S-1

As filed with the Securities and Exchange Commission on September 25, 2002.

Subject to Amendment.

Registration Nos. 333-                    

333-                    

333-                    

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

American Safety Insurance Group, Ltd.

American Safety Holdings Corp.

American Safety Capital Trust I

(Exact name of each registrant as specified in its charter)

Bermuda Georgia Delaware (State or other jurisdiction of incorporation or organization)	6411 6411 6411 (Primary Standard Industrial Classification Code Number)	Not applicable 58-2487367 Applied for (I.R.S. Employer Identification No.)
American Safety Insurance Group, Ltd. 44 Church Street P.O. Box HM2064 Hamilton HM HX, Bermuda (441) 295-5688	American Safety Holdings Corp. 1845 The Exchange Atlanta, Georgia 30339 (770) 916-1908	American Safety Capital Trust I 1845 The Exchange Atlanta, Georgia 30339 (770) 916-1908

(Address, Including Zip Code, and Telephone Number, Including

Area Code of Each Registrant’s Principal Executive Offices)

Fred J. Pinckney

American Safety Holdings Corp.

1845 The Exchange

Atlanta, Georgia 30339

(770) 485-4346

FAX: (770) 485-5892

(Address, Including Zip Code, and Telephone Number, Including Area Codes of Agent For Service)

With Copies to:

W. Brinkley Dickerson, Jr. Troutman Sanders LLP 600 Peachtree Street, Suite 5200 Atlanta, Georgia 30308 (404) 885-3000 FAX: (404) 962-6743 Paul D. Freshour Arnold & Porter 1600 Tysons Blvd., Suite 900 McLean, Virginia 22102 (703) 720-7000 FAX: (703) 720-7399

Approximate date of commencement of proposed sale to the public:    As soon as practicable after this Registration Statement becomes effective.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.  ¨

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    ¨

If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box.    ¨

CALCULATION OF REGISTRATION FEE

Title Of Shares To Be Registered	Amount To Be Registered (1)	Proposed Maximum Aggregate Price Per Share (1)	Proposed Maximum Aggregate Offering Price (1)	Amount of Registration Fee (1)
Preferred Securities of American Safety Capital Trust I	1,725,000	$10	$17,250,000	$1,587
Debentures of American Safety Holdings Corp. for issuance to American Safety Capital Trust I (2) (3)	N/A	N/A	N/A	N/A
Guarantees of Preferred Securities of American Safety Capital Trust I by American Safety Insurance Group, Ltd. (3)	N/A	N/A	N/A	$0
Guarantees of Debentures of American Safety Holdings Corp. by American Safety Insurance Group, Ltd. (3)	N/A	N/A	N/A	$0

(1) Estimated solely for purposes of calculating the registration fee which is calculated pursuant to Rule 457(o) under the Securities Act of 1933.

(2) The debentures will be purchased by American Safety Capital Trust I with the proceeds of the sale of the preferred securities. The debentures may later be distributed for no additional consideration to holders of the preferred securities upon the dissolution of American Safety Capital Trust I and the distribution of its assets.

(3) This Registration Statement is deemed to cover the debentures of American Safety Holdings Corp., the rights of holders of the debentures under the indenture, the rights of holders of the debentures under the debenture guarantee of American Safety Insurance Group, Ltd., the rights of holders of the preferred securities of American Safety Capital Trust I under the trust agreement and the rights of holders of the preferred securities under the preferred securities guarantee of American Safety Insurance Group, Ltd., which taken together, fully, irrevocably and unconditionally guarantee all of the obligations of American Safety Capital Trust I under the preferred securities. No separate consideration will be received for the guarantee. Pursuant to Rule 457, no separate fee is payable with respect to the preferred securities guarantee, the debenture guarantee and the debentures.

THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.

Information contained in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities, and we are not soliciting an offer to buy these securities, in any state where the offer or sale is not permitted.

Subject to Completion, dated         , 2002

PROSPECTUS

$15,000,000

AMERICAN SAFETY CAPITAL TRUST I

% Preferred Securities

(Liquidation amount $10 per preferred security)

Guaranteed by

AMERICAN SAFETY INSURANCE GROUP, LTD.

The Offering:

• American Safety Capital Trust I is a Delaware statutory trust which will sell 1,500,000 preferred securities to the public and all of its common securities to American Safety Holdings Corp., a wholly-owned subsidiary of American Safety Insurance Group, Ltd.

• The preferred securities will represent beneficial ownership interests in the Trust. The sole assets of the Trust will be the        % debentures issued by American Safety Holdings Corp. which mature on             , 2032.

• We will file an application to list the preferred securities on [the New York Stock Exchange or the NASDAQ National Market] under the symbol “            .”

Distributions on the Preferred Securities:

• For each preferred security that you own, you may receive a quarterly cash distribution accumulating from             , 2002 at an annual rate of        % of the liquidation amount of $10 per preferred security on March 31, June 30, September 30 and December 31 of each year, beginning December 31, 2002.

• American Safety Holdings Corp. may defer interest payments on the debentures for up to 20 consecutive quarterly periods. If American Safety Holdings Corp. defers interest payments on the debentures, the Trust will defer payments of distributions on the preferred securities you own. Although you would not be receiving cash distributions during a deferral period, you will incur an income tax obligation as if you were receiving these payments.

• The Trust may redeem the preferred securities at any time on or after                 , 2007 at a redemption price of $10 plus accumulated and unpaid distributions.

• American Safety Insurance Group, Ltd. will fully and unconditionally guarantee the payments on the preferred securities based on its combined obligations pursuant to a preferred securities guarantee, an Indenture and a debenture guarantee.

You should carefully review the “ Risk Factors” section beginning on page 8 in connection with this offering and an investment in the preferred securities.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

	Per Security	Total
Public Offering Price	$10	$	15,000,000
Underwriting commissions (paid by American Safety Insurance Group, Ltd.)	$	$	,000
Proceeds to the Trust	$10	$	,000,000

The underwriters may also purchase up to an additional 225,000 preferred securities at the public offering price within 30 days after the date of this prospectus to cover any over-allotments. See “Underwriting.”

Advest, Inc.	Ferris, Baker Watts
	Incorporated

The date of this Prospectus is                         , 2002

TABLE OF CONTENTS

	Page
Prospectus Summary	1
The Offering	4
Selected Financial Data	7
Risk Factors	8
Special Note Regarding Forward Looking Information	15
Use of Proceeds	16
Accounting Treatment	16
Ratio of Earnings to Fixed Charges	17
Capitalization	17
Business Overview	17
Management’s Discussion and Analysis of Financial Condition and Results of Operations	34
Management	42
Certain Relationships and Related Transactions	46
Principal Shareholders	47
Description of the Preferred Securities	48
Description of the Debentures	59
Description of the Preferred Securities Guarantee	68
Description of the Debenture Guarantee	70
Relationship Among the Preferred Securities, the Debentures, the Preferred Securities Guarantee and the Debenture Guarantee	70
Material United States Federal Income Tax Consequences	72
Certain ERISA Considerations	75
Underwriting	75
Transfer Agent	77
Legal Matters	77
Experts	77
Where You Can Find More Information	77
Index to Consolidated Financial Statements and Financial Statement Schedules	F-1
Glossary of Insurance Industry Terms	G-1
Harbour Village Development Chart	R-1

PROSPECTUS SUMMARY

This summary highlights information from this prospectus that we believe is the most important regarding this offering. You should read the entire prospectus carefully before investing in the preferred securities. Insurance industry terms that are used and are not otherwise defined in this prospectus have the meaning given to those terms in the “Glossary of Insurance Industry Terms” beginning on page G-1.

The term “Trust” refers to American Safety Capital Trust I, a Delaware statutory trust organized to purchase American Safety Holdings Corp.’s debentures and issue the preferred securities. The terms “we,” “our,” “us,” and “American Safety Insurance” refer to American Safety Insurance Group, Ltd. and, unless the context requires otherwise, will include the Trust and our subsidiaries.

American Safety Insurance Group, Ltd.

44 Church Street

P.O. Box HM2064

Hamilton HM HX, Bermuda

(441) 296-8560

Overview

We are a specialty insurance holding company organized under the laws of Bermuda which, through our subsidiaries, develops, underwrites, manages and markets primary casualty insurance and reinsurance programs in the alternative insurance market in all 50 states for environmental remediation risks, contracting, and other specialty risks. We are also the owner/developer of a residential condominium, marina and par 3 golf course development in Ponce Inlet, Florida.

We were formed as a group captive insurance company in 1986 to provide stable, long term insurance protection for the asbestos abatement and environmental remediation industry in the United States, which had suffered from disruptive market cycles in the standard insurance market. In 1988, pursuant to the Liability Risk Retention Act of 1986, as amended, we assisted in the formation of American Safety Risk Retention Group, a non-subsidiary affiliate (referred to herein as American Safety Group RRG), in order to establish a U.S. insurance company to market and underwrite specialty environmental coverages. Funded by the proceeds of our 1998 initial public offering, we now provide a broad range of specialty insurance coverages and services through approximately 190 independent insurance agencies and brokerage firms. Our managed premiums have grown from $28 million in 1997 to $176 million in 2001. Our specialty insurance lines now include coverages for general liability, pollution liability, professional liability, workers’ compensation, surety, as well as custom designed risk management programs (including captive and rent-a-captive facilities).

Industry Ratings.    In September 2002, A.M. Best Company, an independent, nationally recognized insurance industry rating service, reaffirmed a rating of “A (Excellent),” with a “stable” outlook, on a group basis to American Safety Insurance (including its insurance subsidiaries and its non-subsidiary risk retention group affiliate). The rating of “A (Excellent)” is the third highest of A.M. Best’s 16 letter ratings. A.M. Best’s ratings represent an independent opinion of an insurer’s ability to meet its obligations to policyholders, which opinion is of concern primarily to policyholders, insurance agents and brokers and should not be considered an investment recommendation. See “Business Overview—Industry Ratings.”

Business Strategy.    We have developed extensive expertise in identifying insurable opportunities not addressed in the standard insurance market. Typically, we target niche insurance markets that are underserved because they:

• are small in number of insureds or in size of coverage needed;

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• need unique or unusual coverages; or

• have not yet been identified by our competition.

For these markets, we are able to offer a broad array of innovative products and services. In fact, a significant portion of our new business comes through insurance agencies and brokers who are aware of our interest and ability to offer insurance to underserved markets and who have identified a market that they believe provides both them and us a potentially profitable opportunity.

In these niche markets, we are able to select our role as program developer, primary underwriter, reinsurer or program manager. Depending upon the needs of the particular market, we have the ability to combine (1) intensive underwriting, (2) value-added services, including customized coverages, professional risk management, dedicated loss control and claims management and (3) a commitment to superior service, in order to fashion the product offering that offers us the greatest profit opportunity and, at the same time, fulfills the needs of the insurance agents, brokers and insureds. Depending upon the ultimate role selected, we will seek to generate underwriting profits, program management fees or commissions.

A significant focus for our business remains offering insurance products to the environmental remediation industry and contractors that provided the impetus for our formation in 1986. However, as we have grown, we have also diversified into other specialty insurance areas. We intend to continue this diversification in the future.

Our objective is to concentrate on the most profitable opportunities in our core business areas. We have demonstrated our ability to execute on opportunities and at the same time exercise underwriting judgment and discipline which we anticipate will allow us to generate profits, minimize losses, successfully identify and implement new opportunities and stabilize our earnings stream. This most clearly is demonstrated through our willingness to exit or reduce business lines—such as surety and workers’ compensation—when they generated unacceptable claims experience or did not meet our profitability goals. We will continue to expand our business into new lines or services, but we will not be reluctant to exit these lines if the results do not meet our expectations. We believe that we are well positioned for continued success as we continue to execute our business and growth strategies.

Growth Strategy.    Management believes that the increased capital base from the proceeds of this offering, when combined with our expertise in specialty insurance programs, should position us to target a broader client base through:

• the continued development of new insurance programs and products, as well as enhanced coverages, for clients and industries that we currently serve;

• the continued development of insurance programs and products for clients, industries and risks that we do not currently serve; and

• the acquisition of agencies or insurers specializing in insuring specialty risks.

We believe that this is an opportune time to continue our expansion. Over the past year, premium rates have increased for most insurance coverages, and we believe that current market conditions provide a good opportunity for further premium growth.

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American Safety Holdings Corp.

1845 The Exchange

Atlanta, Georgia 30339

(770) 916-1908

American Safety Holdings Corp. (sometimes referred to herein as AS Holdings) was established in 1999 as the holding company of the U.S. subsidiaries of American Safety Insurance. The primary U.S. insurance subsidiaries are:

Name	Primary Function
American Safety Casualty Insurance Company (referred to herein as American Safety Casualty)	Primarily provides casualty insurance products for specialty risks in 48 states and the District of Columbia.
American Safety Indemnity Company (referred to herein as American Safety Indemnity)	Licensed and approved as a surplus lines insurer in 38 states and the District of Columbia for the purpose of writing insurance for excess and surplus lines.
American Safety Insurance Services, Inc. (referred to herein as ASI Services)	Provides specialized fee-based insurance program and product development, underwriting, reinsurance placement, program management, brokerage, loss control, claims administration, marketing and administrative services.

Additionally, AS Holdings owns the subsidiaries responsible for the development and sale of residential properties at Harbour Village Golf & Yacht Club in Ponce Inlet, Florida, as more fully discussed herein under “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Harbour Village Development”.

AS Holdings does not and will not engage in business activities other than financing activities for American Safety Insurance and the direct and indirect subsidiaries of American Safety Insurance.

American Safety Capital Trust I

c/o American Safety Holdings Corp.

1845 The Exchange

Atlanta, Georgia 30339

(770) 916-1908

The Trust was formed for the purpose of issuing common securities to AS Holdings and issuing the preferred securities to the public. Together, the preferred securities and the common securities are referred to as the “trust securities.” The Trust will use the proceeds from the sale of the trust securities to purchase an equal principal amount of debentures from AS Holdings. The Trust will also engage in other limited activities that are necessary, appropriate and incidental to those purposes. Deutsche Bank Trust Company Americas will serve as the trustee under the indenture, the trust agreement, the debenture guarantee and the preferred securities guarantee. In its capacity as trustee under the trust agreement, Deutsche Bank Trust Company Americas will hold the debentures of AS Holdings and, as such, may be referred to herein as the “property trustee.” Steven B. Mathis and Fred J. Pinckney, both officers of American Safety Insurance, will initially serve as the administrators of the Trust. Deutsche Bank Trust Company Delaware will serve as the Delaware trustee under the trust agreement. The administrators, the trustee and the Delaware trustee are sometimes collectively referred to herein as the “trustees.”

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THE OFFERING

What are the preferred securities?	The preferred securities represent an undivided beneficial interest in the assets of the Trust. The assets of the Trust will consist solely of the debentures which will be purchased by the Trust with the proceeds of this offering. As a result, you will hold, through the trust, an interest in the debentures, although the property trustee will hold legal title over the debentures. Because you will have an “undivided” beneficial interest in the Trust’s assets, you will have a proportional interest in the collective assets of the Trust, rather than in any specific debentures.
What are the intended uses of proceeds?	The Trust will use the proceeds from the sale of the preferred securities to purchase the debentures. We plan to use the net proceeds of approximately $         million from the sale of the debentures: •        to expand the capital base of our insurance subsidiaries to take advantage of improving   premium rates in the property and casualty insurance market; and •        for general corporate purposes. See “Use of Proceeds.”
What payments will be made to the holders of the preferred securities?	You are entitled to receive cash payments on the preferred securities payable at an annual amount of $                 per preferred security. These payments will accumulate from the date of issuance of the preferred securities and will be paid quarterly in arrears on March 31, June 30, September 30 and December 31 of each year, beginning on December 31, 2002. For a more detailed explanation of how the cash payments will be calculated, see “Description of the Preferred Securities—Distributions.”
Can distribution payments be deferred?	Yes. AS Holdings has the right, at any time, so long as it is not in default with respect to the debentures, to defer paying interest to the Trust on the debentures for up to 20 consecutive quarterly periods. During any deferral period, the Trust will defer quarterly distributions to you on the preferred securities. During any deferral period, you will accumulate distributions at an annual rate of             %, plus you will earn additional interest at the same rate, compounded quarterly on the deferred distributions.
What are the consequences of a deferral to American Safety Insurance?	During any deferral period, American Safety Insurance will be prohibited, with certain exceptions, from declaring or paying a dividend or making any other payment or distribution on its common stock or debt securities that rank equal with or junior to the debentures. Inter-company dividends will not be prohibited. After a deferral period has been terminated and all amounts then due have been paid, a new deferral period may commence, subject to the preceding requirements.
What are the tax consequences of a deferral?	If distributions are deferred, you will be required to include deferred interest income in your gross income for United States federal income tax purposes without regard to whether you receive the cash distributions with respect to these deferred interest payments. For further information on deferrals and their tax consequences, see “Material United States Federal Income Tax Consequences—Treatment of Interest and Original Issue Discount.”

4

What is the ranking of the preferred securities and the debentures relative to the common securities and other indebtedness of American Safety Insurance and American Safety Holdings?	The preferred securities will generally rank equal to the common securities with regard to right of payment upon liquidation or dissolution of the Trust and payments on the preferred securities will generally be made pro rata with the common securities of the Trust. However, the preferred securities will rank prior to the common securities as to payments if and so long as an event of default under the debentures has occurred and is continuing. Upon completion of the offering, the Trust will have 1,500,000 preferred securities and 46,392 common securities outstanding unless the underwriters exercise their over-allotment option; in such case, the Trust will have no more than 1,725,000 preferred securities and 53,351 common securities outstanding. AS Holdings will own all of the common securities.
	The debentures will be unsecured, subordinate and junior in right of payment to all other senior indebtedness of AS Holdings and American Safety Insurance. In addition, the debentures and the guarantees will be subordinated to all existing and future liabilities of our subsidiaries. At June 30, 2002, we and our subsidiaries had total liabilities, excluding intracompany liabilities, of approximately $248 million, all of which will rank senior to the debentures.
What is American Safety Insurance’s guarantee of the preferred securities?	American Safety Insurance will guarantee payments under the preferred securities based on: •      its guarantee of AS Holdings’ obligations to make payments on the debentures under   the debenture guarantee; •      its obligations under the preferred securities guarantee; •      its obligations under the expense and liabilities agreement.

American Safety Insurance’s obligations under the debenture guarantee are subordinate and junior to all of its senior indebtedness and the senior indebtedness of AS Holdings (as defined under “Description of the Debentures—Subordination”). For a description of the debenture guarantee, see “Description of the Debenture Guarantee.”

The payment of distributions on the preferred securities is guaranteed by American Safety Insurance under the preferred securities guarantee, but only to the extent the Trust has funds legally and immediately available to make distributions.

American Safety Insurance’s obligations under the preferred securities guarantee are:

• subordinate and junior in right of payment to its other liabilities; and

• senior to its common stock.

5

When can the Trust redeem the preferred securities?	The Trust must redeem all of the outstanding trust securities when the debentures are paid at maturity on         , 2032. In addition, if AS Holdings redeems any debentures before their maturity, the Trust will use the proceeds it receives from the redemption to redeem, on a pro rata basis, trust securities having a combined liquidation amount equal to the principal amount of the debentures redeemed.
	AS Holdings may redeem the debentures prior to maturity:
	•   in whole or in part, at any time, on or after,                 , 2007, at the redemption price; or •   in whole but not in part, prior to                     , 2007, at the redemption price, within 180 days following the occurrence of one of the following: •   any change in tax laws or regulations that poses a substantial risk that the preferred securities might lose their special tax treatment; or •   any change in laws or regulations that would render the Trust an “investment company” that would be required to be registered under the Investment Company Act of 1940.
What is the redemption price?	Upon any redemption of the debentures by AS Holdings, the Trust will redeem your preferred securities at the liquidation amount of $10 per security plus any accrued and unpaid distributions as of the redemption date.
Will the preferred securities be rated?	No. The preferred securities will not be rated by any rating service.
When may American Safety Holdings dissolve the Trust?	AS Holdings has the right at any time to dissolve or liquidate the Trust and distribute the debentures to you in exchange for your preferred securities. If that happens, you will receive debentures with the same liquidation amount as your holdings of preferred securities. Prior to dissolving the Trust, American Safety Insurance will be required to pay the creditors of the Trust, if any, and the Trust’s expenses. In such an event, the payments under the debentures would continue to be guaranteed by American Safety Insurance pursuant to the debenture guarantee. See “Description of the Debenture Guarantee.”
What are the voting rights of the preferred securities?	Holders of preferred securities will have very limited voting rights. AS Holdings, as holder of all of the common securities, will have sole voting power on most matters. The holders of a majority of the preferred securities will, however, have the right to direct the time, method and place of conducting any proceeding for any remedy available to the property trustee, or direct the exercise of any trust power conferred upon the property trustee. In certain circumstances, the holders of a majority of the preferred securities may remove the property trustee or the Delaware trustee and appoint a successor trustee. Also, amendments to the trust agreement that would adversely affect the rights or privileges of the holders of the preferred securities require the affirmative vote of the holders of a majority of the outstanding preferred securities.
In what form will the preferred securities be issued?	The preferred securities will be represented by a global security that will be deposited with The Depository Trust Company or its custodian and registered in the name of The Depository Trust Company or its nominee. You will not have a certificate for your preferred securities.

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SELECTED FINANCIAL DATA

The following data of American Safety Insurance is qualified in its entirety by reference to and, therefore, should be read together with the detailed information and financial statements appearing elsewhere in this prospectus.

	Year Ended December 31,															Six Months Ended June 30,
	1997			1998			1999			2000			2001			2001			2002
	(In Thousands)															(In Thousands)
Income Statement Data
Revenues:
Direct and Assumed Premiums Earned	$	10,590		$	13,114		$	18,140		$	54,079		$	146,765		$	63,905		$	67,224
Ceded Premiums Earned		(2,243	)		(3,994	)		(6,015	)		(27,274	)		(81,978	)		(33,499	)		(37,164	)
Net Premiums earned		8,347			9,120			12,125			26,805			64,787			30,406			30,060
Net Investment Income		1,647			2,847			2,878			2,605			3,650			1,763			1,875
Interest on Notes Receivable		798			2,409			2,614			1,531			767			559			—
Brokerage Commission Income		2,589			1,183			1,389			3,291			2,410			999			103
Management Fees from Related Party		601			1,344			1,386			1,425			1,496			731			493
Net Realized Gains (Losses)		84			443			174			(518	)		652			415			(466	)
Real Estate Sales		—			—			—			—			27,561			—			33,936
Other Income		14			24			921			939			1,026			850			89
Total Revenues		14,080			17,370			21,487			36,078			102,349			35,723			66,090
Expenses:
Losses and Loss Adjustment Expenses Incurred		4,093			5,177			6,896			18,506			43,986			18,865			17,531
Acquisition Expenses		2,336			1,192			894			3,792			12,248			6,240			6,297
Real Estate Expenses		—			—			—			—			25,126			751			29,155
Other Expenses		4,084			5,246			7,694			12,758			15,074			6,760			6,999
Expense Due to Rescission		—			—			—			3,542			600			—			354
Total Expenses		10,513			11,615			15,484			38,598			97,034			32,616			60,336
Earnings (Loss) before Income Taxes		3,567			5,755			6,003			(2,520	)		5,315			3,107			5,754
Income Taxes (Benefit)		356			(199	)		83			(1,157	)		1,161			260			1,855
Net Earnings (Loss)	$	3,211		$	5,954		$	5,920		$	(1,363	)	$	4,154		$	2,847		$	3,899
Net Diluted Earnings (Loss) Per Share	$	1.08		$	1.04		$	0.98		$	(0.25	)	$	0.84		$	0.58		$	0.80
Common shares and common share equivalents used in computing net diluted earnings (loss) per share		2,964			5,738			6,032			5,497			4,935			4,950			4,875
Operating Earnings (1)		3,127			5,513			5,759			1,975			4,051			2,563			4,526
GAAP Ratios
Loss and Loss Adjustment expense ratio		49.0	%		56.8	%		56.9	%		69.0	%		67.9	%		62.0	%		58.3	%
Expense Ratio		32.8	%		23.9	%		16.7	%		18.6	%		24.9	%		26.4	%		27.0	%
Combined Ratio		81.8	%		80.7	%		73.6	%		87.6	%		92.8	%		88.4	%		85.3	%
Net premiums written to equity		0.4	x		0.2	x		0.3	x		0.7	x		1.3	x		0.7	x		0.5	x
Statutory Ratios
Loss and Loss Adjustment expense ratio		49.0	%		56.8	%		56.9	%		69.1	%		67.9	%		62.0	%		58.3	%
Expense Ratio		30.5	%		22.6	%		14.0	%		11.8	%		23.6	%		19.2	%		25.5	%
Combined Ratio		79.5	%		79.4	%		70.9	%		80.9	%		91.5	%		81.2	%		83.8	%
Ratio of Earnings to Fixed Charges
Earnings (Loss) to Fixed Charges											(10.3	x)		4.7	x		5.5	x		26.6	x
Earnings to Fixed Charges as adjusted for this offering														[	]					[	]
Balance Sheet Data (at end of period)
Total Investments	$	29,341		$	51,048		$	59,648		$	91,247		$	83,578		$	73,310		$	83,358
Total Assets		47,668			86,147			104,017			207,298			297,261			256,035			311,652
Unpaid Losses and Loss Adjustment Expenses		11,572			14,700			20,413			50,509			121,423			76,267			138,592
Total Liabilities		25,827			26,878			42,978			149,495			237,281			196,933			248,396
Total Shareholders’ Equity		21,841			59,269			61,039			57,803			59,980			59,103			63,256

(1) Operating Earnings exclude amounts for realized gains and losses, as well as amounts for recission expenses. Operating Earnings are commonly used as a meaningful measure of reporting results as a supplemental disclosure to net income. Operating Earnings are not a GAAP measure of performance and may not be comparable to similarly titled measures used by other companies. Operating Earnings should be reviewed in conjunction with net income and cash flow information included elsewhere in this prospectus.

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RISK FACTORS

An investment in the preferred securities involves a number of risks, some of which relate to the terms of the preferred securities or the debentures and others of which relate to American Safety Insurance, American Safety Holdings and their respective businesses. You should carefully review the following information about these risks together with other information contained in this prospectus before purchasing any preferred securities.

Risk Factors Relating to the Preferred Securities

American Safety Holdings’ obligations under the debentures and American Safety Insurance’s obligations under the preferred securities guarantee and the debenture guarantee are subordinated to all existing and future indebtedness and the indebtedness of our subsidiaries; therefore, these other liabilities must be satisfied before payments can be made to the Trust.

American Safety Holdings’ obligations under the debentures will rank junior in right of payment to all of American Safety Holdings’ and our senior indebtedness and our obligations under the debenture guarantee. This means that neither American Safety Insurance nor American Safety Holdings can make any payments on the debentures or the debenture guarantee if it defaults on a payment of senior indebtedness and does not cure such default within the applicable grace period or if the senior indebtedness becomes immediately due because of a default and has not yet been paid in full. At June 30, 2002, American Safety Holdings had senior indebtedness of $1,000,000 (and on a consolidated basis, American Safety Holdings and its subsidiaries had senior indebtedness of $11,200,000 at June 30, 2002). The consolidated senior indebtedness of American Safety Insurance, which includes long-term debt, notes payable, policyholder liabilities, separate account liabilities and general payables, aggregated $248,395,555 as of June 30, 2002.

American Safety Insurance’s obligations under the debenture guarantee and the preferred securities guarantee will rank in priority of payment as follows:

• subordinate and junior in right of payment to its other liabilities; and

• senior to its common stock.

This means that we cannot make any payments on the preferred securities guarantee or the debenture guarantee if we default on a payment on any of our other liabilities. In addition, our creditors or, if applicable, our subsidiaries’ creditors will have priority over you in any distribution of our or our subsidiaries’ assets in a liquidation, reorganization or otherwise. In such an event, our assets would be available to pay obligations under the preferred securities guarantee or the debenture guarantee only after we made all payments on our other liabilities.

Neither the preferred securities, the debentures, the debenture guarantee nor the preferred securities guarantee limit the ability of American Safety Insurance or American Safety Holdings to incur additional indebtedness, including indebtedness that ranks senior in priority of payment to the debentures, the debenture guarantee and the preferred securities guarantee. Any additional indebtedness so incurred would reduce the amount of cash American Safety Holdings would have available to pay its obligations under the debentures or we would have available to pay our obligations under the preferred securities guarantee or the debenture guarantee. See “Description of the Preferred Securities Guarantee—Subordination” and “Description of the Debentures—Subordination.”

Payments on the preferred securities are dependent on American Safety Holdings’ ability to make timely payments on the debentures which depends upon its receipt of cash dividends from its subsidiaries.

The Trust’s ability to pay timely distributions on the preferred securities and to pay the liquidation amount depends upon American Safety Holdings making timely payments on the debentures. In turn, American Safety Holdings’ ability as a holding company to make payments on the debentures depends primarily upon its receipt of cash dividends from its subsidiaries. Subject to the restrictions described below, American Safety Holdings may receive dividends from its subsidiaries.

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The dividends to American Safety Holdings from its insurance subsidiaries are limited by laws applicable to insurance companies. As a Delaware domiciled insurance company, American Safety Casualty may pay a dividend or distribution from its surplus profits, without the prior approval of the Delaware Department of Insurance, only if the dividend or distribution, together with all other dividends and distributions paid within the preceding 12 months, does not exceed the greater of (1) net gain from operations excluding realized capital gains or (2) 10% of surplus, in each case as shown in its preceding annual statutory financial statements. Also, regulatory approval is required when dividends to be paid exceed unassigned surplus.

If we were to apply this dividend formula using our December 31, 2001 statutory unassigned surplus, dividends of $1.1 million are eligible to be paid, without prior approval, in 2002. However, we anticipate that as a result of our dispute with Berkley Insurance Company (as discussed more fully herein), there may not be sufficient funds available from our insurance operations to make payments on the preferred securities in 2003 without prior regulatory approval.

Payments pursuant to the debenture guarantee are dependent on American Safety Insurance’s access to cash.

Our ability to pay any obligation that may arise pursuant to the debenture guarantee is dependent upon our access to cash. As an insurance holding company, we depend directly on our Bermuda reinsurance subsidiary and, indirectly, on our U.S. operations for payments. As more fully described in the preceding risk factor, payments by our indirect U.S. subsidiaries are subject to certain legal and regulatory restrictions. Similarly, our Bermuda reinsurance subsidiary is subject to certain dividend payment restrictions, including seeking the pre-approval of the Minister of Finance for the payment of any dividend that reduces capital by more than 15%.

If either American Safety Holdings or American Safety Insurance incurs additional debt or payments on their existing liabilities significantly exceed their current projections, they may be unable to make payments to the Trust on the debentures or fulfill any obligation pursuant to the debenture guarantee or the preferred securities guarantee and, therefore, you may not receive payments on your preferred securities.

American Safety Holdings projects total principal, interest and dividend payments, including payments on the debentures, of approximately $            million for the remainder of fiscal 2002, $            million in 2003, $            million in 2004 and 2005, $            million in 2006 and $            million in 2007. These projected payments are based upon an assumed interest rate of        % for the debentures. Because American Safety Insurance and American Safety Holdings are insurance holding companies, their liquidity requirements are met through payments received from their subsidiaries through cash dividends and fees. American Safety Holdings believes these payments will be sufficient to meet its obligations on the debentures and certain other indebtedness and that the likelihood of American Safety Holdings deferring interest payments is remote. Furthermore, we believe that these payments will be sufficient to meet our obligations under the debenture guarantee and the preferred securities guarantee. However, if American Safety Insurance or American Safety Holdings incurs significant additional debt, or if they experience a significant drop in operating income or cash flow, they may not be able to make payments on the debentures, make payments pursuant to the debenture guarantee or preferred securities guarantee and, in so doing, will affect the Trust’s ability to make payments on the preferred securities. Currently, there is no limit as to the amount of additional indebtedness that American Safety Insurance or American Safety Holdings can incur.

Our preferred securities guarantee only ensures your payment on the preferred securities if the Trust has funds available.

If American Safety Holdings defaults on its obligations under the debentures and, thereafter, we default on our obligations under the debenture guarantee, the Trust will not have sufficient funds to pay distributions or the liquidation amount. As a result, you will not be able to rely on the preferred securities guarantee for payment of these amounts because the preferred securities guarantee only applies if the Trust has received a payment of principal or interest on the debentures or a payment under the debenture guarantee with respect to such principal or interest. Instead, if American Safety Holdings fails to pay interest or principal on the debentures and, thereafter, we default on our obligations under the debenture guarantee, you:

• may sue American Safety Insurance and/or American Safety Holdings or seek other remedies to collect your pro rata share of payments owed; or

• may rely on the property trustee to enforce the Trust’s rights under the debentures and the debenture guarantee.

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If American Safety Holdings elects to defer interest payments, you will not receive timely distributions but will be required to include interest income in your taxable income.

American Safety Holdings may defer the payment of interest on the debentures at any time for up to 20 consecutive quarterly periods, provided that (1) no deferral period may extend beyond the maturity date of the debentures, (2) American Safety Holdings is not in default under the indenture governing the debentures and (3) American Safety Insurance is not in default of the terms of the preferred securities guarantee or the debenture guarantee. If American Safety Holdings elects to defer interest payments on the debentures, the Trust also will defer distributions on the preferred securities. During any deferral period, your distributions will continue to accrue, and interest on the unpaid distributions will compound quarterly.

Although you will not be receiving cash distributions during a deferral period, you will be required to continue to include accrued interest in income for U.S. federal income tax purposes on your proportionate share of the debentures held by the Trust, even if you are a cash basis taxpayer. As a result, you will need to include this income in your gross income for U.S. federal income tax purposes in advance of the receipt of cash. You also will not receive the cash related to any accrued and unpaid interest income from the Trust if you dispose of the preferred securities prior to the record date for the payment of distributions. For further information regarding the tax consequences during a deferral period, see “Material United States Federal Income Tax Consequences—Treatment of Interest and Original Issue Discount.”

If you sell your preferred securities during a deferral period or in between payment dates, the price of the preferred securities may not reflect unpaid interest and you will have to include accrued interest income in your taxable income through the date of the sale even though you received no cash distributions.

If American Safety Holdings exercises its right to defer interest payments on the debentures, the price at which you could sell the preferred securities may decline. Accordingly, the preferred securities or the debentures that you may receive on dissolution of the Trust may sell at a discount to the price that you paid. In addition, as a result of American Safety Holdings’ right to defer interest payments, the market price of the preferred securities may be more volatile than the market price of other securities on which interest accrues that is not subject to deferrals.

The preferred securities may trade at a price that does not reflect the value of accrued but unpaid interest on the underlying debentures. If you use the accrual method of accounting for tax purposes, or if you use the cash method and the preferred securities are deemed to have been issued with original issue discount, and you dispose of your preferred securities between record dates for any distribution payments, you will have to include as ordinary income for United States federal income tax purposes an amount equal to the accrued but unpaid interest on your proportionate share of the interest on the debentures through the date of your disposition. You will recognize a capital loss on the amount that the selling price is less than your adjusted tax basis.

If American Safety Holdings redeems the debentures, it will cause a redemption of the preferred securities, and you may not be able to reinvest the proceeds at the same or higher rate of return.

On or after         , 2007, American Safety Holdings may redeem the debentures at any time, in whole or in part. In addition, American Safety Holdings may redeem the debentures in whole, but not in part, prior to         , 2007, at any time within 180 days following the occurrence of specified tax or regulatory events, including:

• any change in tax laws or regulations that poses a substantial risk that the preferred securities might lose their special tax treatment, or

• any change in laws or regulations that would render the Trust an “investment company” that would be required to be registered under the Investment Company Act of 1940.

If American Safety Holdings redeems the debentures, the Trust will be required to redeem the preferred securities at a redemption price equal to the liquidation amount of $10 per preferred security together with accumulated but unpaid distributions. If your preferred securities are redeemed, you may not be able to reinvest the money you receive in the redemption at a rate that is equal to or higher than the rate of return you receive on the preferred securities.

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In the event of a default under the indenture, you may not be able to sue American Safety Insurance or American Safety Holdings directly and may be required to rely on the property trustee of the Trust to enforce your rights.

You may not be able to directly enforce rights against us and American Safety Holdings if there is a default with respect to the debentures. If American Safety Holdings defaults under the debentures and the default is continuing, this event will also be an event of default under the preferred securities. In that case, generally you would first have to rely on the property trustee’s enforcement of its rights as holder of the debentures against American Safety Holdings or us a guarantor of the debentures. If the property trustee fails to exercise its rights under the debentures, you, acting jointly with at least 25% of the other holders, will then be able to exercise any other remedies available under the debentures against American Safety Holdings. In addition, you may be able to exercise any other remedies available under the debenture guarantee against us. However, if the default arises because American Safety Holdings fails to pay interest or principal, except during any deferral period on the debentures and, thereafter, we fail to make required payment under the debenture guarantee, you may proceed directly against American Safety Holdings and/or us without first relying on the property trustee. You will not be able to exercise directly any other remedies available to a holder of the debentures unless the property trustee fails to do so.

The covenants relating to the preferred securities, the debentures, the preferred securities guarantee and the debenture guarantee may not protect you from adverse changes in our financial condition.

The governing documents of the Trust impose only limited obligations on us and American Safety Holdings with respect to the preferred securities, the debentures, the preferred securities guarantee and the debenture guarantee. As a result, the governing documents of the Trust will not necessarily protect you in the event of an adverse change in our or American Safety Holdings’ financial condition or operating results, which may hinder American Safety Holdings’ ability to make timely payments to the Trust on the debentures or our ability to make payments under the debenture guarantee and the preferred securities guarantee. For example, the governing documents of the Trust do not limit the ability of American Safety Insurance or American Safety Holdings or their respective subsidiaries to incur additional debt which would rank senior to the preferred securities and/or the debentures. In addition, neither the indenture nor the trust agreement requires American Safety Insurance or American Safety Holdings to maintain any financial ratios or specified levels of net worth, income, cash flow or liquidity. Therefore, you should consider the general lack of covenants contained in the governing documents of the Trust to be a significant factor in evaluating whether we or American Safety Holdings will be able to comply with our respective obligations under the debentures or the guarantees.

American Safety Holdings will generally control the Trust through its ownership of the Trust’s common securities and, therefore, your voting rights are extremely limited and your interests may not be the same as American Safety Holdings’ interests.

You will have almost no voting rights. American Safety Holdings and the administrators of the Trust, who are officers of American Safety Insurance, may amend the Trust Agreement without the consent of holders of the preferred securities as described under “Description of the Preferred Securities—Voting Rights; Amendment of Trust Agreement.”

If an active or liquid trading market for the preferred securities does not develop, you may not be able to sell your preferred securities at a price higher than you paid for them, if at all.

We plan to have the preferred securities listed on [the New York Stock Exchange or the NASDAQ National Market.] We cannot predict whether an active and liquid trading market for the preferred securities will develop or whether a continued quotation of the preferred securities will be available on [the New York Stock Exchange or the NASDAQ National Market.] The underwriters are not obligated to make a market in the preferred securities, and to the extent they do undertake any market-making activity, these activities may be terminated at any time without notice. Future trading prices of the preferred securities will depend on many factors including, among other things, prevailing interest rates, our and American Safety Holdings’ operating results and financial condition, and the market for similar securities. If an active trading market does not develop, the market price of the preferred securities could be more volatile and decline below the offering price. Further, if an active trading market does not develop, you may not be able to sell your preferred securities at a price that is favorable to you, if at all.

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Risk Factors Relating to American Safety Insurance and the Casualty Insurance Industry

Our reinsurance dispute with Berkley Insurance Company may have materially adverse consequences to our business and operating results.

One of our former reinsurers, Berkley Insurance Company, a subsidiary of W.R. Berkley Corp., has disputed its obligations under several reinsurance treaties entered into during 1998 and 1999. In April 2002, we demanded arbitration against the reinsurer to collect the amounts owed. The arbitration panel has been chosen and initial proceedings are scheduled in late September 2002. The amount involved is significant. As of June 30, 2002, the amount of claims we have paid that have not been reimbursed by Berkley Insurance under these treaties is approximately $12.5 million. Additionally, we currently expect the aggregate value of future claims beyond this amount will be approximately $21.0 million.

There can be no assurances that the arbitration or any settlement reached between the parties will be on terms favorable to us. If the arbitrators award us significantly less than we are requesting, or nothing at all, or if any ultimate settlement is on terms that are not favorable to us, we would be required to record a loss and to reduce our capital by the amount that we are not able to recover. We have established no accounting reserves for such an occurrence because, we believe, no such reserves are required in accordance with generally accepted accounting principles. In addition, even if we ultimately prevail in the arbitration or receive a settlement on terms that are favorable to us, if there is no final decision by the arbitrators or if a settlement is not reached before December 31, 2002, we currently estimate that we will have to make a deduction to our statutory capital surplus in an amount equal to 20% of the outstanding paid amounts in dispute to reflect statutory accounting rules regarding the treatment of outstanding reinsurance recoverables. Had this number been calculated as of June 30, 2002, the amount would be $2.5 million. As we continue to pay claims under these reinsurance treaties that are not reimbursed, the deductions to our statutory capital surplus will continue to increase. A negative outcome, including a deduction to our statutory capital surplus, could adversely impact the amount of risk exposure that we would be able to, or want to, retain, our A.M. Best rating, and the ability of our insurance company subsidiaries to pay dividends. In turn, that could have a material adverse effect on our business and financial condition and the ability of American Safety Holdings to make payments under the Indenture. This reduction in statutory capital surplus could also have a material adverse effect on our business and financial condition.

Our financial results could suffer if our A.M. Best ratings are downgraded.

Increased public and regulatory scrutiny of the financial stability of insurance companies have resulted in greater emphasis by policyholders upon insurance company ratings, which has resulted in a potential competitive advantage for insurance companies with higher ratings. In September 2002, A.M. Best reaffirmed its rating of “A (Excellent),” with a “stable” outlook, on a group basis to American Safety Insurance (including its insurance subsidiaries and its non-subsidiary risk retention group affiliate). No assurance can be given that the group will maintain this rating, and any downgrade of such rating could adversely affect American Safety Insurance’s business, financial condition and operating results. A.M. Best’s ratings represent an independent opinion of an insurer’s ability to meet its obligations to policyholders, which opinion is of concern primarily to policyholders, insurance agents and brokers and should not be considered an investment recommendation.

Sales at our Harbour Village real estate development project may be not generated in a timely manner and, thus, our financial results may be adversely impacted.

We are developing residential condominiums in the Harbour Village Golf and Yacht Club on real estate that we foreclosed from a borrower. The development is large—potentially as many as 740 condominiums—and has attendant to it all of the risks that typically accompany a large real estate development project. These may include: (1) the need to finance pre-construction and construction activities in a difficult capital market environment; (2) the costs and risks of complying with environmental, land use, zoning and other regulatory requirements; (3) the risk of design and construction flaws; (4) the risk that buyers of pre-sold units will default; (5) the risk that we will not have buyers for units that are not pre-sold; and (6) the general economic risks attendant to developing real estate for primary or secondary homes and retirement homes in the current economy. Any of these risks, or any other unforeseen risks, could cause our results from the development of Harbour Village to be unprofitable.

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Due to cyclicality in our industry, our financial results are subject to potential fluctuations.

The financial results of casualty insurance companies historically have been subject to significant fluctuations and may vary significantly in the future. Operating results may fluctuate due to a variety of factors, including competitive conditions in the industry, levels of new and renewal insurance business, unpredictable developments in loss trends, adequacy and changes in loss reserves, collectibility of reinsurance receivables, market acceptance of new coverages or enhancements, changes in operating expenses, fluctuations in interest rates and other changes in investment markets which affect market prices of investments and income from such investments, and changes in levels of general business activity and economic conditions. American Safety Insurance has experienced increased competitive pricing pressures in its business lines in recent years. Recently, however, the insurance industry has progressed from a “soft market” (wherein insurers could not charge higher premiums) to a “hard market” (wherein insurers can charge higher premiums). These markets are cyclical and may change at any time.

In addition, insureds are eligible for renewal of their policies on different anniversary dates, subject to underwriting and loss control criteria that we apply. If a large number of insureds were to decline to renew their policies or if their policies were not renewed in a given calendar quarter, our operating results could be materially adversely affected in the renewal quarter and subsequent quarters.

Interest rate fluctuations could impact the value of our investment portfolio.

Our investment portfolio is comprised mostly of (1) cash, which includes short-term investments and fixed-income securities, and (2) real estate. The value of our portfolio is subject to fluctuations depending on changes in prevailing interest rates. We do not hedge our cash investments against interest rate risks, and, accordingly, changes in interest rates may result in fluctuations in the value of our cash investments. The result of changes in interest rates could affect our unrealized gains or losses in our bond portfolio.

Because we significantly concentrate in certain industries, we are inherently subject to specialty industry risks.

Due to our focus on insuring specialty risks, such as the environmental remediation industry and the contracting industry, our operations could be more exposed than our more diversified competitors to the effects of changes in economic conditions, regulations and legal precedents affecting such specialty industries. These changes may include, but are not limited to, economic downturns that may adversely impact the building and real estate development industry and the degree of enactment and enforcement of federal and state environmental regulations that encourage or require environmental remediation efforts.

Our continued viability depends, in part, upon the availability of obtaining and retaining reinsurance.

The availability, amount and cost of reinsurance are subject to prevailing market conditions that are beyond our control and that affect our business, financial condition and operating results. Our business depends significantly upon our ability to limit our risk exposure by ceding (i.e., transferring to others) significant amounts of the potential liability arising from risks insured or reinsured by us. There can be no assurance that such reinsurance will continue to be available. If we were unable to maintain or replace our reinsurance treaties upon their expiration, either our exposures would increase or, if we were unwilling to bear such increase in exposures, we would be required to reduce the level of our underwriting commitments. Furthermore, we are subject to credit risk with respect to our reinsurers, as the ceding of risk to our reinsurers does not relieve us of our primary liability to our insureds. Although we place our reinsurance with reinsurers we believe to be financially stable, a significant reinsurer’s inability to make or honor payments under the terms of a reinsurance treaty could have a material adverse effect on our business, financial condition and operating results.

We cannot guarantee that our reinsurers will pay in a timely fashion, if at all, and, as a result, we could experience losses.

We transfer some of the risk we have assumed to reinsurance companies in exchange for part of the premium we receive in connection with the risk. Although reinsurance makes the reinsurer liable to us to the extent the risk is transferred, it does not relieve

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us of liability to our policyholders. Our reinsurers may not pay the reinsurance recoverables that they owe to us or they may not pay such recoverables on a timely basis. Even though the terrorist attacks of September 11, 2001 have not had a significant impact on our business to-date, they may affect the financial resources of some of our reinsurers. If our reinsurers fail to pay us or fail to pay us on a timely basis, our financial results would be adversely affected.

Our loss reserves may prove to be inadequate to cover certain potential claims.

The establishment of appropriate loss reserves is an inherently uncertain process, particularly in the environmental remediation industry, contracting industry, other specialty and excess and surplus lines risks, where claims that have occurred may not be reported to an insurance company until future periods of time, and there can be no assurance that ultimate losses will not materially exceed our loss reserves. Insurance companies are required to maintain reserves to cover their estimated ultimate liability for losses and loss adjustment expenses with respect to reported and unreported claims incurred. Reserves are estimates at a given time involving actuarial and statistical projections of what we expect to be the cost of the ultimate settlement and administration of claims. These estimates are based on facts and circumstances then known, predictions of future events, estimates of future trends, claims frequency and severity, potential judicial expansion of liability precedents, legislative activity and other factors, such as inflation. We engage an internationally recognized actuarial consulting firm to provide reserve studies and rate studies. To the extent that loss reserves prove to be inadequate in the future, we would have to increase our reserves and incur charges to earnings in the periods such reserves are increased, which would cause fluctuations in operating results and could have a material adverse effect on our business, financial condition and operating results.

We rely on independent insurance agencies and brokers to market our products and their inability to successfully market our products could impact our business results.

The failure or inability of independent insurance agencies and brokers to market our insurance programs successfully could have a material adverse effect on our business, financial condition and operating results. We market our insurance programs primarily through approximately 190 independent insurance agencies and insurance brokerage firms. Agencies and brokers are not obligated to promote our insurance programs and may sell competitors’ insurance programs. As a result, our business depends in part on the marketing efforts of these agencies and brokers and on our ability to offer insurance programs and services that meet the requirements of the clients and customers of these agencies and brokers. Furthermore, as of June 30, 2002, approximately 76% of our premiums written for our excess and surplus business line were produced through five brokers, and the loss of one or more of these brokers going forward could have an adverse effect on our business.

There are many risks associated with our growth strategy that we may be unable to control.

Our growth strategy includes potential strategic acquisitions, as well as continued internal growth, particularly of our specialty business lines, and development of new insurance lines. If we are unable to implement our growth strategy effectively, our business, financial condition and operating results could be materially adversely affected. Although we are not engaged in negotiations with respect to any acquisition, any future acquisition would be accompanied by risks commonly encountered in acquisitions of companies. Such risks include, among other things, the difficulty in assimilating the operations and personnel of an acquired company; potential disruption of our ongoing business; inability to successfully integrate acquired systems and insurance programs into our operations; maintenance of uniform standards, controls and procedures; and possible impairment of relationships with employees and insureds of an acquired business as a result of changes in management. In addition, there can be no assurance that we will be able to successfully implement our strategy for continued internal growth. There can be no assurance that we would be successful in overcoming the risks or any other problems customarily encountered in connection with an acquisition or achieving internal growth or development of new insurance lines.

We and our subsidiaries are subject to various regulations that may change at any time, and our inability to successfully comply with these changed regulations may adversely affect our business results.

Insurance Regulation.    Our primary insurance and reinsurance subsidiaries, as well as our non-subsidiary risk retention group affiliate, are subject to regulation under applicable insurance statutes of the jurisdictions in which they are domiciled or licensed and write insurance. Such regulation may limit our ability or speed to respond to market opportunities and may require us to incur significant annual regulatory compliance expenditures. Insurance regulation is intended to provide safeguards for policyholders rather than to protect shareholders of insurance companies or insurance holding companies. Insurance regulation relates to authorized

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business lines, capital and surplus requirements, types and amounts of investments, underwriting limitations, trade practices, policy forms, claims practices, mandated participation in shared markets, reserve adequacy, insurer solvency, transactions with related parties, changes in control, payment of dividends and a variety of other financial and nonfinancial components of an insurance company’s business. Any changes in insurance laws and regulations could materially adversely affect our business, financial conditions and operating results. We are unable to predict what additional laws and regulations, if any, affecting our business may be promulgated in the future or how they might be interpreted.

Environmental Regulation.     Environmental remediation activities and other environmental risks are highly regulated by both federal and state governments. Environmental regulation is continually evolving and changes in the regulatory patterns at federal and state levels may have a significant effect upon potential claims against us. Such changes may also affect the demand for the types of insurance offered by and through us and the availability or cost of reinsurance. We are unable to predict what additional laws and regulations, if any, affecting environmental remediation activities and other environmental risks may be promulgated in the future or how they might be interpreted.

There exists a potential risk of United States taxation of our Bermuda operations.

Both American Safety Insurance and our reinsurance subsidiary, American Safety Reinsurance, are organized under Bermuda law. Bermuda’s tax laws are more favorable to American Safety Insurance and American Safety Reinsurance than the United States’ tax laws because Bermuda companies are not obligated to pay any taxes in Bermuda based upon income or capital gains. If our Bermuda-based operations were determined to be subject to United States taxation, our operating results could be materially adversely affected. The United States Internal Revenue Code of 1986, as amended, does not contain a definitive identification of activities that constitute being engaged in a United States trade or business, and there can be no assurance that the Internal Revenue Service will not take the position that our Bermuda-based operations are engaged in a United States trade or business and, therefore, are subject to United States income taxation. Our U.S. subsidiaries, however, are subject to United States taxation. See Note (7) in Notes to the Consolidated Financial Statements.

Our success depends in large part on our ability to attract and retain qualified personnel in all facets of our operations.

Competition for qualified personnel is intense, and we may not be successful in attracting and retaining key executives which could impact our ability to maintain and grow our operations. Our future success will depend, to a significant extent, on the ability of our management to operate effectively. In the past, competitors and others have attempted to recruit our employees and, in the future, their attempts may continue. The loss of services of any key personnel, the inability to attract and retain qualified personnel in the future or delays in hiring required personnel could negatively affect our business.

SPECIAL NOTE REGARDING FORWARD-LOOKING INFORMATION

This prospectus contains forward-looking statements. You can identify these statements by the use of forward-looking terminology, such as “may,” “will,” “expect,” “estimate,” “anticipate,” “believe,” “target,” “plan,” “project,” or “continue” or the negatives or other variations or similar terminology. We have made these statements based on our plans and current analyses of our company, our business and the insurance industry as a whole. These statements also relate to our belief that the insurance market is improving in terms of premium rates.

Some of the risks and uncertainties identified by these forward-looking statements, include, but are not limited to:

• general economic conditions and other factors, including prevailing interest rate levels, stock market performance and health care inflation, which may affect our ability to sell our products, the market value of our investments and the lapse rate and profitability of our policies;

• our ability to achieve anticipated levels of operational efficiencies and synergies with acquired companies, as well as through other cost-saving initiatives and the availability and terms of future strategic acquisitions;

• customer response to new products, distribution channels and marketing initiatives;

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• the nature and extent of worker injuries and the cost of healthcare related thereto;

• changes in the Federal income tax laws and regulations which may affect the relative tax advantages of some of our products;

• increasing competition in the sale of our insurance products and services; and

• regulatory changes or actions, including those relating to the underwriting of insurance products, regulation of the sale, underwriting and pricing of insurance products.

The above factors, in some cases, have affected, and in the future could affect, our financial performance and could cause actual operating results for fiscal 2002 and beyond to differ materially from those expressed or implied in the forward-looking statements. These and other material risk factors relating to us and the preferred securities are more fully described under the caption “Risk Factors” beginning on page     .

You may rely on the information contained in this prospectus. We have not authorized anyone to provide information different from that contained in this prospectus. Neither the delivery of this prospectus nor the sale of the preferred securities means that information contained in this prospectus is correct after the date of this prospectus. This prospectus is not an offer to sell or solicitation of an offer to buy the preferred securities in any circumstances under which the offer or solicitation is unlawful.

USE OF PROCEEDS

The Trust will use the proceeds from the sale of the trust securities to purchase the debentures from American Safety Holdings. The net proceeds from the sale of the debentures are expected to be approximately $            million after deducting underwriting commissions and offering expenses payable by us.

We intend to invest a portion of the net proceeds from the debentures to expand the capital base of our insurance subsidiaries to take advantage of improving premium rates in the property and casualty insurance market, as needed, and intend to use the remainder of the balance of the net proceeds for general corporate purposes, including capital investments to finance the continued implementation of our growth strategy. The precise amounts and timing of expenditures of the net proceeds will depend on our funding requirements and the availability of other capital resources. Pending application of the net proceeds as described above, we intend to invest the proceeds from the offering in short-term and intermediate-term interest-bearing securities.

ACCOUNTING TREATMENT

For financial reporting purposes, the Trust will be treated as a direct subsidiary of American Safety Holdings and, accordingly, the account of the Trust will be included in the consolidated financial statements of American Safety Insurance. The preferred securities will be presented as a separate line item in our consolidated balance sheet and appropriate disclosures concerning the preferred securities, the preferred securities guarantee, the debentures and the debenture guarantee will be included in the notes to the consolidated financial statements. For financial reporting purposes, we will record distributions payable on the preferred securities as an expense.

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RATIO OF EARNINGS TO FIXED CHARGES

The following table sets forth our consolidated ratios of earnings to fixed charges for the periods indicated. For purposes of computing the ratios of earnings to fixed charges, earnings represent pre-tax income before extraordinary items and includes realized investment gains and losses. Earnings to fixed charges as adjusted for this offering reflects the applications of the estimated net proceeds to our business.

	Year Ended December 31,							Six Months Ended June 30,
	1997	1998	1999	2000		2001		2001		2002
Earnings (Loss) to fixed charges	—	—	—	(10.3	x)	4.7	x	5.5	x	26.6	x
Earnings to fixed charges as adjusted for this offering						[	]			[	]

  *Please note that there are no interest charges from 1997-1999

**Pro-forma numbers do not include the potential investment income from offering proceeds of [        ]

CAPITALIZATION

The following table shows the consolidated capitalization of American Safety Insurance at June 30, 2002, and as adjusted to give effect to the receipt and application of the estimated net proceeds from American Safety Holdings’ sale of the debentures to the Trust assuming the sale of the preferred securities.

	June 30, 2002			As Adjusted for this Offering
	(In Thousands)
Long-term debt	$	10,211		$	10,211
Short-term debt		1,000			1,000
Guaranteed preferred beneficial interest in the debentures		—			15,000
Shareholders’ equity
Preferred stock, $.01 par value; authorized 5,000,000 shares;		—			—
no shares issued and outstanding
Common stock, $.01 par value; authorized 15,000,000 shares;		63			63
6,347,689 shares issued and outstanding
Additional paid-in capital		35,567			35,567
Accumulated other comprehensive income		1,096			1,096
Retained earnings		36,183			36,183
Treasury stock, 1,601,139 shares		(9,653	)		(9,653	)
Total shareholders’ equity	$	63,256		$	63,256
Total capitalization	$	74,467		$	89,467

For additional information regarding our capital resources, see “Management’s Discussion and Analysis of Financial Condition as Results of Operations—Liquidity and Capital Resources.”

BUSINESS OVERVIEW

American Safety Insurance

American Safety Insurance is a specialty insurance holding company organized under the laws of Bermuda which, through its subsidiaries, develops, underwrites, manages and markets primary casualty insurance and reinsurance programs in the alternative insurance market in all 50 states for environmental remediation risks, contracting, and other specialty risks. We are also the

owner/developer of a residential condominium, marina, par 3 golf course and beach club development in Ponce Inlet, Florida.

We were formed as a group captive insurance company in 1986 to provide stable, long term insurance protection for the asbestos abatement and environmental remediation industry in the United States, which had suffered from disruptive market cycles in the standard insurance market. We now provide specialty insurance coverages and services in all 50 states and market our business lines through approximately 190 independent insurance agency and brokerage firms.

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We develop specialty insurance coverages and custom designed risk management programs not generally available in the standard insurance market. Our specialty insurance lines include coverages for general liability, pollution liability, professional liability, workers’ compensation, surety, as well as custom designed risk management programs (including captive and rent-a-captive facilities) for contractors, consultants and other businesses and property owners who are involved with environmental remediation, contracting, and other specialty risks.

We insure and place risks through our two U.S. insurance subsidiaries, American Safety Casualty Insurance Company and American Safety Indemnity Company, as well as our U.S. non-subsidiary risk retention group affiliate, American Safety RRG, and through other unaffiliated insurance companies. We also reinsure and place, through our Bermuda reinsurance subsidiary, American Safety Reinsurance, and unaffiliated reinsurers, a portion of the risks underwritten directly by our two U.S. insurance subsidiaries, our risk retention group affiliate and other insurers. Substantially all of the reinsurance business that we currently assume is for primary insurance programs that we have developed and underwritten.

We also provide specialized insurance program development, underwriting, reinsurance, program management, brokerage, loss control, claims administration and marketing services through ASI Services, our principal U.S. program development, underwriting, brokerage and administrative services subsidiary. We select our roles as program developer, primary underwriter, reinsurer or program manager. After determining our roles, we utilize our insurance and reinsurance subsidiaries, our insurance brokerage and management services subsidiaries, and our non-subsidiary risk retention group affiliate to generate risk premium revenues, program management fees, insurance and reinsurance commissions and investment income.

Industry Ratings

In September 2002, A.M. Best Company, an independent, nationally recognized insurance industry rating service and publisher, reaffirmed its rating of “A (Excellent),” with a “stable” outlook, on a group basis to American Safety Insurance, as well as its U.S. insurance subsidiary, American Safety Casualty, its U.S. property and casualty excess and surplus lines insurance company, American Safety Indemnity, its Bermuda reinsurance subsidiary, American Safety Reinsurance, and its non-subsidiary risk retention group affiliate, American Safety RRG. The rating of “A (Excellent)” is the third highest of A.M. Best’s 16 letter ratings. A.M. Best’s ratings represent an independent opinion of an insurer’s ability to meet its obligations to policyholders, which opinion is of concern primarily to policyholders, insurance agents and brokers and should not be considered an investment recommendation.

Alternative Insurance Market

The alternative insurance market has developed over the past two decades to serve insureds whose insurance needs have not been adequately met by the standard insurance market. According to A.M. Best, the alternative insurance market has grown to approximately 48% of the total U.S. commercial property and casualty insurance market.

Alternative insurance programs generally involve (1) the underwriting of risks which are characterized by the standard insurance market as difficult or which generate too little premium for standard market insurance companies; and/or (2) the design of specialized insurance programs, such as deductible or risk retention programs, and captive or rent-a-captive facilities, which enable insureds to assume a portion of their own risks and share in the underwriting profitability or losses of the program. Originally developed to respond to the needs of insureds for adequate insurance coverage and stable premium rates, the alternative insurance market also responds to strategic needs of insureds for better financial management, improved claims handling, more effective risk management, customized insurance programs, access to reinsurance markets and greater control over loss prevention. The benefits of such alternative insurance market techniques typically include more stable costs, greater control by the client of its risk management program and an increased emphasis within the client’s organization on loss prevention and loss control.

Business Strategy

We have developed extensive expertise in identifying insurable opportunities not addressed in the standard insurance market. Typically, we target niche insurance markets that are underserved because they:

• are small in number of insureds or in size of coverage needed;

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• need unique or unusual coverages; or

• have not yet been identified by our competition.

For these markets, we are able to offer a broad array of innovative products and services. In fact, a significant portion of our new business comes through insurance agencies and brokers who are aware of our interest and ability to offer insurance to underserved markets and who have identified a market that they believe provides both them and us a potentially profitable opportunity.

In these niche markets, we are able to select our role as program developer, primary underwriter, reinsurer or program manager. Depending upon the needs of the particular market, we have the ability to combine (1) intensive underwriting, (2) value-added services, including customized coverages, professional risk management, dedicated loss control and claims management and (3) a commitment to superior service, in order to fashion the product offering that offers us the greatest profit opportunity and, at the same time, fulfills the needs of the insurance agents, brokers and insureds. Depending upon the ultimate role selected, we will seek to generate underwriting profits, program management fees or commissions.

A significant focus for our business remains offering insurance products to the environmental remediation industry and contractors that provided the impetus for our formation in 1986. However, as we have grown, we have also diversified into other specialty insurance areas. We intend to continue this diversification in the future.

Our objective is to concentrate on the most profitable opportunities in our core business areas. We have demonstrated our ability to execute on opportunities and at the same time exercise underwriting judgment and discipline so that top line premium growth does not damage bottom line operating results. This most clearly is demonstrated through our willingness to exit or reduce business lines—such as surety and workers’ compensation—when they generated unacceptable claims experience or did not meet our profitability goals. We will continue to expand our business into new lines or services, but we will not be reluctant to exit these lines if the results do not meet our expectations. In doing so, we exercise sound underwriting judgment and discipline which we anticipate will allow us to generate profits, minimize losses, successfully identify and implement new opportunities and stabilize our earnings stream.

Our real estate development subsidiary, Ponce Lighthouse Properties, Inc., is the owner/developer of a residential condominium, marina, par 3 golf course and beach club development known as the Harbour Village Golf and Yacht Club (“Harbour Village”) in Ponce Inlet, Florida. We organized Rivermar Contracting Company, a subsidiary, to be the general contractor for the construction of the Harbour Village project. We acquired the property that is being developed as Harbour Village through foreclosure in April 1999. Management believes the development of Harbour Village will provide significant value to our shareholders over the anticipated development period through 2005.

Insurance Program Development, Management and Administrative Operations

Our U.S. brokerage and management subsidiaries, in combination with our primary insurance and reinsurance companies, provide a broad range of dedicated services in connection with the development and implementation of specialty risk insurance programs.

Insurance Services.    ASI Services provides insurance program development, underwriting, reinsurance placement, program management, brokerage, loss control, claims administration, marketing and administrative services to our U.S. insurance operations, our risk retention group affiliate, and unaffiliated insurers and reinsurers.

ASI Services identifies and evaluates potential new program business and also receives submissions for new programs from insurance brokers and other intermediaries throughout the United States. When a submission for a new program is received, ASI Services identifies the resources needed to evaluate and develop the program. In evaluating and developing a new program, ASI Services considers the following factors:

• whether the submitting party will bear risk and the collateral security required;

• the analysis of historic loss data;

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• the integrity and experience of the submitting party;

• the availability of reinsurance; and

• the potential profitability of the program to us.

If the prospects for a new program appear favorable, ASI Services designs the structure for the new program and determines what additional services, such as program management, brokerage, reinsurance, loss control, claims administration, marketing, or other services will be required. ASI Services determines which entities, both affiliated and unaffiliated, are best able to provide such services in a cost-effective manner and implements the program.

ASI Services has developed many of our primary insurance and reinsurance programs. ASI Services also has served since 1990 as the program manager for American Safety Insurance’s risk retention group affiliate, American Safety RRG, providing it with program management, underwriting, loss control, brokerage, marketing and financial services pursuant to guidelines and procedures established by the board of directors of the risk retention group.

Management and Administrative Services.    ASI Services provides a number of services to our two U.S. insurance subsidiaries and to American Safety RRG. These services include:

• program management services for the overall management and administration of a program;

• underwriting services for evaluating individual risks or classes of risk;

• brokerage services for placing risks with affiliated or unaffiliated insurers;

• reinsurance services for placing reinsurance for a program;

• loss control services for evaluating the risks posed by a particular class of risk, as well as the ability of insureds to control their losses;

• claims administration services for the prompt reporting and handling of claims, and the supervision of claims adjusters and third party administrators;

• marketing services for designing and placing advertisements and other marketing materials, as well as marketing insurance programs to independent agents and brokers; and

• administrative services, including data processing, billing, collecting and reporting primary and reinsurance premiums, producing financial reports on programs and paying claims.

Other Insurance Service Subsidiaries.    American Safety Insurance has four other U.S. subsidiaries, under the direction of ASI Services, which provide various administrative and insurance agency services. Each company, along with its primary function, is listed below:

Name	Primary Function
American Safety Purchasing Group, Inc.	Formed to facilitate the provision of certain insurance coverages through a purchasing group (as defined by the Risk Retention Act) by licensed insurance companies
American Safety ReSources, Inc.	A reinsurance services company which places reinsurance to be assumed by one of our companies or ceded to other reinsurers
Environmental Claims Services, Inc.	A specialized claims administration company engaged in the administration and analysis of environmental and other specialty claims
Sureco Bond Services, Inc.	A surety bond agency authorized to write contract performance and payment bonds for unaffiliated insurers

Primary Insurance Operations

Through our two U.S. insurance subsidiaries and our risk retention group affiliate, we provide primary casualty insurance in the alternative insurance market in all 50 states for environmental remediation risks, contracting, and other specialty risks. Our specialty

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insurance lines now include coverages for general liability, pollution liability, professional liability, workers’ compensation, surety, as well as custom designed risk management programs (including captive and rent-a-captive facilities), for contractors, consultants and other businesses and property owners who are involved with environmental remediation, contracting, and other specialty risks.

Environmental Insurance Products

We have developed specialty insurance programs for a broad range of environmental concerns and believe that our intensive underwriting, dedicated loss control and claims management, and superior service to brokers, agents and insureds will enable us to expand our insurance program base to other environmental coverages not currently being provided. Since 1986, our insurance programs have helped asbestos abatement and other environmental remediation contractors and consultants, as well as property owners, perform remediation work in schools, hospitals, commercial, industrial and other project sites.

Our in-house underwriting department consists of trained environmental and other specialty risk underwriters. The underwriting staff analyzes loss histories of prospective insureds, as well as the insureds’ technical capabilities and experience with similar projects to those for which insurance is being requested. The underwriting staff may also request references and financial information. Some of the underwriters have technical backgrounds and experience in various environmental fields. Our in-house loss control department also is involved in the underwriting process, in reviewing technical work guidelines provided by insurance applicants, such as safety and health practices and procedures, as well as inspecting environmental remediation project sites and recordkeeping throughout the United States.

Our general and pollution liability policies for environmental risks cover bodily injury and property damage to third parties arising out of the operations of insureds, which may include losses arising from exposure to specific hazardous substances that are released during a remediation project. Coverages provided for professional liability protect insureds against claims arising out of bodily injury or property damage and/or negligent acts, errors or omissions which occur as a result of the performance of professional consulting, testing, laboratory and similar services, such as the failure to detect hazardous materials in connection with assessments for same, or the failure to properly design or monitor performance on remediation projects in accordance with contracts entered into by such insureds. We also provide workers’ compensation coverage for contractors and consultants involved in environmental remediation, which may include risks such as occupational diseases from exposure to hazardous substances.

We provide insurance coverage for a broad range of environmental risks, including:

Asbestos Abatement.    Asbestos is a fibrous mineral which has been commercially produced for, among other things, insulation and reduction of fire and heat in buildings and products. In spite of the usefulness of asbestos, health problems have arisen with its use. In response to the need for detection, abatement and removal of asbestos, the asbestos abatement industry developed in the mid-1980’s and sought insurance for risks involved with its business. Since 1986, we have provided general, pollution and professional liability coverages as well as workers’ compensation coverage for contractors and consultants involved with asbestos abatement.

Lead Abatement.    We provide general, pollution and professional liability coverages and workers’ compensation coverage for lead paint abatement contractors, consultants and property owners in connection with the abatement of lead paint from both public and private facilities, including housing authority complexes.

Underground Storage Tank Removal and Installation.    We provide general, pollution and professional liability coverages as well as workers’ compensation coverage to contractors and consultants for the removal and installation of underground storage tanks, including associated soil remediation activities attributed to leaking underground storage tanks.

Other Hazardous Substances.    We provide general, pollution and professional liability coverages, and workers’ compensation coverage in connection with the removal and remediation of other hazardous substances, including hazardous waste, polychlorinated biphenyls (PCBs) and various petroleum products.

Other Environmental Risks.    We provide environmental insurance coverages that offer protection against environmental exposures arising from general business or fixed site operations. Environmental impairment liability insurance is offered for varied purposes such as facilitating the financing of real estate transactions, transferring real estate and protecting against the release of hazardous substances from treatment and disposal sites.

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Specialty Risks

We also provide insurance coverage for a broad range of specialty risks, including:

Excess and Surplus Lines.    Our U.S. insurance subsidiary, American Safety Indemnity, a licensed and approved excess and surplus lines insurer in 38 states plus the District of Columbia, provides excess and surplus lines insurance products through appointed surplus lines brokers for commercial casualty risks. The principal focus is on a broad range of general and product liability lines, primarily excess of a self insured retention in order to have the insured participate in its own risk. Typically, these risks are highly specialized with unique exposures and coverage may not be readily available in the standard insurance marketplace. We seek to take advantage of typical “class” underwriting by standard insurance insurers that often non-renew large books of business because of the class of risk rather than non-renewing specific problem accounts. When this occurs, these risks tend to flow into the excess and surplus lines marketplace generally resulting in more restrictive policy terms and less price competition. We seek to write this business through American Safety Indemnity because as an excess and surplus lines insurer, it is generally free from the rate and form filing regulations to which standard insurance insurers must adhere thereby giving excess and surplus lines insurers more freedom over the pricing it can charge for a risk, as well as the policy terms and conditions it offers.

Program Business.    Working with program managers, brokers, reinsurance intermediaries and our two U.S. insurance company subsidiaries, we target small and middle-market specialty niche and homogeneous groups of risks, where the principal insurance requirements are general liability, professional liability or pollution liability. We seek to capitalize on program business opportunities, arising in large part from shrinking reinsurance availability and a decrease in the number of acceptable insurance companies willing to act as the policy-issuing insurer for a program.

We differentiate ourselves from our competitors through the writing of program business in two ways:

• Assuming risk on programs where underwriting profits can be realized.

• Utilizing a due diligence and audit team consisting of experienced insurance professionals to monitor the management and administration of insurance programs.

We combine our insurance and loss control expertise with our insurance and reinsurance programs. We work with brokers, reinsurance intermediaries and reinsurance companies to design profitable, customized insurance programs. Some examples of programs written include dry cleaners’ pollution liability, public entity environmental impairment, home heating oil tank liability, coal mine liability, pest control operators, surplus lines package for small businesses, lawyer’s professional liability program, and bail bonds. We look for programs where we can take and assume a portion of the risk in addition to generating income from fees and commissions.

Surety.    Our U.S. insurance subsidiary, American Safety Casualty, is licensed to write surety bonds in 47 states and the District of Columbia, primarily providing contract performance and payment bonds to general construction and environmental contractors. American Safety Casualty is listed as an acceptable surety on federal bonds, commonly known as a “Treasury Listed” or “T-listed” surety, enabling it to issue surety bonds for federal projects, as well as state and private projects that utilize such designation as a reference in determining the acceptability of surety companies. American Safety Casualty’s underwriting limitation, as determined by the Department of the Treasury as of July 1, 2002, was $1,525,000 on a per-bond basis; however, this limitation does not constrain the amount of a bond that can be written, provided that the excess exposure is protected with approved reinsurance or other methods prescribed by the Department of the Treasury. Beginning in 2001, American Safety Casualty substantially reduced writing contract surety business as a result of adverse loss experience and the lack of affordable reinsurance. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Underwriting.    ASI Services’ underwriting staff handles all insurance underwriting functions for programs on which we assume risk, with specific underwriting authority related to the experience and knowledge level of each underwriter. Risks that are perceived to be more difficult and complex are underwritten by experienced staff and reviewed by management. ASI Services uses management information reports to measure risk selection and pricing in order to control underwriting performance. The principal underwriting factors used by ASI Services for underwriting liability, workers’ compensation and surety coverages, are a financially stable business, an established operating history, favorable loss histories and a demonstrated commitment to loss control practices.

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Claims.    Claims arising under the policies and treaties issued or reinsured by us are reviewed and managed by ASI Services’ internal claims department. When ASI Services receives notice of a loss, its claims personnel open a claim file and establish a reserve with respect to the loss. For programs business, ASI Services retains claims settlement authority, delegating only limited settlement authority to certain third party administrators. ASI Services emphasizes prompt and fair settlement of meritorious claims, maintenance of adequate loss reserves and careful control of claims adjustment and legal expenses.

Former Lines.    Prior to 2002, our U.S. insurance subsidiary, American Safety Casualty, wrote commercial lines insurance primarily for habitational and manufacturing risks, workers’ compensation and general liability insurance for employee leasing companies (also known as professional employer organizations) and staffing industry companies. We continue to manage the run-off from these business lines. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Reinsurance Assumed

We assume reinsurance on primary insurance coverages that we have developed, underwritten or managed and we enter into reinsurance treaties with our insurance subsidiaries, our risk retention group affiliate and unaffiliated insurers.

Reinsurance is a contractual arrangement under which one insurer (the ceding company) transfers to another insurer (the reinsurer) all or a portion of the risk(s) that the ceding company has assumed under the insurance policy or policies it has issued. A ceding company may purchase reinsurance for any number of reasons, including to obtain, through the transfer of a portion of its liabilities, greater underwriting capacity than its own capital resources would support, to stabilize its underwriting results, to protect against catastrophic loss, and to enter into or withdraw from a line of business.

For the year ended December 31, 2001, of the $26.8 million of gross reinsurance premiums written by us, approximately $10.9 million was assumed from our risk retention group affiliate, with the balance of approximately $15.9 million assumed from unaffiliated insurers.

Our assumed reinsurance business for general liability, pollution liability, and professional liability is written under excess of loss treaties primarily with our risk retention group affiliate. In the layer of the first $350,000 of loss per occurrence, we assume 75% of the losses arising from claims covered under the policies written and the risk retention group retains the other 25% of the risk.

Selected Operating Information

Gross Premiums Written and Produced.    As a result of our roles in connection with insurance program development, risk bearing on a primary and reinsurance basis, insurance and reinsurance brokerage, and production and administration, we are involved in a number of insurance and reinsurance premium and fee-generating activities. We place insurance and reinsurance with our insurance and reinsurance subsidiaries and our risk retention group affiliate and also act as an agency and broker for our risk retention group affiliate, unaffiliated insurers and reinsurers for which we receive brokerage commissions. For the year ended December 31, 2001, we were involved with the placement of approximately $176.3 million of gross premiums through its various programs and subsidiaries.

