holding company subsidiary;

	•	restrictions on transactions between our insurance companies and their affiliates;

	•	restrictions on the size of risks insurable under a single policy;

	•	rules requiring deposits for the benefit of policyholders;

	•	rules requiring certain methods of accounting;

	•	periodic examinations of our operations and finances;

	•	claims practices;

	•	rules prescribing the form and content of records of financial condition required to be filed; and

	•	rules requiring adequate reserves for unearned premium, losses and loss expense, or for other purposes.


	*Insolvency Funds and Associations; Mandatory Pools and Insurance Facilities*


Ratio	Usual Range		North Pointe Insurance Ratio

Change in net writings		+33% to -33%		-37.0	%


Ratio	Usual Range		North Pointe Casualty Ratio

Change in net writings		+33% to -33%		460%
Two-year overall operating ratio		+100% to n/a		113%
Gross change in surplus		+50% to -10%		-15%
Net change in adjusted surplus		+25% to -10%		-53%


	•	the availability of sufficient reliable data and our ability to properly analyze available data;

	•	the uncertainties that inherently characterize estimates and assumptions;

	•	our selection and application of appropriate pricing techniques; and

	•	changes in applicable legal liability standards and in the civil litigation system generally.


	•	identify, recruit and integrate new independent agents;

	•	properly design and price new and existing products and programs;

	•	identify profitable new geographic markets and product lines to enter;

	•	obtain necessary licenses;

	•	identify acquisition candidates and successfully execute and integrate acquisitions we undertake; and

	•	identify, hire and train new underwriting and claims handling employees.


	•	Required licensing. Our insurance company subsidiaries operate under licenses issued by various state insurance agencies. If a regulatory authority were to deny or delay granting a new license, our ability to enter that market quickly or offer new insurance products in that market would be substantially impaired. For example, we have been experiencing difficulty in obtaining a surplus lines license in the state of New York for North Pointe Insurance due to its current A.M. Best rating.

	•	Regulation of insurance rates and approval of policy forms. The insurance laws of most states in which we operate require insurance companies to file insurance rate schedules and policy forms for review and approval. If rate increases we deem necessary are not approved by a state insurance agency, we may not be able to respond to market developments and increased costs in that state. For example, we exited the California non-standard automobile insurance market beginning in 2001 due principally to difficulties in obtaining regulatory approval of desired rate increases. Likewise, if insurance policy forms we seek to use are not approved by a state insurance agency, our ability to offer new products and grow our business in that state would be substantially impaired.

	•	Restrictions on cancellation, non-renewal or withdrawal. Many states have laws and regulations restricting an insurance company’s ability to cease or significantly reduce its sales of certain types of insurance in that state. These laws and regulations could limit our ability to exit or reduce our business in unprofitable markets or discontinue unprofitable products. For example, we experienced difficulty in exiting the California non-standard automobile insurance market in a timely manner due to regulatory constraints on our ability to cease renewing existing policies.

	•	Transactions between insurance companies and their affiliates. Transactions between our subsidiary insurance companies and their affiliates generally must be disclosed to — and in some cases approved by — state insurance agencies. State insurance agencies may refuse to approve or delay their approval of a transaction, which may impact our ability to innovate or operate efficiently.


	•	the use of non-public consumer information and related privacy issues;

	•	the use of credit history in underwriting and rating;

	•	limitations on the ability to charge policy fees;

	•	limitations on types and amounts of investments;

	•	the payment of dividends;

	•	the acquisition or disposition of an insurance company or of any company controlling an insurance company;

	•	involuntary assignments of high-risk policies, participation in reinsurance facilities and underwriting associations, assessments and other governmental charges;

	•	reporting with respect to financial condition;

	•	periodic financial and market conduct examinations performed by state insurance department examiners; and

	•	with respect to our premium finance business, the federal Truth-in-Lending Act and similar state statutes. In states where premium finance statutes have not been enacted, we generally are subject to state usury laws that are applicable to consumer loans. State usury laws may limit the amount of interest we are allowed to charge our premium finance customers in these states.


Item 4.	*SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.*


Item 5.	MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES.


	Market Quotations

2005 Quarter Ended	High		Low		Dividends

September 30	$	12.45	$	11.60	$	—

December 31	$	15.90	$	11.15	$	—


			North Pointe Holdings Corporation												Predecessor Companies

												As of and for
												the Period
												from			As of and for			As of and for
												June 26, 2002			the Period			the Year
			As of and for the Year Ended									through			Ended			Ended
			December 31,									December 31,			June 25,			December 31,

			2005(1)			2004(2)			2003			2002			2002			2001

			(Dollars in thousands, except per share and ratio data)
Statements of Operations Data:
Revenues:
	Direct premiums written		$	111,483		$	94,548		$	88,036		$	38,757		$	38,667		$	76,113
	Assumed premiums written			613			1,913			167			73			154			11,775	(3)

	Gross premiums written			112,096			96,461			88,203			38,830			38,821			87,888

	Net premiums written			87,133			80,493			76,224			29,674			30,023			73,597

	Net premiums earned		$	84,736		$	76,957		$	68,740		$	23,815		$	31,078		$	63,382
	Investment income, net of investment expenses			4,003			2,377			2,174			1,452			1,822			4,641
	Net realized capital gains (losses)			(168	)		886			1,264			976			(108	)		2,542
	Fees and other income			1,903			2,222			2,047			1,155			1,424			4,095
	Gains on sales of businesses(4)			—			4,285			200			—			—			—