The following table sets forth our premiums written and produced for the years ended December 31, 2000 and December 31, 2001:

	Year Ended December 31, 2000							Year Ended December 31, 2001
	Gross			Ceded		Net		Gross			Ceded		Net
	(Dollars in thousands)
American Safety Insurance	$	86,872		$	44,872	$	42,000	$	158,018		$	78,949	$	79,068
American Safety RRG (1)		18,683							15,863
Other Insurers and Reinsurers (2)		12,594							13,256
Less: Ceded from American Safety RRG to American Safety Insurance (3)		(7,923	)						(10,864	)
Total		$110,226							$176,272

(1) Represents premiums written by American Safety RRG, American Safety Insurance’s non-subsidiary affiliate.

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(2) Represents premiums produced by American Safety Insurance, as an agency and broker, for unaffiliated insurers and reinsurers.

(3) Represents premiums ceded to American Safety Insurance from American Safety RRG.

Net Premiums Written.    The following table sets forth our net premiums written by principal lines of insurance and reinsurance for the years ended December 31, 2000 and December 31, 2001:

	Year Ended December 31, 2000				Year Ended December 31, 2001
	(Dollars in thousands)
General Liability	$	11,731	27.9	%	$	45,664	57.8	%
Workers’ Compensation		13,318	31.7			21,371	27.0
Program Business		4,271	10.2			7,351	9.3
Commercial Lines		4,293	10.2			3,120	3.9
Surety		8,387	20.0			1,562	2.0
Total	$	42,000	100.0	%	$	79,068	100.0	%
The following table sets forth our net premiums written by specialty industry for the years ended December 31, 2000 and December 31, 2001:
	Year Ended December 31, 2000				Year Ended December 31, 2001
	(Dollars in thousands)
Excess & Surplus Lines	$	4,335	10.3	%	$	35,750	45.2	%
Environmental		9,158	21.8			21,062	26.6
Program Business and Other		6,602	15.7			9,765	12.4
Employee Leasing		9,226	22.0			7,809	9.9
Commercial Lines		4,292	10.2			3,120	3.9
Surety		8,387	20.0			1,562	2.0
Total	$	42,000	100.0	%	$	79,068	100.0	%

Commissions and Fees.    We generate fee and commission income in connection with our program development and management, insurance and reinsurance brokerage services, and production and other insurance related services. Fee and commission income was $4.7 million for the year ended December 31, 2000, and $3.9 million for the year ended December 31, 2001.

Combined Ratio.    The combined ratio is a standard measure of a property and casualty insurer’s performance in managing its losses and expenses. Underwriting results are generally considered profitable when the combined ratio is less than 100%. The following table compares the statutory combined ratios of American Safety Insurance with the property and casualty industry over the past three years.

Combined Ratio (Statutory Basis)

	Year Ended December 31,
	1999		2000		2001
American Safety Insurance (1)(2)	73.2	%	87.4	%	95.6	%
Property and casualty industry (3)	107.5		110.3		117.0

(1) Data has been derived from our consolidated financial statements.

(2) Payments by American Safety Casualty and American Safety Indemnity to ASI Services for management services are included in the combined ratio.

(3) The statutory industry data was obtained from A.M. Best.

The combined ratio of an insurance company measures only the underwriting results of insurance operations and not the profitability of the overall company. Our reported combined ratio for the insurance operations may not provide an accurate indication

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of our overall profitability from insurance and reinsurance programs due to the exclusion of fee and commission income and expenses generated in related management and agency subsidiaries. Depending on our mix of business going forward, the combined ratio may fluctuate from time to time and may not reflect the overall profitability of insurance programs to us.

Premium and Loss Summary.    We are engaged in the development of programs and underwriting of coverages as both a primary casualty insurer and a reinsurer. The following table provides selected historical information based on accounting principles generally accepted in the United States of America (“GAAP”) concerning the business written by American Safety Insurance and the associated underwriting risks. This data should be read in conjunction with the consolidated financial statements and notes thereto and the American Safety Insurance Group, Ltd. Selected Consolidated Financial Data included elsewhere in this prospectus.

	Year Ended December 31,
	1999			2000			2001
	(In thousands, except ratio data)
Primary:
Gross Premiums Written	$	10,821		$	64,226		$	131,253
Net Premiums Written		2,894			21,552			54,097
Net Premiums Earned		1,516			10,099			42,423
Loss & Loss Adjustment Expense Ratio		35.2	%		58.0	%		69.7	%
Reinsurance:
Gross Premiums Written	$	12,584		$	22,646		$	26,764
Net Premiums Written		11,647			20,448			24,971
Net Premiums Earned		10,609			16,706			22,364
Loss & Loss Adjustment Expense Ratio		54.3	%		73.7	%		64.1	%
Combined:
Gross Premiums Written	$	23,405		$	86,872		$	158,017
Net Premiums Written		14,541			42,000			79,068
Net Premiums Earned		12,125			26,805			64,787
Loss & Loss Adjustment Expense Ratio		56.9	%		69.0	%		67.9	%
Expense Ratio		16.7	%		18.6	%		24.9	%
Combined		73.6	%		87.6	%		92.8	%

Significant fluctuations in demand for and supply of various casualty insurance and reinsurance business lines have led to substantial price fluctuations over time. Our management seeks to expand and contract various business lines based on the relative favorability of the pricing environment for its products. As a writer of both primary insurance and reinsurance, we have additional flexibility to adjust our business mix in response to price differences in these markets and to utilize our knowledge of primary insurance markets to guide our assumption of insurance and reinsurance risks. During the past decade, we have operated in a soft market cycle which was characterized by excess insurance capacity and declining insurance premium rates; however, commencing in fiscal year 2000, we have operated in a market characterized by increased insurance premium rates for workers’ compensation, excess and surplus lines.

Reinsurance Ceded

We obtain reinsurance for our primary insurance operations from unaffiliated reinsurers to protect and mitigate our risk exposure. Some of the reinsurance treaties that we maintain for our protection have aggregate limits of liability.

Gross reinsurance premiums ceded in 2000 were $44.9 million, which constituted 52% of the gross premiums written, and in 2001 were $78.9 million, which constituted 50% of the gross premiums written. The amount of reinsurance obtained by us varies with the line of business insured or reinsured. We experienced increased reinsurance costs in 2001, and expect such increased reinsurance costs to continue in 2002, as a result of a hardening reinsurance market.

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We evaluate the credit quality of the U.S. reinsurers and retrocessionaires to which we cede business. The following table sets forth certain information relating to our unaffiliated reinsurers and retrocessionaires as of December 31, 2001 with recoverables in excess of 5% of our total shareholders’ equity:

Reinsurers	A.M. Best Rating (1)	Total Recoverable for Year Ended December 31, 2001	Collateral for Year Ended December 31, 2001
	(In thousands)
Berkley Insurance Company	A	32,382	2,453
Louisiana Pest Control Insurance Company	NR-4	9,095	9,117
Zurich International (UK) Ltd.	NR-5	8,430	8,466
Alea London Ltd.	A-	8,107	7,887
American Constantine Insurance Company Limited	N/A	6,053	8,783
various Lloyd’s of London Syndicates	A-	6,688	208
Everest Re	A+	3,534	—
Dorinco Re	A	3,236	—

(1) A.M. Best rating currently assigned.

During the fourth quarter of 2001, one of our former reinsurers, Berkley Insurance Company (formerly known as Signet Star Reinsurance Company), disputed its obligations under several reinsurance treaties entered into during the “soft reinsurance market” (an insurance market characterized by decreasing premium prices for coverages) that existed in 1998 and 1999. Certain business lines covered by our reinsurance treaties with Berkley developed adverse losses and Berkley stopped reimbursing us for amounts due under these treaties and has requested that we retroactively consider taking a greater portion of the losses than is required under the treaties or, alternatively, to rescind and reform portions of certain treaties. As of June 30, 2002, unreimbursed paid claims under the treaties totaled $12.5 million and additional ceded case reserves and reserves for incurred but not reported losses totaled approximately $21.0 million. We believe the reinsurer’s request has no merit and have instituted arbitration proceedings against the reinsurer. Berkley is a subsidiary of W.R. Berkley Corp. (NYSE: BER). We do not believe this dispute will have a material adverse effect on our overall financial condition or liquidity as management believes we have sufficient current cash flows and other invested assets to meet our insurance obligations. However, there can be no assurances that the arbitration or any settlement reached between the parties will be on terms favorable to us. See “Risk Factors—Our reinsurance dispute with Berkley Insurance Company may have materially adverse consequences to our business and operating results.”

Loss and Loss Adjustment Expense Reserves

We are required to maintain reserves to cover our estimated ultimate liability for losses and loss adjustment expenses with respect to reported and unreported claims incurred. We engage an independent internationally recognized actuarial consulting firm to provide reserve studies, rate studies and opinions. Reserves are estimates at a given time, which are established from actuarial and statistical projections by us of the ultimate settlement and administration costs of claims occurring on or prior to such time, including claims that have not yet been reported to the insurer. The establishment of appropriate loss reserves is an inherently uncertain process, and there can be no assurance that ultimate payments will not materially exceed our reserves.

With respect to reported claims, reserves are established on a case-by-case basis. The reserve amounts on each reported claim are determined by taking into account the circumstances surrounding each claim and policy provisions relating to the type of loss. Loss reserves are reviewed on a regular basis, and as new data becomes available, appropriate adjustments are made to reserves.

As of December 31, 2001, approximately 16% of our net reserves relate to liability associated with asbestos abatement and other environmental general liability insurance programs, 28% of such reserves are attributable to the workers’ compensation insurance, 26% of such reserves relate to excess and surplus lines, and the balance of 30% of such reserves is allocated among surety and other lines of insurance business.

In establishing reserves for its general liability insurance program, we use paid and reported Bornhuetter-Ferguson methods (as defined in the “Glossary of Insurance Industry Terms”) which are based in part on developing paid and reported losses and an initial

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expected loss level. Initial expected losses reflect an expected loss ratio estimated from our experience and a loss cost model applied to premium by coverage year. This loss indication and paid/reported losses are assigned respective weights to obtain estimates of ultimate losses which are considered in establishing ultimate loss levels.

In establishing reserves for our workers’ compensation insurance program, several methods are employed in determining ultimate losses: a pure premium method; two Bornhuetter-Ferguson methods—paid and reported; and two loss development methods—paid and incurred. The first three methods use industry expected losses adjusted for our experience while the last two methods rely on industry payment and reporting patterns to develop our actual losses. We review all methods each coverage year in determining ultimate losses.

In establishing reserves for our surety and other coverages, we use an expected loss ratio method due to the lack of available historical information specific to us.

All the methods used are generally accepted actuarial methods and, with the exception of the pure premium method, rely in part on loss reporting and payment patterns while considering the long tail nature of the coverages and inherent variability in projection results from year-to-year. The patterns used are generally based on industry data with supplemental consideration given to our experience as deemed warranted.

Our independent actuarial consulting firm also relies on industry data to provide the basis for reserve analysis on newer business lines. Provisions for inflation are implicitly considered in the reserving process. For GAAP purposes, our reserves are carried at the total estimate for ultimate expected loss, without any discount to reflect the time value of money. Reserve calculations are reviewed regularly by management and periodically by regulators. Our independent actuarial consulting firm annually expresses an opinion on the adequacy of statutory reserves established by management, which is filed with the various jurisdictions in which our insurance and reinsurance subsidiaries and our risk retention group affiliate are licensed. Based upon practices and procedures employed by us, without regard to independent actuarial opinions, management believes that our reserves are adequate.

The following table provides a reconciliation of beginning and ending liability balances on a GAAP basis for the years indicated:

	Year Ended December 31,
	1999			2000		2001
	(In thousands)
Gross losses and loss adjustment expense reserves at beginning of year	$	14,701		$	20,413	$	50,509
Ceded reserves at beginning of year		1,841			6,065		27,189
Net losses and loss adjustment expense reserves at beginning of year		12,860			14,348		23,320
Add:
Incurred losses related to:
Current accident year		7,499			17,356		42,469
Prior accident years		(553	)		1,150		1,517
Total incurred losses		6,896			18,506		43,986
Less:
Claims payments related to:
Current accident year		1,707			4,291		12,952
Prior accident years		3,701			5,243		10,514
Total claims paid		5,408			9,534		23,466
Net losses and loss adjustment expense reserves at end of year		14,348			23,320		43,840
Ceded reserves at end of year		6,065			27,189		77,583
Gross losses and loss adjustment expense reserves at end of year	$	20,413		$	50,509	$	121,423

The following table shows the development of the reserves for unpaid losses and loss adjustment expenses from 1991 through 2001 for our primary insurance and reinsurance subsidiaries on a GAAP basis. The top line of the table shows the liabilities at the

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balance sheet date for each of the indicated years and reflects the estimated amounts for losses and loss adjustment expenses for claims arising in that year and all prior years that are unpaid at the balance sheet date, including losses incurred but not yet reported to us. The upper portion of the table shows the re-estimated amount of previously recorded liability based on experience as of the end of each succeeding year. The lower portion of the table shows the cumulative amounts subsequently paid as of successive years with respect to the liability. The estimates change as more information becomes known about the frequency and severity of claims for individual years. A redundancy (deficiency) exists when the re-estimated liability at each December 31 is less (greater) than the prior liability estimate. The “cumulative redundancy” or deficiency depicted in the table, for any particular calendar year, represents the aggregate change in the initial estimates over all subsequent calendar years.

	Year Ended December 31
	1991		1992		1993		1994		1995		1996		1997			1998		1999			2000			2001
	(in thousands)
Reserves for unpaid losses and loss   adjustment expense	$	4,552	$	4,135	$	4,798	$	6,048	$	8,288	$	8,869	$	10,793		$	12,860	$	14,348		$	23,320		$43,840
Reserves re-estimated at December 31:
1 year later		3,264		4,266		4,653		5,854		7,482		9,850		11,587			12,307		15,498			24,837
2 years later		3,057		4,100		4,584		5,381		7,518		9,926		12,253			12,967		15,541
3 years later		2,956		4,148		3,920		4,823		7,398		9,606		12,500			12,677
4 years later		2,933		3,644		3,063		4,373		7,027		9,767		11,556			—
5 years later		2,607		2,987		2,740		3,941		7,251		8,677		—			—
6 years later		1,953		2,765		2,535		4,062		6,261		—		—			—
7 years later		1,693		2,504		2,641		3,324		—		—		—			—
8 years later		1,422		2,630		2,002		—		—		—		—			—
9 years later		1,456		2,070		—		—		—		—		—			—
10 years later		1,066		—		—		—		—		—		—			—
Cumulative redundancy (deficiency)		3,486		2,065		2,796		2,724		2,027		192		(763	)		183		(1,193	)		(1,517	)
Cumulative amount of liability paid   through December 31:
1 year later		99		524		152		501		931		1,827		3,007			3,701		5,243			10,514
2 years later		308		651		382		997		2,056		3,506		5,707			6,565		9,616
3 years later		380		872		621		1,552		2,906		4,918		7,443			9,058
4 years later		531		1,095		776		1,899		3,656		6,034		8,991
5 years later		697		1,235		1,064		2,162		4,619		6,638		—			—
6 years later		701		1,511		1,252		2,428		4,906		—		—			—
7 years later		699		1,516		1,500		2,617		—		—		—			—
8 years later		700		1,733		1,500		—		—		—		—			—
9 years later		820		1,733		—		—		—		—		—			—
10 years later		820		—		—		—		—		—		—			—
Net reserve December 31																						23,320		43,840
Ceded Reserves																						27,189		77,583
Gross Reserve																						50,509		121,423

Investments

We have an Investment Services Agreement with an independent, nationally recognized investment management company whereby they provide investment advisory services to us, subject to the investment policies and guidelines established by our Board of Directors. We have consistently invested primarily in investment grade fixed income securities, with the objective of providing reasonable returns while limiting liquidity risk and credit risk. Our current investment strategy is to invest in high quality bonds, as opposed to equity securities, in order to reduce market fluctuations. Our investment portfolio consists primarily of government and governmental agency securities and high quality marketable corporate securities which are rated at investment grade level.

At December 31, 2001, our total assets of $297 million consisted of the following: cash, investments and notes receivable 47%; premiums receivable and agent’s balances 9%; reinsurance recoverables 36%; and other assets 8%. At December 31, 2001, we held

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investment grade fixed income debt securities valued at $62 million and secured notes receivable valued at $8.1 million which represented secured loans to unaffiliated parties, at or above market rates, secured by corporate and personal guarantees, real estate and other collateral.

Our cash and investments at December 31, 2001 totaled approximately $130.4 million, and were classified as follows:

Type of Investment	Book Value		Percent of Portfolio
	(In thousands)
Cash and short-term investments	$	32,056	24.5	%
United States government securities		28,618	21.9
Mortgage-backed securities		7,914	6.1
Corporate bonds		23,153	17.8
Foreign investments		1,004	0.8
Real estate		37,663	28.9
Total	$	130,408	100.00	%

The statement and fair values of the bond portfolio, classified by rating, as of December 31, 2001 were as follows:

S&P’s/Moody’s Rating(1)	Fair Value		Amount Reflected on Balance Sheet		Percent of Total
			(In thousands)
AAA/Aaa (including United States Treasuries of $29,607)	$	39,455	$	39,455	63.8	%
AA/Aa		4,684		4,684	7.6
A/A		10,390		10,390	16.8
BBB/Baa		7,307		7,307	11.8
Total	$	61,836	$	61,836	100.0	%

(1) Ratings are assigned by Standard & Poor’s (“S&P”) or, if no S&P rating is available, by Moody’s Investors Service Inc. (“Moody’s”).

The National Association of Insurance Commissions (“NAIC”) has a bond rating system by which it assigns securities to classes called “NAIC designations” that are used by insurers when preparing their annual financial statements. The NAIC assigns designations to publicly traded as well as privately placed securities. The designations assigned by the NAIC range from class 1 to class 6, with a rating in class 1 being the highest quality. As of December 31, 2001, all of our bond portfolio, measured on a statutory carrying value basis, was invested in securities rated in class 1 or class 2 by the NAIC, which are considered investment grade.

The weighted average maturity of our bond portfolio at December 31, 2001 was 7.90 years. The composition of our bond portfolio, classified by maturity, as of December 31, 2001 was as follows:

Maturity (1)	Amortized Cost		Fair Value
	(In thousands)
Due in one year or less	$	550	$	563
Due from one to five years		22,933		23,883
Due from five to ten years		21,759		21,934
Due after ten years		7,534		7,618
Mortgage-backed securities		7,914		7,838
Total	$	60,690	$	61,836

(1) Based on stated maturity dates with no prepayment assumptions.

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Our investment grade fixed maturity securities included mortgage backed bonds of $7.8 million, which are subject to risks associated with the variable prepayments of the underlying mortgage loans.

At December 31, 2001, we had two secured notes receivable from an unrelated party totaling $8.1 million, whose maturity dates (July 15 and October 2, 2001) were extended until March 1, 2002. These notes carry an interest rate of 12% and are collateralized with various forms of real estate, and personal and corporate guarantees. We ceased accruing interest on these loans after the original maturity dates. These notes are currently in default and we are discussing resolution of this matter with the borrower.

American Safety Risk Retention Group, Inc.

Organization History.    Following the enactment of the Liability Risk Retention Act of 1986, as amended (the “Risk Retention Act”), American Safety Insurance, in order to establish a U.S. insurance company to market and underwrite specialty environmental coverages, assisted in the formation of American Safety RRG, in 1988. American Safety RRG is not owned by us but is managed by ASI Services, our principal U.S. program development, underwriting and administrative services subsidiary. American Safety RRG is authorized to write liability insurance in all 50 states as a result of the Risk Retention Act and is licensed by the Vermont Department of Banking, Insurance, Securities and Health Care Administration (the “Vermont Department”) under the Vermont Captive Act as a stock captive insurance company. Presently, five of the directors of American Safety RRG are also directors of American Safety Insurance. The directors of American Safety RRG are elected annually by the insureds/shareholders of American Safety RRG.

Regulation.    The Risk Retention Act facilitates the establishment of risk retention groups to insure certain liability risks of its members. The statute applies only to “liability” insurance and does not permit coverage of personal risk liability or workers’ compensation.

The Risk Retention Act and the Vermont Captive Act require that each insured of American Safety RRG be a shareholder. Each insured is required to purchase one share of the American Safety RRG’s common stock upon the acceptance of the applicant as an insured. There is no trading market for the shares of common stock of American Safety RRG and each share is restricted as to transfer. If and when a holder of American Safety RRG common stock ceases to be an insured, whether voluntarily or involuntarily, such person’s share of common stock is automatically canceled and such person is no longer a shareholder of American Safety RRG. The ownership interests of members in a risk retention group are considered to be exempt securities for purposes of the registration provisions of the Securities Act and the Securities and Exchange Act and are likewise not considered securities for purposes of any state securities law.

Management.    Since 1990, ASI Services has managed the nationwide operations of American Safety RRG from its offices in Atlanta, Georgia, pursuant to a program management agreement. American Safety RRG has also entered into local management services agreements since 1988 with captive management companies in Vermont, to provide local administrative services.

ASI Services acts as the program manager for American Safety RRG pursuant to the program management agreement and is authorized to solicit and accept applications for insurance and to issue insurance policies on behalf of American Safety RRG subject to guidelines and procedures established by the board of directors of American Safety RRG. For 2002, the program management agreement between American Safety RRG and ASI Services provides for reimbursement of costs based upon premiums written.

We derived approximately 14.5% ($5.2 million) of our revenues in 2000 and 6.8% ($6.9 million) of our revenue in 2001 from American Safety RRG for service fees, commissions and premiums. Fee income is expected to decrease significantly in 2002 as a result of the conversion of the fee structure from a fixed fee to a reimbursement of costs basis.

Insurance Regulation

American Safety Insurance’s primary insurance and reinsurance operations are subject to regulation under applicable insurance statutes of the jurisdictions or states in which each subsidiary is domiciled and writes insurance. Insurance regulations are intended to provide safeguards for the policyholders rather than to protect shareholders of insurance companies or their holding companies.

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The nature and extent of state regulation varies from jurisdiction to jurisdiction, but typically involves prior approval of the acquisition of control of an insurance company or of any company controlling an insurance company, regulation of certain transactions entered into by an insurance company with an affiliate, approval of premium rates for lines of insurance, standards of solvency and minimum amounts of capital and surplus which must be maintained, limitations on types and amounts of investments, restrictions on the size of risks which may be insured by a single company, deposits of securities for the benefit of policyholders, and reports with respect to financial condition and other matters. In addition, state regulatory examiners perform periodic examinations of insurance companies.

Although the federal government does not directly regulate the business of insurance in the United States, federal initiatives often affect the insurance business in a variety of ways. The insurance regulatory structure has also been subject to scrutiny in recent years by the NAIC, federal and state legislative bodies and state regulatory authorities. Various new regulatory standards have been adopted and proposed in recent years. The development of standards to ensure the maintenance of appropriate levels of statutory surplus by insurers has been a matter of particular concern to insurance regulatory authorities.

Bermuda Regulation

American Safety Insurance, as a licensed Bermuda insurance company, and our Bermuda reinsurance subsidiary, American Safety Reinsurance, are subject to regulation under The Insurance Act 1978, as amended, and related regulations (the “Bermuda Act”), which provides that no person shall conduct insurance business (including reinsurance) in or from Bermuda unless registered as an insurer under the Bermuda Act by the Supervisor of Insurance (the “Supervisor”).

The Bermuda Act requires, among other things, Bermuda insurance companies to meet and maintain certain standards of solvency, to file periodic reports in accordance with the Bermuda Statutory Accounting Rules, to produce annual audited financial statements and to maintain a minimum level of statutory capital and surplus. In general, the regulation of insurers in Bermuda relies heavily upon the auditors, directors and managers of the Bermuda insurer, each of which must certify that the insurer meets the solvency capital requirements of the Bermuda Act. Furthermore, the Supervisor is granted powers to supervise, investigate and intervene in the affairs of insurance companies.

Neither we nor American Safety Reinsurance is registered or licensed as an insurance company in any state or jurisdiction in the United States.

U.S. Regulation

American Safety Insurance, as a specialty insurance holding company, does not itself do business in the United States. We do business in the United States through our U.S. subsidiaries. Our two U.S. insurance subsidiaries’ operations are subject to state regulation where each is domiciled and where each writes insurance.

American Safety Casualty, a U.S. insurance subsidiary domiciled in Delaware, was acquired by American Safety Insurance in 1993. American Safety Casualty is currently licensed as a casualty insurer in 48 states and the District of Columbia. The insurer is subject to regulation and examination by the Delaware Insurance Department and the other states in which it is an admitted insurer. The Delaware Insurance Department examines American Safety Casualty on a triennial basis. The insurance laws of Delaware place restrictions on a change of control of American Safety Insurance as result of our ownership of American Safety Casualty. Under Delaware law, no person may obtain 10% or more of the voting securities of American Safety Insurance without the prior approval of the Delaware Insurance Department.

American Safety Casualty, as a licensed insurer, is subject to state regulation of rates and policy forms in the various states in which direct premiums are written for its general liability and workers’ compensation business lines. Under such regulations, a licensed insurer may be required to file and obtain prior approval of its policy form and the rates that are charged to insureds. American Safety Casualty is also required to participate in state insolvency funds, or shared markets, which are designed to protect insureds of insurance insurers which become unable to pay claims due to an insurer’s insolvency. Assessments made against insurers participating in such funds are based on direct premiums written by participating insurers, as a percentage of total direct written premiums of all participating insurers.

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American Safety Indemnity, a U.S. insurance subsidiary domiciled in Oklahoma was acquired by American Safety Insurance in 2000. American Safety Indemnity is currently licensed or approved as an excess and surplus lines insurer in 38 states and the District of Columbia. The insurer is subject to examination by the Oklahoma Insurance Department and the other states in which it is approved as an excess and surplus lines insurer. The Oklahoma Insurance Department examines American Safety Indemnity on a triennial basis. The insurance laws of Oklahoma place restrictions on a change of control of American Safety Insurance as a percentage of its ownership of American Safety Indemnity. Under Oklahoma law no person may obtain 10% or more of the voting securities of American Safety Insurance without the prior approval of the Oklahoma Insurance Department.

American Safety Indemnity, a licensed insurer in the State of Oklahoma and an approved excess and surplus lines insurer in other states, is subject to state regulation. As an excess and surplus lines insurer, premium rates are not filed and approved with the various state insurance departments, but certain restrictions regarding the types of insurance written by excess and surplus lines insurers must be met. Generally, excess and surplus lines insurers may only write coverage that is not available in the “admitted” market and strict guidelines regarding the coverages are set forth in various state statutes. Surplus lines brokers are the licensed individuals or entities placing coverage with excess and surplus lines insurers, and in most states, the broker is responsible for the payment of surplus lines taxes which are payable to the state in which the surplus lines risk is located. Surplus lines insurers are exempt from participation in state insolvency funds which are designed to protect insureds if “admitted” insurers become insolvent and are unable to pay claims. While American Safety Indemnity is exempt from the majority of state regulatory requirements, it must be “approved” to write the type of insurance in the states where its surplus lines insurance is written. The Oklahoma Insurance Department retains primary regulatory authority over American Safety Indemnity, as a licensed and admitted insurance company in Oklahoma.

Competition

The casualty insurance and reinsurance business is highly competitive with respect to a number of factors, including overall financial strength of the insurer or reinsurer, ratings by rating agencies, premium rates, policy terms and conditions, services offered, reputation and commission rates. We face competition from a number of insurers who have greater financial and marketing resources and greater name recognition than us. Although our business strategy is to develop insurance programs for the environmental remediation industry, the contracting industry, as well as other specialty industries and risks by targeting niche markets where our expertise is required and where competition is limited, we nevertheless encounter competition from other insurance companies engaged in insuring risks in broader business lines which encompass our niche markets and specialty programs, and such competition is expected to increase as we expand our operations.

Employees

At December 31, 2001, we employed 130 persons, none of whom was represented by a labor union. ASI Services employs all but one of our employees and manages our U.S. business operations. We employ a senior financial officer in Bermuda.

Harbour Village Development

In March 2000, we announced our plans to complete development of the Harbour Village Golf and Yacht Club, located in Ponce Inlet, Florida, consisting of 740 residential condominium units, a marina containing 142 boat slips, a par 3 golf course and beach club. The Harbour Village property (comprising 173 acres) was acquired by us through foreclosure in April 1999, and has been under development by our subsidiary, Ponce Lighthouse Properties, Inc. and our general contracting subsidiary, Rivermar Contracting Company.

We anticipate that Harbour Village will be developed in three phases with projected completion in 2005, depending on future sales activities and economic conditions that may impact the marketing of the condominium units. From inception through July 31, 2002, our marketing efforts had generated over $152 million of pre-sales of condominium units and boat slips, and we continue to market these units.

American Safety Holdings Corp.

Our U.S. subsidiaries are held through American Safety Holdings. The primary U.S. subsidiaries of American Safety Holdings are ASI Services and American Safety Casualty (which, in turn, is the corporate parent of American Safety Indemnity).

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Additionally, American Safety Holdings holds the subsidiaries responsible for the development and sale of properties at Harbour Village Golf & Yacht Club, as more fully discussed herein.

American Safety Holdings does not and will not engage in business activities other than financing activities for us and our direct and indirect subsidiaries.

American Safety Holdings was incorporated under the laws of the State of Georgia on July 30, 1999. The principal executive offices of American Safety Holdings are located at 1845 The Exchange, Atlanta, Georgia 30339 and the telephone number is

(770) 916-1908.

American Safety Capital Trust I

The Trust is a statutory trust created under Delaware law pursuant to the filing of a certificate of trust with the Delaware Secretary of State on             , 2002. The Trust’s business is defined in a trust agreement, executed by American Safety Holdings, as depositor and the trustees thereunder. The trust agreement will be filed as an exhibit to the registration statement of which this prospectus forms a part. The trust agreement will be qualified as an indenture under the Trust Indenture Act of 1939, as amended. American Safety Holdings will own all of the common securities of the Trust (and, together with the preferred securities, the “trust securities”). The trust securities represent undivided beneficial interests in the assets of the Trust. The Trust exists for the exclusive purpose of (1) issuing the trust securities representing undivided beneficial interests in the assets of the Trust, (2) investing the gross proceeds of its trust securities in a related series of debentures, and (3) engaging in only those other activities necessary, appropriate or incidental thereto.

The Trust’s business and affairs will be conducted by its trustees, which shall be appointed by American Safety Holdings as the holder of the common securities: two officers of American Safety Insurance as administrators (initially such administrators will be Steven B. Mathis and Fred J. Pinckney); Deutsche Bank Trust Company Americas as property trustee; and Deutsche Bank Trust Company Delaware as Delaware trustee. The property trustee of the Trust will act as the indenture trustee with respect to the Trust for purposes of compliance with the provisions of the Trust Indenture Act.

The principal place of business of the Trust shall be c/o American Safety Holdings Corp., 1845 The Exchange, Atlanta, Georgia 30339, and the telephone number is (770) 916-1908.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

American Safety Insurance is a specialty insurance holding company organized under the laws of Bermuda which, through its subsidiaries, develops, underwrites, manages and markets primary casualty insurance and reinsurance programs in the alternative insurance market in all 50 states for environmental remediation risks, contracting, and other specialty risks. We are also the owner/developer of the Harbour Village Golf & Yacht Club, a residential condominium, marina, par 3 golf course and beach club development in Ponce Inlet, Florida.

You should read the following discussion in conjunction with “Risk Factors,” “Business Overview,” “Selected Financial Data” and our consolidated financial statements and the related notes included elsewhere in this prospectus.

Results of Operations

	Year Ended December 31,							Six Months Ended June 30,
	1999		2000			2001		2001		2002			1999 to 2000		2000 to 2001		2001 to 2002
	(Dollars in thousands)
Primary insurance:
Commercial Line	$	39	$	2,638		$	4,197	$	2,033	$	793		6,664.1	%	59.1	%	(61.0	)%
Workers’ Compensation		—		249			6,376		2,127		4,361		—		2,460.6		105.0
Surety		1,302		4,539			5,916		4,469		652		248.6		30.3		(85.4	)
General Liability		—		845			18,423		6,922		13,791		—		2,080.2		99.2
Program Business		221		1,904			7,511		3,945		3,969		761.5		294.5		0.6
Total Primary Insurance		1,562		10,175			42,423		19,496		23,566		551.4		316.9		20.9
Reinsurance:
Workers’ compensation		7,384		11,151			12,657		5,641		—		51.0		13.5		(100.0	)
General Liability		3,149		5,479			9,707		5,269		6,494		74.0		77.2		23.2
Auto Liability		30		—			—		—		—		—		—		—
Total Reinsurance		10,563		16,630			22,364		10,910		6,494		57.4		34.5		(40.5	)
Total Net Premiums Earned		12,125		26,805			64,787		30,406		30,060		121.1		141.7		(1.1	)
Net Investment Income		2,878		2,605			3,650		1,763		1,875		(9.5	)	40.1		6.4
Interest on Notes Receivable		2,614		1,531			767		559		—		(41.4	)	(49.9	)	(100.0	)
Commission and Fee Income:
Brokerage Commission Income		1,389		3,291			2,411		999		103		136.9		(26.7	)	(89.7	)
Management fees from affiliates		1,386		1,425			1,496		731		493		2.8		5.0		(32.6	)
Total Commission and fee income		2,775		4,716			3,907		1,730		596		69.9		(17.2	)	(65.5	)
Net realized gains (losses)		174		(518	)		652		415		(466	)	(397.7	)	225.9		(212.3	)
Real Estate Income		—		—			27,561		—		33,936		—		—		—
Other Income		921		939			1,026		850		89		2.0		9.3		(89.5	)
Total Revenues	$	21,487	$	36,078		$	102,350	$	35,723	$	66,090		67.9	%	183.7	%	85.0	%

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The following table sets forth the components of our statutory combined ratio for the period indicated:

	1999		2000		2001
Insurance Operations
Loss & Loss Adjustment Expense Ratio	56.9	%	69.1	%	67.9	%
Expense Ratio	16.3		18.3		27.7
Combined Ratio	73.2	%	87.4	%	95.6	%

Six Months Ended June 30, 2002 Compared to Six Months Ended June 30, 2001

Net Premiums Earned.    Net premiums earned decreased 1.1% from $30.4 million in the six months ended June 30, 2001 to $30.1 million in the six months ended June 30, 2002. The principal factors accounting for the decrease were a decrease of $1.2 million in primary commercial lines premiums, a decrease of $3.8 million in primary surety premiums, a decrease of $3.4 million in workers’ compensation premiums, while general liability premiums increased $8.1 million. These results were in line with our strategy to focus on our more profitable lines of insurance business.

Net Investment Income.    Net investment income increased 6.4% from $1.8 million in the six months ended June 30, 2001 to $1.9 million in the six months ended June 30, 2002 due to higher levels of invested assets generated from positive cash flows from operations. The average pre-tax yield on investments was 5.2% in the six months ended June 30, 2001 and 4.5% in the six months ended June 30, 2002. The average after-tax yield on investments was 3.9% in the six months ended June 30, 2001 and 3.3% in the six months ended June 30, 2002.

Interest from Notes Receivable.    Interest from notes receivable decreased 100% from $559,000 in the six months ended June 30, 2001 to $0 in the six months ended June 30, 2002 due to repayment of various loans. Average notes receivable decreased to $8.0 million from $9.0 million for the six months. During 2001, we ceased accruing interest for accounting purposes on two impaired loans with one borrower in accordance with our accounting policies. However, the appraised value of the collateral securing these loans is in excess of the balances owed, and the borrower is attempting to refinance the amount due with a different lender.

Brokerage Commission Income and Management Fees.    Income from insurance brokerage operations and management fees decreased 65.6% from $1.7 million in the six months ended June 30, 2001 to $596,000 in the six months ended June 30, 2002. This decrease is the result of changing how fees are realized from our risk retention group affiliate. Previously, our risk retention group paid a fixed management fee plus a commission based on a percentage of the premiums produced to American Safety Insurance. Effective January 1, 2002, our risk retention group pays fees based on its portion of costs allocated from us for its portion of premiums produced. This change was implemented to coincide with the creation of an internal pooling agreement between American Safety Insurance and our subsidiaries, including our risk retention group affiliate. The result of this change will initially lower the commission income and management fees paid to us by our risk retention group affiliate, but the net earned premiums retained by us will increase which we will earn as revenue over the life of the underlying policies as opposed to earning the commissions and fees at the time such policies are written.

Net Realized Gains and Losses.    Net realized gains and losses decreased from a gain of $415,000 in the six months ended June 30, 2001 to a loss of $466,000 for the six months ended June 30, 2002 due to the sale of bonds in our investment portfolio, primarily 8.0% WorldCom Industrial Bonds due May 15, 2006 and 8.25% WorldCom Industrial Bonds due May 15, 2031.

Real Estate Income.    Real estate sales at Harbour Village were $33.9 million for the six months ended June 30, 2002. These sales were realized from the closing of 115 residential condominium units and 55 boat slips. Sales commenced at the Harbour Village project on September 15, 2001 and, accordingly, there were no sales during the six months ended June 30, 2001.

Other Income.    Other income decreased from $850,000 in the six months ended June 30, 2001 to $89,000 for the six months ended June 30, 2002 as a result of lower fees generated by our financial services subsidiary, American Safety Financial Corp. During 2001, we discontinued this line of business.

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Losses and Loss Adjustment Expenses.    Losses and loss adjustment expenses decreased 7.1% from $18.9 million in the six months ended June 30, 2001 to $17.5 million in the six months ended June 30, 2002, as a result of decreased net premiums earned in commercial lines, surety and workers’ compensation lines of insurance business.

Acquisition Expenses.    Policy acquisition expenses increased 0.9% from $6.2 million in the six months ended June 30, 2001 to $6.3 million in the six months ended June 30, 2002 as a result of increased net earned premiums in the general liability line of insurance business. Premium tax expense also increased to $1.7 million from $1.5 million due to higher volumes of direct premiums earned.

Payroll and Other Expenses.    Payroll and other expenses increased 3.5% from $6.8 million in the six months ended June 30, 2001 to $7.0 million in the six months ended June 30, 2002, due to higher payroll and legal expenses during the period.

Real Estate Expenses.    Real estate expenses associated with Harbour Village increased from $751,000 in the six months ended June 30, 2001 to $29.2 million in the six months ended June 30, 2002. Of the $29.2 million of costs recognized during the year, $27.5 million of the costs were previously capitalized variable costs related to the sale of condominium units and boat slips, and the remaining $1.7 million were fixed costs of the project, which includes advertising and other administration costs. See “Harbour Village Development Chart” beginning on page R-1.

Income Taxes.    Federal and state income taxes increased from $259,000 in the six months ended June 30, 2001 to $1.9 million in the six months ended June 30, 2002 due to higher levels of income in our U.S. insurance and real estate subsidiaries.

Year Ended December 31, 2001 to Year Ended December 31, 2000

Net Premiums Earned.    Net premiums earned increased 141.7% from $26.8 million in 2000 to $64.8 million in 2001. The principal factors accounting for the increase were an increase of general liability reinsurance premiums by 77.2% or $4.2 million, an increase in workers’ compensation primary premiums by 2460.6% or $6.1 million, an increase in general liability primary premiums by 2080.2% or $17.6 million, an increase in commercial lines premiums by 59.1% or $2.6 million and an increase in program business premiums by 294.5% or $5.6 million.

Net Investment Income.    Net investment income increased 40.1% from $2.6 million in 2000 to $3.7 million in 2001 as a result of increased levels of invested assets generated from increased cash flows from operations. The average annual pre-tax yield on investments was 4.8% in 2000 and 5.0% in 2001. The average annual after-tax yield on investments was 4.0% in 2000 and 3.7% in 2001.

Interest from Notes Receivable.    Interest from notes receivable decreased 49.9% from $1.5 million in 2000 to $800,000 in 2001. One reason for the decrease relates to repayment of various loans. Average notes receivable have decreased to $8.5 million from $10.9 million. The average annual pretax yield on notes receivable was 14.1% and 9.0% in 2000 and 2001, respectively. We ceased accruing interest for accounting purposes on two impaired loans with one borrower in accordance with our accounting policies. However, the appraised value of the collateral securing these loans is in excess of the balances owed.

Brokerage Commission Income.    Income from insurance brokerage operations decreased 26.7% from $3.3 million in 2000 to $2.4 million in 2001 due to reduced levels of insurance premiums being produced through our risk retention group affiliate, and increased levels of insurance premiums being produced by our excess and surplus lines insurer insurance company (which are not recognized as brokerage commission income).

Management Fees.    Management fees received from the our risk retention group affiliate increased 5.0% from $1.43 million in 2000 to $1.5 million in 2001 and is consistent with the prior year.

Net Realized Gains.    Net realized gains (losses) from the sale of investments increased from a loss of $518,000 in 2000 to a gain of $652,000 in 2001. These gains were primarily realized from the sale of certain bonds in our investment portfolio.

Real Estate Income.    Real estate sales at the Harbour Village project were $27.6 million in 2001. These sales were realized from the closing of 102 condominium units and 59 boat slips for the year ended December 31, 2001.

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Losses and Loss Adjustment Expenses.    Loss and loss adjustment expenses increased 137.7% from $18.5 million in 2000 to $44.0 million in 2001 due to an increase in net earned premiums and increases in surety and commercial lines reserves.

Acquisition Expenses.    Acquisition expenses increased from $3.8 million to $12.2 million as a result of increased earned premiums. Premium tax expense also increased to $3.7 million from $948,000 due to higher volumes of direct premiums earned.

Payroll and Other Expenses.    Payroll and other expenses increased 23.4% from $12.2 million in 2000 to $15.1 million in 2001 due to increases in payroll and litigation costs, write-off of certain workers’ compensation receivables, and costs associated with the Company’s financial service subsidiary.

Real Estate Expenses.    Real estate expenses associated with Harbour Village increased from $542,000 in 2000 to $25.1 million in 2001. Of the costs recognized in 2001, $20.7 million were previously capitalized variable costs related to the sale of the condominium units and boat slips, and the remaining $721,000 of expenses were fixed costs of the project, including advertising and other administrative costs.

Expense Due to Rescission.    Expenses associated with the rescission of the previously acquired Michigan agency and two related insurance companies were $600,000 for 2001, as compared to $3.5 million in 2000.

Income Taxes.    Federal and state income taxes increased from a benefit of $1.2 million in 2000 to an expense of $1.2 million in 2001 as a result of increased levels of income in our U.S. insurance and real estate subsidiaries.

Year Ended December 31, 2000 to Year Ended December 31, 1999

Net Premiums Earned.    Net premiums earned increased 121.1% from $12.1 million in 1999 to $26.8 million in 2000. The principal factors accounting for the increase were an increase in workers’ compensation premiums by 54.4% or $4.0 million, an increase of general liability reinsurance premiums by 100.8% or $3.2 million, an increase in surety premiums by 248.6% or $3.2 million, an increase in commercial lines premiums by 6,664% or $2.6 million, and an increase in program business premiums by 761.5% or $1.7 million.

Net Investment Income.    Net investment income decreased 9.5% from $2.9 million in 1999 to $2.6 million in 2000 as a result of higher levels of short term investments to enable us to fund our stock repurchase programs. The average annual pre-tax yield on investments was 5.8% in 1999 and 4.8% in 2000. The average annual after-tax yield on investments was 5.4% in 1999 and 4.0% in 2000.

Interest from Notes Receivable.    Interest from notes receivable decreased 41.4% from $2.6 million in 1999 to $1.5 million in 2000. The main reason for the decrease relates to repayment of various loans. Average notes receivable has decreased to $10.9 million from $14.6 million. The average annual pretax yield on notes receivable was 18.0% and 12.2% in 1999 and 2000, respectively.

Brokerage Commission Income.    Income from insurance brokerage operations increased 136.9% from $1.4 million in 1999 to $3.3 million in 2000 as a result of increased commissions derived from insurance premiums produced through our risk retention group affiliate. However, commencing in late fiscal 2000, a portion of these insurance premiums are being written by us (rather than our risk retention group affiliate), and revenues will be recognized as premiums earned over the life of the underlying policies and not recognized as brokerage commission income.

Management Fees.    Management fees received from our risk retention group affiliate increased 2.8% from $1.39 million in 1999 to $1.43 million in 2000 and is consistent with the prior year.

Net Realized Gains.    Net realized gains (losses) from the sale of investments decreased from a gain of $174,000 in 1999 to a loss of $518,000 in 2000. These losses were realized from the sale of bonds in our investment portfolio.

Losses and Loss Adjustment Expenses.    Loss and loss adjustment expenses increased 168.3% from $6.9 million in 1999 to $18.5 million in 2000 primarily due to an increase in net earned premiums and release of reserve redundancies in 1999. Increases in

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general liability, workers’ compensation and surety business accounted for the largest portion of the increase in loss and loss adjustment expenses.

Acquisition Expenses.    Acquisition expenses increased 324.3% to $3.8 million from $894,000 as a result of increased production of surety, commercial lines and powersports premiums, which are product lines that produce higher acquisition expenses. Premium tax expense has increased to $1.0 million from $341,000 due to higher volumes of direct premiums earned.

Payroll and Other Expenses.    Payroll and other expenses increased 66.2% from $7.7 million in 1999 to $12.8 million in 2000. The principal factors accounting for the result were an increase in payroll and related expenses of $2.5 million in part due to increased staffing of our newer business units; operating expenses associated with our financial services subsidiary increased to $430,000 for the year due to additional staff and related expenses; noncapitalized expenses associated with our Harbour Village real estate development were $542,000; and expenses for licenses and fees increased $525,000 as we expanded our capability to direct write more lines of insurance business.

Expense Due to Rescission.    Expense for rescission was $3.5 million for 2000 as a result of the rescission of the previously acquired Michigan agency and two related insurance companies.

Income Taxes.    Federal and state income taxes decreased from an expense of $82,722 in 1999 to a benefit of $1.2 million in 2000 due to decreased taxable income in our U.S. subsidiaries and as a result of the acquisition rescission charge.

Liquidity and Capital Resources

We have historically met our cash requirements and financed our growth principally through cash flows generated from operations. During the past decade, we have operated in a soft market cycle which was characterized by excess insurance capacity and declining insurance premium rates; however, commencing in fiscal year 2000, we have operated in a hardening market with increased insurance premium rates for workers’ compensation and excess and surplus lines. Our primary sources of cash flow are proceeds from the sale or maturity of invested assets, premiums earned, investment income, income from real estate development sales, commission income and management fees. Our short-term cash requirements are primarily for claims payments, reinsurance premiums, commissions, salaries, employee benefits, real estate development expenses, and other operating expenses, and the purchase of investment securities, which have historically been satisfied from operating cash flows. Due to the uncertainty regarding settlement of unpaid claims, our long-term liquidity requirements may vary, and we have attempted to structure our investment portfolio to take into account the historical payout patterns. We also purchase reinsurance to mitigate the effect of large claims and to help stabilize demands on our liquidity. Notwithstanding a dispute with one of our former reinsurers, Berkley Insurance Company, management believes that our current cash flows are sufficient for the short-term needs of our insurance business and our invested assets are sufficient for the long-term needs of our insurance business.

One of our former reinsurers, Berkley Insurance Company, has disputed its obligations under several reinsurance treaties entered into during the “soft reinsurance market” (an insurance market characterized by decreasing premium prices for coverages) that existed in 1998 and 1999. As of June 30, 2002, unreimbursed paid claims totaled $12.5 million and additional ceded case and incurred but not reported reserves totaled approximately $21.0 million. A reserve for this dispute has not been established since we do not believe it is probable a loss will occur nor is any potential loss estimatable. If any of these factors change in the future, we will establish a reserve at that time, which could be material. In April 2002, we demanded arbitration against the reinsurer to collect the amounts owed. The arbitration panel has been chosen and initial proceedings are scheduled in late September 2002. Berkley is a subsidiary of W.R. Berkley Corp. (NYSE: BER). Although a material adverse effect is possible, we do not believe that this dispute will have a material adverse effect on our overall financial condition or liquidity. See “Risk Factors—Our reinsurance dispute with Berkley Insurance Company may have materially adverse consequences to our business and operating results.”

On a consolidated basis, net cash provided from operations was $13.6 million for the six months ended June 30, 2001 and $6.2 million for the six months ended June 30, 2002. The positive cash flows for said periods were primarily attributable to net premiums written and net earnings. Because workers’ compensation and general liability claims may be paid over an extended period of time, we have established loss reserves for such business lines. The assets supporting our reserves continue to earn investment income until claims payments are made.

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Total assets increased from $297.3 million at December 31, 2001 to $311.7 million at June 30, 2002 primarily due to increases in reinsurance recoverables. Cash, invested assets and notes receivable decreased from $139.6 million at December 31, 2001 to $137.6 million at June 30, 2002, as a result of decreases in real estate and short term investments. As of June 30, 2002, we have repurchased 1,601,139 shares of our common stock at a total cost of $9.7 million since January 1999.

We are an insurance holding company whose principal assets are its investment portfolio and its investment in the capital stock of its subsidiaries. Our ability to pay dividends to our shareholders will depend, to a significant degree, on the ability of our subsidiaries to generate earnings from which to pay dividends to us. The jurisdictions in which we and our insurance and reinsurance subsidiaries are domiciled place limitations on the amount of dividends or other distributions payable by insurance companies in order to protect the solvency of insurers.

Harbour Village Development.    In March 2000, we announced our plans to complete development of the Harbour Village Golf and Yacht Club, located in Ponce Inlet, Florida, consisting of 740 residential condominium units, a marina containing 142 boat slips, a par 3 golf course and beach club. The Harbour Village property (comprising 173 acres) was acquired by us through foreclosure in April 1999, and has been under development by our subsidiary, Ponce Lighthouse Properties, Inc. and our general contracting subsidiary, Rivermar Contracting Company. From inception through July 31, 2002, our marketing efforts had generated over $152 million of pre-sales of condominium units and boat slips.

Management anticipates that Harbour Village will be developed in three phases with projected completion in 2005, depending on future sales activities and economic conditions that may impact the marketing of the condominium units. Through June 30, 2002, we had outstanding borrowings of $10.2 million from an initial $37 million development and construction loan facility. The estimated completion cost for the remainder of the Harbour Village project is approximately $90.1 million. No assurance can be given, however, as to either future sales activities of the condominium units or the impact of local and national economic conditions on our marketing efforts for the development of the Harbour Village project.

Management believes that the bank credit facility, together with anticipated cash flows from marketing and sales operations, will meet the liquidity needs for the construction and development of Harbour Village during the remainder of its development. There can be no assurance, however, that the amounts available from our sources of liquidity, exclusive of the bank credit facility for the project, will be sufficient or available to meet our future capital needs for the project.

Quantitative and Qualitative Disclosures About Market Risk

Market risk is the risk of economic losses due to adverse changes in the estimated fair value of a financial instrument as the result of changes in equity prices, interest rates, foreign exchange rates and commodity prices. Our consolidated balance sheets include assets whose estimated fair values are subject to market risk. The primary market risk to us is interest rate risk associated with investments in fixed maturities. We have no direct commodity or foreign exchange risk as of December 31, 2001. The estimated fair value of our investment portfolio at December 31, 2001 was $121 million, 69% of which was invested in fixed maturities and short-term investments, and 31% of which was invested in real estate.

Interest Rate Risk.    Our fixed maturity investments and borrowings are subject to interest rate risk. Increases and decreases in interest rates typically result in decreases and increases in the fair value of these financial instruments. Approximately three quarters of our investable assets come from premiums paid by policyholders. These funds are invested predominantly in high quality corporate, government and municipal bonds with relatively short durations. The fixed maturity portfolio is exposed to interest rate fluctuations; as interest rates increase, the fair value of the fixed maturity portfolio declines and as interest rates decrease, the fair value of the fixed maturity portfolio increases. The changes in the fair market value of the fixed maturity portfolio are presented as a component of shareholders’ equity in accumulated other comprehensive income, net of taxes. We work to manage the impact of interest rate fluctuations on our fixed maturity portfolio. The effective duration of the fixed maturity portfolio is managed with consideration given to the estimated duration of our liabilities. We have investment policies which limit the maximum duration and maturity of the fixed maturity portfolio.

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The table below summarizes our interest rate risk and shows the effect of a hypothetical change in interest rates as of December 31, 2001. The selected hypothetical changes do not indicate what would be the potential best or worst case scenarios (dollars in thousands):

Fixed Maturity Investments	Estimated Fair Value at December 31, 2001	Estimated Increase (Decrease) in Interest Rate (bp=basis points)	Estimated Fair Value after Hypothetical Change in Interest Rate	Hypothetical Percentage Increase (Decrease) in Shareholders’s Equity
Total Fixed Maturity Investments (including short-term investments)	$61,836	(200) bp (100) bp     100 bp     200 bp	$69,105   65,285 58,787 56,001	12.0% 5.7   (5.0)   (9.6)

Critical Accounting Policies

The accounting policies described below are those we consider critical in preparing our financial statements. These policies include significant estimates made by management using information available at the time the estimates are made. However, as described below, these estimates could change materially if different information or assumptions were used. The descriptions below are summarized and have been simplified for clarity. A more detailed description of our significant accounting policies used in preparing our financial statements is included in Note (1) of Notes to the Consolidated Financial Statements.

Reinsurance.    One of our former reinsurers, Berkley Insurance Company, has disputed its obligations under several reinsurance treaties entered into during the “soft reinsurance market” (an insurance market characterized by decreasing premium prices for coverages) that existed in 1998 and 1999. As of June 30, 2002, unreimbursed paid claims totaled $12.5 million and additional ceded case and incurred but not reported reserves totals approximately $21.0 million. A reserve for this dispute has not been established because the conditions set forth in Statement of Financial Accounting Standards No. 5: Accounting for Contingencies were not fulfilled. If any of these factors change in the future, we will establish a reserve at that time, which could be material. See “Risk Factors—Our reinsurance dispute with Berkley Insurance Company may have materially adverse consequences to our business and operating results.”

Unpaid Losses & Loss Adjustment Expenses.    We are required to estimate our liability for loss and loss adjustment expenses. The estimated liability for unpaid losses and loss adjustment expenses recorded on our balance sheet at the end of any given period should be adequate to cover all future payments required to be made on account of insured events that occurred on or before the balance sheet date. However, because the future cannot be predicted with certainty, the actual future payments are usually different from the previously recorded estimates, and sometimes the differences may be material. These differences are included in our operating results in the future periods in which they become known.

Deferred Income Taxes.    We are required to establish a valuation allowance for the portion of any deferred tax asset, which amounted to $7.0 million at June 30, 2002, that management believes will not be realized. We believe that it is more likely than not that we will realize the full benefit of our deferred tax assets in future periods. Accordingly, no valuation allowance has been established.

Construction Accounting.    American Safety Insurance recognizes revenue on Harbour Village, its real estate development project, when title to each condominium unit and boat slip transfers to the purchaser. When title transfers, we use a percentage of completion method based on actual costs to total estimated costs (including allocated common costs) to recognize revenue. The estimated future common costs of amenities at June 30, 2002 were $1.9 million, of which $569,000 related to condominium units that were closed since closings began in September 2001. The percentage of completion method is based upon future estimated costs, and actual costs may vary greatly from these estimated costs requiring an adjustment to be recorded in future periods.

Litigation

In April 2002, we demanded arbitration against one of our former reinsurers, Berkley Insurance Company, to collect certain amounts owed. The arbitration panel has been chosen and initial proceedings are scheduled in late September 2002. See “Risk Factors—Our reinsurance dispute with Berkley Insurance Company may have materially adverse consequences to our business and

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operating results,” “—Liquidity and Capital Resources,” “—Critical Accounting Policies—Reinsurance” and “Business Overview—Reinsurance Ceded.”

We are a defendant in various litigation matters considered to be in the normal course of or related to our business. While the outcome of these matters cannot be estimated with certainty, it is the opinion of our management (after consultation with legal counsel) that the resolution of such litigation will not have a material adverse effect on our financial condition or operating results.

Income Taxes

American Safety Insurance is incorporated under the laws of Bermuda and, under current Bermuda law, is not obligated to pay any taxes in Bermuda based upon income or capital gains. We have received an undertaking from the Minister of Finance in Bermuda pursuant to the provisions of The Exempted Undertakings Tax Protection Act 1966, which exempts us and our shareholders, other than shareholders ordinarily resident in Bermuda, from any Bermuda taxes computed on profits, income or any capital asset, gain or appreciation, or any tax in the nature of estate, duty or inheritance until March 28, 2016. We, exclusive of our U.S. subsidiaries, do not consider ourselves to be engaged in a trade or business in the United States and, accordingly, we do not expect to be subject to direct U.S. income taxation. Our U.S. subsidiaries are subject to taxation in the United States.

Combined Ratio

The combined ratio of an insurance company measures only the underwriting results of insurance operations and not the profitability of the overall company. Our reported combined ratio for our insurance operations may not provide an accurate indication of our overall profitability from insurance and reinsurance programs due to the exclusion of fee and commission income and expenses generated in related management and agency subsidiaries. Depending on our mix of business going forward, the combined ratio may fluctuate from time to time and may not reflect the overall profitability of our insurance and reinsurance business lines.

Impact of Inflation

Casualty insurance premiums are established before the amounts of losses and loss adjustment expenses are known and therefore before the extent by which inflation may affect such expenses is known. Consequently, we attempt, in establishing our premiums, to anticipate the potential impact of inflation. However, for competitive and regulatory reasons, we may be limited in raising our premiums consistent with anticipated inflation, in which event we, rather than our insureds, would absorb inflation costs. Inflation also affects the rate of investment return on our investment portfolio with a corresponding effect on our investment income.

Reserves

Certain of our insurance policies and reinsurance assumed, including general and pollution liability policies covering environmental remediation, excess and surplus, and workers’ compensation risks, may be subject to claims brought years after an incident has occurred or the policy period has ended. We are required to maintain reserves to cover our estimated liability for losses and loss adjustment expenses with respect to reported and unreported claims incurred. We engage an independent internationally recognized actuarial consulting firm to provide reserve studies, rate studies and opinions. Reserves are estimates at a given time, which are established from actuarial and statistical projections by us of the ultimate settlement and administration costs of claims occurring on or prior to such time, including claims that have not yet been reported to the insurer. The establishment of appropriate loss reserves is an inherently uncertain process, and there can be no assurance that the ultimate payments will not materially exceed our reserves.

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MANAGEMENT

The executive officers and directors of American Safety Insurance are as follows:

Name	Age	Position
Lloyd A. Fox	56	President and Chief Executive Officer
Stephen R. Crim	39	Executive Vice President and Director
Joseph D. Scollo, Jr.	39	Senior Vice President—Operations
Fred J. Pinckney	55	General Counsel and Secretary
Steven B. Mathis	34	Chief Financial Officer
J. Jeffrey Hood	39	Senior Vice President—Technical Services
Gary J. Campbell	35	Vice President—Finance
Frederick C. Treadway	50	Chairman of the Board
Cody W. Birdwell	48	Director
David V. Brueggen	56	Director
William O. Mauldin, Jr.,	61	Director
Thomas W. Mueller	47	Director
Jerome D. Weaver	47	Director

Lloyd A. Fox is President and Chief Executive Officer of American Safety Insurance. From 1990 through 2001, Mr. Fox headed the management of American Safety Insurance’s U.S. subsidiaries. He assisted as general legal counsel in the formation of American Safety in 1986. Previously, Mr. Fox was an attorney for 16 years in Atlanta, Georgia, where his practice centered on insurance, the environmental and construction industries, as well as corporate and taxation matters. He received a juris doctor degree from the University of Michigan Law School in 1974 and a bachelor of science degree in pharmacy from Brooklyn College of Pharmacy in 1968. Mr. Fox’s employment agreement ends December 31, 2002.

Stephen R. Crim is Executive Vice President and a director of American Safety Insurance and became President of American Safety Insurance’s United States insurance and Bermuda reinsurance operations on January 1, 2002. Mr. Crim will succeed Mr. Fox as President and Chief Executive Officer of American Safety Insurance effective January 1, 2003. Mr. Crim has been responsible for all underwriting functions since joining American Safety Insurance in 1990. Previously, Mr. Crim was employed in the underwriting department of Aetna Casualty and Surety and The Hartford Insurance Co. between 1986 and 1990. Mr. Crim has 15 years experience in the insurance industry. Mr. Crim received a bachelors degree in mathematics from the Indiana University in 1986. Mr. Crim will become President of American Safety Insurance effective January 1, 2003.

Joseph D. Scollo, Jr. is Senior Vice President—Operations of American Safety Insurance since November 1998. Previously, Mr. Scollo served as Senior Vice President—Operations of United Coastal Insurance Company, New Britain, Connecticut since 1989. Mr. Scollo has 13 years experience in the insurance industry. Mr. Scollo received a bachelor of science degree in business from Western New England College in 1985 and is a certified public accountant. Mr. Scollo will become Executive Vice President of American Safety Insurance effective January 1, 2003.

Fred J. Pinckney became General Counsel and Secretary of American Safety Insurance in October 1997. Previously, Mr. Pinckney was an attorney for 25 years in Atlanta, Georgia, where his practice centered on securities and corporate matters. He was involved as special legal counsel in the formation of American Safety Insurance in 1986 and acted as outside legal counsel to American Safety Insurance prior to joining American Safety Insurance. Mr. Pinckney received a juris doctor degree from the University of Michigan Law School in 1973 and a bachelor of arts degree in political science from the University of Pittsburgh in 1969.

Steven B. Mathis became Chief Financial Officer of American Safety Insurance in August 1998. Previously, he was American Safety Insurance’s controller since 1992 and he is currently responsible for all accounting and treasury functions of American Safety Insurance. Mr. Mathis has 12 years accounting experience in the insurance industry having held accounting positions with American Insurance Managers, Inc. and American Security Group. Mr. Mathis received a bachelor of business administration degree in accounting from the University of Georgia in 1989.

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J. Jeffrey Hood is Senior Vice President—Technical Services of ASI Services and is responsible for loss control, claims and regulatory matters. Prior to joining American Safety Insurance in 1990, Mr. Hood served as a consultant for a national technical engineering firm for four years. Mr. Hood received a bachelor of science degree in petroleum engineering from Mississippi State University in 1985. Mr. Hood has 15 years of experience relating torsk management in the environmental remediation industry.

Gary J. Campbell became Vice President—Finance of American Safety Insurance in July 2001. Previously, Mr. Campbell was a Senior Account Executive for Mutual Risk Management Ltd. for four years in Bermuda. From 1991 to 1997, Mr. Campbell was an audit senior in the Chartered Accounting firm of Withy Addison in Mississauga, Canada. Previously, he worked for two years in audit with Ernst & Young in Mississauga, Canada. Mr. Campbell obtained his Chartered Accounting designation in 1996 and passed the CPA United States Reciprocity Exam in 2002. Mr. Campbell received a bachelor’s degree in business from the University of Western Ontario in Canada in 1989.

Frederick C. Treadway has served as the Chairman of the Board of Directors of American Safety Insurance since 1986. Mr. Treadway has been president of Specialty Systems, Inc. in Indianapolis, Indiana, since 1977, which is engaged in general construction and asbestos abatement. Mr. Treadway has 28 years experience in the construction business. Since 1996, Mr. Treadway, as owner and president of Treadway Racing LLC, has been a team owner in the Indy Racing League. Commencing in January 2001, Mr. Treadway became the president of American Safety Insurance’s subsidiary, Rivermar Contracting Company, in connection with the construction of Harbour Village Golf & Yacht Club in Ponce Inlet, Florida.

Cody W. Birdwell has served as a director of American Safety Insurance since 1986. Mr. Birdwell has been president of Houston Sunbelt Communities, L.C. in Houston, Texas, since 1993, which is engaged in subdivision and mobile home community development and sales. Mr. Birdwell has 18 years experience in general and environmental contracting.

David V. Brueggen has served as a director of the Company since 1986. Mr. Brueggen is senior vice president of finance of Anson Industries, Inc. in Melrose Park, Illinois, which is engaged in drywall, acoustical and foam insulation contracting. Mr. Brueggen has been employed by Anson Industries, Inc. since 1982. Mr. Brueggen is a certified public accountant.

William O. Mauldin, Jr. has served as a director of American Safety Insurance since 1986. Mr. Mauldin has been president of Midwest Materials Co. in Springfield, Missouri, since 1975, which is engaged in insulation and cold storage contracting. Mr. Mauldin has 35 years experience in the construction business.

Jerome D. Weaver has served as a director of American Insurance Group since 2001. Mr. Weaver has been chief executive officer of Specialty Systems, Inc. in Indianapolis, Indiana, since 1996, which is engaged in general construction and asbestos abatement. He has been employed by Specialty Systems, Inc. since 1989 and has 13 years experience in the construction business.

Thomas W. Mueller has served as a director of American Safety Insurance since 1986. Mr. Mueller has been vice president of Cardinal Industrial Insulation Co., Inc. in Louisville, Kentucky, since 1975, which is engaged in industrial insulation and asbestos and sound abatement. Mr. Mueller has 26 years experience in the construction business.

Board of Directors

American Safety Insurance’s Board of Directors consists of seven directors and is divided into three groups, each of whom serves a three-year term. Messrs. Birdwell and Mueller serve as directors until the 2003 annual meeting of shareholders. Messrs. Mauldin, Treadway and Weaver serve as directors until the 2004 annual meeting of shareholders. Messrs. Brueggen and Crim serve as directors until the 2005 annual meeting of shareholders.

The Board of Directors has established four standing committees: the audit committee, the compensation committee, the executive committee and the finance committee.

The audit committee is composed of non-employee directors and reviews the scope of American Safety Insurance’s audit, recommends to the Board of Directors the engagement of independent accountants, and reviews such accountants’ reports. The current members of the audit committee are Messrs. Birdwell, Brueggen and Weaver.

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The compensation committee recommends to the Board of Directors matters regarding executive compensation and stock options. The current members of the compensation committee are Messrs. Brueggen, Mueller and Treadway.

The executive committee exercises the general power and authority of the Board of Directors between meetings of the Board of Directors. The executive committee also has responsibility for recommending the nomination of directors to the Board, which then acts as a whole on such recommendation. The current members of the executive committee are Messrs. Birdwell, Brueggen, Crim, Mueller (alternate member) and Treadway.

The finance committee is responsible for recommending portfolio allocations to the Board of Directors, approving our guidelines which provide standards to ensure portfolio liquidity and safety, approving investment managers and custodians for portfolio assets, and considering other matters regarding our financial affairs. The current members of the finance committee are Messrs. Birdwell, Brueggen and Mauldin.

Compensation of Directors

Pursuant to American Safety Insurance’s Directors Stock Plan, non-employee directors are awarded an annual “retainer award” in the form of common shares of American Safety Insurance having a fair market value of $15,000. The retainer award shares are granted to the directors who are serving as directors immediately after each annual general meeting of shareholders and the fair market value of the common shares is determined as of that date. The retainer award shares vest as of the day immediately preceding the next annual general meeting of shareholders following the date of grant.

Non-employee directors are also paid $500 per day for attendance at each meeting of the Board of Directors or each meeting of a committee of the Board of Directors on which they serve. Directors are also reimbursed for their reasonable travel expenses in connection with their service as directors.

Executive Compensation

The following table sets forth information regarding the annual compensation paid to our Chief Executive Officer and the three other executive officers who received a combined salary and bonus in excess of $100,000 (the “Named Executive Officers”) for services rendered in all capacities to us during the years indicated:

Summary Compensation Table

	Annual Compensation			Long Term Compensation Awards
Name and Principal Position	Year	Salary and Bonus		Securities Underlying Options Granted	All Other Compensation (1)
Lloyd A. Fox	2001	$	392,820	0	$5,100
Chief Executive Officer	2000		392,820	0	5,250
and President	1999		392,820	0	3,928
Stephen R. Crim	2001		131,000	0	3,930
Executive Vice President	2000		184,333	23,000	5,250
	1999		146,000	35,000	4,380
Joseph D. Scollo, Jr.	2001		266,000	0	5,100
Senior Vice President—	2000		208,278	7,000	5,250
Operations	1999		181,000	10,000	453
Steven B. Mathis	2001		170,750	0	4,192
Chief Financial Officer	2000		138,500	7,000	4,155
	1999		107,667	7,500	3,230

(1) Represents amounts accrued for contributions by American Safety Insurance with respect to its 401(k) plan.

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Stock Option Plan

American Safety Insurance maintains the 1998 Incentive Stock Option Plan, as amended (the “Incentive Plan”), which is intended to further the interests of American Safety Insurance and its shareholders by attracting, retaining and motivating officers, employees, consultants and advisors to participate in the long-term development of American Safety Insurance through ownership of common shares. The Incentive Plan provides for the grant of stock options, which may be either non-qualified stock options or incentive stock options for tax purposes.

The Incentive Plan is administered by the compensation committee of our Board of Directors. The compensation committee is authorized to determine the terms and conditions of all option grants, subject to the limitations set forth in the Incentive Plan. In accordance with the terms of the Incentive Plan, the option price per share shall not be less than the fair market value of the common shares on the date of grant and the term of any options granted may be no longer than ten years, and there may or may not be a vesting period before any recipient may exercise any such options. The rights of recipients receiving these stock options generally vest equally over three years, beginning with the first anniversary date of grant, and expire ten years from the date of grant.

Stock Option Grants, Exercises and Year-End Values

During 2001, none of the Named Executive Officers identified in the Summary Compensation Table above received grants of stock options. The following table sets forth information regarding an individual grant of stock options made during 2001 to Frederick C. Treadway, the Chairman of the Board of Directors of American Safety Insurance, who entered into a five year employment agreement in January 2001 to become president of American Safety Insurance’s subsidiary, Rivermar Contracting Company, in connection with construction of Harbour Village Golf & Yacht Club in Ponce Inlet, Florida.

	Number of Securities Underlying Options Granted	Percent of Total Options granted to Employees in 2001		Exercise Price Per Share		Expiration Date	Potential Realizable Value at Assumed Annual Rates of Stock Price Appreciation for Option Term (1)
Name							5%	10%
Frederick C. Treadway	300,000	100	%	$	6.00	1/16/11	1,132,010	2,868,736

(1) The dollar amounts calculated represent hypothetical values that may be realized upon exercise of the options immediately prior to the expiration of their term, assuming that the stock price on the date of grant appreciates at the specified annual rates of appreciation, compounded annually over the term of the option. These calculations are based on rules promulgated by the Securities and Exchange Commission.

The following table sets forth information regarding options exercised in 2001 and the number and value of exercised and unexercised stock options held as of December 31, 2001 by the Named Executive Officers identified in the Summary Compensation Table above.

Name	Number of Shares Acquired on Exercise	Value Realized (1)		Number of Securities Underlying Unexercised Options at Year-End			Value of Unexercised In-the-Money Options at Year-End (2)
				Exercisable		Unexercisable	Exercisable		Unexercisable
Lloyd A. Fox	0	$	0	301,090	(3)	0	$	149,183	$	0
Stephen R. Crim	0		0	56,000		27,000		22,080		44,160
Joseph D. Scollo, Jr.	0		0	19,000		8,000		6,720		13,440
Steven B. Mathis	0		0	14,833		7,167		6,720		13,440

(1) The dollar value was calculated determining the difference between the fair market value of the underlying securities on the date of exercise and the exercise price of the options.

(2) The dollar value was calculated determining the difference between the fair market value of the underlying securities at December 31, 2001 ($8.88 per share) and the exercise price of the options.

(3) Includes options granted to Intersure Reinsurance Company, over which Mr. Fox exercises sole investment and voting power.

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Employment Agreements

Lloyd A. Fox, Chief Executive Officer and President of American Safety Insurance, entered into a five year employment agreement with American Safety Insurance in March 1997, which provides for an annual base salary of $375,000, annual discretionary bonus, and other customary executive benefits including stock options and health insurance. Mr. Fox’s compensation is determined pursuant to the principles noted above, and specific consideration is given to Mr. Fox’s responsibilities and experience in the insurance industry and his contributions to American Safety Insurance’s operating results. Mr. Fox plans to leave American Safety Insurance at the expiration of his employment agreement on December 31, 2002.

Frederick C. Treadway, the Chairman of the Board of Directors of American Safety Insurance, entered into a five year employment agreement in January 2001 to become president of American Safety Insurance’s subsidiary, Rivermar Contracting Company, in connection with construction of Harbour Village Golf & Yacht Club in Ponce Inlet, Florida, which provides for an annual salary of $100,000, the grant of non-incentive stock options for 300,000 shares which are immediately exercisable and other customary executive benefits.

Stephen R. Crim, Executive Vice President of American Safety Insurance and President of American Safety Insurance’s United States insurance and Bermuda reinsurance operations, entered into a three year employment agreement with the Company in January 2002, which provides for an annual base salary of $275,000 in 2002, $300,000 in 2003 and $325,000 in 2004, an annual discretionary bonus and other customary executive benefits including stock options and health insurance. Mr. Crim’s compensation is determined pursuant to the principles noted above, and specific consideration is given to Mr. Crim’s responsibilities and experience in the insurance industry and his contributions to American Safety Insurance’s operating results.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Five of the members of our Board of Directors are also directors of American Safety RRG, a non-subsidiary affiliate, which is managed by ASI Services, American Safety Insurance’s principal U.S. program development, underwriting and administrative services subsidiary, on a fee-for-service basis. American Safety RRG is a stock captive insurance company licensed in Vermont and is authorized to write liability insurance in all 50 states as a result of the Liability Risk Retention Act. The directors of American Safety RRG are elected annually by its shareholder/insureds. American Safety Insurance derived approximately 6.8% ($6.9 million) of its revenue in 2001 from American Safety RRG.

In 1995, American Safety Insurance entered into a retrocessional excess of loss reinsurance treaty (for policy limits in excess of reinsurance obtained from other unaffiliated reinsurers) with Intersure Reinsurance Company, which is owned by Lloyd A. Fox, the Chief Executive Officer and President of American Safety Insurance. The treaty covers certain asbestos liability and environmental remediation liability insurance policies in force, written or renewed by American Safety RRG or American Safety Casualty Insurance Company, a subsidiary, for which American Safety Insurance acts as a reinsurer. In 2001, we paid reinsurance premiums of $487,071 to Intersure Reinsurance Company. It is anticipated that this treaty will not be renewed after December 31, 2002. In October 2000, we sold Harbour Consulting, Ltd., a subsidiary which owned a residential property in Cabo San Lucas, Mexico, to Intersure Reinsurance company for a purchase price of $850,000, whereby we made a profit of $24,231. In May 2001, we repurchased Harbour Consulting, Ltd. from Intersure Reinsurance company for a purchase price of $850,000, plus reimbursement to the seller of approximately $54,000 of interest and expenses incurred by the seller since October 2000.

In 1996, we entered into a retrocessional excess of loss reinsurance treaty (for policy limits in excess of reinsurance obtained from other unaffiliated reinsurers) with Omega Reinsurance Company, which is owned by Stephen R. Crim, the Executive Vice President and a director of American Safety Insurance. The treaty covers certain asbestos liability and environmental remediation liability insurance policies in force, written or renewed by American Safety RRG or American Safety Casualty Insurance Company for which we act as a reinsurer. In 2001, we paid reinsurance premiums of $100,000 to Omega Reinsurance company. Effective April 1, 2002, this treaty was replaced by unaffiliated reinsurers and is in run-off.

ASI Services, our principal U.S. program development, underwriting and administrative services subsidiary, leases approximately 23,500 square feet of office space in Atlanta, Georgia, from a landlord, which is owned in part by Messrs. Crim, Hood, Mathis, Mueller, Scollo and Treadway, all of whom are directors or officers of American Safety Insurance. The lease, which expires

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on March 1, 2007, provides for a base annual rent plus an annual increase based on the consumer price index, with such increase not less than 4% per annum. ASI Services paid rent to the landlord of $343,255 in 2001. Previously, until August 2002, the building owners included Messrs. Birdwell, Fox, Mueller, Treadway and Walsh but did not include Messrs. Crim, Hood, Mathis and Scollo.

PRINCIPAL SHAREHOLDERS

The following table sets forth certain information regarding the common shares of American Safety Insurance owned as of September 23, 2002 (i) by each person who beneficially owns more than 5% of the common shares, (ii) by each of our directors, (iii) by each of our Named Executive Officers identified in the Summary Compensation Table above and (iv) by all directors and executive officers of American Safety Insurance as a group. Except as otherwise indicated, each person listed below has sole voting and investment power with respect to such common shares.

Name of Beneficial Owner	Number of Shares(1)	Percentage Ownership
Frederick C. Treadway(2)	1,178,103	23.3%
Lloyd A. Fox(3)	570,648	11.4
David V. Brueggen(4)	289,866	6.1
William O. Mauldin, Jr.(5)	228,820	4.8
Cody W. Birdwell(6)	199,246	4.1
Thomas W. Mueller(7)	185,491	3.9
Jerome D. Weaver(8)	513	*
Stephen R. Crim(9)	160,248	3.3
Joseph D. Scollo, Jr.(10)	26,672	*
Steven B. Mathis(11)	20,917	*
All directors and executive officers as a group (10 persons)	2,860,524	52.8%

* Represents less than 1%

(1) Shares beneficially owned include shares that may be acquired pursuant to the exercise of outstanding stock options that are exercisable within 60 days of July 31, 2002.

(2) Includes 690,727 shares held of record by Treadway Associates, L.P. and 300,000 shares subject to immediately exercisable stock options issued pursuant to an employment agreement with American Safety Insurance’s subsidiary, Rivermar Contracting Company. Mr. Treadway is Chairman of the Board of Directors of American Safety Insurance, and his address is 8945 Antioch Way, Las Vegas, Nevada 89117.

(3) Includes 175,923 shares held of record by Intersure Reinsurance Company, 250,000 shares subject to immediately exercisable stock options, and 41,920 shares owned by his spouse as to which Mr. Fox disclaims beneficial ownership. Mr. Fox is the Chief Executive Officer and President of American Safety Insurance, and his address is 1845 The Exchange, Atlanta, Georgia 30339.

(4) Includes 286,863 shares held of record by Vertecs Corporation, 2,003 shares owned by his spouse and children, as to which Mr. Brueggen disclaims beneficial ownership, and 1,000 shares owned jointly with his spouse. Mr. Brueggen is a director of American Safety Insurance, and his address is 1959 Anson Drive, Melrose Park, Illinois 60160.

(5) Includes 215,354 shares held of record by A.R.I. Incorporated. Mr. Mauldin is a director of American Safety Insurance.

(6) Includes 98,250 shares of record held by The Cody Birdwell Family Limited Partnership. Mr. Birdwell is a director of American Safety Insurance.

(7) Includes shares held of record by The Mark C. Mueller Trust for which Mr. Thomas W. Mueller is the sole trustee. Mark C. Mueller is a brother of Thomas W. Mueller. Excludes 182,745 shares held of record by The Thomas W. Mueller Trust for which Mark C. Mueller is the sole trustee and 151,960 shares held of record by Market Street Realty Trust, for which Thomas W. Mueller is one of three trustees and as to which Thomas W. Mueller disclaims beneficial ownership. Thomas W. Mueller is a director of American Safety Insurance.

(8) Includes 3 shares held by record by his spouse as to which Mr. Weaver disclaims beneficial ownership.

(9) Includes 83,340 shares held of record by Omega Reinsurance Company, 144 shares held of record as custodian for a child, and 75,334 shares subject to immediately exercisable stock options. Mr. Crim is Executive Vice President and a director of American Safety Insurance.

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(10) Includes 24,667 shares subject to immediately exercisable stock options. Mr. Scollo is Senior Vice President—Operations of American Safety Insurance.

(11) Includes 19,667 shares subject to immediately exercisable stock options. Mr. Mathis is Chief Financial Officer of American Safety Insurance.

DESCRIPTION OF THE PREFERRED SECURITIES

Pursuant to the terms of the Amended and Restated Trust Agreement, to be entered into by and among American Safety Holdings, as depositor, Deutsche Bank Trust Company Americas, as property trustee, and Deutsche Bank Trust Company Delaware, as Delaware trustee, the Trust will issue the preferred securities and the common securities. The Amended and Restated Trust Agreement is referred to in this prospectus as the “Trust Agreement.” The preferred securities will represent preferred undivided beneficial interests in the assets of the Trust and the holders of the preferred securities will be entitled to a preference in certain circumstances with respect to distributions (as described below) and amounts payable on redemption or liquidation over the common securities, as well as other benefits as described in the Trust Agreement. This summary of certain provisions of the preferred securities and the Trust Agreement does not purport to be complete and is subject to, and qualified in its entirety by reference to, all the provisions of the Trust Agreement, including the definitions of terms contained in the Trust Agreement. Wherever particular defined terms of the Trust Agreement are referred to in this prospectus, these defined terms are incorporated herein by reference into this prospectus. Before investing in the preferred securities, you should read the Trust Agreement, which is filed as an exhibit to the registration statement, of which this prospectus is a part.

General

The preferred securities will be limited to an aggregate liquidation amount $15 million (which amount may be increased by up to $2.25 million if the underwriters choose to exercise their over-allotment option). See “Underwriting.” The preferred securities will rank equal, and payments will be made on the preferred securities on a pro rata basis, with the common securities except as described under “—Subordination of Common Securities.” The debentures will be registered in the name of the Trust and held by the property trustee in trust for the benefit of the holders of the preferred securities and common securities. The debenture guarantee will be an irrevocable and unconditional guarantee on a subordinated basis by American Safety Insurance with respect to the debentures. See “Description of the Debenture Guarantee.” The preferred securities guarantee will be a guarantee on a subordinated basis by American Safety Insurance with respect to the preferred securities but it will not guarantee payment of distributions or amounts payable on redemption or liquidation of the preferred securities when the Trust does not have funds on hand available to make these payments. See “Description of the Preferred Securities Guarantee.” In such event, the remedy of a holder of preferred securities is to direct the property trustee to enforce its rights under the Indenture and the debenture guarantee. In addition, a holder of preferred securities may institute a legal proceeding directly against AS Holdings and/or American Safety Insurance under the debenture guarantee, without first instituting a legal proceeding against the property trustee or any other person or entity, for enforcement of payment to such holder of principal of or interest on the debentures having a principal amount equal to the aggregate stated liquidation amount of the preferred securities of such holder on or after the due dates specified in the debentures. The above mechanisms and obligations, together with our obligations under the debenture guarantee, the preferred securities guarantee and the expense and liability agreement, constitute a full and unconditional guarantee by American Safety Insurance of payments due on the preferred securities. See “—Voting Rights; Amendment of Trust Agreement” below.

Distributions

As used in this prospectus, the term “distributions” mean amounts payable in respect of the common and preferred securities. The preferred securities represent preferred undivided beneficial interests in the assets of the Trust. As a holder of preferred securities, you will receive distributions on each preferred security in the amount of $            annually, payable quarterly in arrears on March 31, June 30, September 30 and December 31 of each year, to record holders of the preferred securities at the close of business on the 15th day of March, June, September and December. Each date on which distributions are payable is called a distribution date.

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Distributions on the preferred securities will be cumulative. Distributions will accumulate from         , 2002. The first distribution date for the preferred securities will be December 31, 2002. The amount of distributions payable for any period less than a full distribution period will be computed on the basis of the actual number of days elapsed in a partial month in that period. Distributions payable for each full distribution period will be computed by dividing the annual rate by four. If any date on which distributions are payable on the preferred securities is not a business day, then payment of the distributions payable on that date will be made on the next succeeding day that is a business day, with the same force and effect as if made on the date such payment was originally payable. As used in this prospectus, the term “business day” means a day other than (a) a Saturday or Sunday, (b) a day on which banking institutions in the State of Georgia or in the City of New York, New York are authorized or required by law or executive order to remain closed or (c) a day on which the property trustee’s Corporate Trust Office or the Delaware trustee’s Corporate Trust Office or the debenture trustee’s Corporate Trust Office is closed for business. If any date on which a distribution is otherwise payable on the preferred securities is not a business day, then the payment of such distribution shall be made on the next succeeding day that is a business day (without any interest or other payment in respect of any such delay), except that, if such business day is in the next succeeding calendar year, payment of such distributions shall be made on the immediately preceding business day, in either case with the same force and effect as if made on the date on which such payment was originally payable.

So long as no Debenture Event of Default has occurred and is continuing, AS Holdings has the right under the Indenture to defer the payment of interest on the debentures at any time or from time to time for an extension period, provided that no extension period may extend beyond the stated maturity of the debentures. As a consequence of any such deferral, quarterly distributions on the preferred securities by the Trust will be deferred during that extension period. Deferred distributions to which you are entitled will accumulate additional distributions at the rate of         % per annum, compounded quarterly from the relevant payment date for such distributions, computed on the basis of a 360-day year of twelve 30-day months and the actual days elapsed in a partial month in that period. Additional distributions payable for each full distribution period will be computed by dividing the annual rate by four. The term “distributions” as used in this prospectus includes any additional distributions. During any extension period, American Safety Insurance may not:

(1) declare or pay any dividends or distributions on, or redeem, purchase, acquire or make a liquidation payment with respect to, any of our capital stock; or

(2) make any payment of principal of or interest or premium, if any, on or repay, repurchase or redeem any debt securities that rank equal in all respects with or junior in interest to the debentures.

However, during an extension period, American Safety Insurance may undertake (1) or (2) above in connection with:

(a)    repurchases, redemptions or other acquisitions of shares of our capital stock related to any employment contract, benefit plan or other similar arrangement, a dividend reinvestment or stockholder stock purchase plan or the issuance of our capital stock or similar security as consideration in an acquisition transaction entered into prior to the applicable extension period,

(b)    an exchange or conversion of any class or series of our capital stock for any class or series of our capital stock or of any class or series of our indebtedness for any class or series of our capital stock,

(c)    the purchase of fractional interests in shares of our capital stock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged, or

(d)    any dividend in the form of stock, warrants, options or other rights where the dividend stock or the stock issuable upon exercise of the warrants, options or other rights is the same stock as that on which the dividend is being paid or ranks equal with or junior to such stock.

Prior to the termination of any extension period, AS Holdings may further defer the payment of interest. However, the extension period may not exceed 20 consecutive quarterly periods or extend beyond the stated maturity of the debentures. Upon the termination of any extension period and the payment of all amounts then due, AS Holdings may elect to begin a new extension period. No interest shall be due and payable during an extension period, except at the end of that extension period. AS Holdings must give the holders of the preferred securities and the Trustees notice of its election of an extension period at least one business day prior to the earlier of:

(1)    the date the distributions on the preferred securities would have been payable but for the election to begin the extension period, or

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(2)    the date the property trustee is required to give notice to you of the record date or the date distributions are payable, but in any event not less than one business day prior to the record date.

The property trustee will give notice of AS Holdings’ election to begin a new extension period to you. Subject to the foregoing, there is no limitation on the number of times that AS Holdings may elect to begin an extension period. See “Description of the Debentures—Option to Extend Interest Payment Period” and “Material Federal Income Tax Consequences—Treatment of Interest and Original Issue Discount.”

AS Holdings currently does not intend to exercise its right to defer payments of interest by extending the interest payment period on the debentures.

The funds of the Trust available for distribution to you will be limited to payments under the debentures in which the Trust will invest the proceeds from the issuance and sale of the preferred securities. See “Description of the Debentures.” If AS Holdings does not make payments on the debentures and, under such circumstances, we do not make required payments under the debenture guarantee, the Trust will not have funds available to pay distributions or other amounts payable on the preferred securities. The payments on the debentures are guaranteed by American Safety Insurance irrevocably and unconditionally as set forth in this prospectus under “Description of the Debenture Guarantee.” The payment of distributions and other amounts payable on the preferred securities is guaranteed by American Safety Insurance on a limited basis as set forth in this prospectus under “Description of the Preferred Securities Guarantee.”

Redemption

AS Holdings may redeem your preferred securities, in whole or in part, upon repayment of the debentures at maturity or their earlier redemption. Upon the repayment or redemption of the debentures, the proceeds from any repayment or redemption will be applied by the property trustee to redeem a like amount of the trust securities. The property trustee will provide not less than 30 nor more than 60 days notice of any repayment or redemption. The redemption price paid will be equal to the aggregate liquidation amount of the preferred securities plus accumulated but unpaid distributions on the preferred securities up to the date of redemption and the related amount of the premium, if any, paid by AS Holdings upon the concurrent redemption of the debentures. See “Description of the Debentures—Redemption.” If less than all of the debentures are to be repaid or redeemed on a redemption date, then the proceeds from that partial repayment or redemption will be allocated to the redemption of the preferred securities and the common securities. The amount of premium, if any, paid by AS Holdings upon the redemption of all or any part of the debentures will be allocated to the redemption of the preferred securities and the common securities on a pro rata basis.

AS Holdings has the right to redeem the debentures:

(1)    on or after             , 2007, in whole at any time or in part from time to time, or

(2)    in whole, but not in part, at any time within 180 days following the occurrence and during the continuation of a Tax Event or an Investment Company Event, as defined below. See “—Liquidation Distribution Upon Dissolution.”

A redemption of the debentures would cause a mandatory redemption of a like amount of the preferred securities and common securities at the redemption price. As used in this prospectus, the term “like amount” means:

(1)    with respect to a redemption of trust securities, trust securities having a liquidation amount equal to that portion of the principal amount of debentures to be contemporaneously redeemed in accordance with the Indenture, allocated to the common securities and to the preferred securities based upon the relative liquidation amounts of such classes, and

(2)    with respect to a distribution of debentures to holders of trust securities in connection with a dissolution or liquidati on of the Trust, debentures having a principal amount equal to the liquidation amount of the trust securities of the holder to whom such debentures are distributed.

AS Holdings has the right to redeem the debentures in whole, but not in part, and cause a mandatory redemption of the common and preferred securities in whole, but not in part, at the redemption price within 180 days following the occurrence of a Tax Event or an Investment Company Event. In the event a Tax Event or an Investment Company Event occurs and American Safety Holdings

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does not redeem the debentures or liquidate the Trust as described below under “—Liquidation Distribution Upon Dissolution,” the preferred securities will remain outstanding and additional distributions may be payable on the debentures.

“Tax Event” means the receipt by the administrators, American Safety Insurance or AS Holdings of an opinion of counsel experienced in such matters (which may be counsel to us or AS Holdings) to the effect that, as a result of any amendment to, or change (including any announced prospective change) in, the laws or regulations of the United States or any political subdivision or taxing authority thereof or therein, or as a result of any official or administrative pronouncement or action or judicial decision interpreting or applying such laws or regulations, which amendment or change is effective or which pronouncement or decision is announced on or after the date of issuance of the preferred securities, there is more than an insubstantial risk that:

(1)    the Trust is, or will be within 90 days of the delivery of the opinion, subject to United States federal income tax with respect to income received or accrued on the debentures,

(2)    interest payable by AS Holdings on the debentures is not, or within 90 days of the delivery of the opinion, will not be, deductible by a member of our consolidated tax group, in whole or in part, for United States federal income tax purposes,

(3)    the deduction of interest payable by AS Holdings on the debentures will be deferred or suspended for United States federal income tax purposes and the net present value of the benefits of such tax deductions will be materially reduced, or

(4)    the Trust is, or will be within 90 days of the delivery of the opinion, subject to more than a de minimis amount of other taxes, duties or other governmental charges.

“Investment Company Event” means the receipt by the administrators, American Safety Insurance or AS Holdings of an opinion of counsel experienced in such matters (which may be counsel to us or AS Holdings) to the effect that, as a result of the occurrence of a change in law or regulation or a written change (including any announced prospective 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 will be considered an “investment company” that is required to be registered under the Investment Company Act of 1940, as amended (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 preferred securities.

If a Tax Event described in paragraphs (1) or (3) of the definition of Tax Event above has occurred and is continuing and the Trust is the holder of all the debentures, AS Holdings will pay additional sums, if any, on the debentures. The term “additional sums” means the additional amounts as may be necessary in order that the amount of distributions then due and payable by the Trust on the outstanding preferred securities and common securities of the Trust will not be reduced as a result of any additional taxes, duties and other governmental charges to which the Trust has become subject as a result of a Tax Event.

Redemption Procedures

If AS Holdings chooses to redeem the preferred securities, it will redeem your preferred securities at the redemption price with the applicable proceeds from the redemption of the debentures. We will redeem preferred securities and pay the redemption price only to the extent that the Trust has funds on hand available for the payment of the redemption price. See “—Subordination of the Common Securities.”

If the Trust gives a notice of redemption in respect of the preferred securities, then, by 12:00 noon, New York City time, on the redemption date, to the extent funds are available, the property trustee will, for securities held in book-entry form, deposit irrevocably with The Depository Trust Company, or DTC, funds sufficient to pay the applicable redemption price and will give DTC irrevocable instructions and authority to pay the redemption price to the holders of the preferred securities. If the preferred securities are not held in book-entry form, the property trustee, to the extent funds are available, will irrevocably deposit with the paying agent for the preferred securities 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 certificates evidencing the preferred securities.

Notwithstanding the foregoing, distributions payable on or prior to the redemption date for any preferred securities called for redemption will be payable to the holders of the preferred securities on the relevant record dates for the related distribution dates. If

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notice of redemption is given and funds are deposited as required, then upon the date of the deposit, all of your rights with respect to your preferred securities so called for redemption will cease. However, you will have the right to receive the redemption price, excluding interest.

If any date fixed for redemption of preferred securities is not a business day, then payment of the redemption price payable on that date will be made on the next succeeding day which is a business day. If any date on which a distribution is otherwise payable on the preferred securities is not a business day, then the payment of such distribution shall be made on the next succeeding day that is a business day (without any interest or other payment in respect of any such delay), except that, if such business day is in the next succeeding calendar year, payment of such distributions shall be made on the immediately preceding business day, in either case with the same force and effect as if made on the date on which such payment was originally payable. In the event that payment of the redemption price in respect of preferred securities called for redemption is improperly withheld or refused and not paid either by the Trust or by us pursuant to the preferred securities guarantee as described under “Description of the Preferred Securities Guarantee,” distributions on the preferred securities will continue to accumulate at the then applicable rate, from the redemption date originally established by the Trust for the preferred securities to the date the 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.

Subject to applicable law, we and our affiliates may, at any time and from time to time, purchase outstanding preferred securities by tender, in the open market or by private agreement, and may resell such securities.

If less than all the preferred securities and common securities are to be redeemed on a redemption date, then the aggregate liquidation amount of the preferred securities and common securities to be redeemed shall be allocated pro rata to the preferred securities and the common securities based upon the relative liquidation amounts of these classes. The particular preferred securities to be redeemed shall be selected on a pro rata basis not more than 60 days prior to the redemption date by the property trustee from the outstanding preferred securities not previously called for redemption. The property trustee will promptly notify the securities registrar for the trust securities in writing of the preferred securities selected for redemption and, in the case of any preferred securities selected for partial redemption, the liquidation amount to be redeemed. For all purposes of the 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 which has been or is to be redeemed.

Notice of any redemption will be mailed at least 30 days but not more than 60 days before the redemption date to each registered holder of preferred securities to be redeemed at its address appearing on the securities register for the trust securities. Unless AS Holdings defaults in payment of the redemption price on the debentures, on and after the redemption date, interest will cease to accrue on the debentures or portions thereof (and, unless payment of the redemption price in respect of the preferred securities is withheld or refused and not paid either by the Trust, AS Holdings or American Safety Insurance pursuant to the preferred securities guarantee, distributions will cease to accumulate on the preferred securities or portions thereof) called for redemption.

Subordination of the Common Securities

Payment of distributions on, and the redemption price of, and the liquidation distribution, as described below in respect of, the preferred securities and common securities, as applicable, will be made pro rata based on the liquidation amount of the preferred securities and common securities. However, if on any distribution date or redemption date a Debenture Event of Default has occurred and is continuing, no payment of any distribution on, or redemption price of, or liquidation distribution in respect of, any of the common securities, and no other payment on account of the redemption, liquidation or other acquisition of such common securities, may be made unless:

(1)    payment in full in cash of all accumulated and unpaid distributions on all the outstanding preferred securities for all distribution periods terminating on or prior to the distribution or redemption date, will have been made or provided for, or

(2)    in the case of payment of the redemption price, the full amount of the redemption price on all the outstanding preferred securities then called for redemption, will have been made or provided for, and

(3)    all funds available to the property trustee will first be applied to the payment in full in cash of all distributions on, or redemption price of, the preferred securities then due and payable.

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In the case of any Event of Default, as defined below, resulting from a Debenture Event of Default, AS Holdings will be deemed to have waived any right to act with respect to any Event of Default under the Trust Agreement until the effects of all such Events of Default with respect to the preferred securities have been cured, waived or otherwise eliminated. See “—Events of Default; Notice” and “Description of the Debentures—Debenture Events of Default.” Until all such Events of Default under the Trust Agreement with respect to the preferred securities have been so cured, waived or otherwise eliminated, the property trustee will act solely on your behalf and not on AS Holdings’ behalf, as the holder of the common securities, and only the holders of the preferred securities will have the right to direct the property trustee to act on their behalf.

Liquidation Distribution Upon Dissolution

The amount payable on the preferred securities in the event of any liquidation of the Trust is $10 per preferred security plus accumulated and unpaid distributions, subject to certain exceptions, which may be in the form of a distribution of a like amount in debentures.

AS Holdings will have the right at any time to dissolve the Trust and, after satisfaction of liabilities to creditors of the Trust as provided by applicable law, cause the debentures to be distributed to the holders of the preferred securities and common securities in liquidation of the Trust.

Pursuant to the Trust Agreement, the Trust will automatically dissolve upon expiration of its term or, if earlier, will dissolve on the first to occur of:

(1)    certain events of bankruptcy, dissolution or liquidation of American Safety Insurance, AS Holdings or the holder of the common securities,

(2)    the distribution of a like amount of the debentures to the holders of the trust securities, if the holders of common securities have given written direction to the property trustee to dissolve the Trust, which direction is optional and wholly within the discretion of the holders of common securities,

(3)    the redemption of all the preferred securities in connection with the redemption of all the debentures as described under “—Redemption,” or

(4)    the entry of an order for the dissolution of the Trust by a court of competent jurisdiction.

If dissolution of the Trust occurs as described in paragraphs (1), (2) or (4) above, the Trust will be liquidated by the property trustee as expeditiously as the property trustee determines to be possible. The property trustee, after satisfaction of liabilities to creditors of the Trust, will distribute a like amount of the debentures to the holders of trust securities. However, if distribution is not practical or occurs pursuant to paragraph (3) above, you and the other holders of trust securities 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, a liquidation distribution equal to the aggregate liquidation amount plus accumulated and unpaid distributions to the date of payment. If 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 the amounts payable directly by the Trust on its preferred securities shall be paid on a pro rata basis. The holders of the common securities will be entitled to receive distributions upon any liquidation pro rata with the holders of the preferred securities, except that if a Debenture Event of Default has occurred and is continuing as a result of any failure by AS Holdings to pay any amounts in respect of the debentures when due, the preferred securities shall have a priority over the common securities. See “—Subordination of Common Securities.”

After the liquidation date fixed for any distribution of debentures, the preferred securities will no longer be deemed to be outstanding, DTC or its nominee, as the registered holder of preferred securities, will receive a registered global certificate or certificates representing the debentures to be delivered upon such distribution with respect to preferred securities held by DTC or its nominee, and any certificates representing the preferred securities not held by DTC or its nominee will be deemed to represent the debentures having a principal amount equal to the stated liquidation amount of the preferred securities and bearing accrued and unpaid interest in an amount equal to the accumulated and unpaid distributions on the preferred securities until such certificates are presented to the security registrar for the trust securities for transfer or reissuance.

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If AS Holdings does not redeem the debentures prior to maturity and the Trust is not liquidated and the debentures are not distributed to holders of the preferred securities, the preferred securities will remain outstanding until the repayment of the debentures and the distribution of the liquidation distribution to the holders of the preferred securities.

We and AS Holdings can make no assurance as to the market prices for the preferred securities or the debentures that may be distributed in exchange for preferred securities if a dissolution and liquidation of the Trust were to occur. Accordingly, the preferred securities that you may purchase, or the debentures that you may receive on dissolution and liquidation of the Trust, may trade at a discount to the price that you paid to purchase the preferred securities offered by this prospectus.

Events of Default; Notice

Any one of the following events constitutes an “Event of Default” under the Trust Agreement with respect to the preferred securities:

(1)    the occurrence of a Debenture Event of Default (see “Description of the Debentures—Debenture Events of Default”); or

(2)    default by the Trust in the payment of any distribution when it becomes due and payable, and continuation of that default for a period of 30 days; or

(3)    default by the Trust in the payment of any redemption price of any trust security when it becomes due and payable; or

(4)    default in the performance, or breach, in any material respect, of any covenant or warranty of the Trustees in the Trust Agreement (other than a covenant or warranty a default in the performance of which or the breach of which is dealt with in clause (2) or (3) above), and continuation of that default or breach for a period of 60 days after there has been given to the trustees by the holders of at least 25% in aggregate liquidation amount of the outstanding preferred securities, a written notice specifying the default or breach and requiring it to be remedied; or

(5)    the occurrence of certain events of bankruptcy or insolvency with respect to the property trustee if a successor property trustee has not been appointed within 90 days.

Within twenty business days after the occurrence of any Event of Default relating to the payment of principal or interest with respect to the debentures actually known to the property trustee and within ninety business days after the occurrence of any other Event of Default actually known to the property trustee, the property trustee will transmit notice of such Event of Default to the holders of trust securities and the administrators, unless such Event of Default has been cured or waived. AS Holdings, as depositor, and the administrators are required to file annually with the property trustee a certificate as to whether or not they are in compliance with all the conditions and covenants applicable to them under the Trust Agreement.

If a Debenture Event of Default has occurred and is continuing as a result of any failure by AS Holdings to pay any amounts in respect of the debentures when due, the preferred securities will have a preference over the common securities with respect to payments of any amounts in respect of the preferred securities as described above. See “—Subordination of Common Securities,”

“—Liquidation Distribution Upon Dissolution” and “Description of the Debentures—Debenture Events of Default.”

Removal Of Trustees; Appointment Of Successors

The holders of at least a majority in aggregate liquidation amount of the outstanding preferred securities may remove a trustee for cause or, if a Debenture Event of Default has occurred and is continuing, with or without cause. If a trustee is removed by the holders of the outstanding preferred securities, a successor trustee may be appointed by the holders of at least 25% in liquidation amount of the outstanding preferred securities. If a trustee resigns, we will appoint its successor. If a trustee fails to appoint a successor, the holders of at least 25% in liquidation amount of the outstanding preferred securities may appoint a successor. If a successor has not been appointed by the holders, any holder of preferred securities or common securities or the other trustee may petition a court in the State of Delaware to appoint a successor. Any Delaware trustee must meet the applicable requirements of Delaware law. Any property trustee must be a national or state-chartered bank, and at the time of appointment have securities rated in one of the three highest rating categories by a nationally recognized statistical rating organization and have capital and surplus of at least $50 million. No resignation or removal of a trustee and no appointment of a successor trustee shall be effective until the acceptance of appointment by the successor trustee in accordance with the provisions of the Trust Agreement.

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Merger or Consolidation of Trustees

Any entity into which the property trustee or the Delaware trustee may be merged or converted or with which it may be consolidated, or any entity resulting from any merger, conversion or consolidation to which such trustee is a party, or any entity succeeding to all or substantially all the corporate trust business of the trustee, will be the successor of the trustee under the Trust Agreement, provided the entity is otherwise qualified and eligible.

Mergers, Consolidations, Amalgamations or Replacements of the 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 entity, except as described below or as otherwise set forth in the Trust Agreement. The Trust may, at the request of the holders of the common securities and with the consent of the holders of at least a majority in aggregate liquidation amount of the outstanding preferred securities, 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, so long as:

(1)    such successor entity either (a) expressly assumes all the obligations of the Trust with respect to the preferred securities or (b) substitutes for the preferred securities other securities having substantially the same terms as the preferred securities so long as such successor securities have the same priority as the preferred securities with respect to distributions and payments upon liquidation, redemption and otherwise,

(2)    a trustee of the successor entity, possessing the same powers and duties as the property trustee, is appointed to hold the debentures,

(3)    the merger, consolidation, amalgamation, replacement, conveyance, transfer or lease does not cause the preferred securities or any successor securities to be downgraded by any nationally recognized statistical rating organization, if then rated,

(4)    the merger, consolidation, amalgamation, replacement, conveyance, transfer or lease does not adversely affect the rights, preferences and privileges of the holders of the preferred securities or any successor securities in any material respect,

(5)    the successor entity has a purpose substantially identical to that of the Trust,

(6)    prior to any merger, consolidation, amalgamation, replacement, conveyance, transfer or lease, the Trust has received an opinion from independent counsel experienced in these matters to the effect that (a) the 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 and (b) following the 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

(7)    AS Holdings or any permitted successor or assignee owns all the common securities of the successor entity and we guarantee the obligations of the successor entity under the successor securities at least to the extent provided by the preferred securities guarantee.

Notwithstanding the foregoing, the Trust may not, except with the consent of holders of 100% in aggregate liquidation amount 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 entity or permit any other entity to consolidate, amalgamate, merge with or into, or replace it if such consolidation, amalgamation, merger, replacement, conveyance, transfer or lease would cause the Trust or the successor entity to be taxable as a corporation for United States federal income tax purposes.

Voting Rights; Amendment of Trust Agreement

Except as provided in “—Removal of Trustees; Appointment of Successors” and “Description of the Preferred Securities Guarantee—Amendments and Assignment” and as otherwise required by law and the Trust Agreement, you will have no voting rights.

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The Trust Agreement may be amended from time to time by the holders of a majority of the common securities, the administrators and the property trustee, without your consent:

(1)    to cure any ambiguity, correct or supplement any provisions in the Trust Agreement that may be inconsistent with any other provision, or to make any other provisions with respect to matters or questions arising under the Trust Agreement, provided that any amendment does not adversely affect in any material respect the interests of any holder of trust securities, or

(2)    to modify, eliminate or add to any provisions of the Trust Agreement to such extent as may be necessary to ensure that the Trust will not be taxable as a corporation for United States federal income tax purposes at any time that any trust securities are outstanding or to ensure that the Trust will not be required to register as an “investment company” under the Investment Company Act,

and any amendments of the Trust Agreement will become effective when notice of such amendment is given to the holders of trust securities.

The Trust Agreement may be amended by the holders of a majority of the common securities, the administrators and the property trustee with:

(1)    the consent of holders representing not less than a majority in aggregate liquidation amount of the outstanding preferred securities, and

(2)    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 affect the Trust’s not being taxable as a corporation for United States federal income tax purposes or the Trust’s exemption from status as an “investment company” under the Investment Company Act.

However, without the consent of each holder of trust securities affected thereby, the Trust Agreement may not be amended to:

(1)    change the amount or timing of any distribution on the trust securities or otherwise adversely affect the amount of any distribution required to be made in respect of the trust securities as of a specified date, or

(2)    restrict the right of a holder of trust securities to institute suit for the enforcement of any such payment on or after such date.

So long as any debentures are held by the Trust, the property trustee may not:

(1)    direct the time, method and place of conducting any proceeding for any remedy available to the debenture trustee, or execute any trust or power conferred on the property trustee with respect to the debentures,

(2)    waive any past default that is waiveable under Section 5.13 of the Indenture,

(3)    exercise any right to rescind or annul a declaration that the debentures shall be due and payable, or

(4)    consent to any amendment, modification or termination of the Indenture or the debentures, where any consent shall be required, without, in each case, obtaining the requisite prior approval of the holders of the outstanding preferred securities.

The property trustee may not revoke any action previously authorized or approved by a vote of the holders of the preferred securities except by subsequent vote of the holders of the preferred securities. The property trustee will notify each holder of preferred securities of any notice of default with respect to the debentures. In addition to obtaining the foregoing approvals of the holders of the preferred securities, before taking any of the foregoing actions, the property trustee will obtain an opinion of counsel experienced in these matters to the effect that the Trust will not be taxable as a corporation for United States federal income tax purposes on account of the action.

Any required approval of holders of preferred securities may be given at a meeting of holders of preferred securities convened for such purpose or pursuant to written consent. The property trustee will cause a notice of any meeting at which holders of preferred securities are entitled to vote, or of any matter upon which action by written consent of such holders is to be taken, to be given to each registered holder of preferred securities in the manner set forth in the Trust Agreement.

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No vote or consent of the holders of preferred securities will be required to redeem and cancel preferred securities in accordance with the Trust Agreement.

Notwithstanding that holders of preferred securities are entitled to vote or consent under any of the circumstances described above, any of the preferred securities that are owned by us, the trustees or any of our affiliates or any trustees, will, for purposes of the vote or consent, be treated as if they were not outstanding.

Expenses and Taxes

We have agreed to pay all debts and other obligations, except with respect to the preferred securities, and all costs and expenses of the Trust, including costs and expenses relating to the organization of the Trust, the fees and expenses of the Trustees and the costs and expenses relating to the operation of the Trust, and to pay any and all taxes and all costs and expenses with respect thereto, other than United States withholding taxes, to which the Trust might become subject. The foregoing obligations of American Safety Insurance are for the benefit of, and shall be enforceable by, any person to whom any debts, obligations, costs, expenses and taxes are owed whether or not the creditor has received notice thereof. Any creditor may enforce these obligations directly against us, and we have irrevocably waived any right or remedy to require that any creditor take any action against the Trust or any other person before proceeding against us. We have also agreed in the Indenture to execute any additional agreements as may be necessary or desirable to give full effect to the foregoing.

Book-Entry, Delivery And Form

The preferred securities will be issued in the form of one or more fully registered global securities which will be deposited with, or on behalf of, DTC and registered in the name of Cede & Co. as DTC’s nominee. Unless and until it is exchangeable, in whole or in part, for the preferred securities in definitive form, a global security may not be transferred except as a whole by DTC to a nominee of DTC or by a nominee of DTC to DTC or another nominee of DTC or by DTC or any such nominee to a successor of such Depository or a nominee of such successor.

Ownership of beneficial interests in a global security will be limited to persons that have accounts with DTC or its nominee (“Participants”) or persons that may hold interests through Participants. We expect that, upon the issuance of a global security, DTC will credit, on its book-entry registration and transfer system, the Participants’ accounts with their respective principal amounts of the preferred securities represented by such global security. Ownership of beneficial interests in this global security will be shown on, and the transfer of the ownership interests will be effected only through, records maintained by DTC and on the records of Participants. Beneficial owners will not receive written confirmation from DTC of their purchase, but are expected to receive written confirmations from the Participants through which the beneficial owner entered into the transaction. Transfers of ownership interests will be accomplished by entries on the books of Participants acting on behalf of the beneficial owners.

So long as DTC, or its nominee, is the registered owner of a global security, DTC or its nominee, as the case may be, will be considered the sole owner or holder of the preferred securities represented by the global security for all purposes under the Indenture. Except as provided below, owners of beneficial interests in a global security will not be entitled to receive physical delivery of the preferred securities in definitive form and will not be considered the owners or holders thereof under the Indenture. Accordingly, each person owning a beneficial interest in the global security must rely on the procedures of DTC and, if the person is not a Participant, on the procedures of the Participant through which the person owns its interest, to exercise any rights of a holder of preferred securities under the Indenture. We understand that, under DTC’s existing practices, in the event that we request any action of holders, or an owner of a beneficial interest in such a global security desires to take any action which a holder is entitled to take under the Indenture, DTC would authorize the Participants holding the relevant beneficial interests to take that action, and the Participants would authorize beneficial owners owning through the Participants to take that action or would otherwise act upon the instructions of beneficial owners owning through them. Redemption notices will also be sent to DTC. If less than all of the preferred securities are being redeemed, we understand that it is DTC’s existing practice to determine by lot the amount of the interest of each Participant to be redeemed.

Distributions on the preferred securities registered in the name of DTC or its nominee will be made to DTC or its nominee, Cede & Co., as the case may be, as the registered owner of the global security representing the preferred securities. None of American

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Safety Insurance, AS Holdings, the trustees, the administrators, any paying agent or any other agent of American Safety Insurance, AS Holdings or the trustees will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests in the global security for such preferred securities or for maintaining, supervising or reviewing any records relating to the beneficial ownership interests. Disbursements of distributions to Participants shall be the responsibility of DTC. DTC’s practice is to credit Participants’ accounts on a payable date in accordance with their respective holdings shown on DTC’s records unless DTC has reason to believe that it will not receive payment on the payable date. Payments by Participants to beneficial owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in “street name,” and will be the responsibility of such Participant and not of DTC, American Safety Insurance, AS Holdings, the trustees, the paying agent or any other agent of American Safety Insurance or AS Holdings, subject to any statutory or regulatory requirements as may be in effect from time to time.

DTC may discontinue providing its services as securities depository with respect to the preferred securities at any time by giving reasonable notice to us or the trustees. If DTC notifies us that it is unwilling to continue as such, or if it is unable to continue or ceases to be a clearing agency registered under the Exchange Act and a successor depository is not appointed by us within 90 days after receiving the notice or becoming aware that DTC is no longer so registered, we will issue the preferred securities in definitive form upon registration of transfer of, or in exchange for, such global security. In addition, we may at any time and in our sole discretion determine not to have the preferred securities represented by one or more global securities and, in such event, will issue preferred securities in definitive form in exchange for all of the global securities representing such preferred securities.

DTC has advised us and the Trust as follows: DTC is a limited purpose trust company organized under the laws of the State of New York, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the Uniform Commercial Code and a “clearing agency” registered pursuant to the provisions of Section 17A of the Exchange Act. DTC was created to hold securities for its Participants and to facilitate the clearance and settlement of securities transactions between Participants through electronic book-entry changes to accounts of its Participants, thereby eliminating the need for physical movement of certificates. Participants include securities brokers and dealers (such as the underwriters), banks, trust companies and clearing corporations and may include certain other organizations. Certain of such Participants (or their representatives), together with other entities, own DTC. Indirect access to the DTC system is available to others such as banks, brokers, dealers and trust companies that clear through, or maintain a custodial relationship with a Participant, either directly or indirectly.

Same-Day Settlement and Payment

Settlement for the preferred securities will be made by the underwriters in immediately available funds.

Secondary trading in preferred securities of corporate issuers is generally settled in clearinghouse or next-day funds. In contrast, the preferred securities will trade in DTC’s Same-Day Funds Settlement System, and secondary market trading activity in the preferred securities will therefore be required by DTC to settle in immediately available funds. No assurance can be given as to the effect, if any, of settlement in immediately available funds on trading activity in the preferred securities.

Payment and Paying Agency

Payments on the preferred securities will be made to DTC, which will credit the relevant accounts at DTC on the applicable distribution dates or, if the preferred securities are not held by DTC, the payments will be made by check mailed to the address of the holder entitled thereto as such address appears on the securities register for the trust securities. The paying agent will initially be the property trustee and any co-paying agent chosen by the property trustee and acceptable to the administrators. The paying agent will be permitted to resign as paying agent upon 30 days’ written notice to the property trustee and the administrators. If the property trustee is no longer the paying agent, the property trustee will appoint a successor (which must be a bank or trust company reasonably acceptable to the administrators) to act as paying agent.

Registrar and Transfer Agent

The property trustee will act as registrar and transfer agent for the preferred securities.

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Registration of transfers of preferred securities will be effected without charge by or on behalf of the Trust only upon payment of any tax or other governmental charges that may be imposed in connection with any transfer or exchange. The Trust will not be required to register or cause to be registered the transfer of the preferred securities after the preferred securities have been called for redemption.

Information Concerning the Property Trustee

The property trustee, other than during the occurrence and continuance of an Event of Default, undertakes to perform only those duties as are specifically set forth in the Trust Agreement and, after an Event of Default, must exercise the same degree of care and skill as a prudent person would exercise or use in the conduct of his or her own affairs. Subject to this provision, the property trustee is under no obligation to exercise any of the powers vested in it by the Trust Agreement at the request of any holder of preferred securities unless it is offered reasonable indemnity against the costs, expenses and liabilities that might be incurred by the action.

Miscellaneous

The administrators and the property trustee are authorized and directed to conduct the affairs of and to operate the Trust in such a way that:

• the Trust will not be deemed to be an “investment company” required to be registered under the Investment Company Act;

• the Trust will not be taxable as a corporation for United States federal income tax purposes; and

• the debentures will be treated as indebtedness of AS Holdings for United States federal income tax purposes.

In this connection, the property trustee and the holders of common securities are authorized to take any action, not inconsistent with applicable law, the certificate of trust of the Trust or the Trust Agreement, that the property trustee and the holders of common securities determine in their discretion to be necessary or desirable for such purposes, as long as such action does not materially adversely affect the interests of the holders of the preferred securities.

As a holder of preferred securities, you will have no preemptive or similar rights.

The Trust may not borrow money, issue debt or mortgage or pledge any of its assets.

Governing Law

The Trust Agreement and the preferred securities will be governed by and construed in accordance with the laws of the State of Delaware; provided that the immunities and standard of care of the property trustee shall be governed by New York law.

DESCRIPTION OF THE DEBENTURES

The debentures are to be issued under the Indenture between American Safety Insurance, American Safety Holdings and Deutsche Bank Trust Company Americas, the debenture trustee. This summary of certain terms and provisions of the debentures and the Indenture does not purport to be complete and is subject to, and is qualified in its entirety by reference to, all the provisions of the Indenture. Whenever particular defined terms of the Indenture are referred to in this prospectus, those defined terms are incorporated by reference in this prospectus. You should read the Indenture which has been filed as an exhibit to the registration statement, of which this prospectus is a part.

General

Concurrently with the issuance of the preferred securities, the Trust will invest the proceeds of the issuance, together with the consideration paid by AS Holdings for the common securities, in the debentures issued by AS Holdings. The debentures will bear interest, accruing from         , 2002, at the annual rate of        % of the principal amount thereof, payable quarterly in arrears on

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March 31, June 30, September 30 and December 31 of each year, commencing December 31, 2002, to the person in whose name each debenture is registered at the close of business on the 15th day of March, June, September or December next preceding the interest payment date. It is anticipated that, until the liquidation, if any, of the Trust, each debenture will be registered in the name of the Trust and held by the property trustee in trust for the benefit of the holders of the trust securities.

The amount of interest payable for any period less than a full interest period will be computed on the basis of the actual days elapsed in a partial month in that period. The amount of interest payable for any full interest period will be computed by dividing the annual rate by four. If any date on which interest is payable on the debentures is not a business day, then payment of the interest payable on that date will be made on the next succeeding day that is a business day (without any interest or other payment in respect of any such delay), with the same force and effect as if made on the date such payment was originally payable. Accrued interest that is not paid on the applicable interest payment date will bear additional interest (to the extent permitted by law) at an annual rate of        %, compounded quarterly and computed on the basis of a 360-day year of twelve 30-day months and the actual days elapsed in a partial month in such period. The amount of additional interest payable for any full interest period will be computed by dividing the annual rate by four. The term “interest” as used herein includes quarterly interest payments, interest on quarterly interest payments not paid on the applicable interest payment date and additional sums (as defined in “—Additional Sums” below), as applicable.

The debentures will mature on         , 2032, subject to any adjustment or shortening of the maturity date (the “stated maturity”). The maturity adjustment represents the right of AS Holdings to shorten the maturity date once at any time to any date not earlier than         , 2007. In the event AS Holdings elects to shorten the stated maturity of the debentures, it will give no less than 90 days notice to the registered holders of the debentures, the debenture trustee and the Trust. The property trustee must give notice to the holders of the trust securities of the shortening of the stated maturity at least 30 but not more than 60 days before that date.

The debentures will be unsecured and will rank junior and be subordinate in right of payment to all senior indebtedness of AS Holdings and American Safety Insurance. The debentures will not be subject to a sinking fund. The Indenture does not limit the incurrence or issuance of other secured or unsecured debt by us or AS Holdings, including senior indebtedness, whether under the Indenture or any existing or other indenture that we may enter into in the future or otherwise. See “—Subordination.”

Option To Extend Interest Payment Period

So long as no Debenture Event of Default, as described below, has occurred and is continuing, AS Holdings has the right at any time during the term of the debentures to defer the payment of interest at any time or from time to time for a period not exceeding 20 consecutive quarterly periods with respect to each extension period, provided that no extension period may extend beyond the stated maturity of the debentures. During any extension period, AS Holdings will have the right to make partial payments of interest on any interest payment date.

At the end of such extension period, AS Holdings must pay all interest then accrued and unpaid, together with interest at the annual rate of         %, compounded quarterly and computed on the basis of a 360-day year of twelve 30-day months and the actual days elapsed in a partial month in such period, to the extent permitted by applicable law. The amount of additional interest payable for any full interest period will be computed by dividing the annual rate by four. During an extension period, interest will continue to accrue and holders of debentures, or holders of preferred securities while outstanding, will be required to accrue interest income for United States federal income tax purposes. See “Material United States Federal Income Tax Consequences—Treatment of Interest and Original Issue Discount.”

During any extension period, American Safety Insurance shall not:

(1)    declare or pay any dividends or distributions on, or redeem, purchase, acquire or make a liquidation payment with respect to, any of its capital stock, nor

(2)    make any payment of principal of or interest or premium, if any, on or repay, repurchase or redeem any debt securities issued by it that rank equal to in all respects with or junior in interest to the debentures or the debenture guarantee.

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However, during an extension period, American Safety Insurance may undertake (1) or (2) above in connection with:

(a)    repurchases, redemptions or other acquisitions of shares of its capital stock related to any employment contract, benefit plan or other similar arrangement, a dividend reinvestment or stockholder stock purchase plan or the issuance of its capital stock or similar security as consideration in an acquisition transaction entered into prior to the applicable extension period,

(b)    an exchange or conversion of any class or series of its capital stock for any class or series of its capital stock or of any class or series of its indebtedness for any class or series of its capital stock,

(c)    the purchase of fractional interests in shares of its capital stock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged, or

(d)    any dividend in the form of stock, warrants, options or other rights where the dividend stock or the stock issuable upon exercise of the warrants, options or other rights is the same stock as that on which the dividend is being paid or ranks equal with or junior to such stock.

Prior to the termination of any extension period, AS Holdings may further defer the payment of interest. However, the extension period may not exceed 20 consecutive quarterly periods or extend beyond the stated maturity of the debentures. Upon the termination of any such extension period and the payment of all amounts then due, AS Holdings may elect to begin a new extension period subject to the above conditions. No interest shall be due and payable during an extension period, except at the end thereof. AS Holdings must give the trustees notice of its election of such extension period at least one business day prior to the earlier of:

(1)    the date the distributions on the preferred securities would have been payable but for the election to begin the extension period, or

(2)    the date the property trustee is required to give notice to holders of the preferred securities of the record date or the date the distributions are payable, but in any event not less than one business day prior to the record date.

The property trustee will give notice of AS Holdings’ election to begin a new extension period to the holders of the preferred securities. There is no limitation on the number of times that AS Holdings may elect to begin an extension period.

Redemption

The debentures are redeemable prior to maturity at our option (a) on or after            , 2007, in whole at any time or in part from time to time, or (b) in whole, but not in part, at any time within 180 days following the occurrence and during the continuation of a Tax Event or an Investment Company Event at the redemption price described below. The proceeds of any such redemption will be used by the Trust to redeem the preferred securities. See “Description of the Preferred Securities—Redemption.”

The redemption price for the debentures is the outstanding principal amount of the debentures plus accrued interest, including any additional interest or any additional sums, to but excluding, the date fixed for redemption.

Additional Sums

AS Holdings has covenanted in the Indenture that, if and for so long as (a) the Trust is the holder of all of the debentures and (b) the Trust is required to pay any additional taxes, duties or other governmental charges as a result of a Tax Event, AS Holdings will pay as additional sums on the debentures as may be required so that the distributions payable by the Trust will not be reduced as a result of any additional taxes, duties or other governmental charges. See “Description of the Preferred Securities—Redemption.”

Registration, Denomination and Transfer

The debentures will initially be registered in the name of the Trust. If the debentures are distributed to holders of preferred securities, it is anticipated that the depositary arrangements for the debentures will be substantially identical to those in effect for the preferred securities. See “Description of the Preferred Securities—Book-Entry, Delivery and Form.”

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Although DTC has agreed to the procedures described above, it is under no obligation to perform or continue to perform such procedures, and such procedures may be discontinued at any time. If DTC is at any time unwilling or unable to continue as depositary and a successor depositary is not appointed by us within 90 days of receipt of notice from DTC to such effect, American Safety Holdings will cause the debentures to be issued in definitive form.

Payments on debentures represented by a global security will be made to Cede & Co., the nominee for DTC, as the registered holder of the debentures, as described under “Description of the Preferred Securities—Book-Entry, Delivery and Form.” If the debentures are issued in certificated form, principal and interest will be payable, the transfer of the debentures will be registrable, and the debentures will be exchangeable for debentures of other authorized denominations of a like aggregate principal amount, at the corporate trust office of the debenture trustee in New York, New York or at the offices of any paying agent or transfer agent appointed by AS Holdings, provided that payment of interest may be made at AS Holdings’ option by check mailed to the address of the persons entitled to such payments. However, a holder of $1 million or more in aggregate principal amount of debentures may receive any payments of interest, other than interest payable at the stated maturity, by wire transfer of immediately available funds upon written request to the debenture trustee not later than 15 calendar days prior to the date on which the interest is payable.

Debentures will be exchangeable for other debentures of like tenor, of any authorized denominations, and of a like aggregate principal amount.

Debentures may be presented for exchange as provided above, and may be presented for registration of transfer at the office of the securities registrar appointed under the Indenture or at the office of any transfer agent designated by AS Holdings for that purpose without service charge and upon payment of any taxes and other governmental charges as described in the Indenture. We will appoint the debenture trustee as securities registrar under the Indenture. We may at any time designate additional transfer agents with respect to the debentures.

In the event of any redemption, neither AS Holdings nor the debenture trustee will be required to:

(1)    issue, register the transfer of or exchange debentures during a period beginning at the opening of business 15 days before the day of selection for redemption of the debentures to be redeemed and ending at the close of business on the day of mailing of the relevant notice of redemption, or

(2)    transfer or exchange any debentures so selected for redemption, except, in the case of any debentures being redeemed in part, any portion thereof not to be redeemed.

Any monies deposited with the debenture trustee or any paying agent, or then held by AS Holdings in trust, for the payment of the principal, premium or interest on any debenture and remaining unclaimed for two years after the principal, premium or interest has become due and payable shall, at AS Holdings’ request, be repaid to AS Holdings and the holder of such debenture shall thereafter look, as a general unsecured creditor, only to us for payment thereof.

Restrictions on Certain Payments; Certain Covenants of American Safety Insurance and AS Holdings

If any of the following conditions exist:

(1)    there has occurred any event:

(a)    of which American Safety Insurance or AS Holdings has actual knowledge that with the giving of notice or the lapse of time, or both, would constitute a Debenture Event of Default, and

(b)    that American Safety Insurance or AS Holdings has not taken reasonable steps to cure,

(2)    if the debentures are held by the Trust, American Safety Insurance is in default with respect to its payment of any obligations under the preferred securities guarantee, or

(3)    AS Holdings has given notice of its election of an extension period as provided in the Indenture and has not rescinded that notice, or the extension period, or any extension thereof, is continuing,

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American Safety Insurance has covenanted that it will not:

(1)    declare or pay any dividends or distributions on, or redeem, purchase, acquire, or make a liquidation payment with respect to, any of its capital stock, or

(2)    make any payment of principal of or interest or premium, if any, on or repay, repurchase or redeem any debt securities of American Safety Insurance that rank equal in all respects with or junior in interest to the debentures.

However, American Safety Insurance may undertake (1) or (2) above in connection with:

(a)    repurchases, redemptions or other acquisitions of shares of its capital stock related to any employment contract, benefit plan or other similar arrangement, a dividend reinvestment or stockholder stock purchase plan or the issuance of its capital stock or similar security as consideration in an acquisition transaction entered into prior to the applicable extension period or other event referred to below,

(b)    an exchange or conversion of any class or series of its capital stock for any class or series of its capital stock or of any class or series of its indebtedness for any class or series of its capital stock,

(c)    the purchase of fractional interests in shares of its capital stock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged, or

(d)    any dividend in the form of stock, warrants, options or other rights where the dividend stock or the stock issuable upon exercise of the warrants, options or other rights is the same stock as that on which the dividend is being paid or ranks equal with or junior to such stock.

AS Holdings has also covenanted in the Indenture:

(1)    to continue to hold, directly or indirectly, 100% of the common securities, provided that certain successors that are permitted pursuant to the Indenture may succeed to its ownership of the common securities,

(2)    as holder of the common securities, not to voluntarily terminate, windup or liquidate the Trust, other than

(a)    in connection with a distribution of debentures 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

(3)    to use its reasonable efforts, consistent with the terms and provisions of the Trust Agreement, to cause the Trust to continue not to be taxable as a corporation for United States federal income tax purposes.

Modification of the Indenture

From time to time, we, AS Holdings and the debenture trustee may, without the consent of any of the holders of the outstanding debentures, amend, waive or supplement the provisions of the Indenture to:

(1)    evidence succession of another corporation or association to us and the assumption by the person of the obligations of AS Holdings under the debentures,

(2)    add further covenants, restrictions or conditions for the protection of holders of the debentures,

(3)    cure ambiguities or correct the debentures in the case of defects or inconsistencies in the provisions thereof, so long as any cure or correction does not adversely affect the interest of the holders of the debentures in any material respect,

(4)    change the terms of the debentures to facilitate the issuance of the debentures in certificated or other definitive form,

(5)    evidence or provide for the appointment of a successor debenture trustee, or

(6)    qualify, or maintain the qualification of, the Indenture under the Trust Indenture Act.

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The Indenture contains provisions permitting us, AS Holdings and the debenture trustee, with the consent of the holders of not less than a majority in principal amount of the debentures, to modify the Indenture in a manner affecting the rights of the holders of the debentures, except that no modification may, without the consent of the holder of each outstanding debenture so affected,

(1)    change the stated maturity of the debentures,

(2)    reduce the principal amount of the debentures,

(3)    reduce the rate of interest on the debentures or any premium payable upon the redemption of the debentures,

(4)    change the place of payment where, or the currency in which, any amount is payable or impair the right to institute suit for the enforcement of any debenture, or

(5)    reduce the percentage of principal amount of debentures, the holders of which are required to consent to any such modification of the Indenture.

Furthermore, so long as any of the preferred securities remain outstanding, no modification may be made that adversely affects the holders of the preferred securities in any material respect, and no termination of the Indenture may occur, and no waiver of any Debenture Event of Default or compliance with any covenant under the Indenture may be effective, without the prior consent of the holders of at least a majority of the aggregate liquidation amount of the outstanding preferred securities unless and until the principal or premium, if any, on the debentures and all accrued and unpaid interest on the preferred securities have been paid in full and certain other conditions are satisfied.

Debenture Events of Default

The Indenture provides that any one or more of the following described events with respect to the debentures that has occurred and is continuing constitutes an “Event of Default” with respect to the debentures:

(1)    failure to pay any interest on the debentures when due and continuance of such default for a period of 30 days, except any due date deferral in the case of an extension period;

(2)    failure to pay any principal of or premium, if any, on the debentures when due whether at the stated maturity or otherwise;

(3)    failure to observe or perform in any material respect certain other covenants contained in the Indenture for 90 days after written notice to us from the debenture trustee or the holders of at least 25% in aggregate outstanding principal amount of the outstanding debentures; or

(4)    either American Safety Insurance or AS Holdings consents to the appointment of a receiver or other similar official in any liquidation, insolvency or similar proceeding with respect to all or substantially all of its property.

For purposes of the Trust Agreement and this prospectus, each Event of Default under the Indenture is referred to as a “Debenture Event of Default.” As described in “Description of the Preferred Securities—Events of Default; Notice,” the occurrence of a Debenture Event of Default will also constitute an Event of Default with regard to the trust securities.

The holders of at least a majority in aggregate principal amount of outstanding debentures have the right to direct the time, method and place of conducting any proceeding for any remedy available to the debenture trustee. The debenture trustee or the holders of not less than 25% in aggregate principal amount of outstanding debentures may declare the principal due and payable immediately upon a Debenture Event of Default, and, should the debenture trustee or the holders of debentures fail to make that declaration, the holders of at least 25% in aggregate liquidation amount of the outstanding preferred securities will have that right.

However, the holders of a majority in aggregate principal amount of outstanding debentures may annul such declaration and waive the default if all defaults (other than the non-payment of the principal of debentures which has become due solely by such acceleration) have been cured and a sum sufficient to pay all matured installments of interest and principal due otherwise than by acceleration has been deposited with the debenture trustee. Should the holders of debentures fail to annul such declaration and waive such default, the holders of a majority in aggregate liquidation amount of the outstanding preferred securities will have such right.

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The holders of at least a majority in aggregate principal amount of the outstanding debentures affected by a default may, on behalf of the holders of all the debentures, waive any past default, except:

(1)    a default in the payment of principal, premium or interest, except a default that has been cured and a sum sufficient to pay all matured installments of interest and principal due otherwise than by acceleration has been deposited with the debenture trustee, or

(2)    a default in respect of a covenant or provision which under the Indenture cannot be modified or amended without the consent of the holder of each outstanding debenture affected. See “—Modification of Indenture.”

We are required to file annually with the debenture trustee a certificate as to whether or not it is in compliance with all the conditions and covenants applicable to it under the Indenture.

If a Debenture Event of Default occurs and is continuing, the property trustee will have the right to declare the principal of and the interest on the debentures, and any other amounts payable under the Indenture, to be forthwith due and payable and to enforce its other rights as a creditor with respect to the debentures.

Enforcement of Certain Rights By Holders of Preferred Securities

If a Debenture Event of Default has occurred and is continuing and the event is attributable to the failure of AS Holdings to pay any amounts payable in respect of the debentures on the date the amounts are otherwise payable and, under such circumstances, we have not made required payments under the debenture guarantee, a registered holder of preferred securities may institute a direct action against us and/or AS Holdings for enforcement of payment to the holder of an amount equal to the amount payable in respect of debentures having a principal amount equal to the aggregate liquidation amount of the preferred securities held by the holder. We and AS Holdings may not amend the Indenture to remove the right of a preferred security holder to bring a direct action without the prior written consent of the holders of all the preferred securities. We and AS Holdings will have the right under the Indenture to set-off any payment made to the holder of preferred securities in connection with a direct action.

The holders of the preferred securities are not able to exercise directly any remedies available to the holders of the debentures except under the circumstances described in the preceding paragraph. See “Description of the Preferred Securities—Events of Default; Notice.”

Consolidation, Merger, Sale of Assets and Other Transactions

The Indenture provides that we may not consolidate with or merge into any other person or convey, transfer or lease our properties and assets substantially as an entirety to any person, and no person may consolidate with or merge into us or convey, transfer or lease their properties and assets substantially as an entirety to us, unless:

(1)    we consolidate with or merges into another person or conveys or transfers our properties and assets substantially as an entirety to any person,

(2)    the successor person is organized under the laws of the United States or any state or the District of Columbia,

(3)    the successor Person expressly assumes our obligations in respect of the debentures;

(4)    immediately after giving effect to the transaction, no Debenture Event of Default, and no event which, after notice or lapse of time or both, would constitute a Debenture Event of Default, has occurred and is continuing; and

(5)    certain other conditions as prescribed in the Indenture are satisfied.

The provisions of the Indenture do not afford holders of the debentures protection in the event of a highly leveraged or other transaction involving us or AS Holdings that may adversely affect holders of the debentures.

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Satisfaction and Discharge

The Indenture provides that when, among other things, all debentures not previously delivered to the debenture trustee for cancellation:

(1)    have become due and payable,

(2)    will become due and payable at the stated maturity within one year, and

(3)    AS Holdings deposits or causes to be deposited with the debenture trustee funds, in trust, for the purpose and in an amount sufficient to pay and discharge the entire indebtedness on the debentures not previously delivered to the debenture trustee for cancellation, for the principal, premium and interest to the date of the deposit or to the stated maturity, as the case may be, then the Indenture will cease to be of further effect (except as to As Holdings’ obligations to pay all other sums due pursuant to the Indenture and to provide the officers’ certificates and opinions of counsel described in the Indenture), and AS Holdings will be deemed to have satisfied and discharged the Indenture.

Subordination

The debentures will be subordinate and junior in right of payment, to the extent set forth in the Indenture, to all senior indebtedness, as defined below, of American Safety Insurance and American Safety Holdings. If either we or AS Holdings defaults in the payment of any principal, premium or interest, if any, or any other amount payable on any senior indebtedness when the same becomes due and payable, whether at maturity or at a date fixed for redemption or by declaration of acceleration or otherwise, then, unless and until the default has been cured or waived or has ceased to exist or all senior indebtedness has been paid, no direct or indirect payment may be made or agreed to be made on the debentures, or in respect of any redemption, repayment, retirement, purchase or other acquisition of any of the debentures.

As used in this prospectus, “senior indebtedness” means, whether recourse is to all or a portion of the assets of any person and whether or not contingent:

(1)    every obligation of such person for money borrowed;

(2)    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;

(3)    every reimbursement obligation of such person with respect to letters of credit, bankers’ acceptances or similar facilities issued for the account of such person;

(4)    every obligation of such person issued or assumed as the deferred purchase price of property or services, except trade accounts payable or accrued liabilities arising in the ordinary course of business;

(5)    every capital lease obligation of such person;

(6)    every obligation of such person for claims in respect of derivative products such as interest and foreign exchange rate contracts, commodity contracts and similar arrangements; and

(7)    every obligation of the type referred to in paragraphs (1) through (6) 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, directly or indirectly, as obligor or otherwise.

The term “senior indebtedness” does not include:

(1)    any obligations which, by their terms, are expressly stated to rank equal in right of payment with, or to not be superior in right of payment to, the debentures,

(2)    any senior indebtedness of such person which when incurred and without respect to any election under the United States Bankruptcy Code was without recourse to such person,

(3)    any indebtedness of such person to any of its subsidiaries,

(4)    indebtedness to any executive officer or director of such person, or

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(5)    any indebtedness in respect of debt securities issued to any trust, or a trustee of such trust, partnership or other entity affiliated with such person that is a financing entity of such person in connection with the issuance of the financing entity of securities that are similar to the preferred securities.

In the event of:

(1)    certain events of bankruptcy, dissolution or liquidation of AS Holdings,

(2)    any proceeding for the liquidation, dissolution or other winding up of AS Holdings, voluntary or involuntary, whether or not involving insolvency or bankruptcy proceedings,

(3)    any assignment by AS Holdings for the benefit of creditors, or

(4)    any other marshalling of the assets of AS Holdings,

all senior indebtedness, 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 on account of the debentures.

After payment in full of all sums owing with respect to senior indebtedness, the holders of the debentures, together with the holders of any obligations of AS Holdings ranking on a parity with the debentures, will be entitled to be paid from the remaining assets of such person the amounts at the time due and owing on the debentures and any other parity obligations before any payment or other distribution, whether in cash, property or otherwise, will be made on account of any capital stock or obligations of such person ranking junior to the debentures and any other parity obligations. If any payment or distribution on account of the debentures of any character or any security, whether in cash, securities or other property is received by any holder of any debentures in contravention of any of the terms hereof and before all the senior indebtedness has been paid in full, that payment or distribution or security will be received in trust for the benefit of, and must be paid over or delivered and transferred to, the holders of the senior indebtedness at the time outstanding in accordance with the priorities then existing among those holders for application to the payment of all senior indebtedness remaining unpaid to the extent necessary to pay all senior indebtedness in full. By reason of the subordination, in the event of the insolvency of such person, holders of senior indebtedness may receive more, ratably, and holders of the debentures may receive less, ratably, than the other creditors of such person. The subordination will not prevent the occurrence of any Event of Default in respect of the debentures.

The Indenture places no limitation on the amount of additional senior indebtedness that may be incurred by us or AS Holdings. We and AS Holdings may reasonably expect from time to time to incur additional indebtedness constituting senior indebtedness.

Information Concerning the Debenture Trustee

The debenture trustee, other than during the occurrence and continuance of a default by us and AS Holdings in performance of our respective obligations under the Indenture, is under no obligation to exercise any of the powers vested in it by the Indenture at the request of any holder of debentures, unless offered reasonable indemnity by the holder against the costs, expenses and liabilities that might be incurred by such action. The debenture trustee is not required to expend or risk its own funds or otherwise incur personal financial liability in the performance of its duties if the debenture trustee reasonably believes that repayment or adequate indemnity is not reasonably assured to it.

Debenture Guarantee

Pursuant to the Indenture, American Safety Insurance will irrevocably and unconditionally guarantee the debentures as described under “Description of the Debenture Guarantee.”

Governing Law

The Indenture and the debentures will be governed by, and construed in accordance with, the laws of the State of New York.

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DESCRIPTION OF THE PREFERRED SECURITIES GUARANTEE

The preferred securities guarantee will be executed and delivered by us concurrently with the issuance of preferred securities by the Trust for the benefit of the holders from time to time of the preferred securities. Deutsche Bank Trust Company Americas will act as guarantee trustee under the preferred securities guarantee. This summary of certain provisions of the preferred securities guarantee does not purport to be complete and is subject to, and qualified in its entirety by reference to, all the provisions of the preferred securities guarantee. You should read the preferred securities guarantee which has been filed as an exhibit to the registration statement, of which this prospectus is a part. The guarantee trustee will hold the preferred securities guarantee for the benefit of the holders of the preferred securities.

General

American Safety Insurance will irrevocably and unconditionally agree to pay in full on a subordinated basis, to the extent set forth in the preferred securities guarantee and described in this prospectus, the guarantee payments, as defined below, to the holders of the preferred securities, as and when due, regardless of any defense, right of set-off or counterclaim that the Trust may have or assert other than the defense of payment. The following payments with respect to the preferred securities, to the extent not paid by or on behalf of the Trust, will be subject to the preferred securities guarantee:

(1)    any accrued and unpaid distributions required to be paid on the preferred securities, to the extent that the Trust has funds on hand available therefore at such time,

(2)    the redemption price, including all accrued and unpaid distributions to the date of redemption, with respect to any preferred securities called for redemption, to the extent that the Trust has funds on hand available therefore at such time, and

(3)    upon a voluntary or involuntary termination, winding up or liquidation of the Trust (unless the junior subordinated debentures are distributed to holders of the preferred securities), the lesser of (a) the aggregate of the liquidation amount and all accrued and unpaid distributions to the date of payment, to the extent that the Trust has funds legally and immediately available therefore and (b) the amount of assets of the Trust remaining available for distribution to holders of the preferred securities on liquidation of the Trust.

Our obligation to make a guarantee payment may be satisfied by direct payment of the required amounts by us to the holders of the preferred securities or by causing the Trust to pay such amounts to such holders.

The preferred securities guarantee will be an irrevocable guarantee of payment on a subordinated basis of the Trust’s obligations under the preferred securities, but will apply only to the extent that the Trust has funds sufficient to make such payments, and is not a guarantee of collection.

If AS Holdings does not make payments on the debentures held by the Trust, the Trust will not be able to pay any amounts payable in respect of the preferred securities and will not have funds legally available for that payment.

Status of the Preferred Securities Guarantee

The preferred securities guarantee will constitute a guarantee of payment and not of collection (i.e., the guaranteed party may institute a legal proceeding directly against us, as guarantor, to enforce its rights under the preferred securities guarantee without first instituting a legal proceeding against any other person or entity). The preferred securities guarantee will be held by the guarantee trustee for the benefit of the holders of the preferred securities. The preferred securities guarantee will not be discharged except by payment of the guarantee payments in full to the extent not paid by the Trust or distribution to the holders of the preferred securities of the debentures.

American Safety Insurance and AS Holdings have, through the preferred securities guarantee, the debenture guarantee, the Trust Agreement, the debentures and the Indenture, taken together, fully, irrevocably and unconditionally guaranteed all the Trust’s obligations under the preferred securities on a subordinated basis. No single document standing alone or operating in conjunction with fewer than all the other documents constitutes a guarantee. It is only the combined operation of these documents that has the effect of

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providing a full, irrevocable and unconditional guarantee of the Trust’s obligations in respect of the preferred securities. See “Relationship Among the Preferred Securities, the Debentures, the Preferred Securities Guarantee and the Debenture Guarantee.”

Subordination

The preferred securities guarantee constitutes an unsecured obligation of American Safety Insurance and will rank subordinate and junior in right of payment to all senior indebtedness of AS Holdings and American Safety Insurance. The preferred securities guarantee does not limit the incurrence or issuance of other secured or unsecured debt of American Safety Insurance, including senior indebtedness, whether under the Indenture, or any other indenture that we may enter into in the future or otherwise.

Amendments and Assignment

Except with respect to any changes which do not materially adversely affect the rights of holders of the preferred securities (in which case no consent will be required), the preferred securities guarantee may not be amended without the prior approval of the holders of not less than a majority of the aggregate liquidation amount of the outstanding preferred securities. The manner of obtaining any such approval of holders will be as set forth under “Description of the Preferred Securities—Voting Rights; Amendment of Trust Agreement.” All guarantees and agreements contained in the preferred securities guarantee will bind the successors, assigns, receivers, trustees and representatives of American Safety Insurance and will inure to the benefit of the holders of the preferred securities then outstanding.

Events of Default; Rights of Holders of Preferred Securities

An event of default under the preferred securities guarantee will occur upon our failure to perform any of our payment or other obligations thereunder, or to perform any non-payment obligation if the non-payment default remains unremedied for 30 days.

The holders of not less than a majority in aggregate liquidation amount of the outstanding 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 the preferred securities guarantee or to direct the exercise of any trust or power conferred upon the guarantee trustee under the preferred securities guarantee. Any registered holder of preferred securities may institute a legal proceeding directly against us to enforce their rights under the preferred securities guarantee without first instituting a legal proceeding against the Trust, the guarantee trustee or any other person or entity. The holders of a majority in aggregate liquidation amount of preferred securities may, by vote, on behalf of the holders of all of the preferred securities, waive any past event of default and its consequences.

American Safety Insurance, as guarantor, is required to file annually with the guarantee trustee a certificate as to whether or not it is in compliance with all the conditions and covenants applicable to it under the preferred securities guarantee.

Information Concerning the Guarantee Trustee

The guarantee trustee, other than during the occurrence and continuance of a default by American Safety Insurance in performance of the preferred securities guarantee, undertakes to perform only those duties as are specifically set forth in the preferred securities guarantee and, after the occurrence of an event of default with respect to the preferred securities guarantee, must exercise the same degree of care and skill as a prudent person would exercise or use in the conduct of his or her own affairs. Subject to this provision, the guarantee trustee is under no obligation to exercise any of the powers vested in it by the preferred securities guarantee at the request of any holder of the preferred securities, unless offered reasonable indemnity against the costs, expenses and liabilities which might be incurred thereby.

Termination of the Preferred Securities Guarantee

The preferred securities guarantee will terminate and be of no further force and effect upon full payment of the redemption price of the preferred securities, upon full payment of the amounts payable with respect to the preferred securities upon liquidation of the Trust or upon distribution of the debentures to the holders of the preferred securities in exchange for all of the preferred securities.

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The preferred securities guarantee will continue to be effective or will be reinstated, as the case may be, if at any time any holder of the preferred securities must restore payment of any sums paid with respect to the preferred securities or with respect to the preferred securities guarantee.

Governing Law

The preferred securities guarantee will be governed by and construed in accordance with the laws of the State of New York.

The Expense and Liabilities Agreement

Pursuant to an expense and liabilities agreement that we entered into under the Trust Agreement, we irrevocably and unconditionally guarantee to each person or entity to whom the Trust becomes indebted or liable the full payment of any indebtedness, expenses or liabilities of the Trust, other than obligations of the Trust to pay to the holders of the preferred securities or other similar interests in the Trust the amounts due such holders pursuant to the terms of the preferred securities or other similar interests, as the case may be.

DESCRIPTION OF THE DEBENTURE GUARANTEE

Pursuant to the Indenture, we will irrevocably and unconditionally guarantee the due and punctual payment of principal, premium, if any, and interest on the debentures when and as the same shall become due and payable, whether at maturity, upon redemption or otherwise. The debenture guarantee will constitute an unsecured obligation of American Safety Insurance and will rank subordinate and junior to the current and future senior indebtedness of AS Holdings and American Safety Insurance. As of June 30, 2002, our senior indebtedness aggregated approximately $248,000,000. Since American Safety Insurance is a holding company, the right of American Safety Insurance and, hence, the right of creditors of American Safety Insurance (including the holders of the debentures) to participate in any distribution of the assets of any of our subsidiaries, whether upon liquidation, reorganization or otherwise, is subject to prior claims of creditors of each such subsidiary.

RELATIONSHIP AMONG THE PREFERRED SECURITIES,

THE DEBENTURES, THE PREFERRED SECURITIES GUARANTEE

AND THE DEBENTURE GUARANTEE

Full and Unconditional Guarantee

Payments of distributions (to the extent funds therefore are legally and immediately available) and other amounts due on the preferred securities (to the extent funds therefore are legally and immediately available) are irrevocably guaranteed, on a subordinated basis, by American Safety Insurance as and to the extent set forth under “Description of the Preferred Securities Guarantee.” Payments on the debentures are irrevocably and unconditionally guaranteed, on a subordinated basis, by American Safety Insurance as and to the extent set forth under “Description of the Debenture Guarantee.” Taken together, AS Holdings’ and, where applicable, American Safety Insurance’s obligations under the debentures, the Indenture, the Trust Agreement, the debenture guarantee and the preferred securities guarantee provide, in the aggregate, a full, irrevocable and unconditional guarantee of payments of distributions and other amounts due on the preferred securities. No single document standing alone or operating in conjunction with fewer than all the other documents constitutes a guarantee. It is only the combined operation of these documents that has the effect of providing a full, irrevocable and unconditional guarantee of the Trust’s obligations in respect of the preferred securities. If and to the extent that AS Holdings does not make payments on the debentures and, under such circumstances, we do not make payments as required under the debenture guarantee, the Trust will not have sufficient funds to pay distributions or other amounts due on the preferred securities. The preferred securities guarantee does not cover payment of amounts payable with respect to the preferred securities when the Trust does not have sufficient funds to pay these amounts. In that case, the remedy of a holder of the preferred securities is to institute a legal proceeding directly against AS Holdings for enforcement of payment of its obligations under the debentures having a principal amount equal to the liquidation amount of the preferred securities held by the holder and/or a legal proceeding directly against us for enforcement of payment of our obligations under the debenture guarantee with respect to a principal amount of debentures equal to the liquidation amount of the preferred securities held by the holder.

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Sufficiency of Payments

As long as payments of interest and other payments are made when due on the debentures, these payments will be sufficient to cover distributions and other payments due on the preferred securities and common securities, primarily because:

(1)    the aggregate principal amount of the debentures will be equal to the sum of the aggregate stated liquidation amount of the preferred securities and common securities;

(2)    the interest rate and interest and other payment dates on the debentures will match the distribution rate, distribution dates and other payment dates for the preferred securities;

(3)    we will pay for any and all costs, expenses and liabilities of the Trust except the Trust’s obligations to holders of the trust securities, pursuant to the expense and liabilities agreement; and

(4)    the Trust Agreement further provides, among other things, that the Trust will not engage in any activity that is not consistent with the limited purposes of the Trust.

Notwithstanding anything to the contrary in the Indenture, we have the right to set-off any payment we are otherwise required to make thereunder against and to the extent we have made, or are concurrently on the date of such payment making, a payment under the preferred securities guarantee.

Enforcement Rights of Holders of Preferred Securities

If AS Holdings fails to make interest or other payments on the debentures when due (taking into account any deferral period), the Trust Agreement provides a mechanism whereby the holders of the preferred securities may appoint a substitute property trustee. Such holders may also direct the property trustee to enforce its rights under the debentures and the debenture guarantee, including proceeding directly against AS Holdings to enforce the debentures and against us to enforce the debenture guarantee. If the property trustee fails to enforce its rights under the debentures or the debenture guarantee, to the fullest extent permitted by applicable law, any holder of preferred securities may institute a legal proceeding directly against AS Holdings to enforce the property trustee’s rights under the debentures and/or against us to enforce the holder’s rights under the debenture guarantee without first instituting any legal proceeding against the property trustee or any other person or entity. Notwithstanding the foregoing, a holder of preferred securities may institute a legal proceeding directly against us and/or AS Holdings, without first instituting a legal proceeding against the property trustee or any other person or entity, for enforcement of payment to such holder of principal of or interest on the debentures having a principal amount equal to the aggregate stated liquidation amount of the preferred securities of such holder on or after the due dates specified in the debentures.

If we fail to make payments under the preferred securities guarantee, the preferred securities guarantee provides a mechanism whereby the holders of the preferred securities may direct the guarantee trustee to enforce its rights thereunder. In addition, any holder of preferred securities may institute a legal proceeding directly against us to enforce its rights under the preferred securities guarantee without first instituting a legal proceeding against the guarantee trustee, the Trust or any other person or entity. See “Description of the Preferred Securities Guarantee.”