		Total revenues		90,474			86,727			74,425			27,398			34,216			74,660
Expenses:
	Loss and loss adjustment expenses, net			44,003			41,503			33,141			14,827			17,712			45,267
	Policy acquisition costs			21,779			18,687			17,409			1,640			7,584			16,039
	Other underwriting and operating expenses			17,855			13,730			13,159			6,345			9,362			12,798
	Interest expense			959			763			422			329			28			67

		Total expenses		84,596			74,683			64,131			23,141			34,686			74,171
Equity in loss of affiliate				—			—			—			—			—			(552	)

Income (loss) before federal income tax expense (benefit) and extraordinary items				5,878			12,044			10,294			4,257			(470	)		(63	)
Federal income tax expense (benefit)				2,028			3,516			3,725			1,451			(69	)		(554	)

Income (loss) before extraordinary items				3,850			8,528			6,569			2,806			(401	)		491
Extraordinary items(5)				—			2,905			—			10,860			—			—

Net income (loss)			$	3,850		$	11,433		$	6,569		$	13,666		$	(401	)	$	491

Earnings Per Share Data:
Income before extraordinary items:
	Basic		$	0.64		$	1.50		$	1.16		$	0.96		$	—		$	—
	Diluted			0.64			1.46			0.90			0.75			—			—
Net income:
	Basic			0.64			2.07			1.16			4.76			—			—
	Diluted			0.64			1.95			0.90			3.63			—			—
Balance Sheet Data:
Cash and investments			$	142,891		$	115,226		$	99,431		$	93,596		$	89,964		$	93,384
Total assets				275,036			205,079			165,433			165,191			165,680			171,301
Losses and loss adjustment expenses				117,778			96,561			76,319			82,949			84,197			87,201
Debt				5,026			20,062			10,848			12,313			1,060			1,289
Total liabilities				192,809			170,387			137,340			142,525			131,905			134,278
Redeemable preferred stock				—			—			2,000			2,000			—			—
Shareholders’ equity				82,227			34,692			26,093			20,666			33,775			37,023
Combined statutory capital and surplus(6)				69,736			47,900			29,706			29,107			22,352			22,274
Book value per share(7)			$	9.02		$	7.10		$	5.01		$	3.74			—			—
Key Financial Ratios:
Loss ratio(8)				50.8	%		52.4	%		46.8	%		59.4	%		54.5	%		67.1	%
Expense ratio(9)				45.7			41.0			43.2			32.0			52.1			42.7
Combined ratio(10)				96.5			93.4			90.0			91.4			106.6			109.8


	(1)	Of our gross premiums written in 2005, $28.7 million was attributable to our new Florida homeowners business. We expect that a significant component of our gross premiums written relating to this business will continue to occur in the first quarter of every year, but these premiums will be earned over the respective terms of the individual policies.


	(2)	Our results for the year ended December 31, 2004 include $7.3 million of pre-tax expenses ($4.8 million after tax) related to four hurricanes that struck Florida in 2004. Of this $7.3 million, $6.2 million was attributable to losses and loss adjustment expenses related to policyholder claims (after the effect of reinsurance). The remaining $1.1 million of the $7.3 million in hurricane-related expenses was attributable to additional reinsurance costs we incurred relating to our catastrophe reinsurance coverage after each hurricane, which costs were recorded as a reduction in our net premiums earned. Our loss ratio increased from 44.0% to 52.4% as a result of these hurricanes.

	(3)	Our assumed premiums written for the year ended December 31, 2001 includes $6.7 million of non-recurring assumed premiums written related to our acquisition of the renewal rights to the book of business that we acquired in January 2001 from Queensway International Indemnity Company, or Queensway International.

	(4)	The gains on sales of businesses in 2004 was generated by a $4.0 million gain on the sale of the renewal policy rights relating to our non-standard personal automobile insurance line and a $285,000 gain on the sale of our renewal rights relating to approximately 100 liquor liability policies. The $200,000 gain on sales of businesses in 2003 was generated by a gain on the sale of Universal Fire & Casualty.

	(5)	Extraordinary items reflect income generated through the recognition of negative goodwill resulting from acquisitions of companies purchased for less than the aggregate fair value of their net assets. We acquired Queensway International (subsequently renamed North Pointe Casualty Insurance Company) on February 28, 2004 for $11.0 million, resulting in an extraordinary gain of $2.9 million. We acquired the Predecessor Companies on June 26, 2002 for $23.0 million, resulting in an extraordinary gain of $10.9 million.

	(6)	In 2005, we contributed a total of $24.9 million into our insurance company subsidiaries, net of dividends received of which $6.8 million, $5.6 million, $7.5 million and $5.0 million was contributed to North Pointe Insurance, North Pointe Casualty, Home Pointe Insurance and Midfield, respectively. These contributions were funded from initial public offering proceeds, holding company funds and new debt.


	As of December 31, 2004, combined statutory capital and surplus included $15.0 million for North Pointe Casualty, which was acquired in February 2004 utilizing a combination of holding company funds and new debt.


	(7)	Book value per share equals the quotient obtained by dividing shareholders’ equity by the number of shares of common stock outstanding.

	(8)	Loss ratio is the ratio (expressed as a percentage) of losses and loss adjustment expenses incurred divided by the sum of net premiums earned, installment fees and other income.

	(9)	Expense ratio is the ratio (expressed as a percentage) of commissions and operating expenses divided by the sum of net premiums earned, installment fees and other income.