A default or event of default under any senior indebtedness of American Safety Insurance would not constitute a default or Event of Default under the Indenture. However, in the event of payment defaults under, or acceleration of, senior indebtedness of American Safety Insurance, the subordination provisions of the Indenture and the debenture guarantee provide that no payments may be made in respect of the debentures until such senior indebtedness has been paid in full or any payment default thereunder has been cured or waived. Failure to make required payments on the debentures would constitute and Event of Default under the Indenture except that failure to make interest payments on the debentures will not be an Event of Default during a deferral period; provided, however, that any deferral period may not exceed 20 consecutive quarterly periods or extend beyond the maturity of the debentures. See “Description of the Debentures—Subordination.”

Limited Purpose of the Trust

The preferred securities represent preferred undivided beneficial interests in the assets of the Trust, and the Trust exists for the sole purpose of issuing its preferred securities and common securities and investing the proceeds thereof in debentures. A principal

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difference between the rights of a holder of a preferred security and a holder of a debenture is that a holder of a debenture is entitled to receive from AS Holdings payments on debentures held or from American Safety Insurance payments under the debenture guarantee, while a holder of preferred securities is entitled to receive distributions or other amounts distributable with respect to the preferred securities from the Trust or from American Safety Insurance under the preferred securities guarantee only if, and to the extent, the Trust has funds available for the payment of such distributions.

Full and Unconditional Guarantee

The debenture guarantee, the preferred securities guarantee, the Indenture, the debentures, the Trust Agreement and the expense and liabilities agreement, as described herein, constitute a full and unconditional guarantee by American Safety Insurance and AS Holdings of the payments due on the preferred securities.

Rights Upon Dissolution

Upon any voluntary or involuntary dissolution of the Trust, other than any dissolution involving the distribution of the debentures, after satisfaction of liabilities to creditors of the Trust as required by applicable law, the holders of the preferred securities will be entitled to receive, out of assets held by the Trust, the liquidation distribution in cash. See “Description of the Preferred Securities—Liquidation Distribution Upon Dissolution.” Upon any voluntary or involuntary liquidation or bankruptcy of American Safety Insurance or AS Holdings, the property trustee, as holder of the debentures and acting on the Trust’s behalf, would be a subordinated creditor of AS Holdings, subordinated and junior in right of payment to all senior indebtedness as set forth in the Indenture. The property trustee, on the Trust’s behalf, however, will be entitled to receive payment in full of all amounts payable with respect to the debentures before American Safety Insurance, as the sole stockholder of AS Holdings, receives payments or distributions, although not before creditors of American Safety Insurance that hold senior indebtedness under the terms of the Indenture. Since we are the guarantor under the preferred securities guarantee and have agreed under the Indenture to pay for all costs, expenses and liabilities of the Trust (other than the Trust’s obligations to the holders of the trust securities) pursuant to the expense and liabilities agreement, the positions of a holder of the preferred securities and a holder of the debentures relative to other creditors and to stockholders of American Safety Insurance in the event of our liquidation or bankruptcy are expected to be substantially the same.

MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES

The following is a summary of the material United States federal income tax consequences of the ownership and disposition of the preferred securities, but does not purport to be a complete analysis of all the potential tax considerations relating thereto. Unless otherwise stated, this summary deals only with preferred securities held as capital assets by Holders (as defined herein). The tax treatment of a Holder may vary depending on its particular situation. This summary does not deal with special classes of Holders, such as foreign persons, dealers in securities or currencies, banks, thrifts, real estate investment trusts, regulated investment companies, insurance companies, tax exempt organizations, persons holding Preferred Securities as part of a straddle or as part of a hedging or conversion transaction or other integrated investment, or persons whose functional currency is not the United States dollar. Further, it does not include any description of alternative minimum tax consequences or the tax laws of any state, local or foreign government that may be applicable to the preferred securities. This summary is based on the Internal Revenue Code of 1986, as amended (the “Code”), the tax regulations thereunder and administrative and judicial interpretations thereof, all as of the date hereof, and all of which are subject to change (possibly on a retroactive basis). The authorities on which this summary is based are subject to various interpretations, and it is therefore possible that the federal income tax treatment of the ownership and disposition of the preferred securities may differ from the treatment described below. We have not sought any ruling from the Internal Revenue Service (the “IRS”) with respect to the statements made and the conclusions reached in the following summary, and there can be no assurance that the IRS will agree with such statements and conclusions. In addition, the IRS is not precluded from asserting a contrary position. This summary does not consider the effect of any applicable foreign, state, local or other tax laws.

As used herein, the term “Holder” means a beneficial owner of preferred securities, that is for United States federal income tax purposes: (i) a citizen or resident (as defined in Section 7701(b) of the Code) of the United States, (ii) a corporation, partnership or other entity created or organized under the laws of the United States or a political subdivision thereof, (iii) an estate the income of

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which is subject to federal income taxation regardless of its source, or (iv) a trust which is subject to the primary supervision of a United States court and of which one or more United States persons have the authority to control all substantial decisions.

Prospective investors are advised to consult their tax advisors as to the tax consequences of the ownership and disposition of the preferred securities, in light of their particular circumstances, under Federal, income and estate tax laws and any applicable state, local, foreign and other tax laws or tax treaties, including the effects of possible future changes in such laws.

Treatment of the Trust and Preferred Securities for Federal Income Tax Purposes

The Trust will be treated as a “grantor trust” and not as an association taxable as a corporation for federal income tax purposes. Thus, for federal income tax purposes, each Holder will be treated as the beneficial owner of a pro rata undivided interest in the debentures and, consequently, will be required to include in income the Holder’s pro rata share of the entire income from the debentures, whether or not any cash is actually distributed to the Holder. Each Holder generally will determine its net income or loss with respect to the Trust in accordance with its own method of accounting, although income arising from any original issue discount (“OID”), must be taken into account under the accrual method of accounting even if the Holder otherwise would use the cash method of accounting. See “—Treatment of Interest and Original Issue Discount” below.

Treatment of Interest and Original Issue Discount

Except as set forth below, stated interest on a debenture will generally be taxable to a Holder as ordinary income at the time it is paid or accrued in accordance with the Holder’s own method of tax accounting.

The terms of the debentures permit AS Holdings to defer the payment of interest on the debentures at any time and from time to time by extending the interest payment period for up to 20 consecutive quarterly periods with respect to each Extension Period; provided, however, that no Extension Period may extend beyond the stated maturity date of the debentures.

Under the applicable tax regulations, a remote contingency that stated interest will not be timely paid is ignored in determining whether a debt instrument is issued with OID. While the law is not entirely clear, AS Holdings believes that the likelihood of its exercising its option to defer payments is remote within the meaning of the regulations because the exercise of the option would prevent AS Holdings and American Safety Insurance from paying dividends or making any payment or distribution on any class of stock or debt securities of AS Holdings or American Safety Insurance. As a result, the OID rules should not generally apply to debentures (unless and until the option is exercised) and each Holder should include in gross income such Holder’s allocable share of interest in the debentures in accordance with such Holder’s method of tax accounting. It should be noted that these regulations have not yet been directly addressed in any rulings or other interpretations by the IRS. Accordingly, it is possible that the IRS could take a position contrary to the interpretations described herein.

If AS Holdings exercises its option to defer payments of interest, the debentures would, at that time, be treated as issued with OID. A Holder would be required to accrue and include in taxable income on an economic accrual basis the remaining interest payments on the debentures over the remaining term. The OID rules would require a Holder to accrue this income regardless of the Holder’s method of accounting and even during interest deferral periods.

The amount a Holder would include in taxable income would be determined on the basis of a constant yield method over the remaining term of the debentures and the actual receipt of future payments of stated interest on the debentures would no longer be separately reported as taxable income. The total amount of OID that would accrue during the deferred interest period would be approximately equal to the amount of the cash payment due at the end of such period. Any OID included in income would increase a Holder’s adjusted tax basis in their preferred securities, and a Holder’s actual receipt of cash would reduce such Holder’s basis in the preferred securities.

Market Discount and Premium

A Holder who acquires a preferred security for an amount that is less than the liquidation amount at maturity will be treated as acquiring such preferred security with “market discount.”

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The applicable tax regulations may require such a holder to include the market discount associated with a preferred security in income ratably over the remainder of the term of the debenture. In addition, a disposition of a preferred security with market discount may cause some of the gain to be treated as ordinary income. Carrying costs in connection with a preferred security with market discount may also be restricted. Accordingly, Holders who acquire preferred securities with market discount should consult with their advisors as to the tax consequences of the ownership and disposition of such preferred securities.

A Holder who acquires a preferred security for an amount that is greater than its redemption price will be treated as acquiring such preferred security at a “premium.” The applicable tax regulations may permit such a Holder to elect to amortize such premium on a constant yield basis over the remaining term of the preferred security. If no such election is made, the premium will decrease the gain or increase the loss otherwise recognized on a taxable disposition of the preferred security. If AS Holdings exercises its option to defer payments of stated interest on the debentures, a Holder that has acquired a preferred security at a premium may generally apply such premium to reduce the amount of OID otherwise required to be included in income. Holders who acquire preferred securities at a premium should consult with their advisors as to the tax consequences of the ownership and disposition of such preferred securities.

Corporate Holders

Corporate Holders of preferred securities will not be entitled to a dividends-received deduction for any income from the preferred securities.

Sale of Preferred Securities

Upon the sale, retirement (including redemption) or other taxable disposition of all or part of a preferred security, a Holder thereof will recognize gain or loss equal to the difference between the amount realized on such sale, retirement or other disposition and such Holder’s adjusted tax basis in the preferred security or part thereof. If the Holder disposes of a preferred security prior to the occurrence of an extension period, any portion of the amount received that is attributable to accrued interest will be treated as interest income to the Holder and will not be treated as part of the amount realized for purposes of determining gain or loss on the disposition of the preferred security. Assuming the preferred securities are held as capital assets, any recognized gain or loss will be a capital gain or loss. The capital gain or loss generally will be a long-term capital gain or loss if the preferred securities have been held by the Holder for more than one year at the time of sale, retirement or other disposition. A Holder’s adjusted tax basis in a preferred security acquired by purchase will equal the cost of such preferred security to Holder, increased by the amount of any related accrued OID and market discount included in taxable income by the Holder and reduced by any prior payments on the debenture distributed on the preferred security.

Receipt of Debentures upon Liquidation of the Trust

As described under “Description of the Preferred Securities—Redemption” debentures may be distributed to Holders in exchange for the preferred securities and in liquidation of the Trust. Such a distribution would be treated as a non-taxable event to each Holder and each Holder would receive an aggregate tax basis in the Holder’s debentures equal to the Holder’s aggregate tax basis in its preferred securities. A Holder’s holding period with respect to the debentures so received in liquidation of the Trust would include the period for which the preferred securities were held by such Holder.

Application of United States Taxation to our Bermuda-Based Operations

American Safety Insurance and our reinsurance subsidiary, American Safety Reinsurance, are foreign corporations. Foreign corporations generally are not subject to United States taxation. If these corporations were determined to be subject to United States taxation, our operating results could be materially adversely affected. See “Risk Factors—There exists a potential risk of United States taxation of our Bermuda operations.” A foreign corporation will be subject to United States taxation if, among other things, its income is treated as “effectively connected” with a United States trade or business. Neither the Code nor the regulations thereunder fully define the term “trade or business within the United States,” but case law provides that profit-oriented activities in the United States, whether carried on by a foreign corporation directly or through agents, will subject the corporation to United States taxation if these activities are regular, substantial, and continuous. We consider that neither we nor American Safety Reinsurance have the level of regular, substantial and continuous activities necessary to be deemed engaged in a trade or business within the United States and, accordingly, we do not expect either corporation to be subject to United States income taxation.

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Information Reporting and Backup Withholding

Interest accrued during the year with respect to the debentures, and any gross proceeds received by the Trust from the retirement or the redemption of the debentures, will be reported annually to the holders of record of the preferred securities and to the IRS. The Trust currently intends to deliver such reports to holders of record not later January 31 following each calendar year. It is anticipated that persons who hold preferred securities as nominees for beneficial owners will report the required tax information to beneficial owners on Form 1099.

Payments made on, and proceeds from the sale of preferred securities, and any debentures distributed by the Trust may be subject to backup withholding. Backup withholding may apply if a Holder:

• fails to furnish a social security or other taxpayer identification number (“TIN”) in the manner required by the applicable tax regulations;

• furnishes an incorrect TIN;

• fails to properly report payments of interest or dividends; or

• fails to provide a certified statement, signed under penalty of perjury, that the TIN provided is correct and that the Holder is not subject to backup withholding,

Any amount withheld from a payment to a Holder under the backup withholding rules is allowable as a refundable credit against the Holder’s United States federal income tax liability, provided that the required information is timely furnished to the IRS. Under recently enacted legislation, the backup withholding rate for the remainder of year 2002 and for 2003 is 30%, and will be 29% for years 2004 and 2005, and 28% for the years 2006 through 2010. Some Holders are not subject to backup withholding, including corporations and foreign persons who have certified their foreign status on properly executed IRS forms or have otherwise established an exemption.

We urge Holders to consult with their tax advisors as to their ability to qualify for an exemption from backup withholding and the procedure for obtaining an exemption from backup withholding. In addition, we urge foreign Holders to consult with their tax advisors as to whether they are subject to other withholding rules because of their foreign status, whether they qualify for a full or partial exemption from such withholding and the procedure for obtaining such an exemption.

The foregoing discussion is not tax advice. Accordingly, we urge each holder to consult a tax advisor as to the particular tax consequences to such holder of the ownership and disposition of preferred securities, including the applicability and effect of any foreign, state or local tax laws and any recent or prospective changes in applicable tax laws.

CERTAIN ERISA CONSIDERATIONS

American Safety Insurance and certain of our affiliates may each be considered a “party in interest” within the meaning of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) or a “disqualified person” within the meaning of Section 4975 of the Code with respect to certain employee benefit plans and individual retirement accounts (“Plans”) that are subject to ERISA and/or Section 4975 of the Code. The purchase of the preferred securities by a Plan that is subject to the fiduciary responsibility provisions of ERISA and/or the prohibited transaction provisions of Section 4975(e)(1) of the Code and with respect to which we, or any of our affiliates is a service provider (or otherwise is a party in interest or a disqualified person) may constitute or result in a prohibited transaction under ERISA or Section 4975 of the Code, unless the preferred securities are acquired pursuant to and in accordance with an applicable exemption. Any Plan proposing to acquire any preferred securities should consult with its counsel.

UNDERWRITING

Subject to the terms and conditions of an underwriting agreement dated             , 2002, among American Safety Insurance, AS Holdings, the Trust and the underwriters named in the underwriting agreement, for whom Advest, Inc. and Ferris, Baker Watts,

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Incorporated are acting as representatives, the Trust has agreed to sell to the underwriters, and the underwriters have severally agreed to purchase from the Trust, the following aggregate liquidation amount of preferred securities at the public offering price:

Underwriter:	Liquidated Amount of Preferred Securities:
Advest, Inc
Ferris, Baker Watts, Incorporated
Total	$	15,000,000

We expect the preferred securities will be ready for delivery in book-entry form only through DTC on or about            , 2002.

The underwriting agreement provides that the obligations of the underwriters are subject to certain conditions precedent and that the underwriters will purchase all of the preferred securities offered hereby if any of the preferred securities are purchased.

We have been advised by the representatives that the underwriters propose to offer the preferred securities to the public at the public offering price set forth on the cover page of this prospectus and to certain dealers at that price less a concession not in excess of $0.      per preferred security. The underwriters may allow, and such dealers may reallow, a concession not in excess of $0.     per preferred security to certain other dealers. After the public offering, the offering price and other selling terms may be changed by the underwriters.

We have granted to the underwriters an option, exercisable not later than 30 days after the date of this prospectus, to purchase up to an additional $2,225,000 aggregate liquidation amount of the preferred securities at the public offering price. To the extent that the underwriters exercise this option, we will be obligated, pursuant to the option, to sell these preferred securities to the underwriters. The underwriters may exercise this option only to cover over-allotments made in connection with the sale of the preferred securities offered by this prospectus. If purchased, the underwriters will offer the additional preferred securities on the same terms as those on which the $15,000,000 aggregate liquidation amount of the preferred securities are being offered. We have further agreed not to otherwise sell any securities substantially similar to the preferred securities during the 180 day period following the completion of the sale of the preferred securities.

In connection with the offering of the preferred securities, the underwriters and any selling group members and their respective affiliates may engage in transactions effected in accordance with Rule 104 of the Securities and Exchange Commission’s Regulation M that are intended to stabilize, maintain or otherwise affect the market price of the preferred securities. These transactions may include over-allotment transactions in which the underwriters create a short position for their own account by selling more preferred securities than they are committed to purchase from the Trust. In such a case, to cover all or part of the short position, the underwriters may exercise the over-allotment option described above or may purchase preferred securities in the open market following completion of the initial offering of the preferred securities. The underwriters also may engage in stabilizing transactions in which they bid for, and purchase, shares of the preferred securities at a level above that which might otherwise prevail in the open market for the purpose of preventing or retarding a decline in the market price of the preferred securities. The underwriters also may reclaim any selling concessions allowed to an underwriter or dealer if the underwriters repurchase shares distributed by that underwriter or dealer. Any of the foregoing transactions may result in the maintenance of a price for the preferred securities at a level above that which might otherwise prevail in the open market. Neither American Safety Insurance nor any of the underwriters makes any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the price of the preferred securities. The underwriters are not required to engage in any of the foregoing transactions and, if commenced, such transactions may be discontinued at any time without notice.

In view of the fact that the proceeds from the sale of the preferred securities will be used to purchase the debentures issued by us, the underwriting agreement provides that we will pay as compensation for the underwriter’s arranging the investment therein of these proceeds. The following table shows the amounts we will pay the underwriters assuming both no exercise and full exercise of the underwriters’ over-allotment option:

	Paid by Us
	No Exercise	Full Exercise
Per security	$	$
Total

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Because the National Association of Securities Dealers, Inc. is expected to view the preferred securities as interests in a direct participation program, the offering of the preferred securities is being made in compliance with the applicable provisions of Rule 2810 of the NASD’s Conduct Rules.

We have filed an application to have the preferred securities approved for listing on the New York Stock Exchange. However, we cannot guarantee that an active trading market for the preferred securities will develop or continue or that the market price of the preferred securities will not decline below the price to the public set forth on the cover page of this prospectus. If this application is approved, trading in the preferred securities is expected to commence within a 30-day period after the initial delivery of the preferred securities.

American Safety Insurance, AS Holdings and the Trust have each agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act.

Certain of the underwriters may in the future perform various services for us, including investment banking services, for which they may receive customary fees for such services.

TRANSFER AGENT

Deutsche Bank Trust Company Americas, New York, will act as registrar and transfer agent for the preferred securities.

LEGAL MATTERS

Certain matters of Delaware law relating to the validity of the preferred securities will be passed upon on behalf of AS Holdings and the Trust by Richards, Layton & Finger, P.A., Wilmington, Delaware, special Delaware counsel to AS Holdings and the Trust. The validity of the debentures, the debenture guarantee, the preferred securities guarantee and certain matters relating thereto will be passed upon on behalf of American Safety Insurance and AS Holdings by Troutman Sanders LLP, Atlanta, Georgia, and, with regard to Bermuda law, by Conyers, Dill & Pearman, Hamilton, Bermuda. Troutman Sanders LLP will also pass upon certain matters relating to United States federal income tax consequences. Certain legal matters will be passed upon for the Underwriters by Arnold & Porter, Washington, D.C.

EXPERTS

The consolidated financial statements including schedules incorporated by reference of American Safety Insurance as of December 31, 2001 and 2000, and for each of the three years in the period ended December 31, 2001 have been included herein and in the registration statement in reliance upon the reports of KPMG, independent accountants, appearing elsewhere herein and upon the authority of such firm as experts in accounting and auditing.

WHERE YOU CAN FIND MORE INFORMATION

This prospectus is part of a registration statement on Form S-1 filed by American Safety Insurance and the Trust with the SEC relating to the preferred securities registered under this prospectus. As permitted by SEC rules, this prospectus does not contain all of the information contained in the registration statement and accompanying exhibits and schedules filed by us and the Trust with the SEC. The registration statement, the exhibits and schedules provide additional information about the Company, the Trust and the preferred securities. The registration statement, exhibits and schedules are also available at the SEC’s public reference rooms or through its EDGAR database on the internet.

We file annual, quarterly and current reports, proxy statements and other information with the SEC. These documents are available for inspection and copying, upon payment of a fee set by the SEC, at the public reference room of the SEC in

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Washington, D.C. (450 Fifth Street, N.W., 20549). The SEC may be contacted at 1-800-732-0330 for more information on the public reference room. Our filings are also available to the public on the internet through the SEC’s EDGAR database at the SEC’s web site at http://www.sec.gov. You may also find our SEC filings and other relevant information about us at our web site at http://www.americansafetygroup.com.

There are not separate financial statements of the Trust in the prospectus because:

• the Trust is a subsidiary of American Safety Insurance and we file consolidated financial information under the Securities Exchange Act of 1934.

• the Trust does not have any independent operations other than issuing the preferred and common securities and purchasing AS Holdings’ debentures.

• the Trust’s only material assets will be AS Holdings’ debentures when issued.

• our combined obligations under the debentures, the preferred securities guarantee, the debenture guarantee, the trust agreement and the indenture have the effect of providing a full and unconditional guarantee of the Trust’s obligation under its preferred securities. See “Description of the Preferred Securities,” “Description of the Debentures,” “Description of the Preferred Securities Guarantee,” “Description of the Debenture Guarantee” and “Relationship Among the Preferred Securities, the Debentures, the Preferred Securities Guarantee and the Debenture Guarantee.”

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AMERICAN SAFETY INSURANCE GROUP, LTD. AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Page
Report of KPMG, Independent Auditors	F-2
Consolidated Balance Sheets at December 31, 2000 and 2001	F-3
Consolidated Statements of Earnings for the years ended December 31, 1999, 2000 and 2001	F-4
Consolidated Statements of Shareholders’ Equity for the years ended December 31, 1999, 2000 and 2001	F-5
Consolidated Statements of Cash Flow for the years ended December 31, 1999, 2000 and 2001	F-6
Consolidated Statements of Comprehensive Earnings for the years ended December 31, 1999, 2000, and 2001	F-7
Notes to the Consolidated Financial Statements	F-8
Consolidated Balance Sheets as of December 31, 2001 and June 30, 2002 (Unaudited)	F-26
Consolidated Statements of Earnings (Unaudited) for the three and six months ended June 30, 2001 and 2002	F-27
Consolidated Statements of Cash Flow (Unaudited) for the six months ended June 30, 2001 and 2002	F-28
Consolidated Statements of Comprehensive Earnings (Unaudited) for the three and six months ended June 30, 2001 and 2002	F-29
Notes to the Consolidated Financial Statements (Unaudited)	F-30

F-1

REPORT OF KPMG, INDEPENDENT AUDITORS

The Board of Directors

American Safety Insurance Group, Ltd.:

We have audited the consolidated financial statements of American Safety Insurance Group, Ltd. and subsidiaries as listing the accompanying index. In connection with our audits of the consolidated financial statements, we also have audited the financial statement schedules as listed in the accompanying index. These consolidated financial statements and financial statement schedules are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedules based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. 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. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of American Safety Insurance Group, Ltd. and subsidiaries as of December 31, 2000 and 2001, and the results of their operations and their cash flow for each of the years in the three-year period ended December 31, 2001, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the related financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.

KPMG

Hamilton, Bermuda

March 20, 2002

F-2

AMERICAN SAFETY INSURANCE GROUP, LTD. AND SUBSIDIARIES

Consolidated Balance Sheets

December 31, 2000 and 2001

Assets	2000			2001
Investments:
Securities available for sale, at fair value:
Fixed maturities	$	45,985,656		$	61,836,101
Common stock		162,322			—
Investment in real estate		23,946,305			37,662,600
Short-term investments		15,312,377			21,742,272
Total investments		85,406,660			121,240,973
Cash		3,784,102			1,302,842
Restricted Cash		6,117,682			9,010,489
Accrued investment income		1,543,675			2,424,551
Notes receivable—other		8,878,018			8,081,899
Premiums receivable		33,344,382			25,783,225
Ceded unearned premium		22,190,095			19,161,319
Reinsurance recoverable		27,929,794			87,173,021
Funds on deposit		298,000			312,717
Due from affiliate		985,320			1,108,520
Income tax recoverable		160,333			1,614,940
Deferred income taxes		7,383,191			7,415,033
Deferred acquisition costs		3,039,144			5,781,810
Property, plant and equipment		935,743			2,046,332
Prepaid items		1,755,191			1,480,078
Goodwill		1,553,863			1,466,629
Other assets		1,992,923			1,857,239
Total assets	$	207,298,116		$	297,261,617
Liabilities and Shareholders’ Equity
Liabilities:
Unpaid losses and loss adjustment expenses		50,508,627			121,423,039
Unearned premiums		41,953,354			53,205,500
Reinsurance on paid losses and loss adjustment expenses		928,865			2,081,845
Ceded premiums payable		24,311,656			14,224,460
Due to affiliate:
Ceded premiums payable		567,786			—
Reinsurance on paid losses and loss adjustment expenses		229,790			—
Escrow deposits		6,200,182			11,718,824
Accounts payable and accrued expenses		6,384,429			13,459,422
Funds held		4,861,472			1,433,648
Loan payable		11,435,221			16,403,135
Collateral held		1,544,839			821,302
Deferred Revenue		—			2,185,104
Unearned loan fees		568,750			325,000
Total liabilities		149,494,971			237,281,279
Shareholders’ equity:
Preferred stock, $0.01 par value; authorized 5,000,000 shares; no shares issued and outstanding		—			—
Common stock, $0.01 par value; authorized 15,000,000 shares; issued and outstanding at December 31, 2000, 6,281,386 shares, and at December 31, 2001, 6,287,266 shares		62,814			62,873
Additional paid-in capital		35,148,577			35,206,614
Retained earnings		29,262,582			33,416,851
Accumulated other comprehensive income, net		428,085			834,974
Treasury stock, 1,267,200 shares at December 31, 2000, and 1,589,239 shares at December 31, 2001		(7,098,913	)		(9,540,974	)
Total shareholders’ equity		57,803,145			59,980,338
Total liabilities and shareholders’ equity	$	207,298,116		$	297,261,617

See accompanying notes to consolidated financial statements.

F-3

AMERICAN SAFETY INSURANCE GROUP, LTD. AND SUBSIDIARIES

Consolidated Statement of Earnings

Years ended December 31, 1999, 2000 and 2001

	1999		2000			2001
Revenues:
Direct premiums earned	$	6,625,018	$	35,602,221		$	119,120,688
Assumed premiums earned:
Affiliate		3,449,178		5,760,586			10,964,521
Nonaffiliates		8,065,737		12,715,642			16,679,635
Total assumed premiums earned		11,514,915		18,476,228			27,644,156
Ceded premiums earned
Affiliate		3,972,686		4,468,674			7,005,328
Nonaffiliates		2,042,216		22,805,125			74,972,700
Total ceded premiums earned		6,014,902		27,273,799			81,978,028
Net premiums earned		12,125,031		26,804,650			64,786,816
Net investment income		2,877,771		2,605,218			3,649,985
Interest on notes receivable		2,614,572		1,531,183			766,937
Brokerage commission income		1,389,242		3,291,605			2,410,810
Management fees from affiliate		1,386,108		1,424,986			1,496,068
Net realized gains (losses)		173,605		(517,857	)		652,230
Real estate income		—		—			27,561,004
Other income		920,926		938,570			1,026,067
Total revenues		21,487,255		36,078,355			102,349,917
Expenses:
Losses and loss adjustment expenses incurred		6,896,423		18,506,290			43,986,019
Acquisition expenses		893,737		3,792,040			12,248,342
Payroll and related expenses		5,032,382		7,561,311			8,238,355
Real estate expenses				542,444			25,125,848
Other expenses		2,661,723		4,654,307			6,835,780
Expenses due to recession		—		3,541,848			600,000
Total expenses		15,484,265		38,598,240			97,034,344
Earnings (loss) before income taxes		6,002,990		(2,519,885	)		5,315,573
Income taxes (benefit)		82,722		(1,156,728	)		1,161,304
Net earnings (loss)	$	5,920,268	$	(1,363,157	)	$	4,154,269
Net earnings (loss) per share:
Basic	$	0.99	$	(0.25	)	$	0.87
Diluted	$	0.98	$	(0.25	)	$	0.84
Average number of shares outstanding:
Basic		6,006,605		5,496,106			4,797,371
Diluted		6,032,364		5,497,434			4,933,167

See accompanying notes to consolidated financial statements.

F-4

AMERICAN SAFETY INSURANCE GROUP, LTD. AND SUBSIDIARIES

Consolidated Statements of Shareholders’ Equity

Years ended December 31, 1999, 2000 and 2001

	1999			2000			2001
Common stock—number of shares
Balance at beginning of period		6,074,770			6,077,750			6,281,386
Issuance of common shares		2,980			203,636			5,880
Balance at end of period		6,077,750			6,281,386			6,287,266
Common stock:
Balance at beginning of period	$	60,747		$	60,777		$	62,814
Issuance of common shares		30			2,037			59
Balance at end of period		60,777			62,814			62,873
Additional paid-in capital:
Balance at beginning of period		33,809,141			33,810,387			35,148,577
Issuance of common shares		1,246			1,338,190			58,037
Balance at end of period		33,810,387			35,148,577			35,206,614
Retained earnings:
Balance at beginning of period		24,705,471			30,625,739			29,262,582
Net earnings (loss)		5,920,268			(1,363,157	)		4,154,269
Balance at end of period		30,625,739			29,262,582			33,416,851
Accumulated other comprehensive income:
Balance at beginning of period		693,934			(1,288,804	)		428,085
Unrealized gain (loss) during the period (net of deferred tax benefit (expense) of $180,514, $(240,095) and $(152,279) respectively)		(1,982,738	)		1,716,889			406,889
Balance at end of period		(1,288,804	)		428,085			834,974
Treasury Stock:
Balance at beginning of period		—			(2,169,339	)		(7,098,913	)
Shares purchased, 300,000 shares in 1999, 967,200 shares in 2000 and 322,039 shares in 2001		(2,169,339	)		(4,929,574	)		(2,442,061	)
Balance at end of period		(2,169,339	)		(7,098,913	)		(9,540,974	)
Total shareholders’ equity	$	61,038,760		$	57,803,145		$	59,980,338

See accompanying notes to consolidated financial statements.

F-5

AMERICAN SAFETY INSURANCE GROUP, LTD. AND SUBSIDIARIES

Consolidated Statements of Cash Flow

Years ended December 31, 1999, 2000 and 2001

	1999			2000			2001
Cash flow from operating activities:
Net earnings (loss)	$	5,920,268		$	(1,363,157	)	$	4,154,269
Adjustments to reconcile net earnings to net cash provided by operating activities:
Realized losses (gains) on sale of investments		(173,605	)		517,857			(652,230	)
Amortization of deferred acquisition costs, net		(334,906	)		(2,764,443	)		(2,742,666	)
Accretion of loan discount		(510,636	)		—			—
Change in:
Accrued investment income		(1,321,926	)		1,239,988			(880,876	)
Premiums receivable		(6,400,977	)		(21,104,838	)		7,561,157
Commissions receivable		16,621			5,948			—
Reinsurance recoverable and ceded unearned premiums		(6,034,994	)		(39,953,983	)		(55,061,471	)
Unearned loan fees		—			568,750			(243,750	)
Due from affiliate		(1,420,674	)		1,103,428			(123,200	)
Prepaid items		(261,950	)		(1,317,597	)		275,113
Funds held		(357,509	)		4,503,963			(3,427,824	)
Funds deposited		353,407			55,407			(14,717	)
Collateral held		1,208,976			335,863			(723,537	)
Income taxes		(70,127	)		(993,235	)		(1,486,449	)
Unpaid losses and loss adjustment expenses		5,712,763			30,095,391			70,914,412
Unearned premiums		5,264,831			32,793,955			11,252,146
Liability for deductible fees held		(529,053	)		—			—
Ceded premiums payable		2,356,146			17,572,588			(10,087,196	)
Due to affiliate		1,461,476			(917,829	)		(797,576	)
Accounts payable and accrued expenses		(794,531	)		4,490,959			7,074,993
Deferred Revenue		—			—			2,185,104
Other, net		1,427,631			(503,562	)		905,758
Net cash provided by operating activities		5,511,231			24,365,453			28,081,460
Cash flow from investing activities:
Purchases of fixed maturities		(9,775,786	)		(15,549,384	)		(54,172,603	)
Purchase of common stocks		(1,305,656	)		(5,908,304	)		(2,905,977	)
Proceeds from maturity and redemption of fixed maturities		7,732,263			868,191			530,323
Proceeds from sales of fixed maturities		4,034,887			16,358,289			38,168,205
Proceeds from sales of common stock		4,467,664			5,771,377			3,068,210
Purchase of Trafalgar Insurance Company, net cash of acquired company		—			(7,050,877	)		—
Proceeds from notes receivable—related parties		—			1,530,000			—
Increase in short-term investments		(4,463,471	)		(8,562,586	)		(6,429,895	)
Repayment (advance) in notes receivable—other		(3,967,511	)		(2,572,754	)		796,119
Advance in notes receivable—related parties		(1,420,000	)		—			—
Increase in investment in real estate		(1,842,983	)		(12,796,382	)		(13,716,295	)
Sales (purchase) of fixed assets, net		(1,112,553	)		298,551			(1,110,589	)
Net cash used in investing activities		(7,653,146	)		(27,613,879	)		(35,772,502	)
Cash flow from financing activities:
Proceeds from sale of common stock		1,276			17,227			58,094
Purchase of treasury stock		(2,169,339	)		(4,929,574	)		(2,442,061	)
Proceeds of loan payable		—			11,435,221			4,967,914
Proceeds from escrow deposits		—			6,200,182			5,518,642
Net cash provided by (used in) financing activities	$	(2,168,063	)	$	12,723,056		$	8,102,589
Net increase (decrease) in cash		(4,309,978	)		9,474,630			411,547
Cash at beginning of period		4,737,132			427,154			9,901,784
Cash at end of period	$	427,154		$	9,901,784		$	10,313,331
Non Cash Items: Operating activities:
Change in accrued interest income		980,120			—			—
Recoverable due to rescission in other assets		—			(1,323,000	)		—
Change in prepaid items		—			(170,000	)		—
Investing activities:
Decrease in notes receivable—other		9,162,777			4,950,000			—
Purchase of real estate		(10,142,897	)		(4,950,000	)		—
Financing activities:
Issuance of common stock		—			1,323,000			—
Notes receivable related parties		—			170,000			—
Net noncash adjustment		—			—			—
Supplemental disclosure of cash flow information:
Income taxes paid (recovered)	$	(217,427	)	$	114,572		$	2,800,000
Interest paid	$	—		$	—		$	1,265,874

See accompanying notes to consolidated financial statements.

F-6

AMERICAN SAFETY INSURANCE GROUP, LTD. AND SUBSIDIARIES

Consolidated Statements of Comprehensive Earnings

Years ended December 31, 1999, 2000 and 2001

	1999			2000			2001
Net earnings (loss)	$	5,920,268		$	(1,363,157	)	$	4,154,269
Other comprehensive earnings (loss) before income taxes:
Unrealized gains (losses) on securities available for sale		(2,043,609	)		1,414,896			1,315,686
Reclassification adjustment for realized gains (losses) included in net earnings		119,643			(542,088	)		756,512
Total other comprehensive earnings (loss) before taxes		(2,163,252	)		1,956,984			559,174
Income tax expense (benefit) related to items of comprehensive income		(180,514	)		240,095			152,285
Other comprehensive earnings (loss) net of income taxes		(1,982,738	)		1,716,889			406,889
Total comprehensive earnings	$	3,937,530		$	353,732		$	4,561,158

See accompanying notes to consolidated financial statements.

F-7

AMERICAN SAFETY INSURANCE GROUP, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) Summary of Significant Accounting Policies

(a) Basis of Presentation

The accompanying consolidated financial statements of American Safety Insurance Group, Ltd. (“American Safety”) and its subsidiaries (collectively, the “Company”) are prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates, based on the best information available, in recording transactions resulting from business operations. The balance sheet amounts that involve a greater extent of accounting estimates and actuarial determinations subject to future changes are the Company’s liabilities for unpaid losses and loss adjustment expenses. As additional information becomes available (or actual amounts are determinable), the recorded estimates may be revised and reflected in operating results. While management believes that the liability for unpaid losses and loss adjustment expenses is adequate to cover the ultimate liability, such estimates may be more or less than the amounts actually paid when claims are settled.

(b) Description of Common Stock—Voting and Ownership Rights

The authorized share capital of the Company is 20 million shares, consisting of 15 million common shares, par value $.01 per share (“Common Shares”), and 5 million preferred shares, par value $.01 per share (“Preferred Shares”). The Common Shares are validly issued, fully paid, and non-assessable. There are no provisions of Bermuda law or the Company’s Bye-Laws which impose any limitations on the rights of shareholders to hold or vote Common Shares by reason of such shareholders not being residents of Bermuda. Holders of Common Shares are entitled to receive dividends ratably when and as declared by the Board of Directors out of funds legally available therefor.

Each holder of Common Shares is entitled to one vote per share on all matters submitted to a vote of the Company’s shareholders, subject to the 9.5% voting limitation described below. All matters, including the election of directors, voted upon at any duly held shareholders meeting shall be authorized by a majority of the votes cast at the meeting by shareholders represented in person or by proxy, except (i) approval of a merger, consolidation or amalgamation; (ii) the sale, lease, or exchange of all or substantially all of the assets of the Company; and (iii) amendment of certain provisions of the Bye-Laws, which each require the approval of at least 66 ²/3% of the outstanding voting shares (in addition to any regulatory or court approvals). The Common Shares have noncumulative voting rights, which means that the holders of a majority of the Common Shares may elect all of the directors of the Company and, in such event, the holders of the remaining shares will not be able to elect any directors.

The Bye-Laws contain certain provisions that limit the voting rights that may be exercised by certain holders of Common Shares. The Bye-Laws provide that each holder of Common Shares is entitled to one vote per share on all matters submitted to a vote of the Company’s shareholders, except that if, and so long as, the Controlled Shares (as defined below) of any person constitute 9.5% or more of the issued and outstanding Common Shares, the voting rights with respect to the Controlled Shares owned by such person shall be limited, in the aggregate, to a voting power of 9.5%, other than the voting rights of Frederick C. Treadway or Treadway Associates, L.P., affiliates of a founding shareholder of the Company.

“Controlled Shares” mean (i) all shares of the Company directly, indirectly, or constructively owned by any person and (ii) all shares of the Company directly, indirectly, or beneficially owned by such person within the meaning of Section 13(d) of the Exchange Act (including any shares owned by a group of persons, as so defined and including any shares that would otherwise be excluded by the provisions of Section 13(d)(6) of the Exchange Act). Under these provisions, if, and so long as, any person directly, indirectly, or constructively owns Controlled Shares having more than 9.5% of the total number of votes exercisable in respect of all shares of voting stock of the Company, the voting rights attributable to such shares will be limited, in the aggregate, to 9.5% of the total number of votes.

No holder of Common Shares of the Company shall, by reason only of such holder, have any preemptive right to subscribe to any additional issue of shares of any class or series nor to any security convertible into such shares.

(c) Principles of Consolidation

The consolidated financial statements include the accounts of American Safety Insurance Group, Ltd., a Bermuda company, American Safety Reinsurance, Ltd. (“American Safety Re”) formed in January 1998 to serve as the successor for the reinsurance business of American Safety, as a 100%-owned licensed Bermuda insurance company, and American Safety Holdings Corp. (“American Safety Holdings”), formed in July 1999 to serve as a 100%-owned insurance and financial services holding company.

F-8

AMERICAN SAFETY INSURANCE GROUP, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

American Safety Holdings in turn wholly owns American Safety Casualty Insurance Company (“American Safety Casualty”), a property and casualty insurance company, American Safety Insurance Services, Inc. (“ASI Services”), an insurance management and brokerage company, Ponce Lighthouse Properties, Inc. (“Ponce”), the development company of the Harbour Village project, and Rivermar Contracting Company (“Rivermar”), the general contractor of the Harbour Village project. American Safety Casualty wholly owns American Safety Indemnity Company, a property and casualty excess and surplus lines insurance company. ASI Services wholly owns the following subsidiaries: Sureco Bond Services, Inc. (“Sureco”), a bonding agency; Environmental Claims Services, Inc. (“ECSI”),a claims consulting firm; American Safety Financial Corp., a financial services subsidiary; and American Safety Purchasing Group, Inc., which acts as a purchasing group for the placement of business with American Safety Casualty. All significant intercompany balances have been eliminated in consolidation.

(d) Business Environment

The following is a description of certain risks facing the Company and its subsidiaries:

Legal/Regulatory Risk is the risk that changes in the legal or regulatory environment in which an insurer operates will create additional expenses not anticipated by the insurer in pricing its products and beyond those recorded in the financial statements. That is, regulatory initiatives designed to reduce insurer profits or otherwise affecting the industry in which the insurer operates, new legal theories or insurance company insolvencies through guaranty fund assessments, may create costs for the insurer beyond those recorded in the financial statements. The Company attempts to mitigate this risk by actively writing insurance business in several states, thereby spreading this risk over a large geographic area.

Potential Risk of United States Taxation of Bermuda Operations.    Under current Bermuda law, American Safety is not required to pay any taxes in Bermuda on either income or capital gains. American Safety has received an undertaking from the Minister of Finance in Bermuda that will exempt American Safety from taxation until the year 2016 in the event of any such taxes being imposed. Whether a foreign corporation is engaged in a United States trade or business or is carrying on an insurance business in the United States depends upon the level of activities conducted in the United States. If the activities of a foreign company are “continuous, regular, and considerable,” the foreign company will be deemed to be engaged in a United States trade or business. Due to the fact that American Safety will continue to maintain an office in Bermuda and American Safety and American Safety Re’s sole business is reinsuring contracts via treaty reinsurance agreements, which are all signed outside of the United States, American Safety does not consider itself to be engaged in a trade or business in the United States and, accordingly, does not expect to be subject to United States income taxes. This position is consistent with the position taken by various other entities that have similar operational structures as American Safety.

However, because the Internal Revenue Code of 1986, as amended, the Treasury Regulations and court decisions do not definitively identify activities that constitute being engaged in a United States trade or business, and because of the factual nature of the determination, there can be no assurance that the Internal Revenue Service will not contend that American Safety or its Bermuda insurance subsidiary are engaged in a United States trade or business. In general, if American Safety or its Bermuda insurance subsidiary are considered to be engaged in a United States trade or business, it would be subject to (i) United States Federal income tax on its taxable income that is effectively connected with a United States trade or business at graduated rates and (ii) the 30 percent branch profits tax on its effectively connected earnings and profits deemed repatriated from the United States. Certain subsidiaries of American Safety are, however subject to U.S. Federal and state income tax, as they are domiciled and conduct business in the United States.

Credit Risk is the risk that issuers of securities owned by the insurer or secured notes receivable will default or that other parties, including reinsurers that have obligations to the insurer, will not pay or perform. The Company attempts to mitigate this risk by adhering to a conservative investment strategy, by obtaining sufficient collateral for secured note obligations and by maintaining sound reinsurance, credit and collection policies.

Interest Rate Risk is the risk that interest rates will change and cause a decrease in the value of an insurer’s investments. The Company attempts to mitigate this risk by attempting to match the maturities of its assets with the expected payouts of its liabilities.

(e) Investments

Fixed maturity securities for which the Company has the positive intent and ability to hold to maturity are classified as “held to maturity” and are reported at amortized cost. Fixed maturity and equity securities that are bought and held principally for the purpose of selling them in the near term are classified as “trading” and are reported at fair value, with unrealized gains and losses included in

F-9

AMERICAN SAFETY INSURANCE GROUP, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

earnings. Fixed maturity and equity securities not classified as either held to maturity or trading are classified as “available for sale” and are reported at fair value, with unrealized gains and losses (net of deferred taxes) charged or credited as a component of accumulated other comprehensive income.

While it is the Company’s intent to hold fixed maturity securities until the foreseeable future or until maturity, it may sell such securities in response to, among other things, market conditions, liquidity needs, or interest rate fluctuations. At December 31, 2000 and 2001, the Company considered all of its fixed maturity and equity securities as available for sale.

Investment income is recorded as earned on the accrual basis and includes amortization of premiums and accretion of discounts using the interest method. Realized gains or losses on disposal of investments are determined on a specific identification basis and are included in revenues. Investments in real estate are carried at the lower of cost or market plus capitalized development costs.

The Company owns no on-balance sheet or off-balance sheet derivative instruments.

(f) Notes Receivable

Notes receivable represent indebtedness under various secured lending arrangements with related and unrelated parties. Interest income, loan fees, and deferred loan costs are recognized on an effective yield basis over the life of the loan. The allowance for possible loan losses has been determined based on those losses management considers probable at each reporting date. At December 31, 1999, 2000 and 2001, no allowance was deemed necessary by Company management.

The Company ceases the accrual of interest on loans when any payment is past due. Additionally, the Company assesses loan impairment by comparing the carrying value of such loan, including accrued but unpaid interest at the valuation date to the fair market value of collateral held with respect to such loan. Any shortage of fair value over carrying value is first recognized by reversing interest income recognized for the year of impairment and then recognizing any further loss against the allowance for loan losses.

(g) Recognition of Premium Income

General liability premiums are primarily assumed from American Safety Risk Retention Group, Inc. (“American Safety RRG”), a non-subsidiary affiliate. General liability premiums are estimated based upon the annual revenues of the underlying insureds. Additional or return premiums are recognized for differences between provisional premiums billed and estimated ultimate general liability premiums due. General liability, surety, commercial auto, other commercial lines and workers’ compensation premiums are recorded ratably over the policy period with unearned premium calculated on a pro rata basis over the lives of the underlying coverages.

(h) Brokerage Commission Income

Brokerage commissions on business produced by Sureco are recognized as income when the related insurance policies are underwritten. Commissions on business produced by ASI Services are recognized as the related insurance premiums are written. For ASI Services produced business which remains in the consolidated group, any commissions recognized are eliminated in consolidation or otherwise recognized in revenue consistent with the recognition of premiums earned.

(i) Management Fees from Affiliate

The program management agreement between American Safety RRG and ASI Services provided for payment of a monthly program management fee, a managing general agency commission and producing agent commissions. The level of program management fees are designed to reimburse the Company for the allocable share of expenses incurred in managing the American Safety RRG program. The fees are earned as expenses are incurred.

(j) Deferred Policy Acquisition Costs

The costs of acquiring business, primarily commissions and underwriting expenses, are deferred (to the extent they are recoverable from future premium income) and amortized to earnings in relation to the amount of premiums earned. If necessary, investment income is considered in the determination of the recoverability of deferred policy acquisition costs. Deferred revenue results when reinsurance ceding commissions received exceed the related deferred acquisition costs for direct and assumed business.

F-10

AMERICAN SAFETY INSURANCE GROUP, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

An analysis of deferred policy acquisition costs (deferred revenue) follows:

	Years ended December 31,
	1999			2000			2001
Balance, beginning of period	$	(60,205	)	$	274,701		$	3,039,144
Acquisition costs deferred		1,499,496			7,479,745			15,294,666
Amortized during the period		(1,164,590	)		(4,715,302	)		(12,552,000	)
Balance, end of period	$	274,701		$	3,039,144		$	5,781,810

(k) Unpaid Losses and Loss Adjustment Expenses

The Company provides a liability for unpaid losses and loss adjustment expenses based upon aggregate case estimates for reported claims and estimates for incurred but not reported losses. Because of the length of time required for the ultimate liability for losses and loss adjustment expenses to be determined for certain lines of business underwritten, the Company has limited experience upon which to base an estimate of the ultimate liability. For this business, management has established loss and loss adjustment expense reserves based on an independent actuarial valuation that it believes is reasonable and representative of anticipated ultimate experience. Beginning in 1996, the Company’s actuarial consultant refined the estimation process for the determination of ultimate loss and loss adjustment expense to begin to recognize differences between the Company’s reporting and settlement patterns and industry patterns as sufficient Company specific data (10 years of Company specific actuarial data) was then available. This method (Bornhuetter-Ferguson) entails developing an initial expected loss ratio based upon gross ultimate losses from prior accident years, estimating the portion of ultimate losses expected to be reported and unreported, and adding the actual reported losses to the expected unreported losses to derive the indicated ultimate losses. However, the net amounts that will ultimately be paid to settle the liability may be more or less than the estimated amounts provided.

(l) Income Taxes

For subsidiaries subject to taxation, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

(m) Reinsurance

Reinsurance contracts do not relieve the Company from its obligation to policyholders. Failure of reinsurers to honor their obligations could result in losses to the Company. The Company evaluates the financial condition of its reinsurers and monitors concentration of credit risk to minimize its exposure to significant losses from reinsurer insolvencies. Reinsurance recoverables on unpaid losses and prepaid reinsurance represent amounts recoverable from reinsurers for unpaid losses and unearned ceded reinsurance premiums, respectively.

(n) Goodwill

On April 2, 1993, American Safety Casualty exchanged 8% of its common shares for 100% of the common stock of ASI Services, which shares were subsequently re-acquired by the Company. The goodwill created from this transaction is being amortized ratably over 20 years. In March 2000, American Safety Holdings Corp. purchased 100% of the common stock of Trafalgar Insurance Company and renamed it American Safety Indemnity Company. The goodwill created from this transaction is being amortized ratably over 20 years. Accumulated amortization was $193,582 at December 31, 2000 and $280,816 at December 31, 2001. See paragraph (1)(p) below for additional information.

(o) Net Earnings Per Share

Basic earnings (loss) per share and diluted earnings (loss) per share are computed by dividing net earnings (loss) by the weighted average number of shares outstanding for the period (basic EPS) plus dilutive shares subject to stock options (diluted EPS).

F-11

AMERICAN SAFETY INSURANCE GROUP, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Earnings (loss) per share are as follows:

	1999		2000			2001
Weighted average shares outstanding		6,006,605		5,496,106			4,797,371
Shares attributable to stock options		25,759		1,328			135,796
Weighted average common and common equivalents		6,032,364		5,497,434			4,933,167
Earnings (loss) per share:
Basic	$	0.99	$	(0.25	)	$	0.87
Diluted	$	0.98	$	(0.25	)	$	0.84

(p) Accounting Pronouncements

In June 1998, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 133, Accounting for Derivative Instruments and Hedging Activities. SFAS No. 133, as amended, is effective for years beginning after June 15, 2000. The standard requires that all derivatives be recorded as an asset or liability, at estimated fair value, regardless of the purpose or intent for holding the derivative. If a derivative is not utilized as a hedge, all gains or losses from the change in the derivative’s estimated fair value are recognized in earnings. The gains or losses from the change in estimated fair value of certain derivatives utilized as hedges are recognized in earnings or other comprehensive income depending on the type of hedge relationship. The adoption of SFAS No. 133, as amended, did not have an impact on the Company’s consolidated financial position and results of operations.

In September 2000, the FASB issued SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities, a replacement of FASB Statement No. 125. SFAS No. 140 revises the standards of accounting for securitization and other transfers of financial assets and collateral and requires certain disclosures not previously required under SFAS No. 125. This statement is effective for all transfers and servicing of financial assets and liabilities occurring after March 31, 2001. For recognition and reclassification of collateral and for disclosures relating to securitization transactions and collateral, it is effective for fiscal years ended after December 15, 2000. The adoption of SFAS No. 140 did not have a material impact on the Company’s consolidated financial position and results of operation.

In July 2001, the FASB issued Statement No. 141, Business Combinations, and Statement No. 142, Goodwill and Other Intangible Assets. Statement 141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001, as well as all purchase method business combinations completed after June 30, 2001. Statement 141 also specifies criteria intangible assets acquired in a purchase method business combination must meet to be recognized and reported apart from goodwill, noting that any purchase price allocable to an assembled workforce may not be accounted for separately. Statement 142 will require that goodwill and intangible assets with indefinite useful lives no longer be amortized, but instead tested for impairment at least annually in accordance with the provisions of Statement 142. Statement 142 will also require that intangible assets with definite useful lives be amortized over their respective estimated useful lives to their estimated residual values, and reviewed for impairment in accordance with SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of.

Statement 141 will require upon adoption of Statement 142, that the Company evaluate its existing intangible assets and goodwill that were acquired in a prior purchase business combination, and to make any necessary reclassifications in order to conform with the new criteria in Statement 141 for recognition apart from goodwill. Upon adoption of Statement 142, the Company will be required to reassess the useful lives and residual values of all intangible assets acquired in purchase business combinations, and make any necessary amortization period adjustments by the end of the first interim period after adoption. In addition, to the extent an intangible asset is identified as having an indefinite useful life, the Company will be required to test the intangible asset for impairment in accordance with the provisions of Statement 142 within the first interim period. Any impairment loss will be measured as of the date of adoption and recognized as the cumulative effect of a change in accounting principle in the first interim period.

As of the date of adoption, the Company expects to have unamortized goodwill in the amount of $1.5 million, which will be subject to the transition provisions of Statement 141 and 142. Amortization expense related to goodwill was $87,234 and $69,869 for the year ended December 31, 2001 and the year ended December 31, 2000, respectively.

F-12

AMERICAN SAFETY INSURANCE GROUP, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

During 2001, the FASB also issued Statements No. 143 and 144 dealing with impairment and disposition of long-lived assets. The adoption of SFAS No. 143 and No. 144 is not expected to have a material impact on the Company’s consolidated financial position and results of operations.

(q) Reclassifications

Certain items in the prior periods’ financial statements have been reclassified to conform with the 2001 presentation.

(2) Investments

Net investment income is summarized as follows:

	Years ended December 31,
	1999			2000		2001
Fixed maturities	$	2,499,362		$	2,183,392	$	3,282,285
Equity securities		1,507			48,760		16,803
Short-term investments and cash		422,173			460,777		526,903
		2,873,042			2,692,929		3,825,991
Less investment expenses		(4,729	)		87,711		176,006
Net investment income	$	2,877,771		$	2,605,218	$	3,649,985

Realized and unrealized gains and losses were as follows:

	Years ended December 31,
	1999			2000			2001
Realized gains:
Fixed maturities	$	16,608		$	37,757		$	974,604
Equity securities		124,637			—			—
Real estate		53,962			24,231			—
Total gains		195,207			61,988			974,604
Realized losses:
Fixed maturities		(17,171	)		(573,884	)		(218,092	)
Equity securities		(4,431	)		(5,961	)		—
Real estate		—			—			—
Total losses		(21,062	)		(579,845	)		(322,374	)
Net realized gains (losses)	$	173,605		$	(517,857	)	$	652,230
Changes in unrealized gains (losses):
Fixed maturities	$	(2,144,359	)	$	1,951,504		$	559,172
Equity securities		(18,893	)		5,480			—
Net unrealized gains (losses)	$	(2,163,252	)	$	1,956,984		$	559,172

At December 31, 2000 and 2001, the Company did not hold fixed-maturity securities which individually exceeded 10% of shareholders’ equity, except U.S. government and government agency securities.

F-13

AMERICAN SAFETY INSURANCE GROUP, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The amortized cost and estimated fair values of investments at December 31, 2000 and 2001 are as follows:

	Amortized cost		Gross unrealized gains		Gross unrealized losses		Estimates fair value
December 31, 2000:
Securities available for sale:
Fixed maturities:
U.S. Treasury securities and obligations of U.S. Government corporations and agencies	$	30,952,452	$	615,498	$	112,524	$	31,455,426
Obligations of states and political subdivisions		6,083,661		190,974		—		6,274,635
Corporate securities		6,799,319		17,688		153,243		6,663,764
Mortgage-backed securities		1,562,888		31,997		3,054		1,591,831
Total fixed maturities		45,398,320		856,157		268,821		45,985,656
Equity investments—common stocks		162,322		—		—		162,322
Total	$	45,560,642	$	856,157	$	268,821	$	46,147,978
December 31, 2001:
Securities available for sale:
Fixed maturities:
U.S. Treasury securities and obligations of U.S. Government corporations and agencies	$	28,618,104	$	1,091,312	$	101,892	$	29,607,524
Obligations of states and political subdivisions
Corporate securities		24,157,207		380,283		146,968		24,390,522
Mortgage-backed securities		7,914,282		3,956		80,183		7,838,055
Total fixed maturities		60,689,593		1,475,551		329,043		61,836,101
Equity investments—common stocks		—		—		—		—
Total	$	60,689,593	$	1,475,551	$	329,043	$	61,836,101

The amortized cost and estimated fair values of fixed maturities at December 31, 2001, by contractual maturity are shown below. Expected maturities may differ from contractual maturities as certain borrowers may have the right to call or prepay obligations with or without call or prepayment penalty.

	Amortized cost		Estimated fair value
Due in one year or less	$	549,755	$	563,408
Due after one year through five years		22,933,293		23,882,645
Due after five years through ten years		21,758,766		21,934,318
Due after ten years		7,533,497		7,617,675
Mortgage-backed securities		7,914,282		7,838,055
Total	$	60,689,593	$	61,836,101

Bonds with an amortized cost of $12,648,910 and $14,199,157 were on deposit with insurance regulatory authorities at December 31, 2000 and 2001 in accordance with statutory requirements.

(3) Investment in Real Estate

The Company’s investment in real estate is comprised of 173 acres of property in Ponce Inlet, Florida that was acquired in foreclosure during April 1999. At the date of foreclosure the Company evaluated the carrying value of its investment in real estate by comparing the fair value of the foreclosed collateral to the book value of the underlying loan and accrued interest. As the book value of the loan and accrued interest was less than the fair value of the collateral, no loss was recognized on foreclosure and the book balance of the loan and accrued interest became the basis of the real estate.

F-14

AMERICAN SAFETY INSURANCE GROUP, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Throughout 1999, it was the Company’s intent to sell the property known as Harbour Village Golf and Yacht Club (“Harbour Village”) and the Company negotiated with a potential purchaser who was interested in developing the property. During the negotiation period, the Company agreed to manage the property development on the potential purchaser’s behalf.

On February 17, 2000 the Company was informed that the potential purchaser was unable to secure acceptable construction financing terms and requested an extension of time to seek other financing. The Company denied the potential purchaser’s request and is developing the property for its own account.

During 1999, the Company recognized $360,000 in property management fees for the management of the property during the due diligence period on behalf of the potential purchaser and applied $140,000 in nonrefundable earnest monies against the carrying value of its investment in real estate.

As of December 31, 2000 and 2001, the investment in real estate for the Harbour Village project is broken down as follows (in thousands):

	2000		2001
Land	$	6,149	$	4,360
Capitalized overhead, interest and taxes		3,886		3,925
Work in process		8,961		28,328
Total	$	18,996	$	36,613

In October 2000, the Company refinanced several secured notes receivable into one secured note receivable and the Company took title to several parcels of land as partial payment of the notes receivable. The repayment value given to the borrower was $4.27 million and the Company was paid a fee of $650,000.

(4)    Notes Receivable

As of December 31, 2001, notes receivable consists of two notes which are secured by real and personal property and various corporate and personal guarantees. These notes bear interest rates at 12% and are payable on various dates. These notes are currently in default.

The recorded investment in notes receivable, which meet the definition of impaired loans at December 31, 2000 and 2001 were  -0- and $8,081,899, respectively. The Company did not maintain an allowance for loan losses, as it believes that the value of collateral held is sufficient to preclude any losses. The weighted average recorded investment in impaired notes receivable as of December 31, 2000 and 2001 were -0- and $2,494,294, respectively. Interest income recognized on impaired notes receivable during the twelve months ended December 31, 2000 and 2001 were $0 and $0, respectively.

(5)    Financial Instruments

The carrying amounts for short-term investments, cash, premiums receivable, commissions receivable, accrued investment income, liability for deductible fees held, ceded premiums payable, funds held, collateral held and accounts payable and accrued expenses approximate their fair values due to the short-term nature of these instruments.

Estimated fair values for fixed maturities were provided by outside consultants using market quotations, prices provided by market makers or estimates of fair values obtained from yield data relating to investment securities with similar characteristics.

The estimated fair values for equity securities were determined by using market quotations on the principal public exchange markets for which such securities are traded.

Of the two notes receivable at December 31, 2000 and 2001, all have fair values which approximate market values, and have maturity dates in 2002.

F-15

AMERICAN SAFETY INSURANCE GROUP, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(6)    Reinsurance

General Liability

The Company has excess of loss reinsurance treaties with Berkley Insurance Company, QBE Reinsurance Corporation, Partner Reinsurance Company US, Hartford Fire Insurance Company, Trenwick America Reinsurance Corporation, Alea London, Ltd., Terra Nova Insurance Company and Lloyds of London (the “Reinsurers”) for the Company’s general liability lines of business. These treaties provide $9.75 million excess $250,000 to the Company.

Workers’ Compensation

The Company assumes workers’ compensation business from Legion Insurance Company (“Legion”). This business is produced by ASI Services, which bills and collects the premiums on behalf of Legion and remits net of its agent’s commissions. Legion then deducts its expenses for the program as well as 10% of the premium to deposit in its loss fund. The balance of the premium is ceded to American Safety Casualty. Legion uses the 10% loss fund to pay claims, and when this fund is extinguished, Legion cedes the losses to American Safety Casualty. American Safety Casualty has a 50% quota share arrangement between itself and American Reinsurance, Ltd. Pursuant to the arrangement with Legion Insurance Company, the Company’s exposure is limited to $250,000 per occurrence and a 70% aggregate stop-loss ratio percentage.

During 2000, American Safety Casualty began direct writing the workers’ compensation business that had been previously written by Legion. The reinsurance structure described above is also utilized by American Safety Casualty except the 10% loss fund is not applicable to business directly written by American Safety Casualty. Effective January 2001, Legion terminated new and renewal writings under the program.

The Company has excess of loss treaties with Berkley Insurance Company, QBE Reinsurance Company U.S., Partners Reinsurance Company U.S., Hartford Fire Insurance Company, Trenwick America Reinsurance Corporation, Lloyd’s of London, American Healthcare Indemnity Company, and Transatlantic Reinsurance Company for the Company’s workers’ compensation line of business. These treaties provide $49.75 million excess $250,000 to the Company.

Surety

The Company has an excess of loss reinsurance treaty with Berkley Insurance Company for the Company’s surety line of business. The treaties provide per bond and per principal reinsurance of $750,000 excess $250,000. American Safety Casualty also has a 50% quota share arrangement between itself and American Safety Reinsurance, Ltd. Effective January 1, 2002, the Company has no reinsurance for its surety line of business and has substantially reduced writing contract surety business.

Excess and Surplus

Effective January 1, 2001, the Company entered into an excess of loss reinsurance treaty with Folksamerica Reinsurance Company, QBE Reinsurance Corporation, Partner Reinsurance Company and Trenwick America Reinsurance Corporation to reinsure the Company’s excess and surplus risks. The treaty provides $650,000 excess $350,000 of coverage to the Company.

Commercial Lines

Effective January 1, 2000, the Company entered into various reinsurance treaties to limit its commercial lines exposure. A liability treaty with Signet Star Reinsurance Company provides $900,000 excess of $100,000. Three property treaties provide $400,000 excess $100,000 and $500,000 excess $500,000 and $2 million excess $1 million of coverage to the Company on a 100% basis. Two property catastrophe treaties provide $500,000 excess $500,000 and $2.5 million excess $1 million of coverage to the Company.

Program Business

The Company’s program business division buys various forms of reinsurance on both a quota share basis as well as an excess of loss basis. These treaties cover the majority of risks written by the Company in this division. Where appropriate, collateral is obtained from the reinsurers to secure their obligations.

F-16

AMERICAN SAFETY INSURANCE GROUP, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The approximate effect of reinsurance on the financial statement accounts listed below is as follows:

	Years ended December 31,
	1999			2000			2001
	(In thousands)
Written premiums:
Direct	$	10,820		$	64,227		$	131,253
Assumed		12,585			22,646			26,764
Ceded		(8,864	)		(44,873	)		(78,949	)
Net	$	14,541		$	42,000		$	79,068
Earned premiums:
Direct	$	6,625		$	35,602		$	119,121
Assumed		11,515			18,477			27,644
Ceded		(6,015	)		(27,274	)		(81,978	)
Net	$	12,125		$	26,805		$	64,787
Losses and loss adjustment expenses incurred:
Direct	$	4,800		$	29,291		$	111,700
Assumed		6,045			13,739			18,115
Ceded		(3,949	)		(24,524	)		(85,829	)
Net	$	6,896		$	18,506		$	43,986
Unpaid loss and loss adjustment expenses:
Direct	$	5,638		$	28,431		$	97,756
Assumed		14,775			22,077			23,667
Ceded		(6,065	)		(27,930	)		(77,583	)
Net	$	14,348		$	22,578		$	43,840

During the fourth quarter of 2001, one of the Company’s former reinsurers, Berkley Insurance Company, disputed its obligations under several reinsurance treaties entered into during the “soft reinsurance market” (an insurance market characterized by decreasing premium prices for coverages) that existed in 1998 and 1999. As a result of adverse loss experience to the reinsurer from certain lines of business, Berkley has stopped reimbursing the Company for amounts due under such treaties and has requested that the Company retroactively consider taking a greater portion of the losses than is required under the treaties. As of December 31, 2001, unreimbursed paid claims under the treaties totaled $6.5 million and additional ceded case reserves and reserves for incurred but not reported losses totaled approximately $25.8 million. The Company is discussing resolution of this matter with Berkley, although the Company believes the reinsurer’s request has no merit and was made in bad faith. If this dispute cannot be resolved, the Company will institute legal and arbitration proceedings against the reinsurer. Berkley is a subsidiary of W.R. Berkley Corp. (NYSE: BER).

(7) Income Taxes

Total income tax expense (benefit) for the years ended December 31, 1999, 2000 and 2001 were allocated as follows:

	1999			2000			2001
Tax expense (benefit) attributable to:
Income (loss) from continuing operations	$	82,722		$	(1,156,728	)	$	1,161,304
Unrealized gain (losses) on securities available for sale		(180,514	)		240,095			152,279
Total	$	(97,792	)	$	(916,633	)	$	1,313,583

F-17

AMERICAN SAFETY INSURANCE GROUP, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

U.S. Federal and state income tax expense (benefit) from continuing operations consists of the following components:

	Current			Deferred			Total
December 31, 1999	$	272,484		$	(189,762	)	$	82,722
December 31, 2000		(106,588	)		(1,050,140	)		(1,156,728	)
December 31, 2001		1,345,427			(184,123	)		1,161,304

The state income tax (benefit) components aggregated $93,627, $(43,357) and $55,698 for the years ended December 31, 1999, 2000, and 2001, respectively. Income tax expense for the years ended December 31, 1999, 2000, and 2001 differed from the amount computed by applying the U.S. Federal income tax rate of 34% to earnings before Federal income taxes as a result of the following:

	1999			2000			2001
Expected income tax expense (benefit)	$	2,041,017		$	(856,761	)	$	1,807,295
Foreign earned income not subject to direct taxation		(2,028,352	)		(169,124	)		(614,882	)
Tax-exempt interest		(77,895	)		(151,738	)		(15,654	)
State taxes and other		147,952			20,895			(15,455	)
	$	82,722		$	(1,156,728	)	$	1,161,304

Deferred income taxes are based upon temporary differences between the financial statement and tax bases of assets and liabilities. The following deferred taxes are recorded:

	December 31,
	2000		2001
Deferred tax assets:
Loss reserve discounting	$	1,075,061	$	2,336,868
Unearned premium reserves		1,209,162		2,128,862
Net operating loss carry forward		398,597		—
Difference between tax and GAAP basis of Harbour Village project		5,839,919		5,118,563
Gross deferred tax assets		8,522,739		9,584,293
Deferred tax liabilities:
Deferred acquisition costs		978,785		1,855,958
Unrealized gain on securities		159,251		311,530
Other		1,512		1,772
Gross deferred tax liabilities		1,139,548		2,169,260
Net deferred tax asset	$	7,383,191	$	7,415,033

A valuation allowance has not been established as the Company believes it is more likely than not that the deferred tax asset will be realized.

(8) Insurance Accounting

The consolidated financial statements have been prepared in conformity with generally accepted accounting principles which vary in certain respects, for the Company, American Safety Casualty and American Safety Indemnity, from statutory accounting practices prescribed or permitted by regulatory authorities. Statutory accounting practices includes state laws, regulations, and general administrative rules, as well as a variety of publications of the National Association of Insurance Commissioners (the “NAIC”). In its March 1998 meeting, the NAIC membership adopted the Codification of Statutory Accounting Principles Project (the “Codification”) as the NAIC-supported basis of accounting. The Codification was approved with a provision allowing for commissioner discretion in determining appropriate statutory accounting for insurers. Accordingly, such discretion will continue to allow prescribed or permitted accounting practices that may differ from state to state.

F-18

AMERICAN SAFETY INSURANCE GROUP, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The implementation date of Codification for the Company is January 1, 2001. The Company evaluated the impact of adopting Codification on statutory capital and surplus at January 1, 2001 and determined that statutory capital and surplus increased by $803,935 due to the recognition of a deferred tax asset for statutory reporting.

The Bermuda Insurance Act of 1978 and related regulations (the “Act”) requires the Company to meet a minimum solvency margin. Statutory capital and surplus as of December 31, 1999, 2000 and 2001 were $61,038,760, $57,709,998 and $60,066,839, respectively, and the amounts required to be maintained by the Company were $2,355,558, $3,179,716 and $3,610,139, respectively. In addition, a minimum liquidity ratio must be maintained whereby relevant assets, as defined by the Act, must exceed 75% of relevant liabilities. Once these requirements have been met, there is no restriction on the retained earnings available for distribution.

As reported in American Safety Casualty’s 2001 annual statement, the statutory capital and surplus of American Safety Casualty approximated $24,600,583. The maximum amount of dividends which can be paid, without prior written approval of the Commissioner of Insurance of the State of Delaware, is limited to the greater of 10% of surplus as regards policyholders or net income, excluding realized capital gains, of the preceding year. Accordingly, American Safety Casualty can pay dividends in 2002 of approximately $2,460,058.

The National Association of Insurance Commissioners (the “NAIC”) has established risk-based capital (“RBC”) requirements to help state regulators monitor the financial strength and stability of property and casualty insurers by identifying those companies that may be inadequately capitalized. Under the NAIC’s requirements, each insurer must maintain its total capital above a calculated threshold or take corrective measures to achieve the threshold. The threshold of adequate capital is based on a formula that takes into account the amount of risk each company faces on its products and investments. The RBC formula takes into consideration four major areas of risk: (i) asset risk which primarily focuses on the quality of investments; (ii) insurance risk which encompasses coverage-related issues and anticipated frequency and severity of losses when pricing and designing insurance coverages; (iii) interest rate risk which involves asset/liability matching issues; and (iv) other business risks.

American Safety Casualty and American Safety Indemnity have calculated their RBC level and have determined that their capital and surplus is in excess of threshold requirements.

(9) Loans Payable

Acquisition and Development Loan

In July 2000, the Company, through its subsidiary, Ponce Lighthouse Properties, Inc., initially closed a $37,900,000 acquisition, development and construction loan facility with a commercial bank for the Harbour Village Golf and Yacht Club project. As of December 31, 2000, the Company had outstanding borrowings of $11,021,976. The loan facility was increased in July 21, 2001 and through December 31, 2001, the Company had outstanding borrowings of $15,290,265. Interest only is due monthly until July 19, 2002, at which time all outstanding principal and interest is due. Partial repayments are required as residential condominium units and boat slips are sold. The loan bears interest at a variable rate equal to 30 day LIBOR plus 2.25%, adjusted monthly. The loan is secured by a first mortgage on the real estate and a first priority security interest in all contracts for the sale of condominium units and boat slips, as well as all personal property used in the project. Both the Company and American Safety Holdings Corp., a subsidiary, have provided partial loan guarantees. The Company has also provided a $1,928,932 letter of credit as additional security.

Finance of Insurance Premiums

The Company through its subsidiary, Ponce Lighthouse Properties, Inc., financed various insurance premiums in connection with the Harbour Village project. The premium financing loan is unsecured and bear interest at a rate of 8.5%. The outstanding balance at December 31, 2001 was $43,433. The outstanding principal of $43,433 is due in 2002.

Maturities of Loans Payable

Loans payable mature as follows: $15,333,698 in 2002.

F-19

AMERICAN SAFETY INSURANCE GROUP, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Interest Cost

The Company capitalizes interest as a component of cost during the development and construction period. In 2001, the Company incurred $1,232,860 in interest cost, all of which was capitalized.

(10) Related Party and Affiliate Transactions

The Company has entered into reinsurance agreements with two companies, Intersure Reinsurance Company (“Intersure Re”) and Omega Reinsurance Company (“Omega Re”), each of which is owned and controlled, respectively, by a senior officer of the Company, in order to provide limits of coverage on terms not readily available in the commercial reinsurance market. Reinsurance premiums ceded and earned aggregated $206,000, $308,875 and $587,071 for the years ended December 31, 1999, 2000 and 2001, respectively. Intersure Re has exercised a previously granted option to purchase common shares of American Safety at an option price approximating fair value at the date of the grants. See Note (14).

ASI Services, American Safety’s underwriting and administrative services subsidiary, leases office space from an entity which is owned by certain directors and shareholders of the Company. The lease commenced on March 1, 2001 and expires on February 28, 2006. The Company pays base annual rent of $343,255 plus an annual increase based on the consumer price index of at least 4%.

The following tables reconcile the income statement effects to the Company from American Safety RRG:

	Years ended December 31,
	1999			2000		2001
	(In thousands)
Assumed premiums from American Safety RPG	$	3,449		$	5,761	$	10,964
Ceded premiums to American Safety RRG		3,973			4,469		7,005
Net premiums earned		(524	)		1,292		3,959
Management fee		1,386			1,424		1,496
Loss control fees		75			—		—
Brokerage commission income		1,080			2,515		1,490
Total revenues	$	2,017		$	5,231	$	6,945
Loss and loss adjustment expense incurred	$	181		$	535	$	2,392

For the years ended December 31, 1999, 2000 and 2001, ASI Services and ECSI received fees from American Safety RRG for risk management, claims administration and other management services. ASI Services also recognized brokerage commission income from American Safety RRG.

The following table shows the balance sheet effects to the Company from American Safety RRG:

	December 31,
Assets	1999		2000		2001
Due from affiliate	$	2,088,748	$	985,320	$	1,108,520
Liabilities
Unpaid loss and Loss adjustment expenses		6,541,918		5,902,643		8,821,395
Unearned premiums		2,114,813		1,508,781		4,238,931
Ceded premiums payable		1,636,207		567,786		—
Reinsurance payable on paid loss and Loss adjustment expenses		79,198		229,790		—

(11) Segment Information

Factors used to identify the Company’s reportable segments:

The Company’s United States and Bermuda operating segments were identified by management as separate operating segments based upon the regulatory environments of each of these countries. Significant differences exist under United States and Bermuda law

F-20

AMERICAN SAFETY INSURANCE GROUP, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

concerning the regulation of insurance entities, including differences in: types of permissible investments, minimum capital requirements, solvency monitoring, pricing, corporate taxation, etc.

Products and services from each reportable segment:

The Company is a specialty insurance holding company which, through its United States and Bermuda operating segments, develops, underwrites, manages and markets primary casualty insurance and reinsurance programs in the alternative insurance market for environmental remediation risks, employee leasing and staffing industry risks, and other specialty risks. The Company has demonstrated expertise in developing specialty insurance coverages and custom designed risk management programs not generally available in the standard insurance market.

The Company is the owner/developer of the Harbour Village project in Ponce Inlet, Florida, as discussed in Note 3, and this item is reflected in the segment United States-Real Estate.

The United States operating segment’s specialty insurance programs include insurance and reinsurance for general, pollution and professional liability, workers’ compensation, surety, as well as custom designed risk management programs for contractors, consultants and other business and property owners who are involved with environmental remediation, general construction and other specialty risks.

Through its United States brokerage and management services subsidiaries, the Company also provides specialized insurance program development, underwriting, risk and reinsurance placement, program management, brokerage, loss control, claims administration and marketing services. The Company also insures and places risks through two United States insurance subsidiaries, as well as its non-subsidiary risk retention group affiliate and other unaffiliated insurance companies.

Through its Bermuda operating segment, the Company places and reinsures a portion of the risks underwritten directly by its United States segment, its risk retention group affiliate and other insurers.

Information about segment profit or loss and assets

	December 31,
	1999			2000			2001
	(In thousands)
United States—Insurance
Net premiums earned—All other	$	9,626		$	24,413		$	62,855
Net premiums earned—Intersegment		(4,082	)		(8,501	)		(13,288	)
Net investment income and interest on notes receivable		807			1,955			2,882
Other income		4,061			3,804			5,331
Total revenues		10,412			21,671			57,780
Interest expense		—			—			183
Depreciation and amortization expense		126			21,671			301
Equity in net earnings of subsidiaries		437	*		—			—
Income taxes		83			240			332
Segment earnings (loss)		(45	)		(816	)		735
Significant noncash items other than depreciation and amortization		—			—			—
Property, plant and equipment		393			702			840
Total investments		31,508			56,032			70,607
Total assets		48,316			155,821			233,879
Total policy and contract liabilities		23,042			87,149			170,374
Total liabilities		38,782			127,480			204,516

* Represents earnings during 1999 prior to transfer of American Safety Casualty from Bermuda segment to the U.S. segment in August 1999

F-21

AMERICAN SAFETY INSURANCE GROUP, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

	December 31,
	1999			2000			2001
	(In thousands)
United States—Real Estate
Net premiums earned—All other	$	—		$	—		$	—
Net premiums earned—Intersegment		—			—			—
Net investment income and interest on notes receivable		—			—			—
Real estate income		—			—			27,561
Other income		—			1			5
Total revenues		—			1			27,566
Interest expense		—			—			—
Depreciation and amortization expense		—			44			—
Equity in net earnings of subsidiaries		—			—			—
Income taxes (benefit)		—			(184	)		830
Segment earnings (loss)		—			(357	)		1,611
Significant noncash items other than depreciation and amortization		—			—			—
Property, plant and equipment		—			234			368
Total investments		—			24,836			36,612
Total assets		—			28,975			46,925
Total policy and contract liabilities		—			—			—
Total liabilities		—			19,658			35,987
Bermuda
Net premiums earned—All other		2,499			2,392			1,932
Net premiums earned—Intersegment		4,082			8,501			13,288
Net investment income and interest on notes receivable		4,686			2,181			1,535
Other income		327			491			418
Total revenues		11,594			13,565			17,173
Interest expense		—			—			—
Depreciation and amortization expense		12			16			11
Equity in net earnings (loss) of subsidiaries		391			(1,861	)		2,346
Income taxes		—			—			—
Segment earnings		5,965			497			1,808
Significant noncash items other than depreciation and amortization		—			—			—
Property, plant and equipment		841			—			839
Total investments		53,676			58,200			65,497
Total assets		93,022			85,486			95,100
Total policy and contract liabilities		12,262			16,501			16,368
Total liabilities		15,979			17,520			23,944
Intersegment Eliminations
Net premiums earned—All other		—			—			—
Net premiums earned—Intersegment		—			—			—
Net investment income and interest on notes receivable		—			—			—
Other income		(519	)		841			(169	)
Total revenues		(519	)		841			(169	)
Interest expense		—			—			(150	)
Depreciation and amortization expense		—			—			—
Equity in net earnings (loss) of subsidiaries		(828	)		1,861			(2,346	)
Income taxes		—			—			—
Segment earnings		—			—			—
Significant noncash items other than depreciation and amortization		—			—			—
Property, plant and equipment		—			—			—
Total investments		(25,536	)		(47,821	)		(51,476	)
Total assets		(37,321	)		(62,984	)		(78,642	)
Total policy and contract liabilities		(5,732	)		(11,188	)		(12,113	)
Total liabilities		(11,784	)		(15,163	)		(27,166	)
Total
Net premiums earned—All other		12,125			26,805			64,787
Net premiums earned—Intersegment		—			—			—
Net investment income and interest on notes receivable		5,493			4,136			4,417
Other income		3,869			5,137			5,585
Total revenues		21,487			36,078			102,350
Interest expense		—			—			33
Depreciation and amortization expense		138			300			312
Equity in net earnings of subsidiaries		—			—			—
Income taxes (benefit)		83			(1,157	)		1,162
Net earnings (loss)		5,920			(1,363	)		4,154
Significant noncash items other than depreciation and amortization		—			—			—
Property, plant and equipment		1,234			936			2,047
Total investments		59,648			91,247			121,240
Total assets		104,017			207,298			297,262
Total policy and contract liabilities		29,572			92,462			174,629
Total liabilities		42,977			149,495			237,281

F-22

AMERICAN SAFETY INSURANCE GROUP, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(12) Commitments and Contingencies

At December 31, 2000 and 2001, the Company had aggregate outstanding irrevocable letters of credit which had not been drawn amounting to $1,000,000 in favor of the Vermont Department of Banking, Insurance, Securities and Health Care Administration. Investments in the amount of $1,000,000 have been pledged as collateral to the issuing bank.

(13)    Liability for Unpaid Loss and Loss Adjustment Expenses

Activity in the liability for unpaid claims and claim adjustment expenses is summarized as follows:

	Years ended December 31,
	1999			2000		2001
	(In thousands)
Unpaid loss and loss adjustment expenses, January 1	$	14,701		$	20,413	$	50,509
Reinsurance recoverable on unpaid losses and loss adjustment expenses at end of period		1,841			6,064		27,189
Net unpaid loss and loss adjustment expense, January 1		12,860			14,348		23,320
Incurred related to:
Current year		7,449			17,356		42,469
Prior years		(553	)		1,150		1,517
Total incurred		6,896			18,506		43,986
Paid related to:
Current year		1,707			4,291		12,952
Prior years		3,701			5,243		10,514
Total paid		5,408			9,534		23,466
Net unpaid losses and loss adjustment expenses at end of period		14,348			23,320		43,840
Reinsurance recoverable on unpaid losses and loss adjustment expenses at end of period		6,065			27,189		77,583
Unpaid loss and loss adjustment end expenses at of period		20,413			50,509		121,423

The negative development in 2000 and 2001 is attributable to the Company’s commercial lines and surety lines of business. Management continually attempts to improve its loss estimation process by refining its ability to analyze loss development patterns, claims payments and other information, but many reasons remain for potential adverse development of estimated ultimate liabilities. For example, the uncertainties inherent in the loss estimation process have become increasingly subject to changes in legal trends. In recent years, this trend has expanded the liability of insureds, established new liabilities and reinterpreted contracts to provide unanticipated coverage long after the related policies were written. Such changes from past experience significantly affect the ability of insurers to estimate liabilities for unpaid losses and related expenses.

Management recognizes the higher variability associated with certain exposures and books of business and considers this factor when establishing liabilities for losses. Management currently believes the Company’s gross and net liabilities are adequate.

The net liabilities for losses and loss adjustment expenses maintained by the Company’s insurance subsidiaries are equal under both statutory and generally accepted accounting principles.

F-23

AMERICAN SAFETY INSURANCE GROUP, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(14) Stock Options

The following table shows the stock option activity for the Company during 1999, 2000 and 2001.

	Option shares		Weighted average exercise price
Outstanding at December 31, 1998	451,181		$	9.86
1999 activity:
Granted	106,500			9.50
Canceled	(15,250	)		—
Outstanding at December 31, 1999	542,431		$	9.78
2000 activity:
Granted	99,650			6.00
Canceled	(17,891	)		—
Outstanding at December 31, 2000	624,190		$	9.20
2001 activity:
Granted	328,724			6.00
Canceled	(15,341	)		—
Outstanding at December 31, 2001	937,573		$	8.13

Of the 937,573 outstanding options at December 31, 2001, 834,718 were exercisable.

Of the 624,190 outstanding options at December 31, 2000, 361,140 were exercisable.

Of the 542,431 outstanding options at December 31, 1999, 232,348 were exercisable.

The remainder of the options vest evenly over a three year period.

The following table summarizes information about stock options outstanding at December 31, 2001:

Options Outstanding				Options exercisable
Range of exercise price	Number outstanding	Weighted average remaining contractual life	Weighted average exercise price	Grant Year	Number exercisable	Weighted average exercise price
$5.96	51,090	0.18	$5.96	1997	51,090	$5.96
7.08	65,500	5.75	7.08	1997	65,500	7.08
11.00	320,000	6.13	11.00	1998	320,000	11.00
9.50	93,400	7.13	9.50	1999	62,267	9.50
6.00	107,583	8.17	6.00	2000	35,861	6.00
6.00	300,000	9.04	6.00	2001	300,000	6.00
$5.96-11.00	937,573	7.04	$8.13		834,718	$8.26

Had compensation cost for the Company’s stock options granted in 1999, 2000 and 2001 been determined using the fair-value-based method as described in SFAS No. 123, the Company’s net earnings (loss) and earnings (loss) per share would approximate the pro forma amounts indicated below:

	December 31, 1999		December 31, 2000		December 31, 2001
	(In thousands, except per share amounts)
Net earning (loss):
As reported	$	5,920	(1,363	)	$	4,154
Effect of stock options		736	886			2,210
Pro forma net earnings (loss)	$	5,184	(2,249	)	$	1,944
Net earnings (loss) per share:
As reported	$	.98	(.25	)	$	.84
Effect of stock options		.12	(.16	)		.45
Pro forma net earnings (loss) per share	$	.86	(.41	)	$	.39

F-24

AMERICAN SAFETY INSURANCE GROUP, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The fair value of each option granted during 1999, 2000 and 2001 was estimated on the date of grant using the Black-Scholes multiple option approach with the following assumptions: dividend yield of 0.0%; expected volatility of 37.87%, 51.08% and 44.33% in 1999, 2000 and 2001, respectively; risk-free interest rate of 5.40%; and expected life from the vesting dates ranging from 0.50 years to 10.00 years.

The effects of applying SFAS No. 123 in this pro forma disclosure are not indicative of future amounts. The Company expects to grant additional awards in future years. The Company granted options in 1999, 2000 and 2001 at an amount deemed to be fair market value at the date of grant.

(15)    Acquisitions

On March 24, 2000, the Company purchased Trafalgar Insurance Company, an Oklahoma licensed insurance company, which has authority to operate as an excess and surplus lines insurance company in 34 states and the District of Columbia. Trafalgar Insurance Company’s stock was acquired from Houston Casualty Company for a purchase price of $16.3 million cash, and Trafalgar had, at closing, cash of $9.3 million and investments of $5.7 million creating $1.3 million of goodwill. The net cash outlay for this acquisition was $7.0 million. Prior to closing, Trafalgar entered into a bulk assumption reinsurance agreement with Houston Casualty, under which Houston Casualty assumed all of Trafalgar’s prior and existing insurance business. Trafalgar has been renamed American Safety Indemnity Company.

On January 6, 2000, the Company acquired (i) the stock of L&W Holdings, Inc. and its wholly-owned subsidiary, RCA Syndicate #1, Ltd., an Illinois licensed insurance insurer operating on the INEX (formerly the Illinois Insurance Exchange), (ii) the stock of Principal Management, Inc., an insurance program development and management company headquartered in Okemos, Michigan, and in a related transaction, the Company also acquired (iii) the stock of Pegasus Insurance, a Cayman Islands licensed insurance insurer. The transactions were structured as stock acquisitions, with the purchase price paid by the Company consisting of $3,500,000 plus 200,000 American Safety common shares and earnout provisions for up to an additional 254,000 American Safety common shares over a five-year period. Of the purchase price, $1,000,000 of cash and 109,086 shares of stock are held in escrow to secure the obligations of the sellers. The Company also obtained a security interest in a real estate condominium in the Cayman Islands with an estimated value of $600,000 to secure the obligations of the sellers. On April 21, 2000, the Company filed a lawsuit to rescind these acquisitions based upon the sellers’ misrepresentations as to the business affairs and financial condition of the acquired companies, and recognized an expense, net of recoverables, of $3.5 million in 2000 and $600,000 in 2001 for such rescission. The sellers’ misrepresentations as to the business affairs and financial condition of the acquired companies, and the under-reserving for claims, relate only to the operations of the acquired companies. The lawsuit is in the final stages of pre-trial discovery.

(16)    Litigation

The Company is a defendant in various litigation matters considered to be in the normal course of or related to its business. While the outcome of these matters cannot be estimated with certainty, it is the opinion of management (after consultation with legal counsel) that the resolution of such litigation will not have a material adverse effect on the Company’s financial statements.

F-25

AMERICAN SAFETY INSURANCE GROUP, LTD. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

	December 31, 2001			June 30, 2002 (unaudited)
Assets
Investments:
Securities available for sale, at fair value:
Fixed maturities	$	61,836,101			71,166,457
Investment in real estate		37,662,600			32,243,516
Short-term investments		21,742,272			12,191,991
Total investments		121,240,973			115,601,964
Cash		1,302,842			5,400,444
Restricted cash		9,010,489			8,708,072
Accrued investment income		2,424,551			2,517,756
Notes receivable—other		8,081,899			7,983,768
Premiums receivable		25,783,225			20,619,266
Ceded unearned premium		19,161,319			23,387,683
Reinsurance recoverable		87,173,021			99,869,828
Funds on deposit		312,717			333,219
Due from affiliate		1,108,520			2,816,997
Income tax recoverable		1,614,940			1,037,339
Deferred income taxes		7,415,033			7,022,302
Deferred acquisition costs		5,781,810			6,701,091
Property, plant and equipment		2,046,332			2,131,302
Prepaid items		1,480,078			1,684,743
Goodwill and other intangible assets		1,466,629			1,466,629
Other assets		1,857,239			4,369,563
Total assets	$	297,261,617		$	311,651,966
Liabilities and Shareholders’ Equity
Liabilities:
Unpaid losses and loss adjustment expenses		121,423,039			138,592,123
Unearned premiums		53,205,500			59,218,024
Reinsurance on paid losses and loss adjustment expenses		2,081,845			—
Ceded premiums payable		14,224,460			11,195,856
Due to affiliate:
Reinsurance on paid losses and loss adjustment expenses		—			599,353
Escrow deposits		11,718,824			9,768,029
Accounts payable and accrued expenses		13,459,422			10,935,117
Funds held		1,433,648			2,037,810
Loan payable		16,403,135			11,211,145
Collateral held		821,302			1,309,532
Deferred Revenue		2,185,104			3,203,566
Unearned loan fees		325,000			325,000
Total liabilities		237,281,279			248,395,555
Shareholders’ equity:
Preferred stock, $0.01 par value; authorized 5,000,000 shares; no shares issued and outstanding		—			—
Common stock, $0.01 par value; authorized 15,000,000 shares; issued and outstanding at December 31, 2001, 6,287,266 shares, and at June 30, 2002, 6,347,689 shares		62,873			63,476
Additional paid-in capital		35,206,614			35,566,503
Retained earnings		33,416,851			36,183,432
Accumulated other comprehensive income (loss), net		834,974			1,095,715
Treasury stock, 1,589,239 shares at December 31, 2001, and 1,601,139 shares at June 30, 2002		(9,540,974	)		(9,652,715	)
Total shareholders’ equity		59,980,338			63,256,411
Total liabilities and shareholders’ equity	$	297,261,617		$	311,651,966

See accompanying notes to consolidated financial statements (unaudited).

F- 26

AMERICAN SAFETY INSURANCE GROUP, LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS

(Unaudited)

	Three Months ended June 30,					Six Months ended June 30,
	2001		2002			2001		2002
Revenues:
Direct premiums earned	$	28,156,096	$	27,940,967		$	51,163,158	$	57,798,874
Assumed premiums earned:
Affiliate		2,640,891		3,553,857			5,103,703		6,541,476
Nonaffiliates		3,878,997		1,635,335			7,638,339		2,883,607
Total assumed premiums earned		6,519,888		5,189,192			12,742,042		9,425,083
Ceded premiums earned:
Affiliate		1,540,646		787,385			2,917,653		1,527,437
Nonaffiliates		16,098,341		16,881,575			30,581,532		35,636,084
Total ceded premiums earned		17,638,987		17,668,960			33,499,185		37,163,521
Net premiums earned		17,036,997		15,461,199			30,406,015		30,060,436
Net investment income		905,108		899,318			1,762,620		1,874,875
Interest on notes receivable		283,383		—			559,315		—
Brokerage commission income		508,081		37,514			999,024		102,640
Management fees from affiliate		367,503		75,754			731,308		493,181
Net realized gains (losses)		175,830		(547,949	)		415,349		(465,702	)
Real estate income		—		14,896,921			—		33,935,661
Other income		189,726		36,703			849,585		88,510
Total revenues		19,466,628		30,859,460			35,723,216		66,089,601
Expenses:
Losses and loss adjustment expenses incurred		10,767,405		8,561,371			18,865,372		17,530,512
Acquisition expenses		3,134,384		3,199,148			6,240,112		6,297,445
Payroll and related expenses		2,095,148		2,202,352			4,182,085		4,304,100
Real estate expenses		365,359		12,459,152			751,289		29,154,480
Other expenses		1,298,655		1,559,663			2,577,514		2,695,252
Expense due to rescission		—		142,844			—		353,592
Total expenses		17,660,951		28,124,530			32,616,372		60,335,381
Earnings before income taxes		1,805,677		2,734,930			3,106,844		5,754,220
Income taxes		220,009		881,534			259,400		1,855,293
Net earnings	$	1,585,668	$	1,853,396		$	2,847,444	$	3,898,927
Net earnings per share:
Basic	$	0.33	$	0.39		$	0.59	$	0.83
Diluted	$	0.32	$	0.38		$	0.58	$	0.80
Common shares used in computing earnings per share:
Basic		4,799,206		4,743,803			4,840,561		4,724,263
Diluted		4,984,085		4,882,899			4,949,580		4,875,679

See accompanying notes to consolidated financial statements (unaudited).

F-27

American Safety Insurance Group, Ltd. and Subsidiaries

Consolidated Statements of Cash Flow

(unaudited)

	Six Months ended June 30,
	2001			2002
Cash flow from operating activities:
Net earnings	$	2,847,444		$	3,898,927
Adjustments to reconcile net earnings to net cash provided by operating activities:
Realized (gains) losses on sale of investments		(415,349	)		465,702
Amortization of deferred acquisition costs		(1,760,261	)		(919,281	)
Change in:
Accrued investment and interest income		(651,249	)		(93,205	)
Premiums receivable		2,804,168			5,163,959
Commissions receivable		(26,034	)		—
Reinsurance recoverable and ceded unearned premiums		(15,176,103	)		(19,005,016	)
Unearned loan fees		(162,500	)		—
Funds held by reinsured		(1,256,211	)		604,162
Due from affiliate		(3,647,760	)		(1,708,477	)
Funds on Deposit		(655,584	)		(20,502	)
Income taxes		178,144			970,322
Unpaid losses and loss adjustment expenses		25,758,317			17,169,084
Unearned premiums		11,352,714			6,012,524
Ceded premiums payable		(6,785,205	)		(3,028,604	)
Due to affiliate		493,458			599,353
Accounts payable and accrued expenses		1,321,786			(2,524,305	)
Collateral		(710,045	)		488,230
Prepaid items		(283,596	)		(204,665	)
Deferred revenue		—			1,018,462
Other, net		342,503			(2,648,255	)
Net cash provided by operating activities		13,568,637			6,238,425
Cash flow from investing activities:
Purchases of fixed maturities		(30,788,837	)		(36,189,600	)
Purchases of equity investments		(2,304,382	)		—
Proceeds from maturity and redemption of fixed maturities		898,850			184,139
Proceeds from sale of fixed maturities		19,580,957			26,502,526
Proceeds from sale of equity investments		1,697,366			103,550
Decrease (increase ) in investment in real estate		(14,868,514	)		5,419,084
Decrease (increase) in short-term investments		(1,211,039	)		9,550,281
(Advances) repayment in notes receivable—other		(312,410	)		98,131
Purchase of fixed assets, net		(1,025,116	)		(84,970	)
Net cash (used in) provided by investing activities		(28,333,125	)		5,583,141
Cash flow from financing activities:
Purchase of treasury stock		(1,432,612	)		(111,741	)
Proceeds from issuance of common stock		—			360,494
Proceeds from (repayment of) loan payable		11,905,591			(5,191,990	)
Proceeds from (repayment of) escrow deposits		5,688,503			(1,950,795	)
Dividends paid		—			(1,132,349	)
Net cash provided by (used in) financing activities		16,161,482			(8,026,381	)
Net increase in cash		1,396,994			3,795,185
Cash at beginning of period		9,901,784			10,313,331
Cash at end of period	$	11,298,778		$	14,108,516

See accompanying notes to consolidated financial statements (unaudited).

F-28

AMERICAN SAFETY INSURANCE GROUP, LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS

(Unaudited)

	Three months ended June 30,						Six months ended June 30,
	2001			2002			2001			2002
Net earnings	$	1,585,668		$	1,853,396		$	2,847,444		$	3,898,927
Other comprehensive earnings (loss) before income taxes:
Unrealized gains (losses) on securities available for sale		(616,579	)		1,385,811			218,663			(156,815	)
Reclassification adjustment for realized gains (losses) included in net earnings		175,830			(547,949	)		415,349			(465,702	)
Total other comprehensive earnings (loss) before taxes		(792,409	)		1,933,760			(196,686	)		308,887
Income tax expense (benefit) related to items of other comprehensive income		(194,853	)		445,678			(81,502	)		48,146
Other comprehensive earnings (loss) net of income taxes		(597,556	)		1,488,082			(115,184	)		260,741
Total comprehensive earnings	$	988,112		$	3,341,478		$	2,732,260		$	4,159,668

See accompanying notes to consolidated financial statements (unaudited).

F-29

AMERICAN SAFETY INSURANCE GROUP, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1—Basis of Presentation

The accompanying unaudited interim consolidated financial statements of American Safety Insurance Group, Ltd. (“American Safety”) and its subsidiaries (collectively, the “Company”) are prepared in accordance with accounting principles generally accepted in the United States of America and, in the opinion of management, reflect all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation of the interim period presented. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates, based on the best information available, in recording transactions resulting from business operations. The balance sheet amounts that involve a greater extent of accounting estimates and actuarial determinations subject to future changes are the Company’s liabilities for unpaid losses and loss adjustment expenses. As additional information becomes available (or actual amounts are determinable), the recorded estimates may be revised and reflected in operating results. While management believes that the liability for unpaid losses and loss adjustment expenses is adequate to cover the ultimate liability, such estimates may be more or less than the amounts actually paid when claims are settled.

The results of operations for the three months or six months ended June 30, 2002 may not be indicative of the results that may be expected for the full year ending December 31, 2002. These unaudited interim consolidated financial statements and notes should be read in conjunction with the financial statements and notes included in the audited consolidated financial statements of American Safety and its subsidiaries for the year ended December 31, 2001.

The unaudited interim consolidated financial statements include the accounts of American Safety and each of its subsidiaries. All significant intercompany balances have been eliminated. Certain items from prior periods have been reclassified to conform with the 2002 presentation.

Note 2—Accounting Pronouncements

In July 2001, the FASB issued Statement No. 141, Business Combinations, and Statement No. 142, Goodwill and Other Intangible Assets. Statement 141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001, as well as all purchase method business combinations completed after June 30, 2001. Statement 141 also specifies criteria intangible assets acquired in a purchase method business combination must meet to be recognized and reported apart from goodwill, noting that any purchase price allocable to an assembled workforce may not be accounted for separately. Statement 142 requires that goodwill and intangible assets with indefinite useful lives no longer be amortized, but instead tested for impairment at least annually in accordance with the provisions of Statement 142. Statement 142 also requires that intangible assets with definite useful lives be amortized over their respective estimated useful lives to their estimated residual values, and reviewed for impairment in accordance with SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of.

Statement 141 requires upon adoption of Statement 142, that the Company evaluate its existing intangible assets and goodwill that were acquired in a prior purchase business combination, and to make any necessary reclassifications in order to conform with the new criteria in Statement 141 for recognition apart from goodwill. Upon adoption of Statement 142, the Company is required to reassess the useful lives and residual values of all intangible assets acquired in purchase business combinations, and make any necessary amortization period adjustments by the end of the first interim period after adoption. In addition, to the extent an intangible asset is identified as having an indefinite useful life, the Company is required to test the intangible asset for impairment in accordance with the provisions of Statement 142 within the first interim period. Any impairment loss is measured as of the date of adoption and recognized as the cumulative effect of a change in accounting principle in the first interim period. The Company adopted SFAS 142 effective January 1, 2002.

As of the date of adoption, the Company had unamortized goodwill in the amount of $1.5 million, which is subject to the transition provisions of Statement 141 and 142. Amortization expense related to goodwill was $87,234, $0 and $0 for the year ended December 31, 2001 and the three and six month periods ended June 30, 2002, respectively. See Note 10 for additional information.

F-30

AMERICAN SAFETY INSURANCE GROUP, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

The FASB issued Statement No. 143 (“SFAS 143”), “Accounting for Asset Retirement Obligations” in August 2001. This standard requires entities to record the fair value of a liability for an asset retirement obligation in the period in which it is incurred. The standard is effective for fiscal years beginning after June 15, 2002. The Company will adopt SFAS 143 effective January 1, 2003, and does not expect the adoption of this statement to have any material impact on its consolidated financial statements.

The FASB issued Statement 144 (“SFAS 144”), “Accounting for the Impairment or Disposal of Long-Lived Assets” in October 2001. The FASB’s new rules on asset impairment supersede FASB Statement No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of” and provide a single accounting model for long-lived assets to be disposed of. The standard is effective for fiscal years beginning after December 15, 2001 and interim periods within those fiscal years, with early application encouraged. The Corporation adopted SFAS 144 effective January 1, 2002 with no material impact on its consolidated financial statements.

Note 3—Nature of Operations

The following is a description of certain risks facing the Company:

Legal/Regulatory Risk is the risk that changes in the legal or regulatory environment in which an insurer operates which will create additional expenses not anticipated by the insurer in pricing its products and beyond those recorded in the financial statements. Regulatory initiatives designed to reduce insurer profits or otherwise affecting the industry in which the Company operates, new legal theories or insurance company insolvencies through guaranty fund assessments, may create costs for the Company beyond those recorded in the financial statements. The Company attempts to mitigate this risk by writing insurance business in several states, thereby spreading this risk over a large geographic area.

Potential Risk of United States Taxation of Bermuda Operations. Under current Bermuda law, American Safety is not required to pay any taxes in Bermuda on either income or capital gains. American Safety has received an undertaking from the Minister of Finance in Bermuda that will exempt American Safety from taxation until the year 2016 in the event of any such taxes being imposed. The Company, exclusive of its United States subsidiaries, does not consider itself to be engaged in a trade or business in the United States and accordingly does not expect to be subject to direct United States income taxation. The Company’s U.S. subsidiaries are subject to taxation in the United States.

Whether a foreign corporation is engaged in a United States trade or business or is carrying on an insurance business in the United States depends upon the level of activities conducted in the United States. If the activities of a foreign company are “continuous, regular, and considerable,” the foreign company will be deemed to be engaged in a United States trade or business. Due to the fact that American Safety will continue to maintain an office in Bermuda and American Safety and its Bermuda insurance subsidiary’s business is reinsuring contracts via treaty reinsurance agreements, which are all signed outside of the United States, American Safety does not consider itself to be engaged in a trade or business in the United States and, accordingly, does not expect to be subject to United States income taxes. This position is consistent with the position taken by various other entities that have the same operational structure as American Safety.

However, because the Internal Revenue Code of 1986, as amended, the Treasury Regulations and court decisions do not definitively identify activities that constitute being engaged in a United States trade or business, and because of the factual nature of the determination, there can be no assurance that the Internal Revenue Service will not contend that American Safety or its Bermuda insurance subsidiary are engaged in a United States trade or business. In general, if American Safety or its Bermuda insurance subsidiary are considered to be engaged in a United States trade or business, it would be subject to (i) United States Federal income tax on its taxable income that is effectively connected with a United States trade or business at graduated rates and (ii) the 30 percent branch profits tax on its effectively connected earnings and profits deemed repatriated from the United States.

F-31

AMERICAN SAFETY INSURANCE GROUP, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

Credit Risk is the risk that issuers of securities owned by the Company or secured notes receivable will default or that other parties, including reinsurers that have obligations to the insurer, will not pay or perform. The Company attempts to mitigate this risk by adhering to a conservative investment strategy, by obtaining sufficient collateral for secured note obligations and by maintaining sound reinsurance, credit and collection policies.

Interest Rate Risk is the risk that interest rates will change and cause a decrease in the value of an insurer’s investments. The Company attempts to mitigate this risk by attempting to match the maturities of its assets with the expected payouts of its liabilities.

Note 4—Investments

The amortized cost and estimated fair values of investments at December 31, 2001 and June 30, 2002 are as follows:

	Amortized cost		Gross unrealized gains		Gross unrealized losses		Estimated fair value
December 31, 2001:
Securities available for sale:
Fixed maturities:
U.S. Treasury securities and obligations of U.S. Government corporations and agencies	$	28,618,104	$	1,091,312	$	101,892	$	29,607,524
Corporate securities		24,157,207		380,283		146,968		24,390,522
Mortgage-backed securities		7,914,282		3,956		80,183		7,838,055
Total fixed maturities	$	60,689,593	$	1,475,551	$	329,043	$	61,836,101
June 30, 2002:
Securities available for sale:
Fixed maturities:
U.S. Treasury securities and obligations of U.S. Government corporations and agencies	$	30,654,029	$	1,079,444	$	100,906	$	31,632,567
Corporate securities		33,969,100		751,115		336,293		34,383,922
Foreign Securities		599,411		12,243		—		611,654
Mortgage-backed securities		4,488,521		58,738		8,945		4,538,314
Total fixed maturities	$	69,711,061	$	1,901,540	$	446,144	$	71,166,457

Note 5—Segment Information

(a) Factors used to identify the Company’s reportable segments:

The Company’s United States and Bermuda operating segments were identified by management as separate operating segments based upon the regulatory environments of each of these countries. Significant differences exist under United States and Bermuda law concerning the regulation of insurance entities including differences in: types of permissible investments, minimum capital requirements, solvency monitoring, pricing, corporate taxation, etc.

(b) Products and services from each reportable segment:

The Company’s United States and Bermuda operating segments, develop, underwrite, manage and market primary casualty insurance and reinsurance programs in the alternative insurance market for environmental remediation risks, contracting and other specialty risks. The Company has demonstrated expertise in developing specialty insurance coverages and custom designed risk management programs not generally available in the standard insurance market.

The Company is also involved in the development of the Harbour Village Golf and Yacht Club project in Ponce Inlet, Florida, as discussed in Note 7 and this item is reflected in the segment United States—Real Estate.

F-32

AMERICAN SAFETY INSURANCE GROUP, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

The United States operating segment’s specialty insurance programs provide insurance and reinsurance for general, pollution and professional liability exposures, for workers’ compensation and surety, as well as custom designed risk management programs for contractors, consultants and other business and property owners who are involved with environmental remediation, general construction and other specialty risks.

Through its United States brokerage and management services subsidiaries, the Company also provides specialized insurance program development, underwriting, risk and reinsurance placement, program management, brokerage, loss control, claims administration and marketing services. The Company also insures and places risks through its United States insurance subsidiary, as well as its non-subsidiary risk retention group affiliate and other unaffiliated insurance and reinsurance companies.

Through its Bermuda operating segment, the Company places and reinsures a portion of the risks underwritten directly by its United States segment, its risk retention group affiliate and other insurers.

F-33

AMERICAN SAFETY INSURANCE GROUP, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

(c) Information about segment profit or loss and assets:

	Six Months ended June 30,
	2001			2002
United States—Insurance
Net premiums earned—All other	$	29,266,036		$	29,867,698
Net premiums earned—Intersegment		(5,136,869	)		(10,839,625	)
Net investment income and interest on notes receivable		1,380,030			1,465,592
Real estate income		—			—
Other revenues		2,940,980			466,607
Total revenues		28,450,177			20,960,272
Interest expense		74,856			102,302
Depreciation and amortization expense		128,633			109,983
Equity in net earnings of subsidiaries		—			—
Income taxes expense (benefit)		422,730			(193,583	)
Segment profit/(loss)		803,591			(420,714	)
Significant noncash items other than depreciation and amortization		—			—
Property, plant and equipment		801,769			881,490
Total investments		60,224,512			66,695,462
Total assets		179,635,063			250,802,872
Total policy and contract liabilities		121,964,519			191,561,189
Total liabilities		155,142,118			218,792,908
United States—Real Estate
Net premiums earned—All other		—			—
Net premiums earned—Intersegment		—			—
Net investment income and interest on notes receivable		—			—
Real estate income		—			33,935,661
Other revenues		2,105			1,447
Total revenues		2,105			33,937,108
Interest expense		—			—
Depreciation and amortization expense		31,760			67,813
Equity in net earnings of subsidiaries		—			—
Income taxes expense (benefit)		(163,330	)		2,048,876
Segment profit/(loss)		(317,052	)		3,113,408
Significant noncash items other than depreciation and amortization		—			—
Property, plant and equipment		309,323			420,645
Total investments		38,814,819			32,243,516
Total assets		51,006,457			42,802,487
Total policy and contract liabilities		—			—
Total liabilities		37,512,023			28,751,052
Bermuda
Net premiums earned—All other		1,139,979			192,738
Net premiums earned—Intersegment		5,136,869			10,839,625
Net investment income and interest on notes receivable		941,905			409,283
Real estate income		—			—
Other revenues		150,696			(174,425	)
Total revenues		7,369,449			11,267,221
Interest expense		—			—
Depreciation and amortization expense		9,292			10,000
Equity in net earnings of subsidiaries		486,529			2,646,541
Income taxes		—			—
Segment profit		2,360,905			1,206,233
Significant noncash items other than depreciation and amortization		—			—
Property, plant and equipment		849,167			829,167
Total investments		63,077,705			74,104,282
Total assets		90,290,969			105,588,867
Total policy and contract liabilities		17,519,117			29,627,744
Total liabilities		19,183,783			30,952,559
Intersegment Eliminations
Net premiums earned—All other		—			—
Net premiums earned—Intersegment		—			—
Net investment income and interest on notes receivable		—			—
Real estate income		—			—
Other revenues		(98,815	)		(75,000	)
Total revenues		(98,815	)		(75,000	)
Interest expense		(75,000	)		(75,000	)
Depreciation and amortization expense		—			—
Equity in net earnings (loss) of subsidiaries		(486,539	)		(2,646,541	)
Income taxes		—			—
Segment profit (loss)		—			—
Significant noncash items other than depreciation and amortization		—			—
Property, plant and equipment		—			—
Total investments		(49,991,771	)		(57,441,296	)
Total assets		(64,897,111	)		(87,542,260	)
Total policy and contract liabilities		(9,910,624	)		(23,378,786	)
Total liabilities		(14,905,340	)		(30,100,964	)
Total
Net premiums earned—All other		30,406,015			30,060,436
Net premiums earned—Intersegment		—			—
Net investment income and interest on notes receivable		2,321,935			1,874,875
Real estate income		—			33,935,661
Other revenues		2,995,266			218,629
Total revenues		35,723,216			66,089,601
Interest expense		—			27,302
Depreciation and amortization expense		169,685			187,796
Equity in net earnings of subsidiaries		—			—
Income taxes expense (benefit)		259,400			1,855,293
Net profit (loss)		2,847,444			3,898,927
Significant noncash items other than depreciation and amortization		—			—
Property, plant and equipment		1,960,859			2,131,302
Total investments		112,125,265			115,601,964
Total assets		256,035,378			311,651,966
Total policy and contract liabilities		129,573,012			197,810,147
Total liabilities		196,932,584			248,395,555

F-34

AMERICAN SAFETY INSURANCE GROUP, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

Note 6—Shareholder Matters

During the six months ended June 30, 2002, the Company repurchased 11,900 shares of its stock at a total price of $111,741 in open market transactions pursuant to its share repurchase program.

Note 7—Investment in Real Estate

The Company’s investment in the development of the Harbour Village Golf and Yacht Club (“Harbour Village”) project is comprised of 173 acres of property in Ponce Inlet, Florida (the “Property”) that was acquired through foreclosure on April 13, 1999. At the date of foreclosure, the Company evaluated the carrying value of its investment in real estate by comparing the fair value of the foreclosed collateral to the book value of the underlying loan and accrued interest. As the book value of the loan and accrued interest was less than the fair value of the collateral, no loss was recognized on foreclosure and the basis of real estate was recorded in accordance with EITF Abstract 98-11, which included the recognition of $5.8 million in a deferred tax asset.

As of December 31, 2001 and June 30, 2002, the investment in real estate for the Harbour Village project is as follows (in thousands):

	December 31, 2001		June 30, 2002
Land	$	4,360	$	2,428
Capitalized overhead, interest and taxes		3,925		2,597
Work in process		28,328		27,219
Total	$	36,613	$	32,244

During the quarter ended June 30, 2002, the Company closed 49 condominium units and 20 boat slips at Harbour Village. The Company has determined to recognize revenue when title to each individual unit or boat slip passes to the purchaser. When title passes, the Company uses a percentage of completion method, based on actual costs to total estimated costs (including allocated common costs) to recognize revenue. The difference between total sales price and the revenue recognized is set up as deferred revenue and will be recognized as the additional costs of each building are incurred.

Note 8—Income Taxes

Total income tax (benefit) for the six months ended June 30, 2001 and 2002 were allocated as follows:

	Six Months ended June 30,
	2001		2002
Tax expense (benefit) attributable to: Income from continuing operations	$	259,400		1,855,293
Unrealized gains (losses) on securities available for sale		81,502		(48,150	)
Total	$	340,902	$	1,807,143

F-35

AMERICAN SAFETY INSURANCE GROUP, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

U.S. Federal and state income tax expense (benefit) from continuing operations consists of the following components:

	Current	Deferred		Total
June 30, 2001	859,090	(599,690	)	259,400
June 30, 2002	511,037	1,344,256		1,855,293

The state income tax components aggregated $13,170 and $450,001 for the periods ended June 30, 2001 and 2002, respectively.

Income tax expense (benefit) for the periods ended June 30, 2001 and 2002 differed from the amount computed by applying the U.S. Federal income tax rate of 34% to earnings before Federal income taxes as a result of the following:

	June 30,
	2001			2002
Expected income tax expense	$	1,056,327		$	1,956,435
Foreign earned income not subject to U.S. taxation		(802,708	)		(410,220	)
Tax-exempt interest		(15,654	)		—
State taxes and other		21,435			309,078
	$	259,400		$	1,855,293

Deferred income taxes are based upon temporary differences between the financial statement and tax bases of assets and liabilities. The following deferred taxes are recorded:

	December 31, 2001		June 30, 2002
Deferred tax assets:
Loss reserve discounting		2,336,868		2,680,229
Unearned premium reserves		2,128,862		1,640,250
Difference between tax and GAAP basis of Harbour Village Project		5,118,563		4,394,806
Gross deferred tax assets	$	9,584,293	$	8,715,285
Deferred tax liabilities:
Deferred acquisition costs		1,855,958		1,331,531
Unrealized gain on securities		311,530		359,680
Other		1,772		1,772
Gross Deferred tax liabilities		2,169,260		1,692,983
Net deferred tax asset	$	7,415,033	$	7,022,302

Note 9—Notes Receivable

The Company ceases the accrual of interest on loans when any payment is past due. Additionally, the Company assesses loan impairment by comparing the carrying value of such loan, including accrued but unpaid interest at the valuation date to the fair market value of collateral held with respect to such loan. Any shortage of fair value over carrying value is first recognized by reversing interest income recognized for the year of impairment and then recognizing any further loss against the allowance for loan losses. Cash receipts on impaired notes receivable are applied to reduce the principal amount of such notes until the principal has been recovered and are recognized as interest income, thereafter.

F-36

AMERICAN SAFETY INSURANCE GROUP, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

The recorded investment in notes receivable, which meet the definition of impaired loans at December 31, 2001 and June 30, 2002 were $8,081,899 and $7,983,768, respectively. The Company did not maintain an allowance for loan losses, as it believes that the value of collateral held is sufficient to preclude any losses. The weighted average recorded investment in impaired notes receivable as of December 31, 2001 and June 30, 2002 were $2,494,294 and $8,032,834 respectively. Interest income recognized on impaired notes receivable during the six months ended June 30, 2001 and June 30, 2002 were $0 and $0, respectively.

Note 10—Goodwill and Intangibles

The Company adopted SFAS 142 on January 1, 2002. Under SFAS 142, goodwill and indefinite-lived intangible assets are no longer amortized but are reviewed annually (or more frequently if impairment indicators arise) for impairment. Separable intangible assets that are not deemed to have an indefinite life will continue to be amortized over their useful lives (but with no maximum life).

Goodwill and Intangibles	December 31, 2001		June 30, 2002
	(In Thousands)
Goodwill	$	1,467		—
Indefinite-lived Intangibles		—	$	1,467
Other Amortizable Intangibles		—		—
Total Goodwill and Intangibles	$	1,467	$	1,467

In accordance with the disclosure requirements of SFAS 142 the following table shows the effect of the goodwill and intangibles amortization on the reported net income for the six months ended June 30, 2001 to show comparability between the periods presented.

	Six Months ended June 30,
	2001		2002
	(In Thousands)
Reported Net Income	$	2,847	$	3,899
Add back: Goodwill and Intangibles Amortization		44		—
Adjusted Net Income	$	2,891	$	3,899
Income Per Share Diluted Reported Net Income	$	.59	$	.83
Add back: Goodwill and Intangibles Amortization		—		—
Adjusted Net Income—Basic	$	.59	$	.83
Adjusted Net Income—Diluted	$	.58	$	.80

Note 11—Commitments and Contingencies

One of the Company’s former reinsurers, Berkley Insurance Company, has disputed its obligations under several reinsurance treaties entered into during the “soft reinsurance market” that existed in 1998 and 1999. As of June 30, 2002, unreimbursed paid claims totaled $12.5 million and additional ceded case and incurred but not reported reserves totals approximately $21.0 million. A reserve for this dispute has not been established since the Company does not believe it is probable a loss will occur nor is any potential loss estimatable. If any of these factors change in the future, the Company will establish a reserve at that time, which could be material. On April 5, 2002, the Company demanded arbitration against the reinsurer to collect the amounts owed. Berkley is a subsidiary of W.R. Berkley Corp. (NYSE: BER). The Company does not believe that this dispute will have a material adverse effect on the overall financial condition or liquidity of the Company.

F-37

GLOSSARY OF INSURANCE INDUSTRY TERMS

Alternative insurance market	An insurance market which has developed over the past 15 years to respond to the needs of insureds for adequate insurance coverage and affordable premium rates through (i) the underwriting of risks which are characterized by the standard insurance market as difficult or which generate too little premium for standard insurance companies; and/or (ii) the design of specialized insurance programs such as deductible or risk retention programs, and captive or rent-a-captive facilities.
Bornhuetter-Ferguson methods	An actuarial estimation method which is based on developing paid and reported losses and an initial expected loss level.
Broker; intermediary	One who negotiates contracts of insurance or reinsurance on behalf of an insured party, receiving a commission from the insurer or reinsurer for placement and other services rendered.
Capacity	The percentage of surplus, or the dollar amount of exposure, that an insurer or reinsurer is willing to place at risk. Capacity may apply to a single risk, a program, a line of business or an entire book of business.
Captive	A company formed to insure the risks of a group of insureds or of a parent company or affiliated group of companies.
Captive line of business	The creation of companies formed to insure the risks of a group of insureds of a parent company or affiliated group of companies.
Casualty insurance	Insurance which is primarily concerned with the losses caused by injuries to third persons or their property (i.e., not the policyholder) and the legal liability imposed on the insured resulting therefrom. It includes, but is not limited to, general liability, employers’ liability, workers’ compensation, professional liability, public liability and automobile liability insurance. It excludes certain types of losses that by law or custom are considered as being exclusively within the scope of other types of insurance, such as fire or marine.
Cede; ceded; ceding company	When an insurance company reinsures its risk with another insurance company in consideration of a premium, it “cedes” (i.e. transfers) business and is referred to as the “ceding company.”
Combined ratio	The sum of the loss and loss adjustment exposure ratio and the underwriting expense ratio, expressed as a percentage of net written premium. Both methods use earned premium to calculate the loss and loss adjustment expense ratio. A combined ratio below 100% generally indicates profitable underwriting results. A combined ratio over 100% generally indicates unprofitable underwriting results.
Commercial lines	Types of insurance written for businesses instead of individuals.
Direct premiums written	Insurance premiums written (less return premiums) without any allowance for premiums assumed or ceded reinsurance.

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Earned surplus	The cumulative amount of retained net profits from insurance operations, including investment income, as determined under SAP.
Excess and surplus lines	A term used to describe any risk or part thereof for which insurance is not available through a company licensed in the applicant’s state (an “admitted” insurer). The business, therefore, is placed with insurers not licensed in the state (“non-admitted” insurers) in accordance with surplus lines or excess lines provisions of state insurance laws. Under these provisions, the non-admitted insurer is not subject to the same rate or coverage requirements which apply to an admitted insurer.
Expense ratio; underwriting expense ratio	The ratio of underwriting expenses to net premiums written, if determined in accordance with SAP, or the ratio of underwriting expenses (adjusted by deferred policy acquisition costs) to earned premiums, if determined in accordance with GAAP.
Generally accepted accounting principles (“GAAP”)	Accounting principles as set forth in opinions of the Accounting Principles Board of the American Institute of Certified Public Accountants and/or in statements of the Financial Accounting Standards Board and/or their respective successors and which are applicable in the circumstances as of the date in question.
Gross premiums written	Total premiums for primary insurance written and reinsurance assumed during a given period.
Group captive insurance company	A captive insurance company established by a group of companies engaged in similar businesses to underwrite their own collective risks.
Hard insurance market	An insurance market characterized by increasing premium prices for coverages.
Incurred but not reported reserves	Loss reserves for estimated losses and loss adjustment expenses which have been incurred but not yet reported to the insurer (including future developments on losses that are known to the insurer).
Loss ratio	For SAP and GAAP, net losses and loss adjustment expenses incurred, divided by net premiums earned, expressed as a percentage.
Loss reserves	Liabilities established by insurers and reinsurers to reflect, as of a given date, the estimated cost of claims payments that the insurer or reinsurer will ultimately be required to pay in respect of insurance or reinsurance it has written. Reserves are established for losses and for loss adjustment expenses, and consist of case reserves and IBNR reserves.
National Association of Insurance Commissioners (“NAIC”)	An association of state insurance regulatory officials organized to promote consistency of regulatory practice and statutory accounting standards for insurance companies throughout the United States.
Net premiums earned	The portion of net premiums written which applies to the expired portion of the policy period.

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Net premiums written	Gross premiums written less premiums ceded to reinsurers.
Premiums	Payments and consideration for insurance, surety bonds or reinsurance coverage under insurance policies, surety bonds or reinsurance agreements.
Primary insurance	Insurance policies issued to insureds generally.
Reinsurance	The practice whereby one party, called the reinsurer, in consideration of a premium paid to it, agrees to indemnify another party, called the ceding party, for part or all of the liability assumed by the ceding party under a policy or policies of insurance which it has issued. The reinsured may be referred to as the original or primary insurer, the direct writing company or the ceding company. Reinsurance does not legally discharge the primary insurer from its liability to the insured.
Reinsurer	The insurer that assumes all or part of the insurance or reinsurance liability written by another insurer. The term includes retrocessionaires, which are insurers that assume reinsurance from a reinsurer.
Rent-a-captive	A program under which a captive insures the risk of an unrelated insured who bears the risk of its own loss experience without the administrative costs and capital commitment necessary to establish and operate its own captive insurance company.
Rent-a-captive line of business	A program under which a captive insures the risk of an unrelated insured who bears the risk of its own loss experience without the administration costs and capital commitment necessary to establish and operate its own captive insurance company.
Reserves	Liabilities established by insurers and reinsurers to reflect the estimated costs of claims payments and the related expenses that the insurer or reinsurer will ultimately be required to pay in accordance with the insurance or reinsurance it has written.
Retention	The amount or portion of risk which an insurer or reinsurer retains for its own account. Losses in excess of the retention level are paid by the reinsurer or retrocessionaire. In quota share treaties, the retention may be a percentage of the original policy’s limit. In excess of loss reinsurance, the retention is a dollar amount of loss, a loss ratio or a percentage of loss.
Retrocession; retrocessionaire	A transaction whereby a reinsurer cedes to another reinsurer (the “retrocessionaire”).
Soft insurance market	An insurance market characterized by decreasing premium prices for coverages.
Standard insurance market	An insurance market comprised of risks that are not in the alternative insurance market.

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Statutory Accounting Practices or “SAP”	The rules and procedures prescribed or permitted by state insurance regulatory authorities for recording transactions and preparing financial statements. Statutory accounting principles generally reflect a liquidating, rather than a going concern, concept of accounting. The principal differences between SAP and GAAP are as follows: (a) under SAP, certain assets (non-admitted assets) are eliminated from the balance sheet; (b) under SAP, policy acquisition costs are expensed upon policy inception, while under GAAP they are deferred and amortized over the term of the policies; (c) under SAP, no provision is made for deferred income taxes; and (d) under SAP, certain reserves are recognized which are not recognized under GAAP.
Statutory reserves	Reserves established to provide for future obligations with respect to all insurance policies as determined in accordance with SAP.
Statutory surplus	The amount remaining after all liabilities, including loss reserves, are subtracted from all admitted assets as determined in accordance with SAP. Admitted assets of an insurer are assets permitted by a state to be taken into account in determining the insurer’s financial condition for statutory purposes.
Surety bond	A contract under which a party guarantees certain obligations of a second party to a third party.
Workers’ compensation	A system, established under state laws, under which employers provide insurance for benefit payments to their employees for work-related injuries.
Written premiums	Premiums written, whether or not earned, during a given period.

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HARBOUR VILLAGE DEVELOPMENT CHART

Harbour Village Development Status

(000)s except references to Condo Units

	Phase 1				Phase 2		Phase 3
	Marina Condos	Townhouses			The Links North	The Links South	Fisherman’s Harbour	Total Condo	Boat Slips	Total
		Oak Hammock	Riverwalk
6/30/2002
Planned Number of Condo Units and Boat Slips	248	18	28		188	188	70	740	142	882
Condo Units and Boat Slips Under Contract (Note 1)	246	15	28		162	8	54	513	139	652
Number of Closed Units	217	—	—		—	—	—	217	104	321
Value of Pre-sale Contracts (Note 1)	62,292	7,140	10,664		40,274	1,950	11,768	134,088	12,712	146,800
Number of Buildings	8	4	6		4	4	1	27
Number of Buildings Complete by Task	8	4	5		2	—	—
Building Foundation	8	4	5		2	—	—
Vertical Building Completed	8	3	2		—	—	—
Interior Finish Completed	8	—	—		—	—	—
Certificate of Occupancy Received	8	—	—		—	—	—
Actual 6/30/2002 YTD
Units Closed	115	—	—		—			115	45	160
Revenue Recognized	29,973	—	—		—			29,973	3,638	33,611
Other Revenue										325
Total Revenue										33,936
Gross Profit Recognized	4,935	—	—		—			4,935	1,543	6,478
Other Expense (Income) Items (Note 2)										1,697
Pre-Tax Profit										4,781
Outlook for 3rd Quarter of 2002
Units Closed (Note 1)	29	5	10		—			44	12	56
Revenue Recognized	7,958	2,486	3,244		—			13,688	1,111	14,799
Other Revenue										150
Total Revenue										14.949
Gross Profit Recognized	1,185	37	(33	)	—			1,189	434	1,623
Other Expense (Income) Items (Note 2)										898
Pre-Tax Profit										725

Note 1—No assurance can be given that purchasers under binding pre-sale contracts with deposits will close each contemplated transaction.

Note 2—Other includes net brokerage commissions, advertising, promotion, and other general and administrative costs. These items are not allocated to specific buildings.

The projected results contained above for unit closings, revenue, gross profit, fixed costs and pre-tax profit are forward looking statements. With respect to our development of the Harbour Village property, such forward looking statements involve risks and uncertainties which may cause actual results to differ materially, and are subject to change based on various real estate development industry factors, including competitive housing conditions in the local market area, risks inherent in real estate development and construction, increases in construction costs, construction delays, weather, litigation, changes in interest rates and the availability of mortgage financing for prospective purchasers of condominium units and boat slips and changes in local and national levels of general business activity and economic conditions.

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PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13.    OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The estimated expenses to be paid in connection with the issuance and distribution of the securities being registered, other than underwriting discounts and commissions, are as follows:

SEC Registration Statement filing fees	$	1,587
NASD fees	$	*
Listing fees	$	*
Trustees’ fees and changes (including counsel)	$	*
Accounting fees and expenses	$	*
Legal fees	$	*
Printing and preparation of Registration Statement, Prospectus, etc.	$	*
Blue Sky fees and expenses	$	*
Miscellaneous	$	*
Total	$	*

* To be filed by amendment

ITEM 14.    INDEMNIFICATION OF DIRECTORS AND OFFICERS.

American Safety Insurance Group, Ltd.

American Safety Insurance Group, Ltd. is incorporated under the laws of Bermuda. Section 98 of the Companies Act, 1981 of Bermuda (the “Companies Act”) provides generally that a Bermuda company may indemnify its directors, officers and auditors against any liability which by virtue of Bermuda law otherwise would be imposed on them, except in cases where such liability arises from the fraud or dishonesty of which such director, officer or auditor may be guilty in relation to the company. Section 98 further provides that a Bermudian company may indemnify its directors, officers and auditors against liability incurred by them in defending any proceedings, whether civil or criminal, in which judgment is awarded in their favor or they are acquitted or in which they are acquitted or granted relief by the Supreme Court of Bermuda in certain proceedings arising under Section 281 of the Companies Act.

The Company has adopted provisions in its Bye-Laws that provide that the Company shall indemnify its officers and directors to the maximum extent permitted under the Companies Act. The Company has also adopted provisions in its Bye-Laws that provide that each shareholder of the Company and the Company itself agrees to waive any claim or right of action he or it might have, whether individually or by or in the right of the Company, against any director on account of any action taken by such director, or the failure of such director to take any action, in the performance of his duties, or supposed duties, with or for the Company, provided that such waiver shall not extend to any matter in respect of any fraud or dishonesty which may attach to such director.

The Underwriting Agreement provides for [reciprocal indemnification between the Company and the Underwriters against certain liabilities in connection with the Offering, including liabilities under the Securities Act of 1933. Reference is made to the form Underwriting Agreement filed herewith as Exhibit 1.1.]

The Company has in force and effect an insurance policy insuring our directors and officers against losses which they or any of them will become legally obligated to pay by reason of any actual or alleged error or misstatement or misleading statement or act or omission or neglect or breach of duty by the directors and officers in the discharge of their duties, individually or collectively, or any matter claimed against them solely by reason of their being directors or officers. Such coverage is limited by the specific terms and provisions of the insurance policies.

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American Safety Holdings Corp.

American Safety Holdings Corp. is incorporated under the laws of the State of Georgia. The Georgia Business Corporation Code (the “GBCC”) permits a corporation to eliminate or limit the personal liability of a director to the corporation or its shareholders for monetary damages for breach of duty of care or other duty as a director, provided that no provisions shall eliminate or limit the liability of a director: (i) for any appropriation, in violation of his duties, of any business opportunity of the corporation; (ii) for acts or omissions which involve intentional misconduct or a knowing violation of law; (iii) for unlawful corporate distributions; or (iv) for any transaction from which the director received an improper personal benefit. This provision pertains only to breaches of duty by directors in their capacity as directors (and not in any other corporate capacity, such as officers) and limits liability only for breaches of fiduciary duties under the GBCC (and not for violation of other laws, such as the federal securities laws).

The By-Laws of the Company provide for indemnification of its officers and directors to the fullest extent of the law.

The Company has in force and effect an insurance policy insuring our directors and officers against losses which they or any of them will become legally obligated to pay by reason of any actual or alleged error or misstatement or misleading statement or act or omission or neglect or breach of duty by the directors and officers in the discharge of their duties, individually or collectively, or any matter claimed against them solely by reason of their being directors or officers. Such coverage is limited by the specific terms and provisions of the insurance policies.

American Safety Capital Trust I

American Safety Capital Trust I is incorporated under the laws of the State of Delaware. Section 145 of Title 8 of the Delaware Code gives a corporation power to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceedings, had no reasonable cause to believe his conduct was unlawful. The same Section also gives a corporation power to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys’ fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation and except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper. Also, the Section states that, to the extent that a present or former director or officer of a corporation has been successful on the merits or otherwise in defense of any such action, suit or proceeding, or in defense of any claim, issue or matter therein, he shall be indemnified against expenses (including attorneys’ fees) actually and reasonably incurred by him in connection therewith.

Under the Amended and Restated Trust Agreement, dated as of September            , 2002, among American Safety Holdings Corp., as depositor, Deutsche Bank Trust Company Americas, as property trustee, Deutsche Bank Trust Company Delaware, as Delaware trustee, and Fred J. Pinckney and Steven B. Mathis, as administrators, American Safety Holdings has agreed, to the fullest extent permitted by applicable law, to indemnify and hold harmless (i) each Issuer Trustee, (ii) each Administrator, (iii) any Affiliate of any Issuer Trustee, (iv) any officer, director, shareholder, employee, representative or agent of any Issuer Trustee, and (v) any employee or agent of the Issuer Trust, (referred to here in as an “Indemnified Person”) from and against any loss, damage, liability, tax (excluding income taxes, other than taxes referred to in

II-2

Section 4.5 and 4.6 of the trust agreement), penalty, expense or claim of any kind or nature whatsoever incurred by such Indemnified Person arising out of or in connection with the creation, operation or dissolution of the Issuer Trust or any act or omission performed or omitted by such Indemnified Person in good faith on behalf of the Issuer Trust and in a manner such Indemnified Person reasonably believed to be within the scope of authority conferred on such Indemnified Person by the trust agreement, except that no Indemnified Person shall be entitled to be indemnified in respect of any loss, damage or claim incurred by such Indemnified Person by reason of bad faith, negligence or willful misconduct with respect to such acts or omissions.

ITEM 15.    RECENT SALES OF UNREGISTERED SECURITIES

None.

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ITEM 16.    EXHIBITS

The following exhibits are filed as part of this Registration Statement:

Exhibit		Description
*1.1		Form of Underwriting Agreement
4.1		Memorandum of Association of American Safety Insurance Group, Ltd. (incorporated by reference to Exhibit 3.1 to Amendment No.1 to the Registration Statement on Form S-1 of American Safety Insurance Group, Ltd. (Registration No. 333-42749) as filed with the Commission on January 27, 1998)
4.2		Bye-Laws of American Safety Insurance Group, Ltd. (incorporated by reference to Exhibit 3.2 to Amendment No. 1 to the Registration Statement on Form S-1 of American Safety Insurance Group, Ltd. (Registration No. 333-42749) as filed with the Commission on January 27, 1998)
4.3		Certificate of Incorporation of American Safety Holdings Corp.
4.4		By-Laws of American Safety Holdings Corp.
4.5		Specimen Common Share Certificate (incorporated by reference to Exhibit 4.1 to Amendment No. 1 to the Registration Statement on Form S-1 of American Safety Insurance Group, Ltd. (Registration No. 333-42749) as filed with the Commission on January 27, 1998)
4.6		Form of Junior Subordinated Indenture
4.7		Certificate of Trust of American Safety Capital Trust I, dated as of September 24, 2002, and filed with the Delaware Secretary of State on September 24, 2002
4.8		Trust Agreement of American Safety Capital Trust I, dated as of September 24, 2002
4.9		Form of Amended and Restated Trust Agreement of American Safety Capital Trust I
4.10		Form of Preferred Securities Guarantee Agreement with respect to the preferred securities issued by American Safety Capital Trust I
4.11		Form of Junior Subordinated Debenture Securities Guarantee Agreement with respect to the junior subordinated debenture securities issued by American Safety Holding Corp.
*4.12		Form of Depositary Agreement
*5.1		Opinion of Troutman Sanders LLP
*5.2		Opinion of Richards, Layton & Finger, P.A.
*5.3		Opinion of Conyers, Dill & Pearman
*8.1		Tax Opinion of Troutman Sanders LLP
10.1		Employment Contract between American Safety Insurance Group, Ltd. and Lloyd A. Fox (incorporated by reference to Exhibit 10.1 to Amendment No. 1 to the Registration Statement on Form S-1 of American Safety Insurance Group, Ltd. (Registration No. 333-42749) as filed with the Commission on January 27, 1998)
10.2		Employment Contract between American Safety Insurance Group, Ltd. and Frederick C. Treadway
10.3		Employment Contract between American Safety Insurance Group, Ltd. and Stephen R. Crim (incorporated by reference to Exhibit 10.6 to American Safety Insurance Group, Ltd.’s Annual Report on Form 10-K for the fiscal year ended December 31, 2001 (File No. 1-14795) as filed with the Commission on April 1, 2002)
10.4	(a)	Incentive Stock Option Plan (incorporated by reference to Exhibit 10.2 to Amendment No. 1 to the Registration Statement on Form S-1 of American Safety Insurance Group, Ltd.(Registration No. 333-42749) as filed with the Commission on January 27, 1998)
10.4	(b)	First Amendment to the Incentive Stock Option Plan
10.5		Directors Stock Award Plan (incorporated by reference to Exhibit 10.3 to Amendment No. 1 to the Registration Statement on Form S-1 of American Safety Insurance Group, Ltd. (Registration No. 333-42749) as filed with the Commission on January 27, 1998)
10.6		Lease Agreement between 1845 Tenants-In-Common (formerly known as Windy Hill Exchange, L.L.C.) and American Safety Insurance Services, Inc. (formerly known as Environmental Management Services, Inc.) for office space in Atlanta, Georgia (incorporated by reference to Exhibit 10.4 to the Registration Statement on Form S-1 of American Safety Insurance Group, Ltd.(Registration No. 333-42749) as filed with the Commission on December 19, 1997)
10.7	(a)	Program Management Agreement between Synergy Insurance Services, Inc. (now known as American Safety Insurance Services, Inc.) and American Safety Risk Retention Group, Inc. (incorporated by reference to Exhibit 10.5 to Amendment No. 1 to the Registration Statement on Form S-1 of American Safety Insurance Group, Ltd.(Registration No. 333-42749) as filed with the Commission on January 27, 1998)
10.7	(b)	Amended and Restated Program Management Agreement between American Safety Insurance Services, Inc. and American Safety Risk Retention Group, Inc.
21.1		Subsidiaries of American Safety Insurance Group, Ltd. (incorporated by reference to Exhibit 10.6 to American Safety Insurance Group, Ltd.’s Annual Report on Form 10-K for the fiscal year ended December 31, 2001 (File No. 1-14795) as filed with the Commission on April 1, 2002)
*23.1		Consent of Troutman Sanders LLP (included in Exhibit 5.1)
*23.2		Consent of Richards, Layton & Finger, P.A. (included in Exhibit 5.2)
*23.3		Consent of Conyers, Dill & Pearman (included in Exhibit 5.3)
*23.4		Consent of KPMG
24.1		Power of Attorney (included on the signature page to this Registration Statement)
*25.1		Statement of Eligibility of Deutsche Bank Trust Company Americas on Form T-1, as Indenture Trustee, Property Trustee and Guarantee Trustee
*25.2		Statement of Eligibility of the Deutsche Bank Trust Company Delaware on Form T-1, as Delaware Trustee
99		Harbour Village Development Status (incorporated by reference to Exhibit 10.6 to American Safety Insurance Group, Ltd.’s Form 10-K for the fiscal year ended December 31, 2001 (File No. 1-14795) as filed with the Commission on April 1, 2002)

* To be filed, if necessary, subsequent to the effectiveness of this registration statement by an amendment to this registration statement.

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ITEM 17.    UNDERTAKINGS

The undersigned registrants hereby undertake that:

(a)    to provide to the underwriters at the closing specified in the underwriting agreement, certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.

(b)    insofar as indemnification for liabilities arising under the Securities Act of 1933 (the “Securities Act”) may be permitted to directors, officers and controlling persons of the registrants pursuant to the foregoing provisions, or otherwise, the registrants have been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrants of expenses incurred or paid by a director, officer or controlling person of the registrants in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrants will, unless in the opinion of their counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by them is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

(c)    for the purpose of determining any liability under the Securities Act, the information omitted from the form of prospectus and filed as a part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrants pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be a part of this registration statement as of the time it was declared effective.

(d)    for the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

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SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, American Safety Insurance Group, Ltd. has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized on the 24th day of September, 2002.

AMERICAN SAFETY INSURANCE GROUP, LTD.
By:	/s/  LLOYD A. FOX
	President and Chief Executive Officer

POWER OF ATTORNEY

Each person whose signature appears below hereby constitutes and appoints each of Stephen R. Crim and Fred J. Pinckney, individually, as his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, (i) to sign any and all amendments (including post-effective amendments) to this Registration Statement, (ii) to sign any registration statement to be filed pursuant to Rule 462(b) under the Securities Act, and (iii) to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, each acting alone, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, each acting alone, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act, this Registration Statement has been signed by the following persons in the capacities indicated on the 24th day of September, 2002.

	Signature	Title	Date
By:	/s/  LLOYD A. FOX Lloyd A. Fox	President and Chief Executive Officer (Principal Executive Officer)	September 24, 2002
By:	/s/  STEVEN B. MATHIS Steven B. Mathis	Chief Financial Officer (Principal Financial and Accounting Officer)	September 24, 2002
By:	/s/  CODY W. BIRDWELL Cody W. Birdwell	Director	September 24, 2002
By:	/s/  DAVID V. BRUEGGEN David V. Brueggen	Director	September 24, 2002
By:	/s/  STEPHEN R. CRIM Stephen R. Crim	Director	September 24, 2002
By:	/s/    WILLIAM O. MAULDIN, JR. William O. Mauldin, Jr.	Director	September 24, 2002
By:	/s/  THOMAS W. MUELLER Thomas W. Mueller	Director	September 24, 2002
By:	/s/  FREDERICK C. TREADWAY Frederick C. Treadway	Director	September 24, 2002
By:	/s/  JEROME D. WEAVER Jerome D. Weaver	Director	September 24, 2002

II-6

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, American Safety Holdings Corp. has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized on the 24th day of September, 2002.

AMERICAN SAFETY HOLDINGS CORP.
By:	/S/  LLOYD A. FOX
	President and Chief Executive Officer

POWER OF ATTORNEY

Each person whose signature appears below hereby constitutes and appoints each of Stephen R. Crim and Fred J. Pinckney, individually, as his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, (i) to sign any and all amendments (including post-effective amendments) to this Registration Statement, (ii) to sign any registration statement to be filed pursuant to Rule 462(b) under the Securities Act, and (iii) to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, each acting alone, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, each acting alone, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act, this Registration Statement has been signed by the following persons in the capacities indicated on the 24th day of September, 2002.

Signature	Title	Date
By:                /S/  LLOYD A. FOX Lloyd A. Fox	President and Chief Executive Officer (Principal Executive Officer)	September 24, 2002
By:                /S/  STEVEN B. MATHIS Steven B. Mathis	Chief Financial Officer (Principal Financial and Accounting Officer)	September 24, 2002
By:                /S/  DAVID V. BRUEGGEN David V. Brueggen	Director	September 24, 2002
By:                /S/  STEPHEN R. CRIM Stephen R. Crim	Director	September 24, 2002
By:                /S/  THOMAS W. MUELLER Thomas W. Mueller	Director	September 24, 2002
By:                /S/  FREDERICK C. TREADWAY Frederick C. Treadway	Director	September 24, 2002

II-7

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, American Safety Capital Trust I has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized on the 24th day of September, 2002.

AMERICAN SAFETY CAPITAL TRUST I
By:	AMERICAN SAFETY HOLDINGS CORP., Depositor
By:	/S/ LLOYD A. FOX
	President and Chief Executive Officer

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EXHIBIT INDEX

Exhibit		Description
*1.1		Form of Underwriting Agreement
4.1		Memorandum of Association of American Safety Insurance Group, Ltd. (incorporated by reference to Exhibit 3.1 to Amendment No.1 to the Registration Statement on Form S-1 of American Safety Insurance Group, Ltd. (Registration No. 333-42749) as filed with the Commission on January 27, 1998)
4.2		Bye-Laws of American Safety Insurance Group, Ltd. (incorporated by reference to Exhibit 3.2 to Amendment No. 1 to the Registration Statement on Form S-1 of American Safety Insurance Group, Ltd. (Registration No. 333-42749) as filed with the Commission on January 27, 1998)
4.3		Certificate of Incorporation of American Safety Holdings Corp.
4.4		By-Laws of American Safety Holdings Corp.
4.5		Specimen Common Share Certificate (incorporated by reference to Exhibit 4.1 to Amendment No. 1 to the Registration Statement on Form S-1 of American Safety Insurance Group, Ltd. (Registration No. 333-42749) as filed with the Commission on January 27, 1998)
4.6		Form of Junior Subordinated Indenture
4.7		Certificate of Trust of American Safety Capital Trust I, dated as of September 24, 2002, and filed with the Delaware Secretary of State on September 24, 2002
4.8		Trust Agreement of American Safety Capital Trust I, dated as of September 24, 2002
4.9		Form of Amended and Restated Trust Agreement of American Safety Capital Trust I
4.10		Form of Preferred Securities Guarantee Agreement with respect to the preferred securities issued by American Safety Capital Trust I
4.11		Form of Junior Subordinated Debenture Securities Guarantee Agreement with respect to the junior subordinated debenture securities issued by American Safety Holding Corp.
*4.12		Form of Depositary Agreement
*5.1		Opinion of Troutman Sanders LLP
*5.2		Opinion of Richards, Layton & Finger, P.A.
*5.3		Opinion of Conyers, Dill & Pearman
*8.1		Tax Opinion of Troutman Sanders LLP
10.1		Employment Contract between American Safety Insurance Group, Ltd. and Lloyd A. Fox (incorporated by reference to Exhibit 10.1 to Amendment No. 1 to the Registration Statement on Form S-1 of American Safety Insurance Group, Ltd. (Registration No. 333-42749) as filed with the Commission on January 27, 1998)
10.2		Employment Contract between American Safety Insurance Group, Ltd. and Frederick C. Treadway
10.3		Employment Contract between American Safety Insurance Group, Ltd. and Stephen R. Crim (incorporated by reference to Exhibit 10.6 to American Safety Insurance Group, Ltd.’s Annual Report on Form 10-K for the fiscal year ended December 31, 2001 (File No. 1-14795) as filed with the Commission on April 1, 2002)
10.4	(a)	Incentive Stock Option Plan (incorporated by reference to Exhibit 10.2 to Amendment No. 1 to the Registration Statement on Form S-1 of American Safety Insurance Group, Ltd.(Registration No. 333-42749) as filed with the Commission on January 27, 1998)
10.4	(b)	First Amendment to the Incentive Stock Option Plan
10.5		Directors Stock Award Plan (incorporated by reference to Exhibit 10.3 to Amendment No. 1 to the Registration Statement on Form S-1 of American Safety Insurance Group, Ltd. (Registration No. 333-42749) as filed with the Commission on January 27, 1998)
10.6		Lease Agreement between 1845 Tenants-In-Common (formerly known as Windy Hill Exchange, L.L.C.) and American Safety Insurance Services, Inc. (formerly known as Environmental Management Services, Inc.) for office space in Atlanta, Georgia (incorporated by reference to Exhibit 10.4 to the Registration Statement on Form S-1 of American Safety Insurance Group, Ltd.(Registration No. 333-42749) as filed with the Commission on December 19, 1997)
10.7	(a)	Program Management Agreement between Synergy Insurance Services, Inc. (now known as American Safety Insurance Services, Inc.) and American Safety Risk Retention Group, Inc. (incorporated by reference to Exhibit 10.5 to Amendment No. 1 to the Registration Statement on Form S-1 of American Safety Insurance Group, Ltd.(Registration No. 333-42749) as filed with the Commission on January 27, 1998)
10.7	(b)	Amended and Restated Program Management Agreement between American Safety Insurance Services, Inc. and American Safety Risk Retention Group, Inc.
21.1		Subsidiaries of American Safety Insurance Group, Ltd. (incorporated by reference to Exhibit 10.6 to American Safety Insurance Group, Ltd.’s Annual Report on Form 10-K for the fiscal year ended December 31, 2001 (File No. 1-14795) as filed with the Commission on April 1, 2002)
*23.1		Consent of Troutman Sanders LLP (included in Exhibit 5.1)
*23.2		Consent of Richards, Layton & Finger, P.A. (included in Exhibit 5.2)
*23.3		Consent of Conyers, Dill & Pearman (included in Exhibit 5.3)
*23.4		Consent of KPMG
24.1		Power of Attorney (included on the signature page to this Registration Statement)
*25.1		Statement of Eligibility of Deutsche Bank Trust Company Americas on Form T-1, as Indenture Trustee, Property Trustee and Guarantee Trustee
*25.2		Statement of Eligibility of the Deutsche Bank Trust Company Delaware on Form T-1, as Delaware Trustee
99		Harbour Village Development Status (incorporated by reference to Exhibit 10.6 to American Safety Insurance Group, Ltd.’s Form 10-K for the fiscal year ended December 31, 2001 (File No. 1-14795) as filed with the Commission on April 1, 2002)

* To be filed, if necessary, subsequent to the effectiveness of this registration statement by an amendment to this registration statement.

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EX-4.3

EXHIBIT 4.3

ARTICLES OF INCORPORATION

OF

AMERICAN SAFETY HOLDINGS CORP.

ARTICLE 1.    Name.

The name of the Corporation is American Safety Holdings Corp.

ARTICLE 2.  State of Organization.

The Corporation is organized pursuant to the provisions of the Georgia Business Corporation Code (the “Code”).

ARTICLE 3.    Capital Stock.

The total number of shares of stock which the Corporation shall have authority to issue is not more than 100,000 shares of capital stock, no par value per share, all of which shall be designated “Common Stock.” The shares of Common Stock may be issued from time to time as authorized by the Board of Directors of the Corporation without further approval of the shareholders except as otherwise provided herein or to the extent that such approval is required by statute, rule or regulation. Except as otherwise provided by statute, the holders of the Common Stock shall exclusively possess all voting power.

ARTICLE 4.    Registered Office and Registered Agent.

The initial registered office of the Corporation shall be at 1845 The Exchange, Suite 200, Atlanta, Cobb County, Georgia 30339. The initial registered agent of the Corporation at such address shall be Fred J. Pinckney.

ARTICLE 5.    Principal Office.

The initial principal office of the Corporation shall be at 1845 The Exchange, Suite 200, Atlanta, Cobb County, Georgia 30339.

ARTICLE 6.    Initial Directors.

The initial Board of Directors shall consist of four (4) members whose names and addresses are set forth below.

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Name	Address
David V. Brueggen	1845 The Exchange, Suite 200 Atlanta, Georgia 30339.
Lloyd A. Fox	1845 The Exchange, Suite 200 Atlanta, Georgia 30339.
Thomas W. Mueller	1845 The Exchange, Suite 200 Atlanta, Georgia 30339.
Frederick C. Treadway	1845 The Exchange, Suite 200 Atlanta, Georgia 30339.

ARTICLE 7.    Director’s Liability.

No director shall have any personal liability to the Corporation or to its shareholders for monetary damages for breach of duty of care or other duty as a director, by reason of any act or omission occurring on or subsequent to the date when this provision becomes effective, except that this provision shall not eliminate or limit the liability of a director for (a) any appropriation, in violation of his duties, of any business opportunity of the Corporation; (b) acts or omissions which involve intentional misconduct or a knowing violation of law; (c) liabilities of a director imposed by Section 14-2-832 of the Code; or (d) any transaction from which the director received an improper personal benefit.

ARTICLE 8.    Indemnification.

Each person who is or was a director or officer of the Corporation, and each person who is or was a director or officer of the Corporation who at the request of the Corporation is serving or has served as an officer, director, partner, joint venturer, trustee, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise shall be indemnified by the Corporation against those expenses (including attorneys’ fees), judgments, fines, penalties and amounts paid in settlement which are allowed to be paid or reimbursed by the Corporation under the laws of the State of Georgia and which are actually and reasonably incurred in connection with any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, in which such person may be involved by reason of his being or having been a director or officer of this Corporation or of such other enterprises.

Notwithstanding anything contained herein to the contrary, this Article is intended to provide indemnification to each director and officer of the Corporation to the fullest extent authorized by the Code, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader rights than said statute permitted the Corporation to provide prior thereto).

ARTICLE 9.    Action by Shareholders Without a Meeting.

Any action required or permitted by statute or by the Articles of Incorporation or Bylaws of the Corporation to be taken at a meeting of the shareholders of the Corporation may be taken without a meeting if a written consent, setting forth the action so taken, shall be signed by persons entitled to vote at a meeting those shares having sufficient voting power to cast not less than the minimum number (or numbers, in the case of voting by groups) of votes that would be necessary to authorize or take such action at a meeting at which all shareholders entitled to vote were present and voted. No such written consent shall be valid unless (i) the consenting shareholder has been furnished the same material that

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would have been required to be sent to shareholders in a notice of a meeting at which the proposed action would have been submitted to the shareholders for action, including notice of any applicable dissenters’ rights, or (ii) the consent includes an express waiver of the right to receive the material otherwise required to be furnished. Notice of such action without a meeting by less than unanimous written consent, together with such material, shall be given within ten (10) days of the taking of such action to those shareholders of record who did not participate in taking the action.

ARTICLE 10.    Savings Clause.

In the event any provision (or portions thereof) of these Articles of Incorporation shall be found to be invalid, prohibited or unenforceable for any reason, the remaining provisions (or portions thereof) of these Articles of Incorporation shall remain in full force and effect, and shall be construed as if such invalid, prohibited or unenforceable provision had been stricken herefrom or otherwise rendered inapplicable, it being the intent of the Corporation and its shareholders that each such remaining provision (or portions thereof) of these Articles of Incorporation remain, to the fullest extent permitted by law, applicable and enforceable as to all shareholders notwithstanding any such finding.

ARTICLE 11.    Incorporator.

The name and the address of the Incorporator is Fred J. Pinckney, Esq., 1845 The Exchange, Suite 200, Atlanta, Georgia 30339.

IN WITNESS WHEREOF, the undersigned has executed these Articles of Incorporation this 30th day of July, 1999.

Fred J. Pinckney, Incorporator

1845 The Exchange

Suite 200

Atlanta, GA 30339

770/916-1908

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EX-4.4

EXHIBIT 4.4

BYLAWS OF

AMERICAN SAFETY HOLDINGS CORP.

TABLE OF CONTENTS

		PAGE
ARTICLE ONE—OFFICES
Section 1.	Registered Office and Agent	4
Section 2.	Other Offices	4
ARTICLE TWO—SHAREHOLDERS' MEETINGS
Section 2.1.	Date, Time and Place of Meetings	4
Section 2.2.	Annual Meetings	4
Section 2.3.	Special Meetings	4
Section 2.4.	Notice of Meetings	4
Section 2.5.	Quorum	5
Section 2.6.	Adjournment	5
Section 2.7	Vote Required	5
Section 2.8	Voting of Shares	6
Section 2.9	No Action by Written Consent	6
Section 2.10	Shareholders' List	6
Section 2.11	Inspectors of Election	6
Section 2.12	Conduct of Meetings	7
Section 2.13	Voting of Shares by Certain Holders	8
ARTICLE THREE—THE BOARD OF DIRECTORS
Section 3.1	General Powers	9
Section 3.2	Number and Tenure	9
Section 3.3	Qualification of Directors	9
Section 3.4	Vacancy	9
Section 3.5	Removal	10
Section 3.6	Compensation	10
Section 3.7	Nominations of Directors	10
ARTICLE FOUR—MEETINGS OF THE BOARD OF DIRECTORS
Section 4.1	Annual and Other Regular Meetings	11
Section 4.2	Special Meetings	11
Section 4.3	Notice	12

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Section 4.4	Quorum and Adjournment	12
Section 4.5	Voting	12
Section 4.6	Presumption of Assent	12
Section 4.7	Meeting by Means of Conference Telephone or Similar Telecommunications Equipment	13
Section 4.8	Action by Directors Without a Meeting	13
Section 4.9	Conduct of Meetings	13
Section 4.10	Resignation	13
ARTICLE FIVE—BOARD COMMITTEES
Section 5.1	Committees	14
ARTICLE SIX—OFFICERS
Section 6.1	Officers	14
Section 6.2	Compensation	15
Section 6.3	Election and Term of Office	15
Section 6.4	Removal	15
Section 6.5	Vacancy	15
Section 6.6	Chairman of the Board	15
Section 6.7	President	15
Section 6.8	Vice President	16
Section 6.9	Secretary	16
Section 6.10	Treasurer	16
Section 6.11	Assistant Vice President, Assistant Secretary and Assistant Treasurer	16
Section 6.12	Delegation of Authority	17
ARTICLE SEVEN—CAPITAL STOCK
Section 7.1	Stock Certificates	17
Section 7.2	Stock Records	17
Section 7.3	Stock Transfers	17
Section 7.4	Record Dates	18
Section 7.5	Transfer Agents and Registrars	18
Section 7.6	Lost Certificates	18

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ARTICLE EIGHT—GENERAL PROVISIONS
Section 8.1	References	19
Section 8.2	Reference to Gender	19
Section 8.3	Legal Restrictions	19
Section 8.4	Seal	19
Section 8.5	Fiscal Year	19
Section 8.6	Voting Shares in Subsidiaries	19
Section 8.7	Inspection of Books	19
Section 8.8	Contracts	20
Section 8.9	Amendment of Bylaws	20
ARTICLE NINE—INDEMNIFICATION
Section 9.1	Indemnification	20

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AMERICAN SAFETY HOLDINGS CORP.

(a Georgia corporation)

ARTICLE ONE

OFFICES

SECTION 1.    Registered Office and Agent.

The Corporation will maintain a registered office and will have a registered agent whose business office is identical with such registered office. The registered office need not be identical with the principal business office of the Corporation.

SECTION 2.    Other Offices.

The Corporation may have offices at such other place(s), within or without the State of Georgia, as the Board of Directors may from time to time determine or the business of the Corporation may require.

ARTICLE TWO

SHAREHOLDERS’ MEETINGS

SECTION 2.1.    Date, Time and Place of Meetings.

All meetings of the shareholders shall be held on such date, time and place, within or without the State of Georgia, as the Board of Directors may set forth from time to time, or if no place is so specified, at the principal executive office of the Corporation.

SECTION 2.2.    Annual Meetings.

The annual meeting of shareholders shall be held on a date and at a time following the end of the Corporation’s fiscal year as may be determined by the Board of Directors, for the purpose of electing directors and transacting any and all business that may properly come before the meeting.

SECTION 2.3.    Special Meetings.

Special meetings of the shareholders for any purpose(s) may be called at any time by the Chairman of the Board, or by a majority of the directors then in office or by written demand of holders of at least 51% of the then outstanding shares of capital stock of the Corporation entitled to be cast, voting together as a single class. Business transacted at any special meeting of shareholders shall be limited to the purpose(s) stated in the notice thereof.

SECTION 2.4.    Notice of Meetings.

Written notice of each shareholders’ meeting stating the date, time and place of the meeting will be delivered either personally or by mail to each shareholder of record entitled to vote at such meeting, not less than 10 days

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nor more than 60 days before the date of the meeting. In the case of an annual meeting, the notice of the meeting need not state the purpose(s) for which the meeting is called. In the case of a special meeting, the notice of meeting shall state the purpose(s) for which the meeting is called. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail with first class postage affixed thereon, prepaid, addressed to each shareholder at his address as it appears on the Corporation’s record of shareholders. Attendance of a shareholder at a meeting of the shareholders shall constitute a waiver of notice of such meeting and of all objections to the place or time of such meeting, or the manner in which it has been called or convened, except when a shareholder attends a meeting solely for the purpose of stating, at the beginning of the meeting, any such objection to the transaction of any business. Notice need not be given to any shareholder who signs a waiver of notice, in person or by proxy, either before or after the meeting. If the language of a proposed resolution or plan requiring the approval of the shareholders is included in a written notice of a meeting of the shareholders, the shareholders’ meeting considering the resolution or plan may adopt it with such clarifying or other amendments as do not enlarge its original purpose without further notice to shareholders not present in person or by proxy.

SECTION 2.5.    Quorum.

The presence, in person or by proxy, of the holders of a majority of shares then issued and outstanding and entitled to vote, shall constitute a quorum for the transaction of business at any meeting of shareholders, except as otherwise required by statute or the Articles of Incorporation. Where a quorum is once present at a meeting, it shall not be broken by the subsequent withdrawal of any of those present.

SECTION 2.6.    Adjournment.

In the absence of a quorum or for any other reason, the holders of the majority of the shares then issued and outstanding and entitled to vote at any meeting of the shareholders, present in person or represented by proxy, or the Chairman of the Board shall have the power to adjourn the meeting from time to time, without notice other than announcement at the meeting of the date, time and place of the adjourned meeting. At such adjourned meeting in which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally notified. If after the adjournment a new record date is picked for the adjourned meeting, notice of the adjourned meeting shall be given to each shareholder of record entitled to vote at the adjourned meeting.

SECTION 2.7    Vote Required.

When a quorum is present at any meeting, the affirmative vote of the holders of a plurality of the shares of stock of the Corporation entitled to vote and present in person or represented by proxy, voting together as a single class, shall decide any questions brought before such meeting, except as otherwise required by statute or the Articles of Incorporation.

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SECTION 2.8    Voting of Shares.    

Except as otherwise required by statue or the Articles of Incorporation, each shareholder shall be entitled to one vote, in person or represented by proxy, for each share of stock having voting power held by such shareholder at every meeting of the shareholders. Shareholders may vote in person or by written proxy; provided, however, no proxy shall be voted or acted on after 11 months from its date, unless the proxy provides for a longer period. Any proxy to be voted at a meeting of shareholders shall be filed with the Secretary of the Corporation before or at the time of the meeting. Voting on matters brought before a shareholders’ meeting may, at the discretion of the person presiding at the meeting, be by voice vote or show of hands, unless any qualified voter, prior to the voting on such matter, demands vote by ballot, in which event the voting shall be by ballot.

SECTION 2.9     No Action by Written Consent.    

Shareholders shall not be entitled to take any action by written consent in lieu of taking such action at an annual or special meeting of shareholders.

SECTION 2.10    Shareholders’ List.    

A complete list of shareholders entitled to vote at any meeting of shareholders, arranged in alphabetical order showing the address of each such shareholder as it appears in the records of the Corporation and the number of shares registered in the name of such shareholder, shall be prepared by the Secretary of the Corporation at least 10 days prior to every meeting of shareholders. Such list shall be open to the examination of any shareholder, for any purpose relating to the meeting, during ordinary business hours for a period of at least 10 days prior to the meeting, either at a place within the city where the meeting is to be held or, if not so specified, the place where the meeting is to be held, and a duplicate list shall be similarly open to examination at the principal executive office of the Corporation. The list shall also be produced and kept at the time and place of the meeting during the duration thereof, and may be inspected by any shareholder who is present.

SECTION 2.11    Inspectors of Election.    

In advance of any meeting of shareholders, the Board of Directors may appoint any persons, other than nominees for office, as inspectors of election to act at such meeting or any adjournment thereof. The number of inspectors shall be either one or three. If such persons are not so appointed or fail or refuse to act, the presiding officer of such meeting shall make such appointment(s) at the meeting. If there are three inspectors, the decision, action or certificate of a majority of such inspectors shall be effective and shall represent the decision, action or certificate of all. No such inspector need be a shareholder of the Corporation.

Unless otherwise required by statute or the Articles of Incorporation, the duties of such inspectors shall include: determining the number of shares outstanding and the

6

voting power of each share, the number of shares represented at the meeting, the existence of a quorum, the authenticity, validity and effect of proxies; receiving votes or ballots; hearing and determining all challenges and questions in any way arising in connection with the right to vote; counting and tabulating all ballots or votes and determining the results thereof; and such acts as may be proper to conduct the election or vote with fairness to all shareholders. Upon request, the inspectors shall make a report in writing to the presiding officer of the meeting concerning any challenge, question or other matter as may have been determined by them and shall execute and deliver to such presiding officer a certificate of any fact found by them.

SECTION 2.12    Conduct of Meetings.

(a)  All annual and special meetings or shareholders shall be conducted in accordance with such rules and procedures as the Board of Directors may determine subject to the requirements of statute and, as to matters not governed by such rules and procedures, as the presiding officer of such meeting shall determine. The presiding officer of any annual or special meeting of shareholders shall be the President or, in his absence, such person as designated by the Board of Directors. The Secretary, or in his absence, a person designated by the presiding officer, shall act as secretary of the meeting.

(b)  At any annual meeting of shareholders, only such business shall be conducted as shall have been brought before the meeting (i) as specified in the notice of the meeting given by or at the direction of the Board of Directors, (ii) otherwise properly brought before the meeting by or at the direction of the Board of Directors, or (iii) otherwise properly brought before the meeting by any shareholder of the Corporation who is entitled to vote with respect thereto and who complies with the notice procedures set forth in this subparagraph (b).

For business to be properly brought before an annual meeting by a shareholder, the shareholder must have given timely notice thereof in writing to the Secretary of the Corporation. To be timely, a shareholder’s notice must be delivered or mailed to and received at the principal executive office of the Corporation not less than 30 days prior to the date of the annual meeting; provided, however, that in the event that less than 40 days’ notice or prior public disclosure of the date of the meeting is given or made to shareholders, notice by a shareholder to be timely must be received not later than the close of business on the 10th day following the day on which such notice of the date of the annual meeting was mailed or such public disclosure was made. A shareholder’s notice to the Secretary shall set forth as to each matter such shareholder proposes to bring before the annual meeting (i) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting (ii) the name and address, as they appear on the books of the Corporation, of the shareholder proposing such business, (iii) the

7

class and number of shares of the Corporation’s capital stock that are beneficially owned by such shareholder and (iv) any material interest of such shareholder in such business. Notwithstanding anything in these Bylaws to the contrary, no business shall be brought before or conducted at an annual meeting except in accordance with the provisions of this subparagraph (b). The presiding officer at the annual meeting shall, if the facts so warrant, determine and declare to the meeting that a matter of business was not properly brought before the meeting in accordance with the provisions of this subparagraph (b) and, if he should so determine, he shall so declare to the meeting and any such business so determined to be not properly brought before the meeting shall not be transacted.

(c)  At any special meeting of the shareholders, only such business shall be conducted as shall have been brought before the meeting by or at the direction of the Board of Directors.

SECTION 2.13    Voting of Shares by Certain Holders.

(a)  If shares or other securities having voting power stand of record in the names of two or more persons, whether fiduciaries, members of a partnership, joint tenants, tenants in common, tenants by the entirety or otherwise, or if two or more persons have the same fiduciary relationship respecting the same shares, unless the Secretary of the Corporation is given written notice to the contrary and is furnished with a copy of the instrument or order appointing them or creating the relationship wherein it is so provided, their acts with respect to voting shall have the following effect: (1) if only one votes, his act binds all; (2) if more than one vote, the act of the majority so voting binds all; (3) if more than one vote, but the vote is evenly split on any particular matter, each faction may vote the securities in question proportionally, or any person voting the shares, or a beneficiary, if any, may apply to such Court as may have jurisdiction to appoint an additional person to act with the persons so voting the shares, which shall then be voted as determined by the majority of such persons and the person appointed by the Court. If the instrument so filed shows that any such tenancy is held in unequal interests, a majority or even-split for the purposes hereof shall be a majority or even-split in interests. Shares standing in the name of another corporation may be voted by any officer, agent or proxy as the bylaws of such corporation may prescribe, or, in the absence of such provision, as the board of directors of such corporation may determine. Shares held by an administrator, executor, guardian or conservator may be voted by him, either in person or by proxy, without a transfer of such shares into his name. Shares standing in the name of a trustee may be voted by him, either in person or by proxy, but no trustee shall be entitled to vote shares held by him without a transfer of such shares into his name. Shares standing in the name of a receiver may be voted by such receiver, and shares held by or under the control of a receiver may be voted by such receiver without the transfer thereof into his name if authority so to do is contained in an appropriate order of the court or other public authority by which such receiver was appointed.

8

(b)  A shareholder whose shares are pledged shall be entitled to vote such shares until the shares have been transferred into the name of the pledgee, and thereafter the pledgee shall be entitled to vote the shares so transferred.

ARTICLE THREE

THE BOARD OF DIRECTORS

SECTION 3.1    General Powers.

The business and affairs of the Corporation will be managed by or under the direction of the Board of Directors. In addition to the powers and authority expressly conferred upon it by these Bylaws, the Board of Directors may exercise all such powers of the Corporation and do all such lawful acts and things as are not by statute, by any legal agreement among shareholders, by the Articles of Incorporation or by these Bylaws directed or required to be exercised or done by the shareholders. The Board of Directors shall annually elect a Chairman of the Board from among its members and may elect a Vice Chairman of the Board from among its members.

SECTION 3.2    Number and Tenure.

The Board of Directors shall consist of not less than three (3) nor more than seven (7) directors. The number of directors shall be determined from time to time by resolution of the Board of Directors. Each director shall hold office until his successor is elected and qualified or until his earlier death, resignation, incapacity to serve or removal. No decrease in the number of directors shall shorten the term of any incumbent director. Except as otherwise provided in these Bylaws, directors shall be elected at each annual meeting of shareholders, or at a special meeting of shareholders called for purposes that include the election of directors.

SECTION 3.3    Qualification of Directors.

Directors shall be natural persons who have attained the age of twenty-one years but need not be residents of the State of Georgia or shareholders of the Corporation.

SECTION 3.4    Vacancy.

Any vacancy occurring in the Board of Directors, including any vacancy occurring by reason of an increase in the number of directors or by the removal of a director, may be filled by the vote of a majority of the directors then in office, though less than a quorum. Any director chosen by the Board of Directors to fill a vacancy created, other than by reason of an increase in the number of directorships, shall serve for the unexpired term of the director whose vacancy is being filled. Any director chosen by the Board of Directors to fill a vacancy created by reason of an increase in the

9

number of directorships shall serve for a term to expire at the next election of directors by the shareholders.

SECTION 3.5    Removal.

At a meeting of shareholders with respect to which notice of such purpose has been given, any or all members of Board of Directors may be removed for cause, and then only by the affirmative vote of the holders of at least 51% of the then outstanding shares of capital stock of the Corporation entitled to be cast, voting together as single class. For purposes hereof, “cause” shall mean any act or omission for which a director may be personally liable to the Corporation or its shareholders pursuant to the Articles of Incorporation, as well as any other act or omission which relates to personal dishonesty, criminal conduct, incompetence or intentional failure to perform stated duties.

SECTION 3.6    Compensation.

The Board of Directors shall have the authority to set the compensation of directors and members of any committees thereof. The directors and members of any committees thereof may also be paid for their expenses, if any, of attendance at each meeting of the Board or any committee thereof. No provision of these Bylaws shall be construed to preclude any director or committee member from serving the Corporation in any other capacity and receiving compensation therefor.

SECTION 3.7    Nominations of Directors.

(a)  Only persons who are nominated in accordance with the procedures set forth in these Bylaws shall be eligible for election as Directors. Nominations of persons for election to the Board of Directors of the Corporation may be made at any meeting of shareholders at which Directors are to be elected only (i) by or at the direction of the Board of Directors or (ii) by any shareholder of the Corporation entitled to vote for the election of Directors at the meeting who complies with the notice procedures set forth in this Section. Each year the President shall appoint a special committee of three directors to recommend to the Board of Directors persons to be the management nominees for election as directors. Based on such recommendations, the Board of Directors shall act as a nominating committee to select the management nominees for election as directors. Except in the case of a nominee substituted as a result of the death or other incapacity of a management nominee, the nominating committee shall deliver the names of its nominees to the Secretary at least 40 days prior to the date of the annual meeting.

(b)  Nominations, other than those management nominees made by or at the direction of the Board of Directors, shall be made by timely notice in writing to the Secretary of the Corporation. To be timely, a shareholder’s notice shall be delivered or mailed to and received at the principal executive offices of the Corporation not less than 30 days prior to the date of the meeting; provided, however, that in the event that less than 40 days’ notice or

10

prior public disclosure of the date of the meeting is given or made to shareholders, notice by the shareholder to be timely must be so received not later than the close of business on the 10th day following the day on which such notice of the date of the meeting is mailed or such public disclosure was made. Such shareholder’s notice shall set forth (i) as to each person whom the shareholder proposes to nominate for election or re- election as a director, all information relating to such person as required to be disclosed in solicitation of proxies for election of directors, or as otherwise required, in each case pursuant to Regulation 14A under the Securities and Exchange Act of 1934, as amended (including such person’s written consent to being named in a proxy statement as a nominee and to serving as a director if elected); and (ii) as to the shareholder giving the notice (x) the name and address, as they appear on the books of the Corporation, of such shareholder and (y) the class and number of shares of the Corporation’s capital stock that are beneficially owned by such shareholder. At the request of the Board of Directors any person nominated by the Board of Directors for election as a director shall furnish to the Secretary of the Corporation that information required to be set forth in a shareholder’s notice of nomination which pertains to the nominee. No person shall be eligible for election as a Director of the Corporation unless nominated in accordance with the provisions of this Section. The presiding officer at the meeting shall, if the facts so warrant, determine and declare to the meeting that a nomination was not made in accordance with the provisions of this Section and, if he should so determine, he shall so declare to the meeting and the defective nomination shall be discharged.

ARTICLE FOUR

MEETINGS OF THE BOARD OF DIRECTORS

SECTION 4.1    Annual and Other Regular Meetings.

The annual regular meeting of the Board of Directors shall be held at the time and place of the regularly scheduled meeting of the Board of Directors next following the annual meeting of the shareholders. Regular meetings of the Board of Directors or any committee thereof may be held between annual meetings without notice at such time and at such place, within or without the State of Georgia, as from time to time shall be determined by the Board or any committee thereof, as the case may be.

SECTION 4.2    Special Meetings.

Special meetings of Board of Directors may be called for any purpose(s) by the Chairman of the Board or by written request of a majority of the directors then in office. Special meetings of any committee of the Board of Directors may be held on the date set at the previous meeting of the committee or when called by its chairman or by a majority of its members. Any such special meetings shall be held at such

11

date, time and place, within or without the State of Georgia, as shall be communicated in the notice of the meeting.

SECTION 4.3    Notice.

Notice of any special meeting of the Board of Directors or any committee thereof, setting forth the date, time and place of the meeting, shall be delivered to each director or committee member, addressed to him at his residence or usual place of business, or by telephone, telegram, cable, telecommunication, teletype, facsimile transmission or personal delivery not later than the second business day immediately preceding the date of the meeting. Neither the business to be transacted at, nor the purpose of, any regular or special meeting need be specified in the notice or any waiver of notice.

Notice of any meeting need not be given to any director or committee member who shall attend such meeting in person (except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not properly called or convened) or who shall waive notice thereof, before or after such meeting, in a signed writing.

SECTION 4.4    Quorum and Adjournment.

At all meetings of the Board of Directors or any committee thereof, the presence of a majority of the directors or committee members then in office shall constitute a quorum for the transaction of business. In the absence of a quorum or for any other reason, a majority of the directors or committee members present thereat may adjourn the meeting from time to time. Notice of any adjourned meeting shall be given to each director or committee member who was not present at the time of adjournment and, unless the time and place of the adjourned meeting are announced at the time of adjournment, to the other directors or committee members. At any reconvened meeting following such adjournment at which a quorum shall be present, any business may be transacted which might have transacted at the meeting as originally notified.

SECTION 4.5    Voting.

At all meetings of the Board of Directors or any committee thereof, each director or committee member present shall have one vote. The act of a majority of the directors or committee members present at any meeting, in which there is a quorum, shall be the act of the Board of Directors or any committee thereof, except as otherwise provided by statute, the Articles of Incorporation or these Bylaws. On any question on which the Board of Directors or any committee thereof shall vote, the names of those voting and their votes shall be entered into the minutes of the meeting when any member of the Board of Directors or any committee member present at the meeting so requests.

SECTION 4.6    Presumption of Assent.

Any director or committee member present at a meeting of the Board of Directors or any committee thereof shall be presumed

12

to have assented to any action taken at the meeting unless his dissent or abstention is entered in the minutes of the meeting or unless he files, at the meeting or immediately after its adjournment, his written dissent to the action with the person acting as secretary of the meeting. This right to dissent shall not be available to a director or committee member who voted in favor of the action.

SECTION 4.7    Meeting by Means of Conference Telephone or Similar Telecommunications Equipment.

Members of the Board of Directors or any committee thereof may participate in a meeting of the Board or any committee by means of conference telephone or similar telecommunications equipment, by means of which all persons participating in the meeting can hear each other. Participation in the meeting in this matter shall constitute presence in person at such meeting.

SECTION 4.8    Action by Directors Without a Meeting.

Any action required or permitted to be taken at any meeting of the Board of Directors or any committee thereof may be taken without a meeting if a written consent, setting forth the action so taken, is signed by all the directors or all the committee members, as the case may be, and filed with the minutes of the proceedings of the Board or the committee. Such consent will have the same force and effect as a unanimous vote of the Board of Directors or the committee.

SECTION 4.9    Conduct of Meetings.

All meetings of the Board of Directors or any committee thereof shall be conducted in accordance with such rules and procedures as the directors may determine subject to the requirements of statute and, as to matters not governed by such rules and procedures, as the presiding officer of such meeting shall determine. The presiding officer of any meeting of the Board of Directors shall be the Chairman of the Board or, in his absence, the President, or, in the absence of both, such person as designated by the Board of Directors. The Secretary, or in his absence, a person designated by the presiding officer, shall act as secretary of the meeting.

SECTION 4.10    Resignation.

Any director may resign at any time by giving written notice thereof to the Corporation addressed to the Chairman of the Board or the President. Unless otherwise specified, such resignation shall take effect upon delivery of such notice unless some other date is specified in such notice. Acceptance of any resignation shall not be necessary to make it effective unless the resignation is tendered subject to such acceptance. A director’s absence from more than three consecutive regular meetings of the Board of Directors, unless excused by resolution of the Board of Directors, shall be deemed to constitute the resignation of such a director, effective once such resignation is accepted by resolution of the Board of Directors.

13

ARTICLE FIVE

BOARD COMMITTEES

SECTION 5.1    Committees.

(a)  The Board of Directors may, by the vote of a majority of the directors then in office, establish committees, including standing or special committees, which shall have such duties as are authorized by the Board or by these Bylaws. Committee members, and the chairman of each committee, shall be appointed by the Board of Directors. The presiding officer of any committee meeting shall be the chairman of the committee and the chairman shall designate a person to act as secretary of the committee meeting.

(b)  Each committee shall keep minutes of its actions and proceedings. Any action taken by the Board of Directors with respect to the actions or proceedings of any committee shall be entered into the minutes of the Board of Directors.

(c)  The Board of Directors may, by the vote of majority of the directors then in office, remove any member of any committee, with or without cause, or fill any vacancies in any committee, and dissolve or discontinue any committee.

(d)  The designation of any committee under this Article and the delegation of authority thereto shall not operate to relieve the Board of Directors, or any director, of any responsibility imposed by statute.

ARTICLE SIX

OFFICERS

SECTION 6.1    Officers.

The officers of the Corporation shall include a President, one or more Vice Presidents, a Secretary, and a Treasurer. The Board of Directors may also designate the Chairman of the Board as an officer of the Corporation. The Board of Directors may also designate one or more Vice Presidents as Executive Vice President or Senior Vice President. The Board of Directors may also elect or authorize the appointment of such other officers or assistant officers as the business of the Corporation may require. In addition to the duties and powers enumerated in this Article, the officers of the Corporation shall perform such other duties and exercise such further powers as the Board of Directors may authorize or determine from time to time. Any two or more of the above offices may be held by the same persons except as prohibited by statute, but no officers shall

14

execute, acknowledge or verify an instrument in more than one capacity if the instrument is required by statute or the Articles of Incorporation to be executed, acknowledged or verified by two or more officers. No officer need be a shareholder of the Corporation.

SECTION 6.2    Compensation.

The salaries of the officers of the Corporation shall be fixed by the Board of Directors. No officer shall be prevented from receiving compensation by reason of also being a director of the Corporation.

SECTION 6.3    Election and Term of Office.

The officers of the Corporation shall be elected annually by the Board of Directors at the first meeting of the Board of Directors held after each annual meeting of the shareholders. If the election of officers is not held at such meeting, such election shall be held as soon as possible thereafter. Each officer of the Corporation shall hold office until his successor is elected or until his earlier resignation, death or removal, or the termination of his office. The election or appointment of an officer, employee or agent shall not itself create contractual rights. The Board of Directors may authorize the Corporation to enter into an employment contract or other arrangement with any officer; but no such contract shall impair the rights of the Board of Directors to remove any officer at any time in accordance with this Article.

SECTION 6.4    Removal.

Any officer may be removed from office at any time, with or without cause, by the vote of a majority of the directors then in office whenever, in their judgement, the best interest of the Corporation will be served thereby. Any such removal shall be without prejudice to the contract rights, if any, of the officer so removed.

SECTION 6.5    Vacancy.

Any vacancy in an office resulting from any cause may be filled by the Board of Directors in the manner prescribed by these Bylaws.

SECTION 6.6    Chairman of the Board.

The Chairman of the Board shall be elected annually by the Board of Directors from among its members. The Chairman shall preside at all meetings of the Board and shall perform all of the duties and shall have all the powers commonly incident to his office or delegated to him by the Board of Directors, or which are or may at any time be authorized or required by statute or these Bylaws.

SECTION 6.7    President.

The President shall be the Chief Executive Officer and shall have general responsibility for the management and supervision of the business of the Corporation and corporate policy. The President shall have administrative authority over the business of the Corporation, and shall have such further authority and perform such other duties as may be delegated to him by the Board of Directors.

15

SECTION 6.8    Vice President.

Each Executive Vice President, each Senior Vice President and each other Vice President shall have such powers and perform such duties as may be delegated to him by the Board of Directors or delegated by the President. In the absence or disability of the President, those powers, duties and functions of the President may be temporarily performed and exercised by such one of the Executive Vice Presidents, Senior Vice Presidents or the other Vice Presidents as shall be expressly designated by the Board of Directors. When more than one Vice President is elected, the Board may specify an order of seniority among such Vice Presidents.

SECTION 6.9    Secretary.

The Secretary shall attend all meetings of the Board of Directors and all meetings of the shareholders and record all votes and the minutes of all proceedings in books to be kept for that purpose, and shall perform like duties for any Board committees when required. The Secretary shall give, or cause to be given, any notice required to be given of any meetings of the shareholders, of the Board of Directors or any Board committees when required, and shall perform such other duties as may be prescribed by the Board of Directors or the President, under whose supervision the Secretary shall be. The Secretary shall cause to be kept such books and records as the Board of Directors or the President may require and shall cause to be prepared, recorded, transferred, issued, sealed and cancelled certificates of stock as required by the transactions of the Corporation and its shareholders. The Secretary shall attend to such other correspondence and shall perform such other duties as may be incident to such office or as may be assigned to him by the Board of Directors or the President. The Secretary shall have custody of the seal of the Corporation, shall have the authority to affix the same to any instrument, the execution of which on behalf of the Corporation under its seal is duly authorized, and shall attest the same by his signature whenever required. The Board of Directors may give general authority to any other officer to affix the seal of the Corporation and to attest the same by his signature.

SECTION 6.10    Treasurer.

The Treasurer shall have charge of and be responsible for all funds, securities, receipts and disbursements of the Corporation, and shall deposit, or cause to be deposited, in the name of the Corporation, all monies or other valuable effects, in such banks, trust companies or other depositories as shall from time to time be selected by the Board of Directors. He shall render to the President and to the Board of Directors, whenever requested, an account of the financial condition of the Corporation, and in general, he shall perform all such other duties as may be delegated to him by the Board of Directors or the President.

SECTION 6.11    Assistant Vice President, Assistant Secretary and Assistant Treasurer.

The Assistant Vice President, Assistant Secretary and Assistant Treasurer, in the absence or disability of any Vice President, the Secretary or the Treasurer, respectively, shall perform the duties and exercise the powers of those offices, and, in general, they shall

16

perform such other duties as shall be delegated to them by the Board of Directors or by the person appointing them. Specifically, the Assistant Secretary may affix the seal of the Corporation to all necessary documents and attest the signature of any officer of the Corporation.

SECTION 6.12    Delegation of Authority.

In the case of the absence of any officer of the Corporation or for any other reason that the Board of Directors may deem sufficient, the Board of Directors may delegate, for the time being, any or all of the powers or duties of such officer to any other officer or to any director.

ARTICLE SEVEN

CAPITAL STOCK

SECTION 7.1    Stock Certificates.

Each shareholder shall be entitled to a certificate representing the number of shares of capital stock of the Corporation owned by such person. The certificate shall be in such form as approved by the Board of Directors of the Corporation. Each certificate shall be signed by the President or a Vice President and by the Secretary or an Assistant Secretary and shall be sealed with the seal of the Corporation or a facsimile thereof. The signatures upon a certificate may be facsimiles. In case any officer who shall have signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer of the Corporation before such certificate shall have been issued by the Corporation, such certificate may nevertheless be issued as though the person who signed such certificate had not ceased to be such officer.

SECTION 7.2    Stock Records.

Each certificate for shares of Stock in the Corporation shall be numbered or otherwise identified in the stock records of the Corporation. The Corporation shall keep stock records which shall show the names and addresses of the persons to whom the shares are issued, with the number of shares and date of issuance.

SECTION 7.3    Stock Transfers.

Transfers of shares of stock of the Corporation shall be made on the stock transfer books of the Corporation only when authorized by the person named in the certificate, or by his legal representative, who shall furnish written evidence of such authority, or by his attorney authorized by a duly executed power of attorney and filed with the Corporation. Such transfer shall be made only upon surrender of the certificate therefor, or in the case of a certificate alleged to have been lost, stolen or destroyed, upon compliance with the provisions of this Article and as may otherwise be provided by statute. The Corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends and to vote as such

17

owner, and for all other purposes, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by law. No transfer shall be valid, except between the parties thereto, until such transfer shall have been made upon the books of the Corporation as herein provided. The Board of Directors shall have the power and authority to make such other rules and regulations concerning the issue, transfer and registration of certificates of the Corporation’s stock as it may deem appropriate.

SECTION 7.4    Record Dates.

The Board of Directors may fix, in advance, a date as the record date for the purpose of determining shareholders entitled to notice of, or to vote at, any meeting of shareholders or any adjournment thereof, or shareholders entitled to receive payment of any dividend of other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock, or in order to make a determination of shareholders for any other purpose. Such date in any case shall not be more than 70 days, and in the case of the meeting of shareholders, not less than 10 days, prior to the date on which the particular action, requiring the determination of shareholders is to be taken. Only those shareholders of record on the dates so fixed shall be entitled to any of the foregoing rights, notwithstanding the transfer of any such stock on the books of the Corporation after any such record date fixed by the Board of Directors.

SECTION 7.5    Transfer Agents and Registrars.

The Corporation may have one or more transfer agents and one or more registrars of its stock whose respective duties the Board of Directors or Secretary may, from time to time, determine. No certificate of stock shall be valid until countersigned by a transfer agent, if the Corporation has a transfer agent, or until registered by the registrar, if the Corporation has a registrar. The duties of transfer agent and registrar may be combined.

SECTION 7.6    Lost Certificates.

The Corporation may issue a new certificate of stock in place of any certificate previously issued and alleged to have been lost, stolen or destroyed, and the Corporation may require the owner of the lost, stolen or destroyed certificate, or his legal representative to give the Corporation a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate and any other conditions as may otherwise be provided by statute.

18

ARTICLE EIGHT

GENERAL PROVISIONS

SECTION 8.1    References.

Whenever in these Bylaws reference is made to an Article or Section number, such reference is to the number of an Article or Section of the Bylaws. Whenever in the Bylaws reference is made to the Bylaws, such reference is to these Bylaws of the Corporation as the same may be amended from time to time. Whenever in the Bylaws reference is made to the Articles of Incorporation, such reference is to the Articles of Incorporation of the Corporation as the same may be amended from time to time.

SECTION 8.2    Reference to Gender.

Whenever in the Bylaws reference is made to the masculine gender, such reference shall where the context so requires be deemed to include the feminine gender and the neuter gender, and the Bylaws shall be read accordingly.

SECTION 8.3    Legal Restrictions.

All matters covered in these Bylaws shall be subject to such restrictions as shall be imposed on the Corporation by applicable state and federal statutes, rules and regulations.

SECTION 8.4    Seal.

The seal of the Corporation shall be in such form as the Board of Directors may determine from time to time. The seal may be used by causing it or by facsimile thereof to be impressed or affixed or reproduced or otherwise. If it is inconvenient to use such a seal at any time, the signature of the Chairman of the Board, President, Secretary or an Assistant Secretary of the Corporation, followed by the word “Seal” shall be deemed the seal of the Corporation.

SECTION 8.5    Fiscal Year.

The fiscal year of the Corporation shall be fixed by resolution of the Board of Directors and may be changed from time to time.

SECTION 8.6    Voting Shares in Subsidiaries.

In the absence of other arrangements by the Board of Directors, shares of stock issued by another corporation and owned or controlled by the Corporation, whether in a fiduciary capacity or otherwise, may be voted by the President of the Corporation or by such other person as the Board of Directors by resolution shall so designate, and such person may execute the aforementioned powers by executing proxies and written waivers and consents on behalf of the Corporation.

SECTION 8.7    Inspection of Books.

The Board of Directors shall have the power to determine which accounts and books of the Corporation, if any, shall be opened to the inspection of shareholders, except such as may by statute be specifically opened to

19

inspection, and shall have the power to affix reasonable rules and regulations not in conflict with the applicable statute for the inspection of accounts and books which by statute or by the determination of the Board of Directors shall be opened to inspection, and the shareholders’ rights in this respect are and shall be restricted and limited accordingly.

SECTION 8.8    Contracts.

No contract or other transaction between Corporation and any other corporation, partnership or other entity shall be affected or invalidated by the fact that a shareholder, director or officer of the Corporation is a shareholder, director, partner or other officer of, or is interested in, such other corporation, partnership or other entity, and no contract or other transaction between Corporation and any other person shall be affected or invalidated by the fact that a shareholder, director or officer of the Corporation is a party to, or interested in, such contract or transaction; provided that, in each such case, the nature and extent of the interest of such shareholder, director or officer in such contract or other transaction or the fact that such shareholder, director or officer is a shareholder, director, officer, partner or other party of such other corporation, partnership, entity or other person is known to the Board of Directors or is disclosed at the meeting of the Board of Directors at which such contract or the transaction is authorized.

SECTION 8.9    Amendment of Bylaws.

These Bylaws may be altered, amended or repealed, or new Bylaws adopted by the shareholders at a meeting of the shareholders or by the Board of Directors at a meeting of the Board of Directors; provided, however, such action shall be required to be taken at a meeting of shareholders or directors, and notice of the general nature of the proposed change(s) in the Bylaws will be given in the notice of such meeting. The shareholders may provide by resolution that any Bylaw provision altered, amended, repealed or adopted by them may not be altered, amended, repealed or adopted by the Board of Directors. Action by the shareholders with respect to the Bylaws shall require an affirmative vote of holders of at least 51% of the then outstanding shares of capital stock of the Corporation entitled to be cast, voting together as a single class. Action by the Board of Directors with respect to the Bylaws shall require the affirmative vote of a majority of the directors then in office.

ARTICLE NINE

INDEMNIFICATION

SECTION 9.1    Indemnification.

Subject to the provisions of the Articles of Incorporation, the Corporation shall indemnify any person acting in the capacity of a director or officer of the Corporation to the fullest extent authorized by statute.

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The undersigned, being the duly elected Secretary of the Corporation, hereby certifies that the foregoing Bylaws were duly adopted by the Board of Directors on the 30th day of July, 1999.

/s/    FRED J. PINCKNEY        

Secretary

21

EX-4.6

EXHIBIT 4.6

JUNIOR SUBORDINATED INDENTURE

Among

AMERICAN SAFETY HOLDINGS CORP.,

(as Issuer)

AMERICAN SAFETY INSURANCE GROUP, LTD.

(as Guarantor)

and

DEUTSCHE BANK TRUST COMPANY AMERICAS

(as Trustee)

dated as of

                        , 2002

AMERICAN SAFETY CAPITAL TRUST I

Certain Sections of this Junior Subordinated Indenture relating to

Sections 310 through 318 of the

Trust Indenture Act of 1939:

Trust Indenture Act Section		Junior Subordinated Indenture Section
Section 310	(a)(1)	6.9
	(a)(2)	6.9
	(a)(3)	Not Applicable
	(a)(4)	Not Applicable
	(a)(5)	6.9
	(b)	6.8,6.10
Section 311	(a)	6.13
	(b)	6.13
	(b)(2)	7.3(a)
Section 312	(a)	7.1, 7.2(a)
	(b)	7.2(b)
	(c)	7.2(c)
Section 313	(a)	7.3(a)
	(a)(4)	7.3(a)
	(b)	7.3(b)
	(c)	7.3(a)
	(d)	7.3(c)
Section 314	(a)	7.4
	(b)	7.4
	(c)(1)	1.2
	(c)(2)	1.2
	(c)(3)	Not Applicable
	(e)	1.2
Section 315	(a)	6.1(a)
	(b)	6.2,7.3
	(c)	6.1(b)
	(d)	6.1(c)
	(e)	5.14
Section 316	(a)	5.12
	(a)(1)(A)	5.12
	(a)(1)(B)	5.13
	(a)(2)	Not Applicable
	(b)	5.8
	(c)	1.4(f)
Section 317	(a)(1)	5.3
	(a)(2)	5.4
	(b)	10.3
Section 318	(a)	1.7
Note: This reconciliation and tie shall not, for any purpose, be deemed to be a part of the Indenture.

TABLE OF CONTENTS

		Page(s)
ARTICLE I    DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION		1
Section 1.1.	Definitions	1
Section 1.2.	Compliance Certificate and Opinions	10
Section 1.3.	Forms of Documents Delivered to Trustee	11
Section 1.4.	Acts of Holders	11
Section 1.5.	Notices, Etc. to Trustee and Company	13
Section 1.6.	Notice to Holders; Waiver	14
Section 1.7.	Conflict with Trust Indenture Act	14
Section 1.8.	Effect of Headings and Table of Contents	14
Section 1.9.	Successors and Assigns	14
Section 1.10.	Separability Clause	15
Section 1.11.	Holders of Preferred Securities as Third Party Beneficiaries	15
Section 1.12.	Benefits of Indenture	15
Section 1.13.	Governing Law	15
Section 1.14.	Non-Business Days	15
ARTICLE II    SECURITY FORMS		16
Section 2.1.	Forms Generally	16
Section 2.2.	Form of Face of Security	16
Section 2.3.	Form of Reverse of Security	20
Section 2.4.	Additional Provisions Required in Global Security	23
Section 2.5.	Form of Trustee's Certificate of Authentication	23
ARTICLE III    THE SECURITIES		24
Section 3.1.	Title and Terms	24
Section 3.2.	Denominations	24
Section 3.3.	Execution, Authentication, Delivery and Dating	25
Section 3.4.	Temporary Securities	26
Section 3.5.	Global Securities	26
Section 3.6.	Registration, Transfer and Exchange Generally; Certain Transfers and Exchanges; Securities Act Legends	27
Section 3.7.	Mutilated, Lost and Stolen Securities	30
Section 3.8.	Payment of Interest and Additional Interest; Interest Rights Preserved	31
Section 3.9.	Persons Deemed Owners	32
Section 3.10.	Cancellation	32
Section 3.11.	Computation of Interest	33
Section 3.12.	Deferrals of Interest Payment Dates	33
Section 3.13.	Right of Set-Off	34
Section 3.14.	Agreed Tax Treatment	34

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TABLE OF CONTENTS (cont’d)

		Page(s)
Section 3.15.	CUSIP Numbers	34
Section 3.16.	Shortening of Stated Maturity	35
ARTICLE IV    SATISFACTION AND DISCHARGE		35
Section 4.1.	Satisfaction and Discharge of Indenture	35
Section 4.2.	Application of Trust Money	36
ARTICLE V    REMEDIES		36
Section 5.1.	Events of Default	36
Section 5.2.	Acceleration of Maturity; Rescission and Annulment	37
Section 5.3.	Collection of Indebtedness and Suits for Enforcement by Trustee	38
Section 5.4.	Trustee May File Proofs of Claim	39
Section 5.5.	Trustee May Enforce Claim Without Possession of Securities	39
Section 5.6.	Application of Money Collected	40
Section 5.7.	Limitation on Suits	40
Section 5.8.	Unconditional Right of Holders to Receive Principal, Premium and Interest; Direct Action by Holders of Preferred Securities	41
Section 5.9.	Restoration of Rights and Remedies	41
Section 5.10.	Rights and Remedies Cumulative	41
Section 5.11.	Delay or Omission Not Waiver	42
Section 5.12.	Control by Holders	42
Section 5.13.	Waiver of Past Defaults	42
Section 5.14.	Undertaking for Costs	43
Section 5.15.	Waiver of Usury, Stay or Extension Laws	43
ARTICLE VI    THE TRUSTEE		43
Section 6.1.	Certain Duties and Responsibilities	43
Section 6.2.	Notice of Defaults	44
Section 6.3.	Certain Rights of Trustee	45
Section 6.4.	Not Responsible for Recitals or Issuance of Securities	46
Section 6.5.	May Hold Securities	46
Section 6.6.	Money Held in Trust	46
Section 6.7.	Compensation and Reimbursement	46
Section 6.8.	Disqualification; Conflicting Interests	47
Section 6.9.	Corporate Trustee Required; Eligibility	48
Section 6.10.	Resignation and Removal; Appointment of Successor	48
Section 6.11.	Acceptance of Appointment by Successor	49
Section 6.12.	Merger, Conversion, Consolidation or Succession to Business	50
Section 6.13.	Preferential Collection of Claims Against Company	50
Section 6.14.	Appointment of Authenticating Agent	50

ii

TABLE OF CONTENTS (cont’d)

		Page(s)
ARTICLE VII    HOLDERS LISTS AND REPORTS BY TRUSTEE, PAYING AGENT AND COMPANY		52
Section 7.1.	Company to Furnish Trustee Names and Addresses of Holders	52
Section 7.2.	Preservation of Information, Communications to Holders	52
Section 7.3.	Reports by Trustee and Paying Agent	52
Section 7.4.	Reports by Company	53
ARTICLE VIII    CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE		53
Section 8.1.	Company May Consolidate, Etc., Only on Certain Terms	53
Section 8.2.	Successor Company Substituted	54
Section 8.3.	Guarantor May Consolidate, Etc., Only on Certain Terms	54
Section 8.4.	Successor Guarantor Substituted	55
ARTICLE IX    SUPPLEMENTAL INDENTURES		55
Section 9.1.	Supplemental Indentures Without Consent of Holders	55
Section 9.2.	Supplemental Indentures with Consent of Holders	56
Section 9.3.	Execution of Supplemental Indentures	57
Section 9.4.	Effect of Supplemental Indentures	58
Section 9.5.	Conformity with Trust Indenture Act	58
Section 9.6.	Reference in Securities to Supplemental Indentures	58
ARTICLE X    COVENANTS		58
Section 10.1.	Payment of Principal, Premium and Interest	58
Section 10.2.	Maintenance of Office or Agency	58
Section 10.3.	Money for Security Payments to be Held in Trust	59
Section 10.4.	Statement as to Compliance	60
Section 10.5.	Waiver of Certain Covenants	60
Section 10.6.	Additional Sums	61
Section 10.7.	Additional Covenants of Company and Guarantor	61
Section 10.8.	Federal Tax Reports	62
ARTICLE XI    REDEMPTION OF SECURITIES		62
Section 11.1.	Applicability of this Article	62
Section 11.2.	Election to Redeem; Notice to Trustee	62
Section 11.3.	Selection of Securities to be Redeemed	63
Section 11.4.	Notice of Redemption	63
Section 11.5.	Deposit of Redemption Price	64
Section 11.6.	Payment of Securities Called for Redemption	64
Section 11.7.	Right of Redemption of Securities Initially Issued to the Issuer Trust	65
ARTICLE XII    SINKING FUNDS		65

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TABLE OF CONTENTS (cont’d)

		Page(s)
ARTICLE XIII    SUBORDINATION OF SECURITIES		65
Section 13.1.	Securities Subordinate to Senior Indebtedness	65
Section 13.2.	No Payment When Senior Indebtedness in Default; Payment Over of Proceeds Upon Dissolution, Etc.	65
Section 13.3.	Payment Permitted if No Default	67
Section 13.4.	Subrogation to Rights of Holders of Senior Indebtedness	67
Section 13.5.	Provisions Solely to Define Relative Rights	68
Section 13.6.	Trustee to Effectuate Subordination	68
Section 13.7.	No Waiver of Subordination Provisions	68
Section 13.8.	Notice to Trustee	69
Section 13.9.	Reliance on Judicial Order or Certificate of Liquidating Agent	69
Section 13.10.	Trustee Not Fiduciary for Holders of Senior Indebtedness	70
Section 13.11.	Rights of Trustee as Holder of Senior Indebtedness; Preservation of Trustee's Rights	70
Section 13.12.	Article Applicable to Paying Agents	70
Section 13.13.	Certain Conversions or Exchanges Deemed Payment	70
ARTICLE XIV    GUARANTEE AND INDEMNITY		71
Section 14.1.	The Guarantee	71
Section 14.2.	Subordination of Guarantee	71
ANNEX A		73

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JUNIOR SUBORDINATED INDENTURE

THIS JUNIOR SUBORDINATED INDENTURE, dated as of                         , 2002 between AMERICAN SAFETY HOLDINGS CORP., a Georgia corporation (the “Company”), having its principal office at 1845 The Exchange, Atlanta, Georgia 30339, AMERICAN SAFETY INSURANCE GROUP, LTD., a Bermuda company having its principal office at 44 Church Street, Hamilton HM HX, Bermuda (the “Guarantor”), and DEUTSCHE BANK TRUST COMPANY AMERICAS, as Trustee, having its principal office at 31 West 52^nd St., New York, New York, New York 10019 (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 debentures due                         , 2032 (the “Securities”) of substantially the tenor hereinafter provided, including Securities issued to evidence loans made to the Company from the proceeds from the issuance from time to time by American Safety Capital Trust I, a Delaware statutory trust (the “Issuer Trust”) of preferred undivided beneficial interests in the assets of such Issuer Trust (the “Preferred Securities”) and common undivided interests in the assets of such Issuer 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.

WHEREAS, for value received, the Guarantor has duly authorized the execution and delivery of this Indenture to provide for the issuance of the Guarantee (as such term is defined in Section 1.1 hereof) and the indemnity provided for herein, and all things necessary to make this Indenture a valid agreement of the Guarantor, 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 (as such term is defined in Section 1.1 hereof) thereof, it is mutually covenanted and agreed, for the equal and proportionate benefit of all Holders of the Securities or of any series thereof, and intending to be legally bound hereby, as follows:

ARTICLE 1

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, and include the plural as well as the singular;

(b)  all other terms used herein that are defined in the Trust Indenture Act, either directly or by reference therein, have the meanings assigned to them therein;

(c)  the words “include,” “includes” and “including” shall be deemed to be followed by the phrase “without limitation”;

(d)  all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with generally accepted accounting principles as in effect at the time of computation;

(e)  whenever the context may require, any gender shall be deemed to include the other;

(f)  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; and

(g)  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.

“Act” when used with respect to any Holder has the meaning specified in Section 1.4(a).

“Additional Interest” means the interest, if any, that shall accrue on any interest on the Securities of any series 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.

“Additional Sums” has the meaning specified in Section 10.6.

“Additional Taxes” means any additional taxes, duties and other governmental charges to which the Issuer Trust has become subject from time to time as a result of a Tax Event.

“Administrator” means, in respect of the Issuer Trust, each Person appointed in accordance with the Trust Agreement, solely in such Person’s capacity as Administrator of the Issuer Trust and not in such Person’s individual capacity, or any successor Administrator appointed as therein 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.

“Agent Member” means any member of, or participant in, the Depositary.

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“Applicable 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 Global Security, in each case to the extent applicable to such transaction and as in effect from time to time.

“Authenticating Agent” means any Person authorized by the Trustee pursuant to Section 6.14 to act on behalf of the Trustee to authenticate Securities.

“Board of Directors” means the board of directors of the Company or the executive committee of the board of directors of the Company (or any other committee of the board of directors of the Company performing similar functions) or, for purposes of this Indenture, a committee designated by the board of directors of the Company (or such committee), comprised of two or more members of the board of directors of the Company or officers of the Company, or both.

“Board Resolution” means a copy of a resolution certified by the Secretary or any Assistant Secretary of the Company or Guarantor, as applicable, to have been duly adopted by the Board of Directors, or such committee of the Board of Directors or officers of the Company or Guarantor, as applicable, to which authority to act on behalf of the Board of Directors has been delegated, and to be in full force and effect on the date of such certification, and delivered to the Trustee.

“Business Day” means any day other than (a) a Saturday or Sunday, (b) a day on which banking institutions in the State of Georgia or 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 of the Trustee, or, with respect to the Securities initially issued to the Issuer Trust, the “Corporate Trust Office” (as defined in the Trust Agreement) of the Property Trustee or the Delaware Trustee under the Trust Agreement, is closed for business.

“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 instrument such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act, then the body performing such duties on such date.

“Common Securities” has the meaning specified in the first recital of this Indenture.

“Common Stock” means the no par value common stock of the Company.

“Company” means the Person named as the “Company” in the preamble of this instrument until a successor entity shall have become such pursuant to the applicable provisions of this Indenture, and thereafter “Company” shall mean such successor entity.

“Company Request” and “Company Order” mean, respectively, the written request or order signed in the name of the Company by any Chairman of the Board of Directors, any Vice Chairman of the Board of Directors, its Chief Executive Officer, President or a Vice President, and by its Chief Financial Officer, its Treasurer, its Secretary or an Assistant Secretary, and delivered to the Trustee.

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“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 hereof is located at 100 Plaza One, MSJCY 03-0603, Jersey City, New Jersey 07311.

“Creditor” has the meaning specified in Section 6.7(c).

“Defaulted Interest” has the meaning specified in Section 3.8.

“Delaware Trustee” means, with respect to the Issuer Trust, the Person identified as the “Delaware Trustee” in the Trust Agreement, solely in its capacity as Delaware Trustee of the Issuer 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, with respect to the Securities issuable or issued in whole or in part in the form of one or more Global Securities, the Person designated as Depositary by the Company pursuant to Section 3.1 (or any successor thereto).

“Direct Action” has mean specified in Section 5.8.

“Discount Security” means any security that provides for an amount less than the principal amount thereof to be due and payable upon a declaration of acceleration of the Maturity thereof pursuant to Section 5.2.

“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.

The term “entity” includes a bank, corporation, association, company, limited liability company, joint–stock company or statutory trust.

“Event of Default,” has the meaning specified in Article V.

“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 1.4.

“Extension Period” has the meaning specified in Section 3.12.

“Global Security” means a Security in the form prescribed in Section 2.4 evidencing all or part of the Securities, issued to the Depositary or its nominee, and registered in the name of such Depositary or its nominee.

“Guarantee” means the unconditional guarantee of payment of the principle of, any premium or interest (including Additional Interest, if any) on, and any Additional Sums with respect to the Securities by the Guarantor as more fully set forth in Article XIV.

“Preferred Securities Guarantee Agreement” means the Preferred Securities Guarantee Agreement with respect to the Preferred Securities of the Issuer Trust, dated                         , 2002,

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executed by the Guarantor for the benefit of the Holders of the Preferred Securities issued by the Issuer Trust as modified, amended or supplemented from time to time.

“Guarantor” means the Person named as the “Guarantor” in the first paragraph of this instrument until a successor Person shall have become such pursuant to the applicable provisions of this Indenture, and thereafter “Guarantor” shall mean such successor Person.

“Guarantor’s Board of Directors” means the board of directors of the Guarantor or any committee of that board duly authorized to act generally or in any particular respect for the Guarantor hereunder.

“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 supplemented or amended by one or more indentures supplemental hereto entered into pursuant to the applicable provisions hereof.

“Institutional Accredited Investor” means an institutional accredited investor within the meaning of Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act.

“Interest Payment Date” means the Stated Maturity of an installment of interest on such Securities.

“Investment Company Act” means the Investment Company Act of 1940 and any successor statute thereto, in each case as amended from time to time.

“Investment Company Event” means the receipt by the Issuer Trust of an Opinion of Counsel, rendered by counsel experienced in such matters, to the effect that, as a result of the occurrence of a change in law or regulation or a written change (including any announced prospective 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 Issuer Trust is or will be considered an “investment company” that is 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 Preferred Securities of the Issuer Trust.

“Issuer Trust” has the meaning specified in the first recital of this Indenture.

“Junior Subordinated Debenture Guarantee Agreement” means the Junior Subordinated Debenture Guarantee Agreement, dated                         , 2002, executed by the Guarantor for the benefit of the Holders of the Securities issued by the Issuer as modified, amended or supplemented from time to time.

“Liquidation Amount” has the meaning assigned in the Trust Agreement.

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“Maturity” when used with respect to any Security means the date on which the principal of such Security 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, with respect to any Person, a certificate signed by the Chairman of the Board, Chief Executive Officer, President or a Vice President, and by the Chief Financial Officer, Treasurer, an Associate Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary of such Person, and delivered to the Trustee. Any Officers’ Certificate delivered with respect to compliance with a condition or covenant provided for in this Indenture 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 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;

provided, however, that the Officers’ Certificate delivered pursuant to the provisions of Section 10.4 hereof shall comply with the provisions of Section 314 of the Trust Indenture Act.

“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.

“Original Issue Date” means the date of issuance specified as such in 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:

(a)  Securities theretofore canceled by the Trustee or delivered to the Trustee for cancellation;

(b)  Securities for whose payment money in the necessary amount has been theretofore deposited with the Trustee or any Paying Agent in trust for the Holders of such Securities; and

(c)  Securities in substitution for or in lieu of other Securities which have been authenticated and delivered or that have been paid pursuant to Section 3.6, 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;

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provided, however, 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 (other than, for the avoidance of doubt, the Issuer Trust to which Securities of the applicable series were initially issued) 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 the Trustee 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 (other than, for the avoidance of doubt, the Issuer Trust). Upon the written request of the Trustee, the Company shall furnish to the Trustee promptly an Officers’ Certificate listing and identifying all Securities, if any, known by the Company to be owned or held by or for the account of the Company, or any other obligor on the Securities or any Affiliate of the Company or such obligor (other than, for the avoidance of doubt, the Issuer Trust), and, subject to the provisions of Section 6.1, the Trustee shall be entitled to accept such Officers’ Certificate as conclusive evidence of the facts therein set forth and of the fact that all Securities not listed therein are Outstanding for the purpose of any such determination.

“Paying Agent” means the Trustee or any Person authorized by the Company to pay the principal of (or premium, if any) or interest on, or other amounts in respect of any Securities on behalf of the Company.

“Person” means any individual, partnership, trust, unincorporated organization joint venture or entity (as defined herein) or government or any agency or political subdivision thereof.

“Place of Payment” means, with respect to the Securities, the place or places where the principal of (and premium, if any) and interest on the Securities are payable pursuant to Section 3.1.

“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 3.7 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.

“Preferred Securities” has the meaning specified in the first recital of this Indenture.

“Proceeding” has the meaning specified in Section 13.2.

“Property Trustee” means, with respect to the Issuer Trust, the Person identified as the “Property Trustee” in the Trust Agreement, solely in its capacity as Property Trustee of the Issuer 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.

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“Redemption Date”, when used with respect to any Security to be redeemed, means the date fixed for such redemption by or pursuant to this Indenture or the terms of such Security.

“Redemption Price”, when used with respect to any Security to be redeemed, means the price at which it is to be redeemed pursuant to this Indenture.

“Regular Record Date” for the interest payable on any Interest Payment Date with respect to the Securities means, unless otherwise provided pursuant to Section 3.1 with respect to the Securities, the close of business on March 15, June 15, September 15 or December 15 next preceding such Interest Payment Date (whether or not a Business Day).

“Responsible Officer”, when used with respect to the Property Trustee means any officer assigned to the Corporate Trust Office, including any managing director, principal, vice president, assistant vice president, assistant treasurer, assistant secretary or any other officer of the Trustee customarily performing functions similar to those performed by any of the above designated officers and having direct responsibility for the administration of this Indenture, and also, with respect to a particular matter, any other officer to whom such matter is referred because of such officer’s knowledge of and familiarity with the particular subject.

“Restricted Security” means each Security required pursuant to Section 3.6(c) to bear a Restricted Securities Legend.

“Restricted Securities Certificate” means a certificate substantially in the form set forth in Annex A.

“Restricted Securities Legend” means a legend substantially in the form of the legend required in the form of Security set forth in Section 2.2 to be placed upon a Restricted Security.

“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 and 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 3.6(a).

“Senior Indebtedness” means, whether recourse is to all or a portion of the assets of the Company and the Guarantor and whether or not contingent, (a) every obligation of the Company and the Guarantor for money borrowed; (b) every obligation of the Company and the Guarantor evidenced by bonds, debentures, notes or other similar instruments, including obligations incurred in connection with the acquisition of property, assets or businesses; (c) every reimbursement obligation of the Company and the Guarantor with respect to letters of credit, bankers’ acceptances or similar facilities issued for the account of the Company and the Guarantor, respectively; (d) every obligation of the Company and the Guarantor issued or assumed as the deferred purchase price of property or services (but excluding trade accounts payable or accrued liabilities arising in the ordinary course of business); (e) every capital lease obligation of the Company and the Guarantor; (f) every obligation of the Company and the

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Guarantor for claims (as defined in Section 101(4) of the United States Bankruptcy Code of 1978, as amended) in respect of derivative products such as interest and foreign exchange rate contracts, commodity contracts and similar arrangements; and (g) every obligation of the type referred to in clauses (a) through (f) of another person and all dividends of another person the payment of which, in either case, the Company and the Guarantor have guaranteed or are responsible or liable, directly or indirectly, as obligor or otherwise. Senior Indebtedness shall not include (a) any obligations which, by their terms, are expressly stated to rank pari passu in right of payment with, or to not be superior in right of payment to, the Securities, (b) any Senior Indebtedness of the Company and the Guarantor which when incurred and without respect to any election under Section 1111(b) of the United States Bankruptcy Code of 1978, as amended, was without recourse to the Company and the Guarantor, respectively, (c) any indebtedness of the Company and the Guarantor to any of its subsidiaries or Affiliates, (d) indebtedness to any executive officer or director of the Company and the Guarantor, or (e) any indebtedness in respect of debt securities issued to any trust, or a trustee of such trust, partnership or other entity affiliated with the Company or the Guarantor that is a financing entity of the Company or the Guarantor in connection with the issuance of such financing entity of securities that are similar to the Preferred Securities.

“Special Record Date” for the payment of any Defaulted Interest means a date fixed by the Trustee pursuant to Section 3.8.

“Stated Maturity,” when used with respect to any Security or any installment of principal thereof or interest thereon, means the date specified pursuant to the terms of such Security as the fixed date on which the principal of such Security or such installment of principal or interest is due and payable, as such date may, in the case of such principal, be shortened or extended as provided pursuant to the terms of such Security and this Indenture.

“Subsidiary” means an entity more than 50% of the outstanding voting stock 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.

“Successor Security” of any particular Security means every Security issued after, and evidencing all or a portion of the same debt as that evidenced by, such particular Security; and, for the purposes of this definition, any Security authenticated and delivered under Section 3.7 in exchange for or 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.

“Tax Event” means the receipt by the Issuer Trust of an Opinion of Counsel, rendered by counsel experienced in such matters, to the effect that, as a result of 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 as a result of any official or administrative pronouncement or action or judicial decision interpreting or applying such laws or regulations, which amendment or change is effective or which pronouncement or decision is announced on or after the date of issuance of the Preferred Securities of the Issuer Trust, there is more than an insubstantial risk that (a) the Issuer

9

Trust is, or will be within 90 days of the delivery of such Opinion of Counsel, subject to United States federal income tax with respect to income received or accrued on the corresponding series of Securities issued by the Company to the Issuer Trust, (b) interest payable by the Company on the Securities is not, or within 90 days of the delivery of such Opinion of Counsel will not be, deductible by the Company, in whole or in part, for United States federal income tax purposes, (c) the deduction of interest payable by the Company on the Securities will be deferred or suspended for United States federal income tax purposes and the net present value of the benefits of such tax deductions will be materially reduced or (d) the Issuer Trust is, or will be within 90 days of the delivery of such Opinion of Counsel, subject to more than a de minimis amount of other taxes, duties or other governmental charges.

“Trust Agreement” means the Amended and Restated Trust Agreement, dated as of , 2002, as amended, modified or supplemented from time to time, among the trustees of the Issuer Trust named therein, the Company, as depositor, the Administrators and the holders from time to time of undivided beneficial ownership interests in the assets of the Issuer Trust.

“Trustee” means the Person named as the “Trustee” in the preamble of this Indenture, 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 and, if at any time there is more than one such Person, “Trustee” as used with respect to the Securities shall mean the Trustee with respect to Securities.

“Trust Indenture Act” means the Trust Indenture Act of 1939, as amended by the Trust Indenture Reform Act of 1990, or any successor statute, in each case as amended from time to time, except as provided in Section 9.5.

“Trust Securities” has the meaning specified in the first recital of this Indenture.

“Vice President,” when used with respect to the Company, means any duly appointed vice president, whether or not designated by a number or a word or words added before or after the title “vice president.”

SECTION 1.2.    Compliance Certificate and Opinions.

Upon any application or request by the Company to the Trustee to take any action under any provision of this Indenture, the Company shall 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, except that in the case of any such application or request as to which the furnishing of such documents is specifically required by any provision of this Indenture relating to such particular application or request, no additional certificate or opinion need be furnished.

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Every certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture (other than the certificates provided pursuant to Section 10.4) shall include:

(a)  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;

(b)  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;

(c)  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

(d)  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 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 or the Guarantor 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 in the exercise of reasonable care 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 or the Guarantor stating that the information with respect to such factual matters is in the possession of the Company or the Guarantor, unless such counsel knows, or in the exercise of reasonable care 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.

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, 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 duly appointed in writing; and, except as herein otherwise expressly

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provided, such action shall become effective when such instrument or instruments 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 (subject to Section 6.1) conclusive in favor of the Trustee, the Company and the Guarantor, 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 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.

(c)  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 provided in any other manner that the Trustee deems sufficient and in accordance with such reasonable rules as the Trustee may determine.

(d)  The ownership of Securities shall be proved by the Securities Register.

(e)  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 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.

(f)  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, provided that the Company may not set a record date for, and the provisions of this Section 1.4(f) shall not apply with respect to, the giving or making of any notice, declaration, request or direction referred to in Section 1.4(g). If any record date is set pursuant to this Section 1.4(f), 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, however that no such action shall be effective hereunder unless taken on or prior to the applicable Expiration Date (as defined below) by Holders of the requisite principal amount of Outstanding Securities on such record date. Nothing in this Section 1.4(f) 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 Section 1.4(f) (whereupon the record date previously set shall automatically and with no action by any Person be canceled and of no effect), and nothing in this Section 1.4(f) shall be construed to render ineffective any action taken by Holders of the requisite principal amount of Outstanding Securities on the date such action is taken. Promptly after any record date is set pursuant to this Section 1.4(f), the Company, at its own expense, shall cause notice of such

12

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 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, in each case with respect to Securities. If any record date is set pursuant to this Section 1.4(g), 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, however 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 Outstanding Securities on such record date. Nothing in this Section 1.4(g) 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 Section 1.4(g) (whereupon the record date previously set shall automatically and with no action by any Person be canceled and of no effect) and nothing in this paragraph shall be construed to render ineffective any action taken by Holders of the requisite principal amount of Outstanding Securities on the date such action is taken. 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 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, the party hereto that set such record date shall be deemed to have initially designated the 180th 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 Section 1.4(h). Notwithstanding the foregoing, no Expiration Date shall be later than the 180th day after the applicable record date.

(i)     Without limiting the foregoing, a Holder entitled hereunder 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.

SECTION 1.5    Notices, Etc. to Trustee and Company.

Any request, demand, authorization, direction, notice, consent, waiver or Act of Holders or other document provided or permitted by this Indenture to be made upon, given or furnished to, or filed with:

13

(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 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 (except as otherwise provided in Section 5.1) hereunder if in writing and mailed, first class, postage prepaid, to the Company addressed to it at the address of its principal office specified in the first paragraph of this instrument 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, at 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 services 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 or of the Securities, 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 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.    Conflict with Trust Indenture Act.

If any provision hereof limits, qualifies or conflicts with a provision of the Trust Indenture Act that is required thereunder to be a part of and govern this Indenture, the provision of the Trust Indenture Act shall control. If any provision of this Indenture modifies or excludes any provision of the Trust Indenture Act that may be so modified or excluded, the latter provision shall be deemed to apply to this Indenture as so modified or to be excluded, as the case may be.

SECTION 1.8.    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 hereof.

SECTION 1.9.    Successors and Assigns.

All covenants and agreements in this Indenture by the Company and/or Guarantor shall bind their successors and assigns, whether so expressed or not.

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SECTION 1.10.    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.

SECTION 1.11.    Holders of Preferred Securities as Third Party Beneficiaries.

The Company and the Guarantor hereby acknowledge that, to the extent specifically set forth herein, the holders of the Preferred Securities of the Issuer Trust shall expressly be third party beneficiaries of this Indenture. The Company and the Guarantor further acknowledge that, if an Event of Default has occurred and is continuing and is attributable to the failure of the Company and/or the Guarantor to pay the principal of or premium, if any, or interest with respect to the Securities of the Issuer Trust, any holder of the Preferred Securities of the Issuer may institute a Direct Action against the Company and/or the Guarantor.

SECTION 1.12.    Benefits of Indenture.

Except as provided in Section 1.11 and for the benefit of the parties hereto and their successors and assigns, the holders of Senior Indebtedness and the Holders of the Securities, nothing in this Indenture or in the Securities, express or implied, shall give to any Person, any benefit or any legal or equitable right, remedy or claim under this Indenture.

SECTION 1.13.    Governing Law.

THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

SECTION 1.14.    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 or principal (and premium, if any) or other amounts in respect of such Security need not be made on such date, but may be made on the next succeeding Business Day (and no 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 is 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).

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ARTICLE II

SECURITY FORMS

SECTION 2.1.    Forms Generally.

(a)  The Securities and the Trustee’s certificate of authentication shall be in substantially the forms set forth in this Article II, or in such other form or forms as shall be established by or pursuant to a Board Resolution or in one or more indentures supplemental hereto, in each case with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may be required to comply with applicable tax laws or the rules of any securities exchange or as may, consistently herewith, be determined by the officers executing such securities, as evidenced by their execution of the Securities. If the form of Securities is established by action taken pursuant to a Board Resolution, a copy of an appropriate record of such action shall be certified by the Secretary or an Assistant Secretary of the Company and delivered to the Trustee at or prior to the delivery of the Company Order contemplated by Section 3.3 with respect to the authentication and delivery of such Securities. The Trustee’s certificate of authentication shall be substantially in the form set forth in this Article.

(b)  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.

(c)  Securities distributed to holders of Global Preferred Securities (as defined in the Trust Agreement) upon the dissolution of the Issuer 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 Global Preferred Securities upon the dissolution of the Issuer 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.

SECTION 2.2.    Form of Face of Security.

AMERICAN SAFETY HOLDINGS CORP.

        % Junior Subordinated Deferrable Interest Debentures due                         , 2032

[If the Security is a Restricted Security, insert—THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (A) BY AN INITIAL INVESTOR THAT IS

16

NOT A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT, (I) TO A PERSON WHO THE TRANSFEROR REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (II) IN AN OFFSHORE TRANSACTION COMPLYING WITH THE PROVISIONS OF RULE 903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, OR (III) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE), OR (B) BY AN INITIAL INVESTOR THAT IS A QUALIFIED INSTITUTIONAL BUYER OR BY ANY SUBSEQUENT INVESTOR, AS SET FORTH IN (A) ABOVE AND, IN ADDITION, TO AN INSTITUTIONAL ACCREDITED INVESTOR IN A TRANSACTION EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, AND, IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF THE STATES AND OTHER JURISDICTIONS OF THE UNITED STATES. THE HOLDER OF THIS SECURITY AGREES THAT IT WILL COMPLY WITH THE FOREGOING RESTRICTIONS. SECURITIES OWNED BY AN INITIAL INVESTOR THAT IS NOT A QUALIFIED INSTITUTIONAL BUYER MAY NOT BE HELD IN GLOBAL FORM AND MAY NOT BE TRANSFERRED WITHOUT CERTIFICATION THAT THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS, AS PROVIDED IN THE INDENTURE REFERRED TO BELOW. NO REPRESENTATION CAN BE MADE AS TO THE AVAILABILITY OF THE EXEMPTION PROVIDED BY RULE 144 FOR RESALES OF THE SECURITIES.]

No.                                                                                                                                                                                             $                

American Safety Holdings Corp., a Georgia corporation (hereinafter called the “Company”, which term includes any successor Person under the Indenture hereinafter referred to), for value received, hereby promises to pay to American Safety Capital Trust I, or registered assigns, the principal sum of                          Dollars on                         , 2032, 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 provided that the Company may shorten the Stated Maturity of the principal of this Security to a date not earlier than                         , 2007. The Company further promises to pay interest on said principal from                         , 2002, 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 31, June 30, September 30 and December 31 of each year, commencing December 31, 2002 at the rate of         % per annum, together with Additional Sums, if any, as provided in Section 10.6 of the Indenture, until the principal hereof is paid or duly provided for or made available for payment; provided that any overdue principal, premium or Additional Sums and any overdue installment of interest shall bear Additional Interest at the rate of         % 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 for any period less than a full interest period shall be computed on the basis of a 360–day year of twelve 30–day months and the actual days elapsed in a partial

17

month in such period. The amount of interest payable for any full interest period shall be computed by dividing the applicable rate per annum by four. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will, 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, which shall be the 15th day of March, June, September and December (whether or not a Business Day), as the case may be, next preceding such Interest Payment Date. 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 of this series not less than 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 said Indenture.

So long as no Event of Default has occurred and is continuing, the Company shall have the right, at any time during the term of this Security, from time to time to defer the payment of interest on this Security for up to 20 consecutive quarterly interest payment periods with respect to each deferral period (each an “Extension Period”), during which Extension Periods the Company shall have the right to make partial payments of interest on any Interest Payment Date, and at the end of which the Company shall pay all interest then accrued and unpaid including Additional Interest, as provided below; provided however, that no Extension Period shall extend beyond the Stated Maturity of the principal of this Security, as then in effect, and no such Extension Period may end on a date other than an Interest Payment Date; and provided further, however, that during any such Extension Period, the Company shall not (a) 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 (b) make any payment of principal of or 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 (i) 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, (ii) as a result of a reclassification, 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, (iii) 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, or (iv) 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). Prior to the termination of any such Extension Period, the Company may further defer the payment of interest, provided that no Extension Period shall exceed 20 consecutive quarterly interest payment periods, extend beyond

18

the Stated Maturity of the principal of this Security or end on a date other than an Interest Payment Date. 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, subject to the above conditions. 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 that the payment of such interest shall be legally enforceable) at the rate of     % per annum, compounded quarterly and calculated as set forth in the first paragraph of this Security, from the date on which such amounts would otherwise have been due and payable until paid or made available for payment. The Company shall give the Holder of this Security and the Trustee notice of its election to begin any 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 such securities are held by American Safety Capital Trust I, or at least one Business Day prior to the earlier of (a) the next succeeding date on which Distributions on the Preferred Securities of the Issuer Trust would be payable but for such deferral, and (b) the date on which the Property Trustee of the Issuer Trust is required to give notice to holders of such Preferred Securities of the record date or the date such Distributions are payable, but in any event not less than one Business Day prior to such record date.

Payment of the principal of (and premium, if any) and interest on this Security will be made at the office or agency of the Company maintained for that purpose in the United States, 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; provided however, that at the option of the Company payment of interest may be made (a) by check mailed to the address of the Person entitled thereto as such address shall appear in the Securities Register, or (b) if to a Holder of $1,000,000 or more in aggregate principal amount of this Security, by wire transfer in immediately available funds upon written request to the Trustee not later than 15 calendar days prior to the date on which the interest is payable.

The indebtedness evidenced by this Security is, to the extent provided in the Indenture, subordinate and subject in right of payments to the prior payment in full of all Senior Indebtedness, 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 Indebtedness, whether now outstanding or hereafter incurred, and waives reliance by each such holder upon said provisions.

Reference is hereby made to the further provisions of this Security set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place.

19

Unless the certificate of authentication hereon has been executed by the Trustee referred to on the reverse hereof by manual or facsimile 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 caused this instrument to be duly executed.

AMERICAN SAFETY HOLDINGS CORP.
By:
	Name: Title:

Attest:

Secretary or Assistant Secretary

This is one of the Securities of the series designated therein referred to in the within-mentioned Indenture.

Dated:

DEUTSCHE BANK TRUST COMPANY AMERICAS,  as Trustee
By:
	Authorized Signatory

SECTION 2.3.    Form of Reverse of Security.

This Security is one of a duly authorized issue of securities of the Company (herein called the “Securities”), issued and to be issued under the Junior Subordinated Indenture, dated as of                         , 2002 (herein called the “Indenture”), between the Company and Deutsche Bank Trust Company Americas, as Trustee (herein called 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 Indebtedness and the Holders of the Securities, and of the terms upon which the Securities are, and are to be, authenticated and delivered. This Security is one of the series designated on the face hereof, limited in aggregate principal amount to $                .

All terms used in this Security that are defined in the Indenture or, if not defined in the Indenture, in the Amended and Restated Trust Agreement dated as of                         , 2002 (as

20

modified, amended or supplemented from time to time the “Trust Agreement”), relating to American Safety Capital Trust I (the “Issuer 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 has the right to redeem this Security (a) on or after                         , 2007, in whole at any time or in part from time to time, or (b) in whole (but not in part), at any time within 180 days following the occurrence and during the continuation of a Tax Event or Investment Company Event, in each case at the Redemption Price described below, and subject to possible regulatory approval. The Redemption Price shall equal 100% of the principal amount hereof being redeemed, together with accrued interest to but excluding the date fixed for redemption.

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 applicable, insert—The Indenture contains provisions for defeasance at any time [of the entire indebtedness of this Security] [or] [certain restrictive covenants and Events of Default with respect to this Security] [, in each case] upon compliance by the Company with certain conditions set forth in the Indenture.]

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 to be affected by such supplemental indenture. The Indenture also contains provisions permitting Holders of specified percentages in principal amount of the Securities at the time Outstanding, 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.

[If the Security is not a Discount Security, insert—As provided in and subject to the provisions of the Indenture, if an Event of Default with respect to the Securities at the time Outstanding occurs and is continuing, then and in every such case the Trustee or the Holders of not less than 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 such Holders fail to declare the principal of all the Outstanding Securities to be immediately due and payable, the holders of at least 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 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

21

become immediately due and payable, provided that the payment of principal and interest (including any Additional Interest) on such Securities shall remain subordinated to the extent provided in Article XIII of the Indenture.]

[If the Security is a Discount Security, insert—As provided in and subject to the provisions of the Indenture, if an Event of Default with respect to the Securities at the time Outstanding occurs and is continuing, then and in every such case the Trustee or the Holders of not less than 25% in aggregate principal amount of the Outstanding Securities may declare an amount of principal of 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 such Holders fail to declare such principal amount of the Outstanding Securities to be immediately due and payable, the Holders of at least 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 Company and the Trustee. The principal amount payable upon such acceleration shall be equal to [insert formula for determining the amount]. Upon any such declaration, such amount of the principal of and the accrued interest (including any Additional Interest) on all the Securities shall become immediately due and payable, provided that the payment of such principal and interest (including any Additional Interest) on all the Securities shall remain subordinated to the extent provided in Article XIII of the Indenture. Upon payment (a) of the amount of principal so declared due and payable and (b) of interest on any overdue principal, premium and interest (in each case to the extent that the payment of such interest shall be legally enforceable), all of the Company’s obligations in respect of the payment of the principal of and premium and interest, if any, on this Security shall terminate.]

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 premium, if any) and interest (including Additional Interest) 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 under Section 10.2 of the Indenture for such purpose, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Securities Registrar 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.

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.

22

Prior to due presentment of this Security for registration of transfer, 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 therein, the Holder of, and any Person that acquires a beneficial interest in, this Security agrees that for United States federal, state and local tax purposes it is intended that this Security constitute indebtedness.

THIS SECURITY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

THIS SECURITY IS A DIRECT AND UNSECURED OBLIGATION OF THE COMPANY, DOES NOT EVIDENCE DEPOSITS AND IS NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER INSURER OR GOVERNMENT AGENCY.

SECTION 2.4.    Additional Provisions Required in Global Security.

Unless otherwise specified as contemplated by Section 3.1, any Global Security issued hereunder shall, in addition to the provisions contained in Sections 2.2 and 2.3, bear a legend in substantially the following form:

THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A NOMINEE OF A DEPOSITARY. THIS SECURITY IS EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE AND MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY, EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE.

SECTION 2.5.    Form of Trustee’s Certificate of Authentication.

The Trustee’s certificates of authentication shall be in substantially the following form:

This is one of the Securities referred to in the within-mentioned Indenture.

Dated:

DEUTSCHE BANK TRUST COMPANY AMERICAS,
	as Trustee

23

By: Authorized Signatory  

ARTICLE III

THE SECURITIES

SECTION 3.1.    Title And Terms.

(a)  The aggregate principal amount of Securities that may be authenticated and delivered under this Indenture is $            .

(b)  Subject to Section 3.16, the Securities’ Stated Maturity shall be                         , 2032.

(c)  The Securities, established pursuant to a Board Resolution, shall bear interest at a per annum rate equal to         % from                         , 2001 or from the most recent Interest Payment Date to which interest has been paid or duly provided for, as the case may be, payable quarterly (subject to deferral as set forth in Section 3.12), in arrears, on March 31, June 30, September 30 and December 31 of each year, commencing December 31, 2002, until the principal thereof is paid or made available for payment. Interest will compound quarterly and will accrue at a per annum rate equal to         % to the extent permitted by applicable law, on any interest installment in arrears for more than one quarterly period or during an extension of an interest payment period as set forth below in Section 3.12.

(d)  The principal of (and premium, if any) and interest on the Securities shall be payable at the office or agency of the Paying Agent in the United States maintained for such purpose and at any other office or agency maintained by the Company for such purpose 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; provided, however, that at the option of the Company payment of interest may be made (i) by check mailed to the address of the Person entitled thereto as such address shall appear in the Security Register or (ii) if to a Holder of $1,000,000 or more in aggregate principal amount of this Security, by wire transfer in immediately available funds upon written request to the Trustee not later than 15 calendar days prior to the date on which the interest is payable, at such place and to such account as may be designated by the Person entitled thereto as specified in the Security Register.

(e)  Securities may be issuable in whole or in part in the form of one or more Global Securities and, in such case, the Depositary for such Global Securities shall be The Depository Trust Company.

(f)  The securities shall be subordinated in right of payment to Senior Indebtedness as provided in Article XIII.

SECTION 3.2    Denominations.

The Securities shall be in registered form without coupons and shall be issuable in denominations of $10 and any integral multiple thereof.

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SECTION 3.3.    Execution, Authentication, Delivery and Dating.

(a)  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, President or one of its Vice Presidents, and attested by its Secretary or one of its Assistant Secretaries. The signature of any of these officers on the Securities may be manual or facsimile.

(b)  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. At any time and from time to time after the execution and delivery of this Indenture, the Company may deliver Securities 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. If the form or terms of the Securities have been established by or pursuant to one or more Board Resolutions as permitted by Sections 2.1 and 3.1, 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 (subject to Section 6.1) shall be fully protected in relying upon, an Opinion of Counsel stating:

(i)  if the form of such Securities has been established by or pursuant to Board Resolution as permitted by Section 2.1, that such form has been established in conformity with the provisions of this Indenture;

(ii)  if the terms of such Securities have been established by or pursuant to Board Resolution as permitted by Section 3.1, that such terms have been established in conformity with the provisions of this Indenture; and

(iii)  that 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 valid and legally binding obligations of the Company enforceable in accordance with their 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.

(c)  If such form or terms have been so established, the Trustee shall not be required to authenticate such Securities if the issue of such Securities pursuant to this Indenture will affect the Trustee’s own rights, duties or immunities under the Securities and this Indenture or otherwise in a manner that is not reasonably acceptable to the Trustee.

(d)  Notwithstanding the provisions of Section 3.1 and Section 3.3(b), if all Securities are not to be originally issued at one time, it shall not be necessary to deliver the Officers’ Certificate otherwise required pursuant to Section 3.1 or the Company Order and Opinion of Counsel otherwise required pursuant to Section 3.3(b) at or prior to the authentication of each Security if such documents are delivered at or prior to the authentication upon original issuance of the first Security to be issued.

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(e)  Each Security shall be dated the date of its authentication.

(f)  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 or facsimile signature of one of its authorized officers, 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 3.10, 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.

SECTION 3.4.    Temporary Securities.

(a)  Pending the preparation of definitive Securities, the Company may execute, and upon receipt of a 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.

SECTION 3.5.    Global Securities.

(a)  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 Securities registered, 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 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 the Company is unable to locate a qualified

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successor within 90 days of receipt of such notice from the Depositary, (ii) 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 (iii) there shall have occurred and be continuing an Event of Default.

(c)  If any Global Security is to be exchanged for other Securities or cancelled in whole, it shall be surrendered by or on behalf of the Depositary or its nominee to the Securities Registrar for exchange or cancellation as provided in this Article III. 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 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 the portion thereof to be so exchanged or canceled, or equal to 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 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 Trustee shall, subject to Section 3.6(b) and as otherwise provided in this Article III, 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, whether pursuant to this Article III, Section 9.6 or 11.6 or otherwise, 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)  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 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 agent. Neither the Trustee nor the Securities Registrar shall have any liability in respect of any transfers effected by the Depositary.

(f)  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 Agent Members.

SECTION 3.6.    Registration, Transfer and Exchange Generally; Certain Transfers and Exchanges; Securities Act Legends.

(a)  The Company shall cause to be kept at the Corporate Trust Office of the Trustee a register in which, subject to such reasonable regulations as it may prescribe, the Company shall

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provide for the registration of Securities and transfers of Securities. Such register is herein sometimes referred to as the “Securities Register.” The Trustee is hereby appointed “Securities Registrar” for the purpose of registering Securities and transfers of Securities as herein provided.

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 and bearing such restrictive legends as may be required by this Indenture.

At the option of the Holder, Securities may be exchanged for other Securities of any authorized denominations, of like tenor and aggregate principal amount and bearing such restrictive legends as may be required by this Indenture, 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.

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.

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.

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 governmental charge that may be imposed in connection with any transfer or exchange of Securities.

Neither the Company nor the Trustee shall be required, pursuant to the provisions of this Section, (i) to issue, exchange or register the transfer of any Security during a period beginning at the opening of business 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.

(b)  Certain Transfers and Exchanges.    Notwithstanding any other provision of this Indenture, transfers and exchanges of Securities and beneficial interests in a Global Security shall be made only in accordance with this Section 3.6(b).

(i)  Restricted Non-Global Security to Global Security.    If the Holder of a Restricted Security (other than a Global Security) wishes at any time to transfer all or any portion of such Security to a Person who wishes to take delivery thereof in the form of a beneficial interest in a Global Security, such transfer may be effected only in accordance with the provisions of this clause (b)(i) and subject to the Applicable

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Procedures. Upon receipt by the Securities Registrar of (A) such Security as provided in Section 3.6(a) and instructions satisfactory to the Securities Registrar directing that a beneficial interest in the Global Security in a specified principal amount not greater than the principal amount of such Security be credited to a specified Agent Member’s account and (B) a Restricted Securities Certificate duly executed by such Holder or such Holder’s attorney duly authorized in writing, then the Securities Registrar shall cancel such Security (and issue a new Security in respect of any untransferred portion thereof) as provided in Section 3.6(a) and increase the aggregate principal amount of the Global Security by the specified principal amount as provided in Section 3.5(c).

(ii)  Non-Global Security to Non-Global Security.    A Security that is not a Global Security may be transferred, in whole or in part, to a Person who takes delivery in the form of another Security that is not a Global Security as provided in Section 3.6(a), provided that if the Security to be transferred in whole or in part is a Restricted Security, the Securities Registrar shall have received a Restricted Securities Certificate duly executed by the transferor Holder or such Holder’s attorney duly authorized in writing.

(iii)  Exchanges Between Global Security and Non-Global Security.    A beneficial interest in a Global Security may be exchanged for a Security that is not a Global Security as provided in Section 3.5.

(iv)  Certain Initial Transfers of Non-Global Securities.    In the case of Securities initially issued other than in global form, an initial transfer or exchange of such Securities that does not involve any change in beneficial ownership may be made to an Institutional Accredited Investor or Investors as if such transfer or exchange were not an initial transfer or exchange; provided, however that written certification shall be provided by the transferee and transferor of such Securities to the Securities Registrar that such transfer or exchange does not involve a change in beneficial ownership.

(c)  Restricted Securities Legend.    Except as set forth below, all Securities shall bear a Restricted Securities Legend:

(i)  subject to the following clauses of this Section 3.6(c), a Security or any portion thereof that is exchanged, upon transfer or otherwise, for a Global Security or any portion thereof shall bear the Restricted Securities Legend while represented thereby;

(ii)  subject to the following clauses of this Section 3.6(c), a new Security which is not a Global Security and is issued in exchange for another Security (including a Global Security) or any portion thereof, upon transfer or otherwise, shall, if such new Security is required pursuant to Section 3.6(b)(ii) or (iii) to be issued in the form of a Restricted Security, bear a Restricted Securities Legend;

(iii)  a new Security (other than a Global Security) that does not bear a Restricted Security Legend may be issued in exchange for or in lieu of a Restricted Security or any portion thereof that bears such a legend if, in the Company’s judgment, placing such a legend upon such new Security is not necessary to ensure compliance with the registration requirements of the Securities Act, and the Trustee, at the written

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direction of the Company in the form of an Officer’s Certificate, shall authenticate and deliver such a new Security as provided in this Article III;

(iv)  notwithstanding the foregoing provisions of this Section 3.6(c), a Successor Security of a Security that does not bear a Restricted Securities Legend shall not bear such form of legend unless the Company has reasonable cause to believe that such Successor Security is a “restricted security” within the meaning of Rule 144, in which case the Trustee, at the written direction of the Company in the form of an Officer’s Certificate, shall authenticate and deliver a new Security bearing a Restricted Securities Legend in exchange for such Successor Security as provided in this Article III; and

(v)  Securities distributed to a holder of Preferred Securities upon dissolution of an Issuer Trust shall bear a Restricted Securities Legend if the Preferred Securities so held bear a similar legend.

SECTION 3.7.    Mutilated, Lost and Stolen Securities.

(a)  If any mutilated Security, including any temporary Securities, is surrendered to the Trustee together with such security or indemnity as may be required by the Company or the Trustee to save each of them harmless, the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor a new Security, of like tenor and aggregate principal amount, bearing the same legends, and bearing a number not contemporaneously outstanding.

(b)  If there shall be delivered to the Company and to the Trustee (i) evidence to their satisfaction of the destruction, loss or theft of any Security, and (ii) such security or indemnity as may be required by them to save each of them harmless, then, in the absence of notice to the Company or the Trustee that such Security has been acquired by a bona fide purchaser or a protected purchaser, the Company shall execute and upon its 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 and bearing the same legends 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 3.7, 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 in lieu of any destroyed, lost or stolen Security shall constitute an original additional contractual obligation of the Company, whether or not the destroyed, lost or stolen Security shall be at any time 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.

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(f)  The provisions of this Section 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 3.8.    Payment of Interest and Additional Interest; Interest Rights Preserved.

(a)  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 in respect of Securities, except that, unless otherwise provided in the Securities, interest payable on the Stated Maturity of the principal of a Security 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 or in the Board Resolution pursuant to Section 3.1 with respect to the Securities.

(b)  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 clause (i) or (ii) below:

(i)  The Company may elect to make payment of any Defaulted Interest to the Persons in whose names the Securities in respect of which interest is in default (or their respective Predecessor Securities) are registered at the close of business on a Special Record Date for the payment of such Defaulted Interest, which shall be fixed in the following manner. The Company 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 which shall be fixed 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 as in this clause provided. Thereupon, the Trustee shall fix a Special Record Date for the payment of such Defaulted Interest, which shall be not more than 15 days and not less than 10 days prior to the date of the proposed payment and not less than 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 10 days prior to such Special Record Date. The Trustee may, in its discretion, in the name and at the expense of the Company, cause a similar notice to be published at least once in a newspaper, customarily published in the English language on each Business Day and of general circulation in the Borough of Manhattan, The City of New York, but such publication shall not be a condition precedent to the establishment of such Special Record Date. Notice of the proposed payment of such Defaulted Interest and the Special

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Record Date therefor having been mailed as aforesaid, 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 and shall no longer be payable pursuant to the following clause (ii).

(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 in respect of which interest is in default 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 (ii), such payment shall be deemed practicable by the Trustee.

(c)  Subject to the foregoing provisions of this Section, 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 interest, that were carried by such other Security.

SECTION 3.9    Persons Deemed Owners.

(a)  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 (subject to Section 3.8) any interest on such Security and for all other purposes whatsoever, whether or not such Security be overdue, and none of the Company, the Trustee or any agent of the Company or the Trustee shall be affected by notice to the contrary.

(b)  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. 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 3.10.    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 3.10, except as expressly permitted by this Indenture. All

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canceled Securities shall be destroyed by the Trustee and the Trustee shall deliver to the Company a certificate of such destruction.

SECTION 3.11.    Computation of Interest.

Interest on the Securities for any period shall be computed on the basis of a 360–day year of twelve 30–day months and the actual number of days elapsed in any partial month in such period, and interest on the Securities for a full period shall be computed by dividing the rate per annum by the number of interest periods that together constitute a full twelve months.

SECTION 3.12.    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 during the term of the Securities, from time to time to defer the payment of interest on such Securities for such period or periods (each an “Extension Period”) not to exceed the number of consecutive interest periods that equal 20 consecutive quarterly periods with respect to each Extension Period, during which Extension Periods the Company shall have the right to make partial payments of interest on any Interest Payment Date. No Extension Period shall end on a date other than an Interest Payment Date. At the end of any such Extension Period, the Company shall pay all interest then accrued and unpaid on the Securities (together with Additional Interest thereon, if any, at the rate specified for the Securities to the extent permitted by applicable law); provided, however, that no Extension Period shall extend beyond the Stated Maturity of the principal of the Securities; and provided further, however, that, 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 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 a reclassification, 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, or (D) 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). Prior to the termination of any such Extension Period, the Company may further defer the payment of interest, provided that no Event of Default has occurred and is continuing and provided further, that no Extension Period shall exceed the period or periods specified in such Securities, extend beyond the Stated Maturity of the principal of such Securities or end on a date other than an Interest Payment Date. Upon

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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, subject to the above conditions. No interest or Additional 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. The Company shall give the Holders of the Securities and the Trustee 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 Securities would be payable but for such deferral or, with respect to any Securities issued to the Issuer Trust, so long as any such Securities are held by the Issuer Trust, at least one Business Day prior to the earlier of (x) the next succeeding date on which Distributions (as defined in the Trust Agreement) on the Preferred Securities of the Issuer Trust would be payable but for such deferral, and (y) the date on which the Property Trustee of the Issuer Trust is required to give notice to holders of such Preferred Securities of the record date or the date such Distributions are payable, but in any event not less than one Business Day prior to such record date.

(b)  The Trustee shall promptly give notice of the Company’s election to begin any such Extension Period to the Holders of the Outstanding Securities.

SECTION 3.13.    Right of Set-Off.

With respect to the Securities initially issued to the Issuer Trust, 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 such Security to the extent the Company or the Guarantor has theretofore made, or is concurrently on the date of such payment making, a payment under the Guarantee or to a holder of Preferred Securities pursuant to an action undertaken under Section 5.8 of this Indenture.

SECTION 3.14.    Agreed Tax Treatment.

Each Security issued hereunder shall provide that the Company and, by its acceptance of a Security or a beneficial interest therein, the Holder of, and any Person that acquires a beneficial interest in, such Security agree that for United States federal, state and local tax purposes it is intended that such Security constitutes indebtedness.

SECTION 3.15.    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 notice 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.

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SECTION 3.16.    Shortening of Stated Maturity.

The Company shall have the right to shorten the Stated Maturity of the principal of the Securities at any time to any date not earlier than                         , 2007, provided that the Company shall give notice to the Holders, the Trustee and, in the case of Securities issued to an Issuer Trust, the Issuer Trust of such shortening no less than 90 days prior to the effectiveness thereof.

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 destroyed, lost or stolen and that have been replaced or paid as provided in Section 3.7 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 10.3) 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,

(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 an amount in the currency or currencies in which the Securities are payable sufficient to pay and discharge the entire indebtedness on such Securities not theretofore delivered to the Trustee for cancellation, for the principal (and premium, if any) 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 Redemption Date, as the case may be;

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(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 6.7, the obligations of the Company to any Authenticating Agent under Section 6.14 and, if money shall have been deposited with the Trustee pursuant to subclause (ii) of clause (a) of this Section, the obligations of the Trustee under Section 4.2 and the last paragraph of Section 10.3 shall survive.

SECTION 4.2.    Application of Trust Money.

Subject to the provisions of the last paragraph of Section 10.3, 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, 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 premium, if any) and interest and Additional Interest for the payment of which such money or obligations have been deposited with or received by the Trustee.

ARTICLE V

REMEDIES

SECTION 5.1.    Events of Default.

“Event of Default”, wherever used herein with respect to the Securities, means 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 a period of 30 days (subject to the deferral of any due date in the case of an Extension Period);

(b)  default in the payment of the principal of (or premium, if any, on) any Security at its Stated Maturity;

(c)  failure on the part of the Company or the Guarantor duly to observe or perform any other of the covenants or agreements on the part of the Company or the Guarantor in the Securities or in this Indenture for a period of 90 days after the date on which written notice of such failure (a “Notice of Default”), requiring the Company or the Guarantor to remedy the same, shall have been given to the Company or the Guarantor by the Trustee by registered or

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certified mail or to the Company, the Guarantor and the Trustee by the Holders of at least 25% in aggregate principal amount of the Outstanding Securities; or

(d)  the occurrence of the appointment of a receiver or other similar official in any liquidation, insolvency or similar proceeding with respect to the Company, Guarantor or all or substantially all of the Company or Guarantor’s property; or a court or other governmental agency shall enter a decree or order appointing a receiver or similar official with respect to the Company or Guarantor and such decree or order shall remain unstayed and undischarged for a period of 60 days.

SECTION 5.2.    Acceleration of Maturity; Rescission and Annulment.

(a)  If an Event of Default (other than an Event of Default specified in Section 5.1(d)) with respect to Securities at the time Outstanding occurs and is continuing, then, and in every such case, the Trustee or the Holders of not less than 25% in aggregate principal amount of the Outstanding Securities may declare the principal amount (or, if the Securities are Discount Securities, such portion of the principal amount as may be specified in the terms) 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, however that, if, upon an Event of Default, the Trustee or the Holders of not less than 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 25% in aggregate Liquidation Amount (as defined in the Trust Agreement) of the Preferred Securities issued by the Issuer Trust then outstanding shall have the right to make such declaration by a notice in writing to the Company and the Trustee; and upon any such declaration such principal amount (or specified portion thereof) of and the accrued interest (including any Additional Interest) on all the Securities shall become immediately due and payable. If an Event of Default specified in Section 5.1(d) with respect to Securities at the time Outstanding occurs, the principal amount of all the Securities (or, if the Securities are Discount Securities, such portion of the principal amount of such Securities as may be specified by the terms) shall automatically, and without any declaration or other action on the part of the Trustee or any Holder, become immediately due and payable. Payment of principal and interest (including any Additional Interest) on such Securities shall remain subordinated to the extent provided in Article XIII notwithstanding that such amount shall become immediately due and payable as herein provided.

(b)  At any time after such a declaration of acceleration with respect to the Securities has been made and before a judgment or decree for payment of the money due has been obtained by the Trustee as hereinafter in this Article V, provided the Holders of a majority in aggregate principal amount of the Outstanding Securities, by written notice to the Company and the Trustee, may rescind and annul such declaration and its consequences if:

(i)  the Company or the Guarantor have 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;

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(C)  the principal of (and premium, if any, on) any Securities that have become due otherwise than by such declaration of acceleration and interest and 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 and advances of the Trustee, its 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.

(c)  If the Holders of Securities fail to annul such declaration and waive such default, the holders of a majority in aggregate Liquidation Amount (as defined in the Trust Agreement) of Preferred Securities issued by the Issuer Trust then outstanding shall also have the right to rescind and annul such declaration and its consequences by written notice to the Company and the Trustee, subject to the satisfaction of the conditions set forth in clauses (a) and (b) above of this Section 5.2.

(d)  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 30 days or

(ii)  default is made in the payment of the principal of (and premium, if any, on) any Security at the Stated Maturity thereof,

then the Company will, upon demand of the Trustee, pay to the Trustee, for the benefit of the Holders of the Securities, the whole amount then due and payable on the Securities for principal (and premium, if any) and interest (including any Additional Interest), and, in addition thereto, all amounts owing the Trustee under Section 6.7.

(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, the Guarantor and/or any other obligor upon such Securities and collect the monies adjudged or decreed to be payable in the manner provided by law out of the property of the Company, the Guarantor and/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

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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 other judicial or administrative proceeding relative to the Company, the Guarantor and/or any other obligor upon the Securities or the property of the Company, the Guarantor and/or of such other obligor or their creditors,

(a)  the Trustee (irrespective of whether the principal of the Securities shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Trustee shall have made any demand on the Company and/or the Guarantor for the payment of overdue principal (and premium, if any) or interest (including any Additional Interest)) shall be entitled and empowered, by intervention in such proceeding or otherwise:

(i)  to file and prove a claim for the whole amount of principal (and premium, if any) and interest (including any Additional Interest) owing and unpaid in respect to the Securities and to file such other papers or documents as may be necessary or advisable and to take any and all actions as are authorized under the Trust Indenture Act in order to have the claims of the Holders and any predecessor to the Trustee under Section 6.7 allowed in any such judicial or administrative proceedings; and

(ii)  in particular, the Trustee shall be authorized to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same in accordance with Section 5.6; and

(b)  any custodian, receiver, assignee, trustee, liquidator, sequestrator, conservator (or other similar official) in any such judicial or administrative proceeding is hereby authorized by each Holder to make such payments to the Trustee for distribution in accordance with Section 5.6, and in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due to it and any predecessor Trustee under Section 6.7.

Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Securities or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding; provided, however, that the Trustee may, on behalf of the Holders, vote for the election of a trustee in bankruptcy or similar official and be a member of a creditors’ or other similar committee.

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

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shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall, subject to Article XIII and after provision for the payment of all the amounts owing the Trustee and any predecessor Trustee under Section 6.7, its agents and counsel, 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 (and premium, if any) 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 and any predecessor Trustee under Section 6.7;

SECOND: Subject to Article XIII, to the payment of the amounts then due and unpaid upon Securities for principal (and premium, if any) 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 such Securities for principal (and premium, if any) and interest (including any Additional Interest), respectively; and

THIRD: 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 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, as herein before provided;

(b)  the Holders of not less than 25% 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 for 60 days after its receipt of such notice, request and offer of indemnity has failed to institute any such proceeding; and

(e)  no direction inconsistent with such written request has been given to the Trustee during such 60-day period by the Holders of a majority in aggregate principal amount of the

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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 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 premium, if any) and (subject to Sections 3.8 and 3.12) interest (including any Additional Interest) on such Security on the Stated Maturity (or in the case of redemption, on the Redemption Date) 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 issued by the Issuer Trust shall have the right, upon the occurrence of an Event of Default described in Section 5.1(a) or 5.1(b), to institute a suit directly against the Company and/or the Guarantor for enforcement of payment to such holder of principal of (and premium, if any) and (subject to Sections 3.8 and 3.12) interest (including any Additional Interest) on the Securities having a principal amount equal to the aggregate Liquidation Amount (as defined in the Trust Agreement) of such Preferred Securities held by such holder (a “Direct Action”).

SECTION 5.9.    Restoration of Rights and Remedies.

If the Trustee, any Holder or any holder of Preferred Securities issued by the Issuer Trust 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 Guarantor, 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 the last paragraph of Section 3.7, 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.

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SECTION 5.11.    Delay or Omission Not Waiver.

(a) No delay or omission of the Trustee, any Holder of any Security with respect to the Securities or any holder of any Preferred Security to exercise any right or remedy accruing upon any Event of Default with respect to the Securities shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein.

(b) 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 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, with respect to the Securities, 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 6.1, 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, 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 affected thereby and, the holders of a majority in aggregate Liquidation Amount (as defined in the Trust Agreement) of the Preferred Securities issued by the Issuer Trust may waive any past default hereunder and its consequences except a default:

(i) in the payment of the principal of (or premium, if any) or interest (including any Additional Interest) on any Security (unless such default has been cured and the Company has paid to or deposited with the Trustee a sum sufficient to pay all matured installments of interest (including Additional Interest) and all principal of (and premium, if any 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 affected thereby.

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(b)  Any such waiver shall be deemed to be on behalf of the Holders of all the Securities, or in the case of waiver by holders of Preferred Securities issued by the Issuer Trust, by all holders of Preferred Securities issued by the Issuer Trust.

(c)  Upon any such waiver, such 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 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 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, 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 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 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 premium, if any) or interest (including any Additional Interest) on any Security on or after the Stated Maturity.

SECTION 5.15.    Waiver of Usury, Stay or Extension Laws.

The Company and the Guarantor covenant (to the extent that it may lawfully do so) that they 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 and the Guarantor (to the extent that it may lawfully do so) hereby expressly waive all benefit or advantage of any such law, and covenant that they 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.    Certain Duties and Responsibilities.

(a)  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

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(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, but in the case of any such certificates or opinions that by any provisions 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 conform to the requirements of this Indenture.

(b)  In case an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs.

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

(i)  this subsection shall not be construed to limit the effect of subsection (a) of this Section 6.1;

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

(iii)  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 Holders pursuant to Section 5.12 relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Indenture with respect to the Securities.

(d)  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 there shall be reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it.

(e)  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.

SECTION 6.2.    Notice of Defaults.

Within 90 days after actual knowledge by a Responsible Officer of the Trustee of the occurrence of any default hereunder with respect to the Securities, the Trustee shall transmit by mail to all Holders of Securities, as their names and addresses appear in the Securities Register, notice of such default, unless such default shall have been cured or waived; provided, however, that, except in the case of a default in the payment of the principal of (or premium, if any) or interest (including any Additional Interest) on any Security, the Trustee shall be protected in

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withholding such 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 the withholding of such notice is in the interests of the 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 of Securities shall be given until at least 30 days after the occurrence thereof. For the purpose of this Section 6.2, the term “default” means any event that is, or after notice or lapse of time or both would become, an Event of Default with respect to the Securities.

SECTION 6.3.    Certain Rights of Trustee.

Subject to the provisions of Section 6.1:

(a)  the Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, Security 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)  any request or direction of the Company mentioned herein 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;

(c)  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 absence of bad faith on its part, rely upon an Officers’ Certificate;

(d)  the Trustee may consult with counsel of its choice and the advice of such counsel or any Opinion of 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;

(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 pursuant to this Indenture, unless such Holders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities that might be incurred by it in compliance with such request or direction; provided, however, that nothing herein shall relieve the Trustee of its obligations upon the occurrence of an Event of Default that has not been cured or waived to exercise with respect to the Securities such of the rights and powers vested in the Trustee by this Indenture, and to use the same degree of care and skill in exercising such rights and powers as a reasonably prudent person would use under the circumstances in the conduct of his own affairs.

(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, Security 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; and

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

SECTION 6.4.    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 6.5.    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, subject to Sections 6.8 and 6.13, 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.    Money Held in Trust.

Money held by the Trustee in trust hereunder need not be segregated from other funds except to the extent required by law. The Trustee shall be under no liability for interest on any money received by it hereunder except as otherwise agreed with the Company.

SECTION 6.7.    Compensation and Reimbursement.

(a)  The Company agrees to pay to the Trustee from time to time reasonable compensation for all services rendered by it hereunder in such amounts as the Guarantor 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).

(b)  The Company agrees 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.

(c)  Since the Issuer Trust is being formed solely to facilitate an investment in the Preferred Securities, the Company hereby covenants to pay all debts and obligations (other than with respect to the Preferred Securities and the Common Securities) and all reasonable costs and expenses of the Issuer Trust (including without limitation all costs and expenses relating to the organization of the Issuer Trust, the fees and expenses of the trustees and all reasonable costs and expenses relating to the operation of the Issuer Trust) and to pay any and all taxes, duties, assessments or governmental charges of whatever nature (other than withholding taxes) imposed

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on the Issuer Trust by the United States, or any taxing authority, so that the net amounts received and retained by the Issuer Trust and the Property Trustee after paying such expenses will be equal to the amounts the Issuer Trust and the Property Trustee would have received had no such costs or expenses been incurred by or imposed on the Issuer Trust. The foregoing obligations of the Company are for the benefit of, and shall be enforceable by, any person to whom any such debts, obligations, costs, expenses and taxes are owed (each, a “Creditor”) whether or not such Creditor has received notice thereof. Any such Creditor may enforce such obligations directly against the Company, and the Company irrevocably waives any right or remedy to require that any such Creditor take any action against the Issuer Trust or any other person before proceeding against the Company. The Company shall execute such additional agreements as may be necessary or desirable to give full effect to the foregoing.

(d)  The Company shall indemnify the Trustee, its directors, officers, employees and agents for, and hold them harmless against, any loss, liability or expense (including the reasonable compensation and the expenses and disbursements of its agents and counsel) incurred without negligence, bad faith or willful misconduct, arising out of or in connection with the acceptance or administration of this trust or the performance of its duties hereunder, including the reasonable costs and expenses of defending against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. This indemnification shall survive the termination of this Indenture or the resignation or removal of the Trustee.

(e)  When the Trustee incurs expenses or renders services after an Event of Default specified in Section 5.1(d) occurs, the expenses and the compensation for the services are intended to constitute expenses of administration under the Bankruptcy Reform Act of 1978 or any successor statute.

(f)  To secure the Company’s payment obligations in this Section 6.7, the Trustee shall have a lien prior to the Securities on all money or property held or collected by the Trustee, except that held in trust to pay principal and interest on particular Securities.

(g)  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.

(h)  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 Agreement.

SECTION 6.8.    Disqualification; Conflicting Interests.

The Trustee for the Securities issued hereunder shall be subject to, and shall comply fully with, the provisions of Section 310(b) of the Trust Indenture Act. Nothing herein shall prevent

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the Trustee from filing with the Commission the application referred to in the second to last paragraph of said Section 310(b).

SECTION 6.9.    Corporate Trustee Required; Eligibility.

There shall at all times be a Trustee with respect to the Securities issued hereunder which shall be:

(a)  a Person organized and doing business under the laws of the United States of America or of any state or territory thereof or of the District of Columbia, authorized under such laws to exercise corporate trust powers and subject to supervision or examination by federal, state, territorial or District of Columbia authority, or

(b)  an entity organized and doing business under the laws of a foreign government that is permitted to act as Trustee pursuant to a rule, regulation or order of the Commission, authorized under such laws to exercise corporate trust powers, and subject to supervision or examination by authority of such foreign government or a political subdivision thereof substantially equivalent to supervision or examination applicable to United States institutional trustees; in either case having a combined capital and surplus of at least $50,000,000, subject to supervision or examination by federal or state authority. If such entity publishes reports of condition at least annually, pursuant to law or to the requirements of the aforesaid supervising or examining authority, then, for the purposes of this Section 6.9, the combined capital and surplus of such entity 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 Trustee shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect hereinafter specified in this Article VI. Neither the Company nor any Person directly or indirectly controlling, controlled by or under common control with the Company shall serve as Trustee for the Securities issued hereunder.

SECTION 6.10.    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 shall become effective until the acceptance of appointment by the successor Trustee under Section 6.11.

(b)  The Trustee may resign at any time with respect to the Securities by giving written notice thereof to the Company. If an instrument of acceptance by a successor Trustee shall not have been delivered to the Trustee within 30 days after the giving of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee.

(c)  The Trustee may be removed at any time with respect to the Securities 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 at any time:

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(i)  the Trustee shall fail to comply with Section 6.8 after written request therefor by the Company or by any Holder who has been a bona fide Holder of a Security for at least six months, or

(ii)  the Trustee shall cease to be eligible under Section 6.9 and shall fail to resign after written request therefor by the Company or by any such Holder, or

(iii)  the Trustee shall become incapable of acting or shall be adjudged bankrupt or insolvent or a receiver of the Trustee or of its property shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation;

then, in any such case, (x) the Company, acting pursuant to the authority of a Board Resolution, may remove the Trustee with respect to the Securities issued hereunder, or (y) subject to Section 5.14, 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, petition any court of competent jurisdiction for the removal of the Trustee with respect to the Securities issued hereunder and the appointment of a successor Trustee or Trustees.

(e)  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 cause with respect to the Securities, the Company, by a Board Resolution, shall promptly appoint a successor Trustee with respect to the Securities. If, within one year after such resignation, removal or incapability, or the occurrence of such vacancy, a successor Trustee with respect to the Securities shall be appointed by Act of the Holders of a majority in aggregate principal amount of the Outstanding Securities delivered to the Company and the retiring Trustee, the successor Trustee so appointed shall, forthwith upon its acceptance of such appointment, become the successor Trustee with respect to the Securities and supersede the successor Trustee appointed by the Company. If no successor Trustee with respect to the Securities shall have been so appointed by the Company or the Holders and accepted appointment in the manner hereinafter provided, any Holder who has been a bona fide Holder of a Security for at least six months may, subject to Section 5.14, on behalf of such Holder and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Trustee with respect to the Securities.

(f)  The Company shall give notice of each resignation and each removal of the Trustee with respect to the Securities and each appointment of a successor Trustee with respect to the Securities by mailing written notice of such event by first-class mail, postage prepaid, to the Holders of Securities as their names and addresses appear in the Securities Register. Each notice shall include the name of the successor Trustee with respect to the Securities and the address of its Corporate Trust Office.

SECTION 6.11.    Acceptance of Appointment by Successor.

(a)  In case of the appointment hereunder of a successor Trustee with respect to all Securities, every such 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

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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 Section 6.11(a).

(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 6.12.    Merger, Conversion, Consolidation or Succession to Business.

Any entity into which the Trustee may be merged or converted or with which it may be consolidated, or any entity resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any entity succeeding to all or substantially all of the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, provided such entity shall be otherwise qualified and eligible under this Article VI, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case any Securities shall have been authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation 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.

SECTION 6.13.    Preferential Collection of Claims Against Company.

If and when the Trustee shall be or become a creditor of the Company (or any other obligor upon the Securities), the Trustee shall be subject to the provisions of the Trust Indenture Act regarding the collection of claims against the Company (or any such other obligor).

SECTION 6.14.    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 an entity organized and doing business under the laws of the United States of

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America, or of any state or territory thereof or of 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 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 6.14, such Authenticating Agent shall resign immediately in the manner and with the effect specified in this Section 6.14.

(b)  Any entity into which an Authenticating Agent may be merged or converted or with which it may be consolidated, or any entity resulting from any merger, conversion or consolidation to which such Authenticating Agent shall be a party, or any entity succeeding to all or substantially all of the corporate trust business of an Authenticating Agent shall be the successor Authenticating Agent hereunder, provided such entity shall be otherwise eligible under this Section, 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, the Trustee may appoint a successor Authenticating Agent, which shall be acceptable to the Company and shall give notice of such appointment in the manner provided in Section 1.6 to all Holders of Securities. Any successor Authenticating Agent upon acceptance 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. No successor Authenticating Agent shall be appointed unless eligible under the provision of this Section.

(d)  The Company agrees to pay to each Authenticating Agent from time to time reasonable compensation for its services under this Section, and the Trustee shall be entitled to be reimbursed for such payment, subject to the provisions of Section 6.7.

(e)  If an appointment is made pursuant to this Section 6.14, 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 is one of the Securities referred to in the within mentioned Indenture.

Dated:

DEUTSCHE BANK TRUST COMPANY AMERICAS, as Trustee
By:
	Authorized Signatory

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By:
	As Authenticating Agent

ARTICLE VII

HOLDERS LISTS AND REPORTS BY TRUSTEE, PAYING AGENT AND 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)  quarterly, not more than 15 days after March 15, June 15, September 15, and December 15 in each year, a list, in such form as the Trustee may reasonably require, of the names and addresses of the Holders as of such dates, excluding from any such list names and addresses received by the Trustee in its capacity as Securities Registrar, and

(b)  at such other times as the Trustee may request in writing, within 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 15 days prior to the time such list is furnished, excluding from any such list names and addresses received by the Trustee in its capacity as Securities Registrar.

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 Trustee and Paying Agent.

(a)  The Trustee shall transmit to Holders such reports concerning the Trustee and its actions under this Indenture as may be required pursuant to the Trust Indenture Act, at the times and in the manner provided pursuant thereto.

(b)  Reports so required to be transmitted at stated intervals of not more than 12 months shall be transmitted within 60 days of January 31 in each calendar year, commencing with January 31, 2003.

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(c)  A copy of each such report shall, at the time of such transmission to Holders, be filed by the Trustee with each securities exchange upon which any Securities are listed and also with the Commission. The Company will notify the Trustee when any Securities are listed on any securities exchange.

(d)  Subject to Section 10.8, the Paying Agent shall comply with all withholding, backup withholding, tax and information reporting requirements under the Internal Revenue Code of 1986, as amended, and the Treasury Regulations issued thereunder with respect to payments on, or with respect to, the Securities.

SECTION 7.4.    Reports by Company.

The Company shall file or cause to be filed with the Trustee and with the Commission, and transmit to Holders, such information, documents and other reports, and such summaries thereof, as may be required pursuant to the Trust Indenture Act relating to the Company and Guarantor at the times and in the manner provided in the Trust Indenture Act. In the case of information, documents or reports required to be filed with the Commission by the Company and Guarantor pursuant to Section 13(a) or Section 15(d) of the Exchange Act, the Company shall file or cause the filing of such information documents or reports with the Trustee within 15 days after the same is required to be filed with the Commission.

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 thereof or the District of Columbia and shall expressly assume, by an indenture supplemental hereto, executed and delivered to the Trustee, in form satisfactory to the Trustee, the due and punctual payment of the principal of (and premium, if any), and interest (including any Additional Interest) on all the Securities of every series 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 occurred and be continuing; and

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(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 any such supplemental indenture comply with this Article and that all conditions precedent herein provided for relating to such transaction have been complied with and, in the case of a transaction subject to this Section 8.1, an Officer’s Certificate or Opinion of Counsel to the effect that the surviving, resulting or successor entity is legally bound by the Indenture and the Securities; and the Trustee, subject to Section 6.1, may rely upon such Officers’ Certificates and Opinions of Counsel as conclusive evidence that such transaction complies with this Section 8.1.

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, 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, transfer or lease 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 pursuant to such provisions and any Securities that such successor Person thereafter shall cause to be executed and delivered to the Trustee on its behalf for the purpose pursuant to such provisions. 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.

SECTION 8.3    Guarantor May Consolidate, Etc., Only on Certain Terms.

The Guarantor 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 Guarantor or convey, transfer or lease its properties and assets substantially as an entirety to the Guarantor, unless:

(a)  if the Guarantor 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 Guarantor is merged or the Person that acquires

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by conveyance or transfer, or that leases, the properties and assets of the Guarantor substantially as an entirety shall be an entity organized and existing under the laws of the United States of America or any state thereof or the District of Columbia and shall expressly assume, by an indenture supplemental hereto, executed and delivered to the Trustee, in form satisfactory to the Trustee, the due and punctual payment of the principal of (and premium, if any), and interest (including any Additional Interest) on all the Securities of every series and the performance of every covenant of this Indenture on the part of the Guarantor 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 occurred and be continuing; and

(c)  the Guarantor has delivered to the Trustee an Officers’ Certificate and an Opinion of Counsel, each stating that such consolidation, merger, conveyance, transfer or lease and any such supplemental indenture comply with this Article and that all conditions precedent herein provided for relating to such transaction have been complied with and, in the case of a transaction subject to this Section 8.3, an Officer’s Certificate or Opinion of Counsel to the effect that the surviving, resulting or successor entity is legally bound by the Indenture and the Securities; and the Trustee, subject to Section 6.1, may rely upon such Officers’ Certificates and Opinions of Counsel as conclusive evidence that such transaction complies with this Section 8.3.

SECTION 8.4.    Successor Guarantor Substituted.

(a)  Upon any consolidation or merger by the Guarantor with or into any other Person, or any conveyance, transfer or lease by the Guarantor of its properties and assets substantially as an entirety to any Person in accordance with Section 8.3, the successor entity formed by such consolidation or into which the Guarantor 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 Guarantor under this Indenture with the same effect as if such successor Person had been named as the Guarantor herein; and in the event of any such conveyance, transfer or lease the Guarantor shall be discharged from all obligations and covenants under the Indenture and the Securities.

(b)  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.

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, the Guarantor (when authorized by or pursuant to a Board Resolution by the Guarantor’s Board of Directors) and the Trustee, at any time and from time to time, may amend or waive any provision of this Indenture or enter into one or more indentures supplemental hereto, in form satisfactory to the Trustee, for any of the following purposes:

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(a)  to evidence the succession of another Person to the Company and/or the Guarantor, and the assumption by any such successor of the covenants of the Company herein and in the Securities contained;

(b)  to convey, transfer, assign, mortgage or pledge any property to or with the Trustee or to surrender any right or power herein conferred upon the Company;

(c)  to facilitate the issuance of Securities in certificated or other definitive form;

(d)  to add to the covenants of the Company and/or the Guarantor for the benefit of the Holders of the Securities or to surrender any right or power herein conferred upon the Company and/or the Guarantor;

(e)  to add any additional Events of Default for the benefit of the Holders of the Securities;

(f)  to change or eliminate any of the provisions of this Indenture, provided that any such change or elimination shall not apply to any Outstanding Securities;

(g)  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 any other provisions with respect to matters or questions arising under this Indenture, provided that such action pursuant to this clause (g) shall not adversely affect the interest of the Holders of Securities in any material respect or, in the case of the Securities issued to the Issuer Trust and for so long as any of the Preferred Securities issued by the Issuer Trust shall remain outstanding, the holders of such Preferred Securities;

(h)  to evidence and provide for the acceptance of appointment hereunder by a successor Trustee with respect to the Securities and to add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee, pursuant to the requirements of Section 6.11(b); or

(i)  to comply with the requirements of the Commission in order to effect or maintain the qualification of this Indenture under the Trust Indenture Act.

SECTION 9.2.    Supplemental Indentures with Consent of Holders.

With the consent of the Holders of not less than a majority in aggregate principal amount of the Outstanding Securities affected by such supplemental indenture, by Act of said Holders delivered to the Company and the Trustee, the Company, when authorized by a Board Resolution, the Guarantor (when authorized pursuant to a Board Resolution of the Guarantor’s Board of Directors) 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, however, that no such supplemental indenture shall, without the consent of the Holder of each Outstanding Security affected thereby:

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(a)  change the Stated Maturity of the principal of, or 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 reduce the amount of principal of a Discount Security that would be due and payable upon a declaration of acceleration of the Stated Maturity thereof pursuant to Section 5.2, or change the place of payment where, or the coin or currency in which, any Security or interest thereon is payable, or impair the right to institute suit for the enforcement of any such payment on or after the Stated Maturity thereof (or, in the case of redemption, on or after the Redemption Date),

(b)  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 certain provisions of this Indenture or certain defaults hereunder and their consequences) provided for in this Indenture, or

(c)  modify any of the provisions of this Section, Section 5.13 or Section 10.5, except to increase any such percentage or to provide that certain other provisions of this Indenture cannot be modified or waived without the consent of the Holder of each Security affected thereby;

provided, further, that, in the case of the Securities issued to the Issuer Trust, so long as any of the Preferred Securities issued by the Issuer Trust remains outstanding, (i) no such amendment shall be made that adversely affects the holders of such Preferred Securities in any material respect, and no termination of this Indenture shall occur, and no waiver of any Event of Default or compliance with any covenant under this Indenture shall be effective, without the prior consent of the holders of at least a majority of the aggregate Liquidation Amount (as defined in the Trust Agreement) of such Preferred Securities then outstanding unless and until the principal of (and premium, if any, on) the Securities and all accrued and (subject to Section 3.8) unpaid interest (including any Additional Interest) thereon have been paid in full, and (ii) no amendment shall be made to Section 5.8 of this Indenture that would impair the rights of the holders of Preferred Securities issued by the Issuer Trust provided therein without the prior consent of the holders of each such Preferred Security then outstanding unless and until the principal of (and premium, if any, on) the Securities of such series and all accrued and (subject to Section 3.8) unpaid interest (including any Additional Interest) thereon have been paid in full.

It shall not be necessary for any Act of Holders under this Section 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 (subject to Section 6.1) shall be fully protected in 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

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may, but shall not be obligated to, enter into any such supplemental indenture that affects the Trustee’s own rights, duties or immunities under this Indenture or otherwise.

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 theretofore or thereafter authenticated and delivered hereunder shall be bound thereby.

SECTION 9.5.    Conformity with Trust Indenture Act.

Every supplemental indenture executed pursuant to this Article IX shall conform to the requirements of the Trust Indenture Act as then in effect.

SECTION 9.6.    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 and Interest.

The Company covenants and agrees for the benefit of the Securities that it will duly and punctually pay the principal of (and premium, if any) and interest (including any Additional Interest) on the Securities in accordance with the terms of such Securities and this Indenture.

SECTION 10.2.    Maintenance of Office or Agency.

(a)  The Company will maintain in each Place of Payment an office or agency where Securities may be presented or surrendered for payment, where Securities may be surrendered for registration of transfer or exchange and where notices and demands to or upon the Company in respect of the Securities and this Indenture may be served. The Company initially appoints the Trustee, acting through its Corporate Trust Office, as its agent for said purposes. The Company will give prompt written notice to the Trustee of any change in the location of any such office or agency. If at any time the Company shall fail to maintain such office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee, and the Company hereby appoints the Trustee as its agent to receive all such presentations, surrenders, notices and demands.

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(b)  The Company may also from time to time designate one or more other offices or agencies where the Securities may be presented or surrendered for any or all of such purposes, and may from time to time rescind such designations; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in each Place of Payment for Securities for such purposes. The Company will give prompt written notice to the Trustee of any such designation and any change in the location of any such office or agency.

SECTION 10.3.    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 premium, if any) or interest (including Additional Interest) on any of the Securities, segregate and hold in trust for the benefit of the Persons entitled thereto a sum sufficient to pay the principal (and premium, if any) 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 of its failure so to act.

(b)  Whenever the Company shall have one or more Paying Agents, it will, prior to 10:00 a.m., New York City time, on each due date of the principal of (or premium, if any) or interest, including Additional Interest on any Securities, deposit with a Paying Agent a sum sufficient to pay the principal (and premium, if any) or interest, including Additional Interest so becoming due, such sum to be held in trust for the benefit of the Persons entitled to such principal (and premium, if any) or interest, including Additional Interest, 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 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, that such Paying Agent will:

(i)  hold all sums held by it for the payment of the principal of (and premium, if any) or interest (including Additional Interest) on the Securities in trust for the benefit of the Persons entitled thereto until such sums shall be paid to such Persons or otherwise disposed of as herein provided;

(ii)  give the Trustee notice of any default by the Company (or any other obligor upon such Securities) in the making of any payment of principal (and premium, if any) or interest (including Additional Interest) in respect of any Security;

(iii)  at any time during the continuance of any default with respect to the Securities, upon the written request of the Trustee, forthwith pay to the Trustee all sums so held in trust by such Paying Agent; and

(iv)  comply with the provisions of the Trust Indenture Act applicable to it as a Paying Agent.

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(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 terms 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 premium, if any) or interest (including Additional Interest) on any Security and remaining unclaimed for two years after such principal (and premium, if any) or interest (including Additional 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, however, that the Trustee or such Paying Agent, before being 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 30 days from the date of such publication, any unclaimed balance of such money then remaining will be repaid to the Company.

SECTION 10.4.    Statement as to Compliance.

The Company and the Guarantor shall deliver to the Trustee, within 120 days after the end of each fiscal year of the Company ending after the date hereof, an Officers’ Certificate covering the preceding calendar year, stating whether or not to the best knowledge of the signers thereof the Company or the Guarantor, as the case may be, is in default in the performance, observance or fulfillment of or compliance with any of the terms, provisions, covenants and conditions of this Indenture, and if the Company or the Guarantor, as the case may be, shall be in default, specifying all such defaults and the nature and status thereof of which they may have knowledge. For the purpose of this Section 10.4, compliance shall be determined without regard to any grace period or requirement of notice provided pursuant to the terms of this Indenture.

SECTION 10.5.    Waiver of Certain Covenants.

Subject to the rights of holders of Preferred Securities specified in Section 9.2, if any, the Company may omit in any particular instance to comply with any covenant or condition provided pursuant to Section 3.1, 9.1(c) or 9.1(d) with respect to the Securities, 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, 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,

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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 10.6.    Additional Sums.

So long as no Event of Default has occurred and is continuing and except as otherwise specified as contemplated by Section 2.1 or Section 3.1, if: (a) the Issuer Trust is the Holder of all of the Outstanding Securities, and (b) a Tax Event described in clause (a) or (c) of the definition of “Tax Event” in Section 1.1 hereof has occurred and is continuing in respect of the Issuer Trust, the Company shall pay the Issuer Trust (and its permitted successors or assigns under the Trust Agreement) for so long as the Issuer Trust (or its permitted successor or assignee) is the registered holder of the Outstanding Securities, such additional sums as may be necessary in order that the amount of Distributions (including any Additional Amount (as defined in the Trust Agreement)) then due and payable by the Issuer 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 such Additional Taxes (the “Additional 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 Sums provided for in this paragraph to the extent that, in such context, Additional Sums are, were or would be payable in respect thereof pursuant to the provisions of this paragraph and express mention of the payment of Additional Sums (if applicable) in any provisions hereof shall not be construed as excluding Additional Sums in those provisions hereof where such express mention is not made; provided, however, that the deferral of the payment of interest pursuant to Section 3.12 or the Securities shall not defer the payment of any Additional Sums that may be due and payable.

SECTION 10.7.    Additional Covenants of Company and Guarantor.

(a)  The Guarantor covenants and agrees with each Holder of Securities that it shall not: (a) declare or pay any dividends or distributions on, or redeem, purchase, acquire or make a liquidation payment with respect to, any shares of its capital stock, or (b) make any payment of principal of or 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 Guarantor’s obligations with regard to the Securities, (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 applicable Extension Period or other event referred to below, (ii) as a result of a reclassification, 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 of any class or 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 conversion or exchange provisions of such capital stock or the security being converted or exchanged, or (iv) any dividend in the form of stock, warrants, options or other rights where the dividend stock or

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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) if at such time (A) there shall have occurred any event (x) of which the Company or Guarantor has actual knowledge that with the giving of notice or the lapse of time, or both, would constitute an Event of Default with respect to the Securities, and (y) which the Company or Guarantor shall not have taken reasonable steps to cure, (B) if the Securities are held by the Issuer Trust, the Company or Guarantor shall be in default with respect to its payment of any obligations under the Preferred Securities Guarantee Agreement or the Junior Subordinated Debenture Guarantee Agreement, or (C) the Company shall have given notice of its election to begin an Extension Period with respect to the Securities as provided herein and shall not have rescinded such notice, or such Extension Period, or any extension thereof, shall be continuing.

(b)  The Company covenants with each Holder of Securities issued to the Issuer Trust (a) to hold, directly or indirectly, 100% of the Common Securities of the Issuer Trust, provided that any permitted successor of the Company as provided under Section 8.2 may succeed to the Company’s ownership of such Common Securities, (b) as holder of such Common Securities, not to voluntarily terminate, windup or liquidate the Issuer Trust, other than (i) in connection with a distribution of the Securities to the holders of the Preferred Securities in liquidation of the Issuer Trust, or (ii) in connection with certain mergers, consolidations or amalgamations permitted by the Trust Agreement, and (c) to use its reasonable efforts, consistent with the terms and provisions of the Trust Agreement, to cause the Issuer Trust to continue not to be taxable as a corporation for United States federal income tax purposes.

SECTION 10.8.    Federal Tax Reports.

On or before December 15 of each year during which any Securities are outstanding, the Company shall furnish to each Paying Agent such information as may be reasonably requested by each Paying Agent in order that each Paying Agent may prepare the information which it is required to report for such year on Internal Revenue Service Forms 1096 and 1099 pursuant to Section 6049 of the Internal Revenue Code of 1986, as amended. Such information shall include the amount of original issue discount includible in income for each authorized minimum denomination of principal amount at Stated Maturity of outstanding Securities during such year.

ARTICLE XI

REDEMPTION OF SECURITIES

SECTION 11.1.    Applicability of this Article.

Redemption of Securities as permitted or required by any form of Security issued pursuant to this Indenture shall be made in accordance with such form of Security and this Article; provided, however, that, if any provision of any such form of Security shall conflict with any provision of this Article XI, the provision of such form of Security shall govern.

SECTION 11.2.    Election to Redeem; Notice to Trustee.

The election of the Company to redeem any Securities shall be evidenced by or pursuant to a Board Resolution. In case of any redemption at the election of the Company, the Company

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shall, not less than 30 nor more than 60 days prior to the Redemption Date (unless a shorter notice shall be satisfactory to the Trustee), notify the Trustee and, in the case of Securities held by the Issuer Trust, the Property Trustee under the Trust Agreement of such date and of the principal amount of Securities to be redeemed and provide the additional information required to be included in the notice or notices contemplated by Section 11.4; provided, that, for so long as such Securities are held by the Issuer Trust, such notice shall be given not less than 45 nor more than 75 days prior to such Redemption Date (unless a shorter notice shall be satisfactory to the Property Trustee under the Trust Agreement). In the case of any redemption of Securities prior to the expiration of any restriction on such redemption provided in the terms of such Securities, the Company shall furnish the Trustee with an Officers’ Certificate and an Opinion of Counsel evidencing compliance with such restriction.

SECTION 11.3.    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 not more than 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, provided that the unredeemed portion of the principal amount of any Security shall 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 partial redemption and 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.

SECTION 11.4.    Notice of Redemption.

Notice of redemption shall be given by first-class mail, postage prepaid, mailed not later than the thirtieth day, and not earlier than the sixtieth day, prior to the Redemption Date, to each Holder of Securities to be redeemed, at the address of such Holder as it appears in the Securities Register.

With respect to Securities to be redeemed, each notice of redemption shall state:

(a)  the Redemption Date;

(b)  the Redemption Price and any accrued interest, if any, 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 together with a statement that it is an estimate and that the actual Redemption Price will be calculated on the third Business Day prior to the Redemption Date (if such an estimate of the Redemption Price is given, a subsequent notice shall be given as set forth above setting forth the Redemption Price promptly following the calculation thereof);

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(c)  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;

(d)  that, on the Redemption Date, the Redemption Price will become due and payable upon each such Security or portion thereof, and that interest thereon, if any, shall cease to accrue on and after said date;

(e)  the place or places where such Securities are to be surrendered for payment of the Redemption Price;

(f)  such other provisions as may be required in respect of the terms of the Securities; and

(g)  that the redemption is for a sinking fund, if such is the case.

Notice of redemption of Securities to be redeemed 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 11.5    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 11.4, 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 10.3) an amount of money sufficient to pay the Redemption Price of, and any accrued interest (including Additional Interest) on, all the Securities (or portions thereof) that are to be redeemed on that date.

SECTION 11.6.    Payment of Securities Called for Redemption.

(a)  If any notice of redemption has been given as provided in Section 11.4, 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 in said notice specified, the said 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; provided, however, that, installments of interest (including Additional Interest) whose Stated Maturity is on or prior to the Redemption Date will be payable to the Holders of such Securities, or one or more Predecessor Securities, registered as such at the close of business on the relevant record dates according to their terms and the provisions of Section 3.8.

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(b)  Upon presentation of any Security redeemed in part only, the Company shall execute and 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 under surrender thereof for redemption, the principal of and premium, if any, on such Security shall, until paid, bear interest from the Redemption Date at the rate prescribed therefor in the Security.

SECTION 11.7.    Right of Redemption of Securities Initially Issued to the Issuer Trust.

(a)  The Company, at its option, may redeem such Securities (i) on or after                         , 2007, in whole at any time or in part from time to time, or (ii) upon the occurrence and during the continuation of a Tax Event or an Investment Company Event, at any time within 90 days following the occurrence and during the continuation of such Tax Event or Investment Company Event, in whole (but not in part), in each case at a Redemption Price specified in such Security, together with accrued interest (including Additional Interest) to the Redemption Date.

(b)  If less than all the Securities are to be redeemed, the aggregate principal amount of such Securities remaining Outstanding after giving effect to such redemption shall be sufficient to satisfy any provisions of the Trust Agreement.

ARTICLE XII

SINKING FUNDS

Except as may be provided in any supplemental or amended indenture, no sinking fund shall be established or maintained for the retirement of Securities.

ARTICLE XIII

SUBORDINATION OF SECURITIES

SECTION 13.1.    Securities Subordinate to Senior Indebtedness.

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, the payment of the principal of (and premium, if any) and interest (including any 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 Indebtedness.

SECTION 13.2    No Payment When Senior Indebtedness in Default; Payment Over of Proceeds Upon Dissolution, Etc.

(a)  If the Company or the Guarantor shall default in the payment of any principal of (or premium, if any) or interest on any Senior Indebtedness when the same becomes due and payable, whether at maturity or at a date fixed for prepayment or by declaration of acceleration

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or otherwise, then, upon written notice of such default to the Company or the Guarantor by the holders of Senior Indebtedness 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 premium, if any) or interest (including 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 (i) any insolvency, bankruptcy, receivership, liquidation, reorganization, readjustment, composition or other similar proceeding relating to the Company, its creditors or its property, (ii) any proceeding for the liquidation, dissolution or other winding up of the Company, voluntary or involuntary, whether or not involving insolvency or bankruptcy proceedings, (iii) any assignment by the Company for the benefit of creditors or (iv) any other marshalling of the assets of the Company (each such event, if any, herein sometimes referred to as a “Proceeding”), all Senior Indebtedness (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 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 Indebtedness 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 Indebtedness in accordance with the priorities then existing among such holders until all Senior Indebtedness (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 Indebtedness, 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 premium, if any) and 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 Indebtedness at the time outstanding and to any securities issued in respect thereof under any plan of reorganization or readjustment), shall be received by the Trustee or any Holder in contravention of any of the terms hereof and before all Senior Indebtedness shall have been paid in full, provided the Trustee or Holder has actual knowledge of such circumstances, 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 Indebtedness at the time outstanding in accordance with the priorities then existing among such holders for application to

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the payment of all Senior Indebtedness remaining unpaid, to the extent necessary to pay all such Senior Indebtedness 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 Indebtedness is hereby irrevocably authorized to endorse or assign the same.

(d)  The Trustee and the Holders shall take such action (including, without limitation, the delivery of this Indenture to an agent for the holders of Senior Indebtedness 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 Indebtedness 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 13.2 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 13.3.    Payment Permitted if No Default.

Nothing contained in this Article XIII 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 the first paragraph of Section 13.2 or of any Proceeding referred to in Section 13.2, from making payments at any time of principal of (and premium, if any) or interest (including Additional Interest) on the Securities, or (b) the application by the Trustee of any monies deposited with it hereunder to the payment of or on account of the principal of (and premium, if any) 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 that such payment would have been prohibited by the provisions of this Article.

SECTION 13.4.    Subrogation to Rights of Holders of Senior Indebtedness.

Subject to the payment in full of all amounts due or to become due on all Senior Indebtedness, or the provision for such payment in cash or cash equivalents or otherwise in a manner satisfactory to the holders of Senior Indebtedness, the Holders of the Securities shall be subrogated to the extent of the payments or distributions made to the holders of such Senior Indebtedness pursuant to the provisions of this Article (equally and ratably with the holders of all indebtedness of the Company that by its express terms is subordinated to Senior Indebtedness of the Company to substantially the same extent as the Securities are subordinated to the Senior Indebtedness and is entitled to like rights of subrogation by reason of any payments or distributions made to holders of such Senior Indebtedness) to the rights of the holders of such Senior Indebtedness to receive payments and distributions of cash, property and securities applicable to the Senior Indebtedness until the principal of (and premium if any) and interest (including Additional Interest) on the Securities shall be paid in full. For purposes of such

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subrogation, no payments or distributions to the holders of the Senior Indebtedness 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, and no payments pursuant to the provisions of this Article to the holders of Senior Indebtedness by Holders of the Securities or the Trustee, shall, as among the Company, its creditors other than holders of Senior Indebtedness, and the Holders of the Securities, be deemed to be a payment or distribution by the Company to or on account of the Senior Indebtedness.

SECTION 13.5.    Provisions Solely to Define Relative Rights.

The provisions of this Article XIII 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 Indebtedness on the other hand. Nothing contained in this Article XIII 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 premium, if any) 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 Indebtedness; 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 XIII of the holders of Senior Indebtedness to receive cash, property and securities otherwise payable or deliverable to the Trustee or such Holder.

SECTION 13.6.    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 XIII and appoints the Trustee his or her attorney-in-fact for any and all such purposes.

SECTION 13.7.    No Waiver of Subordination Provisions.

(a)  No right of any present or future holder of any Senior Indebtedness 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.

(b)  Without in any way limiting the generality of Section 13.7(a), the holders of Senior Indebtedness may, at any time and from time 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 XIII or the obligations hereunder of such Holders of the Securities to the holders of Senior

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Indebtedness, do any one or more of the following: (i) change the manner, place or terms of payment or extent the time of payment of, or renew or alter, Senior Indebtedness, or otherwise amend or supplement in any manner Senior Indebtedness or any instrument evidencing the same or any agreement under which Senior Indebtedness is outstanding; (ii) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing Senior Indebtedness (iii) release any Person liable in any manner for the collection of Senior Indebtedness; and (iv) exercise or refrain from exercising any rights against the Company, the Guarantor and any other Person.

SECTION 13.8.    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 XIII 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 the Trustee shall have received written notice thereof from the Company or a holder of Senior Indebtedness or from any trustee, agent or representative therefor; provided, however, that if the Trustee shall not have received the notice provided for in this Section 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 premium, if any, 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)  Subject to the provisions of Section 6.1, 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 Indebtedness (or a trustee or attorney-in-fact therefor) to establish that such notice has been given by a holder of Senior Indebtedness (or a trustee 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 Indebtedness to participate in any payment or distribution pursuant to this Article, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness 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, 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.

SECTION 13.9.    Reliance on Judicial Order or Certificate of Liquidating Agent.

Upon any payment or distribution of assets of the Company referred to in this Article, the Trustee, subject to the provisions of Section 6.1, and the Holders of the Securities shall be entitled to 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, conservator, liquidating trustee, custodian, assignee for the benefit of creditors, agent or other Person making

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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 Indebtedness 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 XIII.

SECTION 13.10.    Trustee Not Fiduciary for Holders of Senior Indebtedness.

The Trustee, in its capacity as trustee under this Indenture, shall not be deemed to owe any fiduciary duty to the holders of Senior Indebtedness 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 Indebtedness shall be entitled by virtue of this Article or otherwise.

SECTION 13.11.    Rights of Trustee as Holder of Senior Indebtedness; Preservation of Trustee’s Rights.

The Trustee in its individual capacity shall be entitled to all the rights set forth in this Article with respect to any Senior Indebtedness that may at any time be held by it, to the same extent as any other holder of Senior Indebtedness, and nothing in this Indenture shall deprive the Trustee of any of its rights as such holder.

SECTION 13.12.    Article Applicable to Paying Agents.

In case 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 XIII 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 in addition to or in place of the Trustee.

SECTION 13.13.    Certain Conversions or Exchanges Deemed Payment.

For purposes of this Article only, (a) the issuance and delivery of junior securities upon conversion or exchange of Securities shall not be deemed to constitute a payment or distribution on account of the principal of (or premium, if any, on) or interest (including any Additional Interest) on such Securities or on account of the purchase or other acquisition of such Securities, and (b) the payment, issuance or delivery of cash, property or securities (other than junior securities) upon conversion or exchange of a Security shall be deemed to constitute payment on account of the principal of such security. For the purposes of this Section, the term “junior securities” means (i) shares of any stock of any class of the Company, and (ii) securities of the Company that are subordinated in right of payment to all Senior Indebtedness that may be outstanding at the time of issuance or delivery of such securities to substantially the same extent as, or to a greater extent than, the Securities are so subordinated as provided in this Article.

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ARTICLE XIV

GUARANTEE AND INDEMNITY

SECTION 14.1.    The Guarantee.

The Guarantor hereby unconditionally guarantees to each Holder of a Security authenticated and delivered by the Trustee all obligations of the Company under this Indenture in accordance with the terms of the Junior Subordinated Debenture Guarantee Agreement.

SECTION 14.2.    Subordination of Guarantee.

Each Holder of Securities issued hereunder agrees that the payment by the Guarantor pursuant to the Guarantee with respect to all Securities of each series issued hereunder, shall be subordinate in right of payment to the extent and in the manner set forth in Sections 6.1 and 6.2 of the Junior Subordinated Debenture Guarantee Agreement.

* * * *

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.

[SIGNATURES APPEAR ON THE FOLLOWING PAGE]

71

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

AMERICAN SAFETY HOLDINGS CORP.
By:
	Lloyd A. Fox President and Chief Executive Officer
AMERICAN SAFETY INSURANCE GROUP, LTD.
By:
	Lloyd A. Fox President and Chief Executive Officer
DEUTSCHE BANK TRUST COMPANY AMERICAS, as Trustee
By:

72

ANNEX A

FORM OF RESTRICTED SECURITIES CERTIFICATE

RESTRICTED SECURITIES CERTIFICATE

(For transfers pursuant to Section 3.6(b) of
 the Indenture referred to below)

[                        ],

as Securities Registrar

[address]

Re:     % Junior Subordinated Debentures of American Safety Holdings Corp. (the “Securities”)

Reference is made to the Junior Subordinated Indenture, dated as of                         , 2001 (the “Indenture”), between American Safety Holdings Corp., a Georgia corporation, American Safety Insurance Group, Ltd., a Bermuda company, and Deutsche Bank Trust Company Americas, as Trustee. Terms used herein and defined in the Indenture or in Regulation S, Rule 144A or Rule 144 under the U.S. Securities Act of 1933, as amended (the “Securities Act”) are used here as so defined.

This certificate relates to $                         aggregate principal amount of Securities, which are evidenced by the following certificate(s) (the “Specified Securities”):

CUSIP No(s).

CERTIFICATE No(s).

CURRENTLY IN GLOBAL FORM: Yes     No     (check one)

The person in whose name this certificate is executed below (the “Undersigned”) hereby certifies that either (a) it is the sole beneficial owner of the Specified Securities or (b) it is acting on behalf of all the beneficial owners of the Specified Securities and is duly authorized by them to do so. Such beneficial owner or owners are referred to herein collectively as the “Owner”. If the Specified Securities are represented by a Global Security, they are held through a Depositary or an Agent Member in the name of the Undersigned, as or on behalf of the Owner. If the Specified Securities are not represented by a Global Security, they are registered in the name of the Undersigned, as or on behalf of the Owner.

The Owner has requested that the Specified Securities be transferred to a person (the “Transferee”) who will take delivery in the form of a Restricted Security. In connection with such transfer, the Owner hereby certifies that, unless such transfer is being effected pursuant to an effective registration statement under the Securities Act, it is being effected in accordance

73

with Rule 144A, Rule 904 of Regulation S or Rule 144 under the Securities Act and all applicable securities laws of the states of the United States and other jurisdictions. Accordingly, the Owner hereby further certifies that:

(a)  Rule 144A Transfers. If the transfer is being effected in accordance with Rule 144A:

(i)  the Specified Securities are being transferred to a person that the Owner and any person acting on its behalf reasonably believe is a “qualified institutional buyer” within the meaning of Rule 144A, acquiring for its own account or for the account of a qualified institutional buyer; and

(ii)  the Owner and any person acting on its behalf have taken reasonable steps to ensure that the Transferee is aware that the Owner may be relying on Rule 144A in connection with the transfer; and

(b)  Rule 904 Transfers. If the transfer is being effected in accordance with Rule 904:

(i)  the Owner is not a distributor of the Securities, an affiliate of the Company or any such distributor or a person acting in behalf of any of the foregoing;

(ii)  the offer of the Specified Securities was not made to a person in the United States;

(iii)  either;

(A)  at the time the buy order was originated, the Transferee was outside the United States or the Owner and any person acting on its behalf reasonably believed that the Transferee was outside the United States, or

(B)  the transaction is being executed in, on or through the facilities of the Eurobond market, as regulated by the Association of International Bond Dealers, or another designated offshore securities market and neither the Owner nor any person acting on its behalf know that the transaction has been prearranged with a buyer in the United States;

(iv)  no directed selling efforts within the meaning of Rule 902 of Regulation S have been made in the United States by or on behalf of the Owner or any affiliate thereof; and

(v)  the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act.

(c)  Rule 144 Transfers. If the transfer is being effected pursuant to Rule 144:

(i)  the transfer is occurring after a holding period of at least one year (computed in accordance with paragraph (d) of Rule 144) has elapsed since the date the Specified Securities were acquired from the Company or from an affiliate (as such term is

74

defined in Rule 144) of the Company, whichever is later, and is being effected in accordance with the applicable amount, manner of sale and notice requirements of paragraphs (e), (f) and (h) of Rule 144;

(ii)  the transfer is occurring after a holding period by the Owner of at least three years has elapsed since the date the Specified Securities were acquired from the Company or from an affiliate (as such term is defined in Rule 144) of the Company, whichever is later, and the Owner is not, and during the preceding three months has not been, an affiliate of the Company; or

(iii)  the Owner is a Qualified Institutional Buyer under Rule 144A or has acquired the Securities otherwise in accordance with Sections (a), (b) or (c) hereof and is transferring the Securities to an institutional accredited investor in a transaction exempt from the requirements of the Securities Act.

This certificate and the statements contained herein are made for your benefit and the benefit of the Company and the Underwriters (as defined in the Trust Agreement relating to the Issuer Trust to which the Securities were initially issued).

(Print the name of the Undersigned, as such term is defined in the second paragraph of this certificate)

Dated: By:                        Name:       Title:

(If the Undersigned is a corporation, partnership or fiduciary, the title of the person signing on behalf of the Undersigned must be stated.)

75

EX-4.7

EXHIBIT 4.7

CERTIFICATE OF TRUST

OF

AMERICAN SAFETY CAPITAL TRUST I

THIS CERTIFICATE OF TRUST of American Safety Capital Trust I (the “Trust”), dated September 24, 2002, is being duly executed and filed by the undersigned, as trustee of the Trust, to form a statutory trust under the Delaware Statutory Trust Act (12 Del. C. § 3801, et seq.).

1.    Name.  The name of the statutory trust being formed hereby is American Safety Capital Trust I.

2.    Delaware Trustee.  The name and business address of the trustee of the Trust, with a principal place of business in the State of Delaware, are Deutsche Bank Trust Company Delaware, E.A. Delle Donne Corporate Center, Montgomery Bldg., 1011 Centre Road, Suite 200, Wilmington, Delaware 19805-1266.

3.    Effective Date.  This Certificate of Trust shall be effective as of its filing.

IN WITNESS WHEREOF, the undersigned, being the sole trustee of the Trust, has executed this Certificate of Trust as of the date first above written.

DEUTSCHE BANK TRUST COMPANY DELAWARE, as Trustee
By:	/S/    ROBERT T. HASTINGS
	Name:  Robert T. Hastings Title:    Associate

EX-4.8

EXHIBIT 4.8

TRUST AGREEMENT

THIS TRUST AGREEMENT is made as of September 24, 2002, by and between American Safety Holdings Corp., a Georgia corporation, as Depositor (the “Depositor”), and Deutsche Bank Trust Company Delaware, as Trustee (the “Trustee”). The Depositor and the Trustee hereby agree as follows:

1.    The trust created hereby shall be known as “American Safety Capital Trust I”, in which name the 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 Trustee the sum of $10. The Trustee hereby acknowledges receipt of such amount in trust from the Depositor, which amount shall constitute the initial trust estate. The 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. §3801, et seq. (the “Statutory Trust Act”), and that this document constitute the governing instrument of the Trust. The Trustee is hereby authorized and directed to execute and file a certificate of trust with the Delaware Secretary of State substantially in the form attached hereto or in such other form as the Trustee may approve.

3.    The Depositor and the Trustee will enter into an amended and restated Trust Agreement satisfactory to each such party and substantially in the form included as an exhibit to the Registration Statement on Form S-1 (the “1933 Act Registration Statement”) referred to below, or in such other form as the Trustee and the Depositor may approve, to provide for the contemplated operation of the Trust created hereby and the issuance of the Preferred Securities and Common Securities referred to therein. Prior to the execution and delivery of such amended and restated Trust Agreement, the Trustee shall not have any duty or obligation hereunder or with respect to the trust estate, except as otherwise 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. However, notwithstanding the foregoing, the Trustee may take all actions deemed proper as are necessary to effect the transactions contemplated herein.

4.    The Depositor and the Trustee hereby authorize and direct the Depositor, as the sponsor of the Trust, (i) to file with the Securities and Exchange Commission (the “Commission”) and execute, in the case of the 1933 Act Registration Statement and 1934 Act Registration Statement (as herein defined), on behalf of the Trust, (a) the 1933 Act Registration Statement including pre-effective or post-effective amendments to such Registration Statement, relating to the registration under the Securities Act of 1933, as amended (the “1933 Act”), of the Preferred Securities of the Trust, (b) any preliminary prospectus or prospectus or supplement thereto relating to the Preferred Securities required to be filed pursuant to Rule 424 under the 1933 Act, and (c) a Registration Statement on Form 8-A or other appropriate form (the “1934 Act Registration Statement”) (including all pre-effective and post-effective amendments thereto) relating to the registration of the

Preferred Securities of the Trust under Section 12(b) of the Securities Exchange Act of 1934, as amended; (ii) to file with the New York Stock Exchange or the NASDAQ National Market and execute on behalf of the Trust a listing application and all other applications, statements, certificates, agreements and other instruments as shall be necessary or desirable to cause the Preferred Securities to be listed on the New York Stock Exchange; (iii) to 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 as shall be necessary or desirable to register the Preferred Securities under the securities or “Blue Sky” laws of such jurisdictions as the Depositor, on behalf of the Trust, may deem necessary or desirable; and (iv) to execute, deliver and perform on behalf of the Trust an underwriting agreement with the Depositor and the underwriter or underwriters of the Preferred Securities of the Trust. The Trustee further hereby ratifies and approves all actions having previously been taken with respect to the foregoing. In the event that any filing referred to in clauses (i)-(iii) above is required by the rules and regulations of the Commission, the New York Stock Exchange or state securities or Blue Sky laws to be executed on behalf of the Trust by the Trustee, Deutsche Bank Trust Company Delaware, in its capacity as Trustee of the Trust, is hereby authorized and 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 Deutsche Bank Trust Company Delaware in its capacity as Trustee of the Trust shall not be required to join in any such filing or execute on behalf of the Trust any such document unless required by the rules and

regulations of the Commission, the New York Stock Exchange or state securities or Blue Sky laws.

5.    This Trust Agreement may be executed in one or more counterparts.

6.    The number of Trustees initially shall be one (1) and thereafter the number of Trustees 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; provided, however, that to the extent required by the Statutory Trust Act, one Trustee shall either be a natural person who is a resident of the State of Delaware or, if not a natural person, an entity which has its principal place of business in the State of Delaware. Subject to the foregoing the Depositor is entitled to appoint or remove without cause any Trustee at any time. Any Trustee may resign upon thirty days’ prior notice to the Depositor.

7.    This Trust Agreement shall be construed in accordance with and governed by the internal laws of the State of Delaware.

2

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

AMERICAN SAFETY HOLDINGS CORP., as Depositor
By:	/s/    STEVEN B. MATHIS
	Name: Steven B. Mathis Title: Treasurer and Chief Financial Officer

DEUTSCHE BANK TRUST COMPANY DELAWARE, as Trustee
By:	/s/    ROBERT T. HASTINGS
	Name: Robert T. Hastings Title: Associate

3

EX-4.9

EXHIBIT 4.9

AMENDED AND RESTATED

TRUST AGREEMENT

Among

AMERICAN SAFETY HOLDINGS CORP.

(as Depositor)

DEUTSCHE BANK TRUST COMPANY AMERICAS

(as Property Trustee)

DEUTSCHE BANK TRUST COMPANY DELAWARE

(as Delaware Trustee)

and

FRED J. PINCKNEY AND STEVEN B. MATHIS

(as Administrators)

dated as of

            , 2002

AMERICAN SAFETY CAPITAL TRUST I

AMERICAN SAFETY CAPITAL TRUST I

Certain Sections of this Trust Agreement relating to

Sections 310 through 318 of the

Trust Indenture Act of 1939:

Trust Indenture Act Section		Trust Agreement Section
Section 310	(a)(1)	8.7
	(a)(2)	8.7
	(a)(3)	8.9
	(a)(4)	2.7(a)(ii)
	(b)	8.8, 10.10(b)
Section 311	(a)	8.13, 10.10(b)
	(b)	8.13, 10.10(b)
Section 312	(a)	10.10(b)
	(b)	10.10(b), (f)
	(c)	5.7
Section 313	(a)	8.15(a)
	(a)(4)	10.10(c)
	(b)	8.15(c), 10.10(c)
	(c)	10.8, 10.10(c)
	(d)	10.10(c)
Section 314	(a)	8.16, 10.10(d)
	(b)	Not Applicable
	(c)(1)	8.17, 10.10(d), (e)
	(c)(2)	8.17, 10.10(d), (e)
	(c)(3)	8.17, 10.10(d), (e)
	(e)	8.17, 10.10(e)
Section 315	(a)	8.1(d)
	(b)	8.2
	(c)	8.1(c)
	(d)	8.1(d)
	(e)	Not Applicable
Section 316	(a)	Not Applicable
	(a)(1)(A)	Not Applicable
	(a)(1)(B)	Not Applicable
	(a)(2)	Not Applicable
	(b)	5.13
	(c)	6.7
Section 317	(a)(1)	Not Applicable
	(a)(2)	8.14
	(b)	5.10
Section 318	(a)	10.10(a)

Note: This reconciliation and tie shall not, for any purpose, be deemed to be a part of the Trust Agreement.

TABLE OF CONTENTS

	Page
ARTICLE I.      DEFINITIONS
Section 1.1.    Definitions	1
ARTICLE II.     CONTINUATION OF THE ISSUER TRUST
Section 2.1.    Name	12
Section 2.2.    Office of the Delaware Trustee; Principal Place of Business	12
Section 2.3.    Initial Contribution of Trust Property; Organizational Expenses	12
Section 2.4.    Issuance of the Preferred Securities	12
Section 2.5.    Issuance of the Common Securities; Subscription and Purchase of Junior Subordinated Debentures	13
Section 2.6.    Declaration of Trust	14
Section 2.7.    Authorization to Enter into Certain Transactions	14
Section 2.8.    Assets of Trust	17
Section 2.9.    Title to Trust Property	18
ARTICLE III.    PAYMENT ACCOUNT
Section 3.1.    Payment Account	18
ARTICLE IV.    DISTRIBUTIONS; REDEMPTION
Section 4.1.    Distributions	18
Section 4.2.    Redemption	19
Section 4.3.    Subordination of Common Securities	21
Section 4.4.    Payment Procedures	22
Section 4.5.    Tax Returns and Reports	22
Section 4.6.    Payment of Taxes, Duties, etc. of the Issuer Trust	23
Section 4.7.    Payments under Indenture or Pursuant to Direct Actions	23
Section 4.8.    Liability of the Holder of Common Securities	23
ARTICLE V.    TRUST SECURITIES CERTIFICATES
Section 5.1.    Initial Ownership	23
Section 5.2.    The Trust Securities Certificates	23
Section 5.3.    Execution and Delivery of Trust Securities Certificates	24
Section 5.4.    Global Preferred Security	24

Section 5.5.      Registration of Transfer and Exchange Generally; Certain Transfers and Exchanges; Preferred Securities Certificates	26
Section 5.6.      Mutilated, Destroyed, Lost or Stolen Trust Securities Certificates	27
Section 5.7.      Persons Deemed Holders	28
Section 5.8.      Access to List of Holders’ Names and Addresses	28
Section 5.9.      Maintenance of Office or Agency	28
Section 5.10.    Appointment of Paying Agent	28
Section 5.11.    Ownership of Common Securities by Depositor	29
Section 5.12.    Notices to Clearing Agency	29
Section 5.13.    Rights of Holders	29
ARTICLE VI.      ACTS OF HOLDERS; MEETINGS; VOTING
Section 6.1.      Limitations on Holder’s Voting Rights	31
Section 6.2.      Notice of Meetings	32
Section 6.3.      Meetings of Holders	33
Section 6.4.      Voting Rights	33
Section 6.5.      Proxies, etc.	33
Section 6.6.      Holder Action by Written Consent	33
Section 6.7.      Record Date for Voting and Other Purposes	34
Section 6.8.      Acts of Holders	34
Section 6.9.      Inspection of Records	35
ARTICLE VII.     REPRESENTATIONS AND WARRANTIES
Section 7.1.      Representations and Warranties of the Property Trustee and the Delaware Trustee	35
Section 7.2.      Representations and Warranties of Depositor	36
ARTICLE VIII.    THE ISSUER TRUSTEES; THE ADMINISTRATORS
Section 8.1.      Certain Duties and Responsibilities	37
Section 8.2.      Certain Notices	39
Section 8.3.      Certain Rights of Property Trustee	39
Section 8.4.      Not Responsible for Recitals or Issuance of Securities	41
Section 8.5.      May Hold Securities	41
Section 8.6.      Compensation; Indemnity; Fees	41

ii

Section 8.7.        Corporate Property Trustee Required; Eligibility of Trustees and Administrators	42
Section 8.8.        Conflicting Interests	43
Section 8.9.        Co-Trustees and Separate Trustee	43
Section 8.10.      Resignation and Removal; Appointment of Successor	45
Section 8.11.      Acceptance of Appointment by Successor	46
Section 8.12.      Merger, Conversion, Consolidation or Succession to Business	46
Section 8.13.      Preferential Collection of Claims Against Depositor or Issuer Trust	46
Section 8.14.      Trustee May File Proofs of Claim	47
Section 8.15.      Reports by Property Trustee	47
Section 8.16.      Reports to the Property Trustee	48
Section 8.17.      Evidence of Compliance with Conditions Precedent	48
Section 8.18.      Number of Issuer Trustees	48
Section 8.19.      Delegation of Power	49
Section 8.20.      Appointment of Administrators	49
ARTICLE IX.    DISSOLUTION, LIQUIDATION AND MERGER
Section 9.1.        Dissolution Upon Expiration Date	50
Section 9.2.        Early Dissolution	50
Section 9.3.        Termination	50
Section 9.4.        Liquidation	51
Section 9.5.        Mergers, Consolidations, Amalgamations or Replacements of the Issuer Trust	52
ARTICLE X.      MISCELLANEOUS PROVISIONS
Section 10.1.      Limitation of Rights of Holders	53
Section 10.2.      Amendment	53
Section 10.3.      Separability	55
Section 10.4.      Governing Law	55
Section 10.5.      Payments Due on Non-Business Day	55
Section 10.6.      Successors	55
Section 10.7.      Headings	55
Section 10.8.      Reports, Notices and Demands	56
Section 10.9.      Agreement Not to Petition	56
Section 10.10.    Trust Indenture Act; Conflict with Trust Indenture Act	57
Section 10.11.    Acceptance of Terms of Trust Agreement, Guarantees and Indenture	58
Section 10.12.    Counterparts	58

iii

EXHIBITS

Exhibit A	Certificate of Trust
Exhibit B	Form of Certificate Depositary Agreement
Exhibit C	Form of Common Securities Certificate
Exhibit D	Form of Preferred Securities Certificate

iv

AMENDED AND RESTATED TRUST AGREEMENT

THIS AMENDED AND RESTATED TRUST AGREEMENT, dated as of             , 2002 (this “Trust Agreement”), is among (a) AMERICAN SAFETY HOLDINGS CORP., a Georgia corporation (including any permitted successors or assigns, the “Depositor”), (b) DEUTSCHE BANK TRUST COMPANY AMERICAS, a New York banking corporation, as property trustee (in such capacity, the “Property Trustee” and, in its separate corporate capacity and not in its capacity as Property Trustee, the “Bank”), (c) DEUTSCHE BANK TRUST COMPANY DELAWARE, a Delaware banking corporation, as Delaware trustee (the “Delaware Trustee”) (the Property Trustee and the Delaware Trustee are referred to collectively herein as the “Issuer Trustees”), (d) FRED J. PINCKNEY, an individual, and STEVEN B. MATHIS, an individual, as administrators (each an “Administrator” and, collectively the “Administrators”) and (e) the several Holders, as hereinafter defined.

RECITALS

WHEREAS, the Depositor and the Delaware Trustee have heretofore duly declared and established a statutory trust pursuant to the Delaware Statutory Trust Act by the entering into a certain Trust Agreement, dated as of             , 2002 (the “Original Trust Agreement”), and by the execution and filing by the Delaware Trustee with the Secretary of State of the State of Delaware of the Certificate of Trust, filed on             , 2002 (the “Certificate of Trust”), a copy of which is attached hereto as Exhibit A; and

WHEREAS, the Depositor and the Delaware Trustee desire to amend and restate the Original Trust Agreement in its entirety as set forth herein to provide for, among other things, (a) the issuance of the Common Securities by the Issuer Trust to the Depositor, (b) the issuance and sale of the Preferred Securities by the Issuer Trust pursuant to the Underwriting Agreement, (c) the acquisition by the Issuer Trust from the Depositor of all of the right, title and interest in the Junior Subordinated Debentures and (d) the appointment of the Property Trustee and the Administrators.

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, intending to be legally bound, as follows:

ARTICLE I

DEFINITIONS

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 and include the plural as well as the singular;

(b)  all other terms used herein that are defined in the Trust Indenture Act, either directly or by reference therein, have the meanings assigned to them therein;

(c)  the words “include,” “includes” and “including” shall be deemed to be followed by the phrase “without limitation”;

(d)  all accounting terms used but not defined herein have the meanings assigned to them in accordance with United States generally accepted accounting principles as in effect at the time of computation;

(e)  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 Trust Agreement;

(f)  the words “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; and

(g)  all references to the date the Preferred Securities were originally issued shall refer to the date the             % Preferred Securities were originally issued.

“Act” has the meaning specified in Section 6.8.

“Additional Amount” means, with respect to Trust Securities of a given Liquidation Amount and/or for a given period, the amount of Additional Interest (as defined in the Indenture) paid by the Depositor on a Like Amount of Junior Subordinated Debentures for such period.

“Additional Sums” has the meaning specified in Section 10.6 of the Indenture.

“Administrators” means each Person appointed in accordance with Section 8.20 solely in such Person’s capacity as Administrator of the Issuer Trust heretofore formed and continued hereunder and not in such Person’s individual capacity, or any successor Administrator appointed as herein provided; with the initial Administrators being Fred J. Pinckney and Steven B. Mathis.

2

“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 Procedures” means, with respect to any transfer or transaction involving a Global Preferred Security or beneficial interest therein, the rules and procedures of the Depositary for such Preferred Security, in each case to the extent applicable to such transaction and as in effect from time to time.

“Bank” has the meaning specified in the preamble to this Trust Agreement.

“Bankruptcy Event” means, with respect to any Person:

(a)  the entry of a decree or order by a court having jurisdiction in the premises judging such Person a bankrupt or insolvent, or 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, or appointing a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of such Person 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 unstayed and in effect for a period of 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 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 the taking of corporate action by such Person in furtherance of any such action.

“Bankruptcy Laws” has the meaning specified in Section 10.9.

“Board of Directors” means the board of directors of the Depositor or the Executive Committee of the board of directors of the Depositor (or any other committee of the board of directors of the Depositor performing similar functions) or, for purposes of this Trust Agreement, a committee designated by the board of directors of the Depositor (or any such committee), comprised of two or more members of the board of directors of the Depositor or officers of the Depositor, or both.

3

“Board Resolution” means a copy of a resolution certified by the Secretary or an Assistant Secretary of the Depositor to have been duly adopted by the Depositor’s Board of Directors, or such committee of the Board of Directors or officers of the Depositor to which authority to act on behalf of the Board of Directors has been delegated, and to be in full force and effect on the date of such certification, and delivered to the Issuer Trustees.

“Business Day” means a day other than (a) a Saturday or Sunday, (b) a day on which banking institutions in the State of Georgia or 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 Property Trustee’s Corporate Trust Office or the Delaware Trustee’s Corporate Trust Office or the Corporate Trust Office of the Debenture Trustee is closed for business.

“Cede” means Cede & Co.

“Certificate Depositary Agreement” means the agreement among the Issuer Trust, the Depositor and the Depositary, as the initial Clearing Agency, dated as of the Closing Date, substantially in the form attached hereto as Exhibit B, as the same may be amended and supplemented from time to time.

“Certificate of Trust” has the meaning specified in the preamble to this Trust Agreement.

“Clearing Agency” means an organization registered as a “clearing agency” pursuant to Section 17A of the Exchange Act. The Depositary shall be the initial Clearing Agency.

“Clearing Agency Participant” means a broker, dealer, bank, other financial institution or other Person for whom from time to time a Clearing Agency effects book-entry transfers and pledges of securities deposited with the Clearing Agency.

“Closing Date” means the Time of Delivery for the Firm Securities, which date is also the date of execution and delivery of this Trust Agreement.

“Code” means the Internal Revenue Code of 1986, as amended or any successor statute, in each case as amended from time to time.

“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 instrument such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act, 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 hereto as Exhibit C.

“Common Security” means an undivided beneficial interest in the assets of the Issuer Trust, having a Liquidation Amount of $10 and having the rights provided therefor in this Trust Agreement, including the right to receive Distributions and a Liquidation Distribution as provided herein.

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“Corporate Trust Office” means (a) with respect to the Property Trustee or the Debenture Trustee, the principal office of the Property Trustee located in the City of New York, New York, which at the time of the execution of this Trust Agreement is located at 31 West 52nd Street, New York, New York 10019; Attention: Corporate Trust and Agency Group—Corporate Market Services, and (b) with respect to the Delaware Trustee, the principal office of the Delaware Trustee located at E.A. Delle Donne Corporate Center, Montgomery Building, 1011 Centre Road, Suite 200, Wilmington, Delaware, 19805-1266.

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

“Debenture Guarantor” means American Safety Insurance Group, Ltd., a Bermuda company, in its capacity as guarantor under the Indenture, and its successors.

“Debenture Redemption Date” means, with respect to any Junior Subordinated Debentures to be redeemed under the Indenture, the date fixed for redemption of such Junior Subordinated Debentures under the Indenture.

“Delaware Statutory Trust Act” means Chapter 38 of Title 12 of the Delaware Code, 12 Del. C. §3801, et seq., as it may be amended from time to time.

“Debenture Trustee” means Deutsche Bank Trust Company Americas, a New York banking corporation and any successor, as trustee under the Indenture.

“Delaware Trustee” means the corporation identified as the “Delaware Trustee” in the preamble to this Trust Agreement solely in its capacity as Delaware Trustee of the Issuer Trust continued hereunder and not in its individual capacity, or its successor in interest in such capacity, or any successor trustee appointed as herein provided.

“Depositary” means The Depository Trust Company or any successor thereto.

“Depositor” has the meaning specified in the preamble to this Trust Agreement.

“Direct Action” has the meaning specified in Section 5.13(c).

“Distribution Date” has the meaning specified in Section 4.1(a).

“Distributions” means amounts payable in respect of the Trust Securities as provided in Section 4.1.

“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 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):

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(a)  the occurrence of a Debenture Event of Default;

(b)  default by the Issuer Trust in the payment of any Distribution when it becomes due and payable, and continuation of such default for a period of 30 days;

(c)  default by the Issuer Trust in the payment of any Redemption Price of any Trust Security when it becomes due and payable;

(d)  default in the performance, or breach, in any material respect, of any covenant or warranty of the Issuer Trust in this Trust Agreement (other than a covenant or warranty a default in the performance of which or the breach of which is dealt with in clause (b) or (c) above) and continuation of such default or breach for a period of 60 days after there has been given, by registered or certified mail, to the Issuer Trustees and the Depositor by the Holders of at least 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 any Bankruptcy Event with respect to the Property Trustee or all or substantially all of its property if a successor Property Trustee has not been appointed within a period of 90 days thereof.

“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, and any successor statute thereto, in each case as amended from time to time.

“Expiration Date” has the meaning specified in Section 9.1.

“Extension Period” has the meaning specified in Section 4.1.

“Firm Securities” means an aggregate Liquidation Amount of $             of the Issuer Trust’s             % Preferred Securities.

“Global Preferred Securities Certificate” means a Preferred Securities Certificate evidencing ownership of Global Preferred Securities.

“Global Preferred Security” means a Preferred Security, the ownership and transfers of which shall be made through book entries by a Clearing Agency as described in Section 5.4.

“Guarantee Agreement” means the Guarantee Agreement executed and delivered by Preferred Securities Guarantor and Deutsche Bank Trust Company Americas, as guarantee trustee, contemporaneously with the execution and delivery of this 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 is registered in the Securities Register; any such Person shall be a beneficial owner within the meaning of the Delaware Statutory Trust Act.

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“Indemnified Person” has the meaning specified in Section 8.6(c).

“Indenture” means the Junior Subordinated Indenture, dated as of             , 2002, between the Depositor, Debenture Guarantor and the Debenture Trustee (as amended or supplemented from time to time) relating to the issuance of the Junior Subordinated Debentures.

“Investment Company Act” means the Investment Company Act of 1940, as amended or any successor statute, in each case as amended from time to time.

“Investment Company Event” means the receipt by the Issuer Trust of an Opinion of Counsel, rendered by counsel experienced in such matters, to the effect that, as a result of the occurrence of a change in law or regulation or a written change (including any announced prospective 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 Issuer Trust is or will be considered an “investment company” that is 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 Preferred Securities.

“Issuer Trust” means American Safety Capital Trust I.

“Issuer Trustees” means, collectively, the Property Trustee and the Delaware Trustee.

“Junior Subordinated Debentures” means the aggregate principal amount of the Depositor’s             % junior subordinated deferrable interest debentures, due             , 2032 which date may be shortened once at any time by the Depositor to any date not earlier than             , 2007 issued pursuant to the Indenture.

“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 Trust Securities, Trust Securities having a Liquidation Amount equal to that portion of the principal amount of Junior Subordinated Debentures to be contemporaneously redeemed in accordance with the Indenture, allocated to the Common Securities and to the Preferred Securities based upon the relative Liquidation Amounts of such classes and (b) with respect to a distribution of Junior Subordinated Debentures to Holders of Trust Securities in connection with a dissolution or liquidation of the Issuer Trust, Junior Subordinated Debentures having a principal amount equal to the Liquidation Amount of the Trust Securities of the Holder to whom such Junior Subordinated Debentures are distributed.

“Liquidation Amount” means the stated amount of $10 per Trust Security.

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“Liquidation Date” means the date on which Junior Subordinated Debentures or the Liquidation Distributions are to be distributed to Holders of Trust Securities in connection with a dissolution and liquidation of the Issuer Trust pursuant to Section 9.4.

“Liquidation Distribution” has the meaning specified in Section 9.4(d).

“Majority in Liquidation Amount of the Preferred Securities” or “Majority in Liquidation Amount of the Common Securities” means, except as provided by the Trust Indenture Act, Preferred Securities or Common Securities, as the case may be, representing more than 50% of the aggregate Liquidation Amount of all then Outstanding Preferred Securities or Common Securities, as the case may be.

“Officers’ Certificate” means, a certificate signed by the Chairman of the Board, Chief Executive Officer, President or a Vice President and by the Chief Financial Officer, the Treasurer, an Associate Treasurer, an Assistant Treasurer, the Secretary, or an Assistant Secretary, of the Depositor, and delivered to the appropriate Issuer Trustee. Any Officers’ Certificate delivered with respect to compliance with a condition or covenant provided for in this Trust Agreement 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 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 such officer, such condition or covenant has been complied with.

“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.

“Option Closing Date” shall have the meaning provided in the Underwriting Agreement.

“Option Securities” means an aggregate Liquidation Amount of $             of the Issuer Trust’s             % Preferred Securities, issuable to the Underwriters, at their option, exercisable within 30 days after the date of the Prospectus, solely to cover over-allotments, if any.

“Option Preferred Securities Certificate” means the certificate evidencing ownership of Preferred Securities issued if the Underwriters exercise their option described in Section 2.4, which certificate shall be substantially in the form attached hereto as Exhibit D.

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“Original Trust Agreement” has the meaning specified in the preamble to this Trust Agreement.

“Outstanding,” with respect to 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 whose payment or redemption money in the necessary amount has been theretofore deposited with the Property Trustee or any Paying Agent for the Holders of such Preferred 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 which have been paid or in exchange for or in lieu of which other Trust Securities have been executed and delivered pursuant to Sections 5.4, 5.5, and 5.6;

provided, however, 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 Issuer Trustee, any Administrator, or any Affiliate of the Depositor or any Issuer Trustee shall be disregarded and deemed not to be Outstanding, except that (i) in determining whether any Issuer Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Preferred Securities that such Issuer Trustee or such Administrator, as the case may be, 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 Issuer Trustees, one or more of the Administrators and/or any such Affiliate. Preferred Securities so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Administrators the pledgee’s right so to act with respect to such Preferred Securities and that the pledgee is not the Depositor or any Affiliate of the Depositor.

“Owner” means each Person who is the beneficial owner of Global Preferred Securities as reflected in the records of the Clearing Agency or, if a Clearing Agency Participant is not the Owner, then as reflected in the records of a Person maintaining an account with such Clearing Agency, directly or indirectly, in accordance with the rules of such Clearing Agency.

“Paying Agent” means any paying agent or co-paying agent appointed pursuant to Section 5.10 and shall initially be the Property Trustee.

“Payment Account” means a segregated non-interest-bearing corporate trust account maintained by the Property Trustee in its trust department for the benefit of the Holders in which all amounts paid in respect of the Junior Subordinated Debentures will be held and from which the Property Trustee or the Paying Agent, shall make payments to the Holders in accordance with Sections 4.1 and 4.2.

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

“Preferred Securities Certificate” means a certificate evidencing ownership of Preferred Securities, substantially in the form attached hereto as Exhibit D.

“Preferred Securities Guarantor” means American Safety Insurance Group, Ltd., a Bermuda company, in its capacity as guarantor under the Guarantee, and its successors.

“Preferred Security” means a Firm Security or an Option Security, each constituting a preferred undivided beneficial interest in the assets of the Issuer Trust, having a Liquidation Amount of $10 and having the rights provided therefor in this Trust Agreement, including the right to receive Distributions and a Liquidation Distribution as provided herein.

“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 Issuer Trust continued hereunder and not in its individual capacity, or its successor in interest in such capacity, or any successor property trustee appointed as herein provided.

“Prospectus” means the final prospectus covering the Preferred Securities, Junior Subordinated Debentures and the Guarantee Agreement.

“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 Junior Subordinated Debenture Redemption Date and the stated maturity of the Junior Subordinated Debentures shall be a Redemption Date for a Like Amount of Trust Securities, including but not limited to any date of redemption pursuant to the occurrence of any Special Event.

“Redemption Price” means with respect to a redemption of any Trust Security, the Liquidation Amount of such Trust Security, together with accumulated but unpaid Distributions to but excluding the date fixed for redemption, plus the related amount of the premium, if any, paid by the Depositor upon the concurrent redemption of a Like Amount of Junior Subordinated Debentures.

“Relevant Trustee” has the meaning specified in Section 8.10.

“Responsible Officer” when used with respect to the Property Trustee means any officer assigned to the Corporate Trust Office, including any managing director, principal, vice president, assistant vice president, assistant treasurer, assistant secretary or any other officer of the Property Trustee customarily performing functions similar to those performed by any of the above designated officers and having direct responsibility for the administration of the Indenture, and also, with respect to a particular matter, any other officer to whom such matter is referred because of such officer’s knowledge of and familiarity with the particular subject.

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“Securities Act” means the Securities Act of 1933, as amended, and 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 5.5.

“Special Event” means any Tax Event or Investment Company Event.

“Successor Securities Certificate” of any particular Preferred Securities Certificate means every Preferred Securities Certificate issued after, and evidencing all or a portion of the same beneficial interest in the Issuer Trust as that evidenced by, such particular Preferred Securities Certificate; and, for the purposes of this definition, any Preferred Securities Certificate executed and delivered under Section 5.6 in exchange for or in lieu of a mutilated, destroyed, lost or stolen Preferred Securities Certificate shall be deemed to evidence the same beneficial interest in the Issuer Trust as the mutilated, destroyed, lost or stolen Preferred Securities Certificate.

“Successor Security” has the meaning specified in Section 9.5.

“Tax Event” means the receipt by the Issuer Trust of an Opinion of Counsel experienced in such matters to the effect that, as a result of 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 as a result of any official or administrative pronouncement or action or judicial decision interpreting or applying such laws or regulations, which amendment or change is effective or which pronouncement, action or decision is announced on or after the date of issuance of the Preferred Securities, there is more than an insubstantial risk that (a) the Issuer Trust is, or will be within 90 days of the delivery of such Opinion of Counsel, subject to United States federal income tax with respect to income received or accrued on the Junior Subordinated Debentures, (b) interest payable by the Depositor on the Junior Subordinated Debentures is not, or within 90 days of the delivery of such Opinion of Counsel will not be, deductible by the Depositor, in whole or in part, for United States federal income tax purposes, (c) the deduction of interest payable by the Depositor on the Junior Subordinated Debentures will be deferred or suspended for United States federal income tax purposes and the net present value of the benefits of such tax deductions will otherwise be materially reduced, or (d) the Issuer Trust is, or will be within 90 days of the delivery of such Opinion of Counsel, subject to more than a de minimis amount of other taxes, duties or other governmental charges.

“Time of Delivery” means 9:00 a.m. Eastern Standard Time, either (a) with respect to the Firm Securities or the Common Securities, on the fourth Business Day (unless postponed in accordance with the provisions of Section 4 of the Underwriting Agreement) following the date of execution of the Underwriting Agreement, or such other time not later than ten Business Days after such date as shall be agreed upon by the Underwriters, the Issuer Trust and the Depositor, or (b) with respect to the Option Securities, the Option Closing Date.

“Trust Agreement” means this Amended and Restated Trust Agreement, as the same may be modified, amended or supplemented in accordance with the applicable provisions hereof,

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including (a) all Exhibits hereto, and (b) for all purposes of this Amended and Restated Trust Agreement and any such modification, amendment or supplement, the provisions of the Trust Indenture Act that are deemed to be a part of and govern this Amended and Restated Trust Agreement and any modification, amendment or supplement, respectively.

“Trust Indenture Act” means the Trust Indenture Act of 1939, as amended by the Trust Indenture Reform Act of 1990, or any successor statute, in each case as amended from time to time.

“Trust Property” means (a) the Junior Subordinated Debentures, (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 Securities Certificate” means any one of the Common Securities Certificates or the Preferred Securities Certificates.

“Trust Security” means any one of the Common Securities or the Preferred Securities.

“Underwriters” has the meaning specified in the Underwriting Agreement.

“Underwriting Agreement” means the Underwriting Agreement, dated as of             , 2002, among the Issuer Trust, the Depositor, Debenture Guarantor and the Underwriters, as the same may be amended from time to time.

ARTICLE II

CONTINUATION OF THE ISSUER TRUST

SECTION 2.1.  Name.

The Issuer Trust continued hereby shall be known as “American Safety Capital Trust I,” as such name may be modified from time to time by the Administrators following written notice to the Holders of Trust Securities and the other Issuer Trustees, in which name the Administrators and the Issuer Trustees may engage in the transactions contemplated hereby, make and execute contracts and other instruments on behalf of the Issuer 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 Deutsche Bank Trust Company Delaware, E.A. Delle Donne Corporate Center, Montgomery Building, 1011 Centre Road, Suite 200, Wilmington, Delaware 19805-1266, Attention: Elizabeth B. Ferry, or such other address in the State of Delaware as the Delaware Trustee may designate by written notice to the Holders and the Depositor. The principal executive office of the Issuer Trust is in care of

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American Safety Holdings Corp., 1845 The Exchange, Atlanta, Georgia 30339, Attention: Office of the Secretary.

SECTION 2.3.  Initial Contribution of Trust Property; Organizational Expenses.

The Issuer Trustees acknowledge receipt in trust from the Depositor in connection with this Trust Agreement of the sum of $10, which constitutes the initial Trust Property. The Depositor shall pay all organizational expenses of the Issuer Trust as they arise or shall, upon request of any Issuer Trustee, promptly reimburse such Issuer Trustee for any such reasonable expenses paid by such Issuer Trustee. The Depositor shall make no claim upon the Trust Property for the payment of such expenses.

SECTION 2.4.  Issuance of the Preferred Securities.

On             , 2002, the Depositor, both on its own behalf and on behalf of the Issuer Trust pursuant to the Original Trust Agreement, executed and delivered the Underwriting Agreement. Contemporaneously with the execution and delivery of this Trust Agreement, an Administrator, on behalf of the Issuer Trust, shall manually execute in accordance with Section 5.3 and the Property Trustee shall authenticate in accordance with Section 5.3 and deliver to the Underwriters, Firm Securities Certificates, registered in the names requested by the Underwriters, in an aggregate amount of              Firm Securities having an aggregate Liquidation Amount of $            , against receipt of the aggregate purchase price of such Preferred Securities of $            , by the Property Trustee.

At the option of the Underwriters, within 30 days of the date of the Prospectus, and solely for the purpose of covering an over-allotment, if any, an Administrator, on behalf of the Issuer Trust, shall manually execute in accordance with Section 5.3 and the Property Trustee shall authenticate in accordance with Section 5.3 and deliver to the Underwriters, Option Preferred Securities Certificates, registered in the names requested by the Underwriters, representing up to              Option Securities having an aggregate Liquidation Amount of up to $             against receipt of the aggregate purchase price of such Option Securities of up to $             by the Property Trustee.

SECTION 2.5.  Issuance of the Common Securities; Subscription and Purchase of Junior Subordinated Debentures.

Contemporaneously with the execution and delivery of this Trust Agreement, an Administrator, on behalf of the Issuer Trust, shall execute in accordance with Section 5.3 and the Property Trustee shall authenticate in accordance with Section 5.3 and deliver to the Depositor, Common Securities Certificates, registered in the name of the Depositor, in an aggregate amount of              Common Securities having an aggregate Liquidation Amount of $             against receipt by the Property Trustee of the aggregate purchase price of such Common Securities of $             by the Property Trustee. In the event of any exercise of an over-allottment option requiring issuance of additional Option Preferred Securities Certificates, as described in Section 2.4 above, a proportionate number of additional Common Securities Certificates, with a corresponding aggregate Liquidation Amount, shall be delivered to the

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Depositor. Contemporaneously with the executions, and deliveries of any Common Securities Certificates and any Preferred Securities Certificates, an Administrator, on behalf of the Issuer Trust, shall subscribe for and purchase from the Depositor, corresponding amounts of Junior Subordinated Debentures, registered in the name of the Issuer Trust and having an aggregate principal amount equal to $            , plus, in the event of any exercise of the over-allotment option (a) a corresponding additional number of Junior Subordinated Debentures not exceeding an aggregate principal amount of $             and (b) a corresponding number of Junior Subordinated Debentures not exceeding an aggregate principal amount equal to the aggregate Liquidation Amount of Common Securities issued pursuant to such exercise of an over-allotment option; and, in satisfaction of the purchase price for such Junior Subordinated Debentures, the Property Trustee, on behalf of the Issuer Trust, shall deliver to the Depositor the sum of $             plus any corresponding over-allotment option amount (being the sum of the amounts delivered to the Property Trustee pursuant to (a) the second sentence of Section 2.4 and (b) the second sentence of this Section 2.5) and receive the Junior Subordinated Debentures on behalf of the Issuer Trust.

SECTION 2.6.  Declaration of Trust.

The exclusive purposes and functions of the Issuer Trust are to (a) issue and sell Trust Securities and use the proceeds from such sale to acquire the Junior Subordinated Debentures, and (b) engage in only those other activities necessary, appropriate, convenient, or incidental thereto. The Depositor hereby appoints the Issuer Trustees as trustees of the Issuer Trust, to have all the rights, powers and duties to the extent set forth herein, and the Issuer Trustees hereby accept such appointment. The Property Trustee hereby declares that it will hold the Trust Property in trust upon and subject to the conditions set forth herein for the benefit of the Issuer Trust and the Holders. The Depositor hereby appoints the Administrators (as agents of the Issuer Trust), with such Administrators having all rights, powers, and duties set forth herein with respect to accomplishing the purposes of the Issuer Trust, and the Administrators hereby accept such appointment, provided, however, that it is the intent of the parties hereto that such Administrators shall not be trustees or fiduciaries with respect to the Issuer Trust and, to the fullest extent permitted by applicable law, this Trust Agreement shall be construed in a manner consistent with such intent. The Property Trustee shall have the right, power and authority to perform those duties assigned to the Administrators. 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 Administrators set forth herein. The Delaware Trustee shall be one of the trustees of the Issuer 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.

SECTION 2.7.  Authorization to Enter into Certain Transactions.

(a)  The Issuer Trustees and the Administrators shall conduct the affairs of the Issuer Trust in accordance with the terms of this Trust Agreement. Subject to the limitations set forth in paragraph (b) of this Section 2.7 and in accordance with the following provisions (i) and (ii), the Issuer Trustees and the Administrators shall act as follows:

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(i)  Each Administrator shall have the power and authority and is hereby authorized and directed to act on behalf of the Issuer Trust with respect to the following:

(A)  the compliance with the Underwriting Agreement regarding the issuance and sale of the Trust Securities;

(B)  the compliance with the Securities Act, applicable state securities or blue sky laws, and the Trust Indenture Act;

(C)  the execution of the Trust Securities on behalf of the Issuer Trust in accordance with this Trust Agreement;

(D)  the listing of the Preferred Securities upon such securities exchange or exchanges or upon the Nasdaq National Market as shall be determined by the Depositor, with the registration of the Preferred Securities under the Exchange Act, if required, and the preparation and filing of all periodic and other reports and other documents pursuant to the foregoing;

(E)  the application for a taxpayer identification number for the Issuer Trust;

(F)  the preparation of a registration statement and a prospectus in relation to the Preferred Securities, including any amendments thereto and the taking of any action necessary or desirable to sell the Preferred Securities in a transaction or series of transactions subject to the registration requirements of the Securities Act;

(G)  causing the Issuer Trust to enter into, and execute, deliver and perform on behalf of the Issuer Trust all agreements, instruments, certificates or other documents as such Administrator deems necessary or incidental to the purposes and functions of the Issuer Trust; and

(H)  any action incidental or convenient to the foregoing as the Administrators may from time to time determine is necessary or advisable to give effect to the terms of this Trust Agreement.

(ii)  The Property Trustee shall have the power and authority, and is hereby authorized and directed, to act on behalf of the Issuer Trust with respect to the following matters:

(A)  establishing and maintain the Payment Account;

(B)  receiving, taking title to, and exercising all of the rights, powers and privileges of the holder of the Junior Subordinated Debentures;

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(C)  receiving and collecting interest, principal and any other payments made in respect of the Junior Subordinated Debentures in the Payment Account;

(D)  distributing amounts owed to the Holders in respect of the Trust Securities in accordance with the terms of this Trust Agreement;

(E)  acting as Paying Agent and/or Securities Registrar to the extent appointed as such hereunder;

(F)  sending notices of default and other information regarding the Trust Securities and the Junior Subordinated Debentures to the Holders in accordance with this Trust Agreement;

(G)  distributing the Trust Property in accordance with the terms of this Trust Agreement;

(H)  to the extent provided in this Trust Agreement, winding up the affairs of and liquidating the Issuer Trust and preparing, executing and filing the certificate of cancellation with the Secretary of State of the State of Delaware;

(I)  after an Event of Default (other than under paragraph (b), (c) or (d) of the definition of such term if such Event of Default is by or with respect to the Property Trustee), complying with the provisions of this Trust Agreement and taking any action to give effect to the terms of this Trust Agreement and protecting and conserving the Trust Property for the benefit of the Holders (without consideration of the effect of any such action on any particular Holder); and

(J)  taking any action incidental or convenient 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;

provided, however, that nothing in this Section 2.7(a)(ii) shall require the Property Trustee to take any action that is not otherwise required in this Trust Agreement.

(b)  So long as this Trust Agreement remains in effect, the Issuer Trust (or the Issuer Trustees or Administrators acting on behalf of the Issuer Trust) shall not undertake any business, activities or transaction except as expressly provided herein or contemplated hereby. In particular, neither the Issuer Trustees nor the Administrators (in each case acting on behalf of the Issuer Trust) shall (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) take any action that would reasonably be expected to cause the Issuer Trust to become taxable as a corporation for United States federal income tax purposes, (iv) incur any indebtedness for borrowed money or issue any other debt, or (v) take or consent to any action that would result in the placement of a Lien on any of the Trust Property. The Property Trustee, subject to Section 8.6, shall defend all claims and demands of all Persons at

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any time claiming any Lien on any of the Trust Property adverse to the interest of the Issuer Trust or the Holders in their capacity as Holders.

(c)  In connection with the issue and sale of the Preferred Securities, the Depositor shall have the power and authority to assist the Issuer Trust with respect to, or effect on behalf of the Issuer 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 preparation and filing by the Issuer Trust with the Commission, and the execution and delivery on behalf of the Issuer Trust, of a registration statement and a prospectus in relation to the Preferred Securities, including any amendments thereto, and the taking of any action necessary or desirable to sell the Preferred Securities in a transaction or a series of transactions subject to the registration requirements of the Securities Act;

(ii)  the determination of the states in which to take appropriate action to qualify or register for sale all or part of the Preferred Securities and the determination of any and all such acts, other than actions that must be taken by or on behalf of the Issuer Trust, and the advice to the Issuer Trustees of actions they must take on behalf of the Issuer Trust, and the preparation for execution and filing of any documents to be executed and filed by the Issuer Trust or on behalf of the Issuer Trust, as the Depositor deems necessary or advisable in order to comply with the applicable laws of any such states in connection with the offer and sale of the Preferred Securities;

(iii)  the negotiation of the terms of, and the execution and delivery of, the Underwriting Agreement providing for the sale of the Preferred Securities;

(iv)  the preparation and filing by the Issuer Trust with the Commission and the execution on behalf of the Issuer Trust of a registration statement on Form 8-A relating to the registration of the Preferred Securities under Section 12(b) or 12(g) of the Exchange Act, as amended, including any amendments thereto;

(v)  compliance with the listing requirements of the Preferred Securities upon such securities exchange or exchanges, or upon the Nasdaq National Market, as shall be determined by the Depositor, the registration of the Preferred Securities under the Exchange Act, if required, and the preparation and filing of all periodic and other reports and other documents pursuant to the foregoing; and

(vi)  the taking of any other actions incidental or convenient to carry out any of the foregoing activities.

(d)  Notwithstanding anything herein to the contrary, the Administrators and the Property Trustee are authorized and directed to conduct the affairs of the Issuer Trust and to operate the Issuer Trust so that the Issuer Trust will not be deemed to be an “investment company” required to be registered under the Investment Company Act, and will not be taxable

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as a corporation for the United States federal income tax purposes and so that the Junior Subordinated Debentures will be treated as indebtedness of the Depositor for United States federal income tax purposes. In this connection, the Property Trustee, the Administrators, and the Holders of Common Securities are authorized to take any action, not inconsistent with applicable law, the Certificate of Trust, or this Trust Agreement, that the Property Trustee, the Administrators, and Holders of Common Securities determine in their 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 Administrators or the Issuer Trustees be liable to the Issuer Trust or the Holders for any failure to comply with this section that results from a change in law or regulations or in the interpretation thereof.

SECTION 2.8.  Assets of Trust.

The assets of the Issuer Trust shall consist solely of the Trust Property.

SECTION 2.9.  Title to Trust Property.

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 its capacity as such) for the benefit of the Issuer Trust and the Holders in accordance with this Trust Agreement.

ARTICLE III

PAYMENT ACCOUNT

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 its agents 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, including (and subject to) any priority of payments provided for herein.

(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 or proceeds with respect to, the Junior Subordinated Debentures. Amounts held in the Payment Account shall not be invested by the Property Trustee pending distribution thereof.

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ARTICLE IV

DISTRIBUTIONS; REDEMPTION

SECTION 4.1.  Distributions.

(a)  The Trust Securities represent undivided beneficial interests in the Trust Property, and Distributions (including Distributions of Additional Amounts) will be made on the Trust Securities at the rate and on the dates that payments of interest (including payments of Additional Interest, as defined in the Indenture) are made on the Junior Subordinated Debentures. Accordingly:

(i)  Distributions on the Trust Securities shall be cumulative and will accumulate whether or not there are funds of the Issuer Trust available for the payment of Distributions. Distributions shall accumulate from             , 2002, and, except in the event (and to the extent) that the Depositor exercises its right to defer the payment of interest on the Junior Subordinated Debentures pursuant to the Indenture, shall be payable quarterly in arrears on March 31, June 30, September 30 and December 31 of each year, commencing on December 31, 2002. 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 day that is a Business Day (without any interest or other payment in respect of any such delay), except that, if such Business Day is in the next succeeding calendar year, payment of such Distributions shall be made on the immediately preceding Business Day, in either case with the same force and effect as if made on the date on which such payment was originally payable (each date on which distributions are payable in accordance with this Section 4.1(a), a “Distribution Date”).

(ii)  The Trust Securities shall be entitled to Distributions payable at a rate of             % per annum of the Liquidation Amount of the Trust Securities. 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 of twelve 30-day months and the actual number of days elapsed in a partial month in a period. Distributions payable for each full Distribution period will be computed by dividing the rate per annum by four. The amount of Distributions payable for any period shall include any Additional Amounts in respect of such period.

(iii)  So long as no Debenture Event of Default has occurred and is continuing, the Depositor has the right under the Indenture to defer the payment of interest on the Junior Subordinated Debentures at any time and from time to time for a period not exceeding 20 consecutive quarterly periods (an “Extension Period”), provided that no Extension Period may extend beyond             , 2032. As a consequence of any such deferral, quarterly Distributions on the Trust Securities by the Issuer Trust will also be deferred (and the amount of Distributions to which Holders of the Trust Securities are entitled will accumulate additional Distributions thereon at the rate of             % per annum, compounded quarterly to the extent permitted by applicable law) from the relevant payment date for such Distributions, computed on the basis of a 360-day year of twelve

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30-day months and the actual number of days elapsed in a partial month in such period. Additional Distributions payable for each full Distribution period will be computed by dividing the rate per annum by four. The term “Distributions” as used in Section 4.1 shall include any such additional Distributions provided pursuant to this Section 4.1(a)(iii).

(iv)  Distributions on the Trust Securities shall be made by the Property Trustee or the Paying Agent from the Payment Account and shall be payable on each Distribution Date only to the extent that the Issuer 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 15th day of March, June, September or December (whether or not a Business Day).

Each Trust Security upon registration of transfer of or in exchange for or in lieu of any other Trust Security shall carry the rights of Distributions accrued (including Additional Amounts, if any) and unpaid, and to accrue (including Additional Amounts, if any), which were carried by such other Trust Security.

SECTION 4.2.  Redemption.

(a)  On each Debenture Redemption Date and on the stated maturity of the Junior Subordinated Debentures, the Issuer 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 30 nor more than 60 days prior to the Redemption Date to each Holder of Trust Securities to be redeemed, at such Holder’s address appearing in the Security Register. All notices of redemption shall state:

(i)  the Redemption Date and accrued interest, if any;

(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 together with a statement that it is an estimate and that the actual Redemption Price will be calculated on the third 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, or as soon as practicable thereafter, that notice of such actual Redemption Price is received pursuant to the Indenture);

(iii)  the CUSIP number or CUSIP numbers of the Preferred Securities affected;

(iv)  if less than all the Outstanding Trust Securities are to be redeemed, the identification and the total Liquidation Amount of the particular Trust Securities to be redeemed;

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(v)  that, on the Redemption Date, the Redemption Price will become due and payable upon each such Trust Security to be redeemed and that Distributions thereon will cease to accumulate on and after said date, except as provided in Section 4.2(d) below; and

(vi)  the place or places where Trust Securities are to be surrendered for the payment of the Redemption Price.

The Issuer Trust in issuing the Trust Securities shall use “CUSIP” numbers, and 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 material.

(c)  The Trust Securities redeemed on each Redemption Date shall be redeemed at the Redemption Price with the applicable proceeds from the contemporaneous redemption of Junior Subordinated Debentures. Redemptions of the Trust Securities shall be made and the Redemption Price shall be payable on each Redemption Date only to the extent that the Issuer Trust has funds then on hand and available in the Payment Account for the payment of such Redemption Price.

(d)  If the Property Trustee gives a notice of redemption in respect of any Preferred Securities, then, by 12:00 noon, New York City time, on the Redemption Date, subject to Section 4.2(c), the Property Trustee will, with respect to Preferred Securities held in global form, irrevocably deposit with the Clearing Agency for such Preferred Securities, to the extent available therefor, funds sufficient to pay the applicable Redemption Price and will give such Clearing Agency irrevocable instructions and authority to pay the Redemption Price to the Owners of the Preferred Securities. With respect to Preferred Securities that are not held in global form, the Property Trustee, subject to Section 4.2(c), 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 called for redemption shall be payable to the Holders of such Trust Securities as they appear on the Securities Register for the Trust Securities 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 so called for redemption will cease, except the right of such Holders to receive the Redemption Price and any Distributions payable in respect of the Trust Securities on or prior to the Redemption Date, but without interest, and such Trust Securities will cease to be Outstanding. In the event that any date on which any applicable Redemption Price is payable is not a Business Day, then payment of the applicable Redemption Price payable on such date will be made on the next succeeding day that is a Business Day (and without any interest or other payment in respect of any such delay), except that, if such Business Day is 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

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Redemption Price in respect of any Trust Securities called for redemption is improperly withheld or refused and not paid either by the Issuer Trust or by the Preferred Securities Guarantor pursuant to the Guarantee Agreement, Distributions on such Trust Securities will continue to accumulate, as set forth in Section 4.1, from the Redemption Date originally established by the Issuer Trust for such Trust Securities to the date such applicable Redemption Price is actually paid, in which case the actual payment date will be the date fixed for redemption for purposes of calculating the applicable 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 particular Preferred Securities to be redeemed shall be selected not more than 60 days prior to the Redemption Date by the Property Trustee from the Outstanding Preferred Securities not previously called for redemption in such a manner as the Property Trustee shall deem fair and appropriate.

(f)  Subject to the foregoing provisions of this Section 4.2 and to applicable law (including, without limitation, United States federal securities laws), the Depositor, the Debenture Guarantor or their Affiliates may, at any time and from time to time, purchase outstanding Preferred Securities by tender into the open market or by private agreement.

SECTION 4.3.  Subordination of Common Securities.

(a)  Payment of Distributions (including Additional Amounts, if applicable) on, the Redemption Price of, and the Liquidation Distribution in respect of, the Trust Securities, as applicable, shall be made, subject to Section 4.2(e), pro rata among the Common Securities and the Preferred Securities based on the Liquidation Amount of such Trust Securities; provided, however, that if on any Distribution Date or Redemption Date any Event of Default resulting from a Debenture Event of Default in Section 5.1(a) or 5.1(b) of the Indenture shall have occurred and be continuing, no payment of any Distribution (including any Additional Amounts, if applicable) on, or 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 Additional Amounts, if applicable) 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 Amounts, if applicable) on, or the Redemption Price of, or Liquidation Distribution in respect of Preferred Securities then due and payable.

(b)  In the case of the occurrence of any Event of Default resulting from any Debenture Event of Default, the Holder of the Common Securities shall have no right to act with respect to any such Event of Default under this Trust Agreement until the effects of 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

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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 Holder of the Common Securities, and only the Holders of 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 Amounts, if applicable) in respect of the Preferred Securities shall be made by check mailed to the address of the Person entitled thereto as such address shall appear on the Securities Register or, if the Preferred Securities are held by a Clearing Agency, such Distributions shall be made to the Clearing Agency in immediately available funds, which will credit the relevant accounts on the applicable Distribution Dates. Payments of Distributions to Holders of $1,000,000 or more in aggregate Liquidation Amount of Preferred Securities may be made by wire transfer of immediately available funds upon written request of such Holder of Preferred Securities to the Securities Registrar not later than 15 calendar days prior to the date on which the Distribution is payable. 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 the Common Securities.

SECTION 4.5.  Tax Returns and Reports.

(a)  The Administrators shall prepare and file (or cause to be prepared and filed), at the Depositor’s expense, all United States federal, state, and local tax and information returns and reports required to be filed by or in respect of the Issuer Trust. In this regard, the Administrators shall (i) prepare and file (or cause to be prepared and filed) all Internal Revenue Service forms required to be filed in respect of the Issuer Trust in each taxable year of the Issuer Trust and (ii) prepare and furnish (or cause to be prepared and furnished) to each Holder all Internal Revenue Service forms required to be provided by the Issuer Trust. The Administrators shall provide the Depositor and the Property Trustee with a copy of all such returns and reports promptly after such filing or furnishing. The Issuer Trustees and the Administrators shall comply with United States federal withholding and backup withholding tax laws and information reporting requirements with respect to any payments to Holders under the Trust Securities.

(b)  On or before December 15 of each year during which any Preferred Securities are outstanding, the Administrators shall furnish to the Paying Agent such information as may be reasonably requested by the Property Trustee in order that the Property Trustee may prepare the information which it is required to report for such year on Internal Revenue Service Forms 1096 and 1099 pursuant to Section 6049 of the Code. Such information shall include the amount of original issue discount includible in income for each outstanding Preferred Security during such year.

SECTION 4.6.  Payment of Taxes; Duties, etc. of the Issuer Trust.

Upon receipt under the Junior Subordinated Debentures of Additional Sums, the Property Trustee, at the written direction of an Administrator or the Depositor, shall promptly pay any

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taxes, duties or governmental charges of whatsoever nature (other than withholding taxes) imposed on the Issuer Trust by the United States or any other taxing authority.

SECTION 4.7.  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 related thereto) has directly received pursuant to Section 5.8 of the Indenture or Section 5.13 of this Trust Agreement.

SECTION 4.8.  Liability of the Holder of Common Securities.

The Holder of Common Securities shall be liable for the debts and obligations of the Issuer Trust as set forth in Section 6.7(c) of the Indenture regarding allocation of expenses.

ARTICLE V

TRUST SECURITIES CERTIFICATES

SECTION 5.1.  Initial Ownership.

Upon the creation of the Issuer Trust by the contribution by the Depositor pursuant to 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 Issuer Trust.

SECTION 5.2.  The Trust Securities Certificates.

(a)  The Trust Securities Certificates shall be executed on behalf of the Issuer Trust by manual or facsimile signature of at least one Administrator, except as provided in Section 5.3. Trust Securities Certificates bearing the signatures of individuals who were, at the time when such signatures shall have been affixed, authorized to sign on behalf of the Issuer 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 Trust Securities Certificates or did not hold such offices at the date of delivery of such Trust Securities Certificates. A transferee of a Trust Securities Certificate shall become a Holder, and shall be entitled to the rights and subject to the obligations of a Holder hereunder, upon due registration of such Trust Securities Certificate in such transferee’s name pursuant to Section 5.5.

(b)  Upon their original issuance, Preferred Securities Certificates shall be issued in the form of one or more fully registered Global Preferred Securities Certificates which will be deposited with or on behalf of Cede as the Depositary’s nominee and registered in the name of Cede as the Depositary’s nominee. Unless and until it is exchangeable in whole or in part for the Preferred Securities in definitive form, a global security may not be transferred except as a whole by the Depositary to a nominee of the Depositary or by a nominee of the Depositary to the Depositary or another nominee of the Depositary or by the Depositary or any such nominee to a successor of such Depositary or a nominee of such successor.

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(c)  A single Common Securities Certificate representing the Common Securities shall be issued to the Depositor in the form of a definitive Common Securities Certificate.

SECTION 5.3.  Execution and Delivery of Trust Securities Certificates.

On the Closing Date, and on the Option Closing Date if applicable, an Administrator shall cause Trust Securities Certificates, in an aggregate Liquidation Amount as provided in Sections 2.4 and 2.5, as the case may be, to be executed on behalf of the Issuer Trust and delivered to the Property Trustee and upon such delivery the Property Trustee shall authenticate such Trust Securities Certificates and deliver such Trust Securities Certificates upon the written order of the Issuer Trust, executed by an Administrator thereof, without further trust action by the Issuer Trust, in authorized denominations, and whereupon the Trust Securities evidenced by such Trust Securities Certificates shall represent duly and validly issued undivided beneficial interests in the assets of the Issuer Trust and entitled to the benefits of this Trust Agreement.

SECTION 5.4.  Global Preferred Security.

(a)  Any Global Preferred Security issued under this Trust Agreement shall be registered in the name of the Clearing Agency or its nominee and delivered to it or its custodian therefor, and such Global Preferred Security shall constitute a single Preferred Security for all purposes of this Trust Agreement.

(b)  Notwithstanding any other provision in this Trust Agreement, a Global Preferred Security may not be exchanged in whole or in part for Preferred Securities registered, and no transfer of the Global Preferred Security in whole or in part may be registered, in the name of any Person other than the Clearing Agency or its nominee for such Global Preferred Security, Cede, or other nominee thereof unless (i) such Clearing Agency advises the Depositor and the Issuer Trustees in writing that such Clearing Agency is no longer willing or able to properly discharge its responsibilities as Clearing Agency with respect to such Global Preferred Security, and the Depositor is unable to locate a qualified successor within 90 days of receipt of such notice from the Depositary, (ii) the Depositor at its option advises the Depositary in writing that it elects to terminate the book-entry system through the Clearing Agency, or (iii) there shall have occurred and be continuing an Event of Default.

(c)  If a Preferred Security is to be exchanged in whole or in part for a beneficial interest in a 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 Liquidation Amount thereof shall be reduced or increased by an amount equal to the portion thereof to be so exchanged or cancelled, or equal to the Liquidation Amount of such other Preferred 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 Security Registrar, whereupon the Property Trustee, in accordance with the Applicable Procedures, shall instruct the Clearing Agency or its authorized representative to make a corresponding adjustment to its records. Upon any such surrender or adjustment of a Global Preferred Security by the Clearing Agency, accompanied by registration instructions, the Property Trustee shall, subject to Section 5.4(b) and as otherwise provided in

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this Article V, authenticate and deliver and an Administrator shall execute any Preferred Securities issuable in exchange for such Global Preferred Security (or any portion thereof) in accordance with the instructions of the Clearing Agency. The Property 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 Preferred Security registered, executed, authenticated, and delivered upon registration of transfer of, or in exchange for or in lieu of, a Global Preferred Security or any portion thereof, whether pursuant to this Article V or Article IV or otherwise, shall be executed, authenticated and delivered in the form of, and shall be, a Global Preferred Security, unless such Global Preferred Security is registered in the name of a Person other than the Clearing Agency for such Global Preferred Security or a nominee thereof.

(e)  The Clearing Agency or its nominee, as the registered owner of a Global Preferred Security, shall be considered the Holder of the Preferred Securities represented by such Global Preferred Security for all purposes under this Trust Agreement and the Preferred Securities, and owners of beneficial interests in such Global Preferred Security shall hold such interests pursuant to the Applicable Procedures and, except as otherwise provided herein, shall not be entitled to receive physical delivery of any such Preferred Securities in definitive form and shall not be considered the Holders thereof under this Trust Agreement. Accordingly, any such Owner’s beneficial interest in the Global Preferred Security shall be shown only on, and the transfer of such interest shall be effected only through, records maintained by the Clearing Agency or its nominee. Neither the Property Trustee, the Securities Registrar nor the Depositor shall have any liability in respect of any transfers effected by the Clearing Agency.

(f)  The rights of Owners of beneficial interests in a Global Preferred Security shall be exercised only through the Clearing Agency and shall be limited to those established by law and agreements between such Owners and the Clearing Agency.

SECTION 5.5.  Registration of Transfer and Exchange Generally; Certain Transfers and Exchanges; Preferred Securities Certificates.

(a)  The Property Trustee shall keep or cause to be kept at its Corporate Trust Office a register or registers for the purpose of registering Preferred Trust Securities Certificates and transfers and exchanges of Preferred Securities Certificates in which the registrar and transfer agent with respect to the Preferred 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 (subject to Section 5.11 in the case of Common Securities Certificates) and registration of transfers and exchanges of Preferred Securities Certificates as herein provided. Such register is herein sometimes referred to as the “Securities Register.” The Property Trustee is hereby appointed “Securities Registrar” for the purpose of registering Preferred Securities and transfers of Preferred Securities as herein provided.

Upon surrender for registration of transfer of any Preferred Security at the offices or agencies of the Property Trustee designated for that purpose, an Administrator shall execute and

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the Property Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Preferred Securities of the same series of any authorized denominations of like tenor and aggregate Liquidation Amount and bearing such legends as may be required by this Trust Agreement.

At the option of the Holder, Preferred Securities may be exchanged for other Preferred Securities of any authorized denominations, of like tenor and aggregate Liquidation Amount and bearing such legends as may be required by this Trust Agreement, upon surrender of the Preferred Securities to be exchanged at such office or agency. Whenever any Preferred Securities are so surrendered for exchange, an Administrator shall execute and the Property Trustee shall authenticate and deliver the Preferred Securities that the Holder making the exchange is entitled to receive.

All Preferred Securities issued upon any transfer or exchange of Preferred Securities shall be the valid obligations of the Issuer Trust, evidencing the same interest, and entitled to the same benefits under this Trust Agreement, as the Preferred Securities surrendered upon such transfer or exchange.

Every Preferred Security presented or surrendered for transfer or exchange shall (if so required by the Property Trustee) be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Property Trustee and the Securities Registrar, duly executed by the Holder thereof or such Holder’s attorney duly authorized in writing.

No service charge shall be made to a Holder for any transfer or exchange of Preferred Securities, but the Property Trustee may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any transfer or exchange of Preferred Securities.

Neither the Issuer Trust nor the Property Trustee shall be required, pursuant to the provisions of this Section, (i) to issue, register the transfer of, or exchange any Preferred Security during a period beginning at the opening of business 15 days before the day of selection for redemption of 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.

(b)  Certain Transfers and Exchanges.    Trust Securities may only be transferred, in whole or in part, in accordance with the terms and conditions set forth in this Trust Agreement. To the fullest extent permitted by applicable law, any transfer or purported transfer of any Trust Security not made in accordance with this Trust Agreement shall be null and void.

(i)  Non-Global Security to Non-Global Security.    A Trust Security that is not a Global Preferred Security may be transferred, in whole or in part, to a Person who takes delivery in the form of another Trust Security that is not a Global Preferred Security as provided in Section 5.5(a).

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(ii)  Free Transferability.    Subject to this Section 5.5, Preferred Securities shall be freely transferable.

(iii)  Exchanges Between Global Preferred Security and Non-Global Preferred Security.    A beneficial interest in a Global Preferred Security may be exchanged for a Preferred Security that is not a Global Preferred Security as provided in Section 5.4.

SECTION 5.6.    Mutilated, Destroyed, Lost or Stolen Trust Securities Certificates.

If (a) any mutilated Trust Securities Certificate shall be surrendered to the Securities Registrar, or if the Securities Registrar shall receive evidence to its satisfaction of the destruction, loss, or theft of any Trust Securities Certificate and (b) there shall be delivered to the Securities Registrar and the Administrators such security or indemnity as may be required by them to save each of them harmless, then in the absence of notice that such Trust Securities Certificate shall have been acquired by a bona fide purchaser or a protected purchaser, the Administrators, or any one of them, on behalf of the Issuer Trust shall execute and make available for delivery, and the Property Trustee shall authenticate, in exchange for or in lieu of any such mutilated, destroyed, lost, or stolen Trust Securities Certificate, a new Trust Securities Certificate of like class, tenor and denomination. In connection with the issuance of any new Trust Securities Certificate under this Section, the Administrators 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. Any duplicate Trust Securities Certificate issued pursuant to this Section shall constitute conclusive evidence of an undivided beneficial interest in the assets of the Issuer Trust corresponding to that evidenced by the lost, stolen or destroyed Trust Securities Certificate, as if originally issued, whether or not the lost, stolen or destroyed Trust Securities Certificate shall be found at any time.

SECTION 5.7.  Persons Deemed Holders.

The Issuer Trustees, the Administrators, the Securities Registrar, or the Depositor shall treat the Person in whose name any Trust Securities are registered in the Securities Register as the owner of such Trust Securities for the purpose of receiving Distributions and for all other purposes whatsoever, and none of the Issuer Trustees, the Administrators, the Securities Registrar nor the Depositor shall be bound by any notice to the contrary.

SECTION 5.8.  Access to List of Holders’ Names and Addresses.

Each Holder and each Owner shall be deemed to have agreed not to hold the Depositor, the Property Trustee, or the Administrators accountable by reason of the disclosure of its name and address, regardless of the source from which such information was derived.

SECTION 5.9.  Maintenance of Office or Agency.

The Property Trustee shall designate, with the consent of the Administrators, which consent shall not be unreasonably withheld, an office or offices or agency or agencies where Preferred Securities Certificates may be surrendered for registration of transfer or exchange and

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where notices and demands to or upon the Issuer Trustees in respect of the Trust Securities Certificates may be served. The Property Trustee initially designates its Corporate Trust Office for such purposes. The Property Trustee shall give prompt written notice to the Depositor, the Administrators and the Holders of any change in the location of the Securities Register or any such office or agency.

SECTION 5.10.  Appointment of Paying Agent.

The Paying Agent shall make Distributions and other payments provided hereby to Holders from the Payment Account and shall report the amounts of such Distributions and payments to the Property Trustee and the Administrators. Any Paying Agent shall have the revocable power to withdraw funds from the Payment Account solely for the purpose of making the Distributions and payments referred to above. The Property Trustee may revoke such power and remove any Paying Agent if such Trustee determines in its sole discretion that the Paying Agent shall have failed to perform its obligations under this Agreement in any material respect. The Paying Agent shall initially be the Property Trustee. Any Person acting as Paying Agent shall be permitted to resign as Paying Agent upon 30 days’ written notice to the Administrators and the Property Trustee. In the event that 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 Property Trustee shall appoint a successor (which shall be a bank or trust company) that is reasonably acceptable to the Administrators to act as Paying Agent. Such successor Paying Agent appointed by the Property Trustee, or any additional Paying Agent appointed by the Administrators, shall execute and deliver to the Issuer Trustees an instrument in which such successor Paying Agent or additional Paying Agent shall agree with the Issuer Trustees that as Paying Agent, such successor Paying Agent or additional 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 Sections 8.1, 8.3 and 8.6 herein shall apply to the Bank also in its role as Paying Agent, for so long as the Bank 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 chosen by the Property Trustee unless the context requires otherwise.

SECTION 5.11.  Ownership of Common Securities by Depositor.

On the Closing Date, and on the Option Closing Date if applicable, the Depositor shall acquire and retain beneficial and record ownership of the Common Securities. Neither the Depositor nor any successor Holder of the Common Securities may transfer less than all of the Common Securities, and the Depositor or any successor Holder may transfer the Common Securities only (a) in connection with a consolidation or merger of the Depositor into another corporation or any conveyance, transfer or lease by the Depositor of its properties and assets substantially as an entirety to any Person, pursuant to Section 8.1 of the Indenture, or (b) a transfer to an Affiliate of the Depositor 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 other attempted transfer of the Common Securities shall be void. The

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Administrators shall cause each Common Securities Certificate issued to the Depositor to contain a legend stating “THIS CERTIFICATE IS NOT TRANSFERABLE EXCEPT TO A SUCCESSOR IN INTEREST TO THE DEPOSITOR OR AN AFFILIATE OF THE DEPOSITOR IN COMPLIANCE WITH APPLICABLE LAW AND SECTION 5.11 OF THE TRUST AGREEMENT.”

SECTION 5.12.  Notices to Clearing Agency.

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 Securities Certificate, the Administrators and the Property Trustee shall give all such notices and communications specified herein to be given to the Clearing Agency, and shall have no obligations to the Owners.

SECTION 5.13.  Rights of Holders.

(a)  The 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 its capacity as such) in accordance with Section 2.9, and the Holders shall not have any right or title therein other than the undivided beneficial interest in the assets of the Issuer 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 Issuer 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. The Trust Securities shall have no preemptive or similar rights and when issued and delivered to Holders against payment of the purchase price therefor will be validly issued, fully paid and, subject to Section 4.8 hereof, nonassessable undivided beneficial interests in the Trust Property. Subject to Section 4.8 hereof, 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.

(b)  For so long as any Preferred Securities remain Outstanding, if, upon a Debenture Event of Default, the Debenture Trustee fails, or the holders of not less than 25% in principal amount of the outstanding Junior Subordinated Debentures fail, to declare the principal of all of the Junior Subordinated Debentures to be immediately due and payable, the Holders of at least 25% in Liquidation Amount of the Preferred Securities then Outstanding shall have such right to make such declaration by a notice in writing to the Property Trustee, the Depositor, Debenture Guarantor and the Debenture Trustee.

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At any time after such a declaration of acceleration with respect to the Junior Subordinated Debentures has been made and before a judgment or decree for payment of the money due has been obtained by the Debenture Trustee as provided in the Indenture, the Holders of a Majority in Liquidation Amount of the Preferred Securities, by written notice to the Property Trustee, the Depositor, Debenture Guarantor and the Debenture Trustee, may rescind and annul such declaration and its consequences if:

(i)  the Depositor and/or the Debenture Guarantor has paid or deposited with the Debenture Trustee a sum sufficient to pay:

(A)  all overdue installments of interest on all of the Junior Subordinated Debentures,

(B)  any accrued Additional Interest on all of the Junior Subordinated Debentures,

(C)  the principal of (and premium, if any, on) any Junior Subordinated Debentures which have become due otherwise than by such declaration of acceleration and interest and Additional Interest thereon at the rate borne by the Junior Subordinated Debentures, and

(D)  all sums paid or advanced by the Debenture Trustee under the Indenture and the reasonable compensation, expenses, disbursements and advances of the Debenture Trustee and the Property Trustee, their agents and counsel; and

(ii)  all Events of Default with respect to the Junior Subordinated Debentures, other than the non-payment of the principal of the Junior Subordinated Debentures which has become due solely by such acceleration, have been cured or waived as provided in Section 5.13 of the Indenture.

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 default under the Indenture, except a default in the payment of principal or interest (unless such default has been cured and a sum sufficient to pay all matured installments of interest and principal due otherwise than by acceleration has been deposited with the Debenture Trustee) or a default in respect of a covenant or provision which under the Indenture cannot be modified or amended without the consent of the holder of each outstanding Junior Subordinated Debentures affected thereby. No such rescission shall affect any subsequent default or impair any right consequent thereon.

Upon receipt by the Property Trustee of written notice declaring such an acceleration, or rescission and annulment thereof, by Holders of the Preferred Securities all or part of which is represented by Global 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

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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 which is 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 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 notice which 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 5.13(b).

(c)  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 Debenture Event of Default specified in Section 5.1(a) or 5.1(b) of the Indenture, any Holder of Preferred Securities shall have the right to institute a proceeding directly against the Depositor and/or Debenture Guarantor pursuant to Section 5.8 of the Indenture, for enforcement of payment to such Holder of the principal amount of or interest on Junior Subordinated Debentures having an aggregate principal amount equal to the aggregate Liquidation Amount of the Preferred Securities of such Holder (a “Direct Action”). Except as set forth in Sections 5.13(b) and 5.13(c) of this Trust Agreement, 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 Junior Subordinated Debentures.

ARTICLE VI

ACTS OF HOLDERS; MEETINGS; VOTING

SECTION 6.1.  Limitations on Holder’s Voting Rights.

(a)  Except as 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 Issuer Trust or the obligations of the parties hereto, nor shall anything herein set forth or contained in the terms of the Trust Securities Certificates be construed so as to constitute the Holders from time to time as members of an association.

(b)  So long as any Junior Subordinated Debentures are held by the Property Trustee on behalf of the Issuer Trust, the Property Trustee shall not (i) direct the time, method, and place of conducting any proceeding for any remedy available to the Debenture Trustee, or execute any trust or power conferred on the Property Trustee with respect to such Junior Subordinated Debentures, (ii) waive any past default that may be waived under Section 5.13 of the Indenture, (iii) exercise any right to rescind or annul a declaration that the principal of all the Junior Subordinated Debentures shall be due and payable, or (iv) consent to any amendment, modification, or termination of the Indenture or the Junior Subordinated Debentures, 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, however, that

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where a consent under the Indenture would require the consent of each holder of Junior Subordinated Debentures 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 Preferred Securities, except by a subsequent vote of the Holders of Preferred Securities. The Property Trustee shall notify all Holders of the Preferred Securities of any notice of default received with respect to the Junior Subordinated Debentures. 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 will not cause the Issuer Trust to be taxable as a corporation for United States federal income tax purposes.

(c)  If any proposed amendment to the Trust Agreement provides for, or the Issuer Trust otherwise proposes to effect, (i) any action that would adversely affect in any material respect the interests, powers, preferences, or special rights of the Preferred Securities, whether by way of amendment to the Trust Agreement or otherwise, or (ii) the dissolution of the Issuer Trust, other than pursuant to the terms of this Trust Agreement, then the Holders of Outstanding Trust 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 Issuer Trust to be taxable as a corporation for United States federal income tax purposes.

SECTION 6.2.  Notice of Meetings.

Notice of all meetings of the Holders, 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 record, at his registered address, at least 15 days and not more than 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 6.3.  Meetings of Holders.

(a)  No annual meeting of Holders is required to be held. The Property Trustee, however, shall call a meeting of Holders to vote on any matter upon the written request of the Holders of record of 25% of the aggregate Liquidation Amount of the Preferred Securities and the Administrators or the Property Trustee may, at any time in their discretion, call a meeting of Holders of Preferred Securities to vote on any matters as to which Holders are entitled to vote.

(b)  Holders of at least a Majority in Liquidation Amount of the Preferred Securities, present in person or represented by proxy, shall constitute a quorum at any meeting of Holders of Preferred Securities.

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(c)  If a quorum is present at a meeting, an affirmative vote by the Holders of record 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 such meeting shall constitute the action of the Holders of Preferred Securities, unless this Trust Agreement requires a greater number of affirmative votes.

SECTION 6.4.  Voting Rights.

Holders shall be entitled to one vote for each $10 of Liquidation Amount represented by their Outstanding Trust Securities in respect of any matter as to which such Holders are entitled to vote.

SECTION 6.5.  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 Property Trustee, or with such other officer or agent of the Issuer Trust as the Property Trustee 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 6.6.  Holder Action by Written Consent.

Any action which may be taken by Holders at a meeting may be taken without a meeting if Holders holding at least a Majority in Liquidation Amount of all outstanding Trust Securities entitled to vote in respect of such action (or such larger proportion thereof as shall be required by any other provision of this Trust Agreement) shall consent to the action in writing.

SECTION 6.7.  Record Date for Voting and Other Purposes.

For the purposes of determining the Holders who are entitled to notice of and to vote at any meeting or 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 Administrators (or the Property Trustee if the Administrators are unable or unwilling to act) may from time to time fix a date, not more than 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.

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SECTION 6.8.  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 duly appointed in writing; and, except as otherwise expressly provided herein, such action shall become effective when such instrument or instruments are delivered to the Property 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 (subject to Section 8.1) conclusive in favor of the Issuer Trustees, if made in the manner provided in this Section 6.8.

(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 his individual capacity, such certificate or affidavit shall also constitute sufficient proof of his 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 which any Issuer Trustee or Administrator 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 Issuer Trustees, the Administrators, or the Issuer 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, the Administrators or the Issuer Trustees with respect to the authenticity, validity or binding nature of any request, demand, authorization, direction, consent, waiver or other Act of such Holder or Issuer Trustee under this Article VI, then the determination of such matter by the Property Trustee shall be conclusive with respect to such matter.

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SECTION 6.9.  Inspection of Records.

Upon reasonable notice to the Administrators and the Property Trustee, the records of the Issuer Trust shall be open to inspection by Holders during normal business hours for any purpose reasonably related to such Holder’s interest as a Holder.

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 (and any successors thereto at the time of their appointment), each severally on behalf of and as to itself, hereby represents and warrants for the benefit of the Depositor and the Holders that:

(a)  The Property Trustee is a banking corporation duly organized, validly existing and in good standing under the laws of New York, with trust power and authority to execute and deliver, and to carry out and perform its obligations under the terms of this Trust Agreement.

(b)  The execution, delivery, and performance by the Property Trustee of this Trust Agreement has been duly authorized by all necessary corporate action on the part of the Property Trustee; and this Trust Agreement has been duly executed and delivered by the Property Trustee, and constitutes a legal, valid, and binding obligation of the Property Trustee, enforceable against it in accordance with its terms, subject to applicable bankruptcy, reorganization, moratorium, insolvency, and other similar laws affecting creditors’ rights generally and to general principles of equity and the discretion of the court (regardless of whether the enforcement of such remedies is considered in a proceeding in equity or at law).

(c)  The execution, delivery and performance of this Trust Agreement by the Property Trustee does not conflict with or constitute a breach of the certificate of incorporation or by–laws of the Property Trustee.

(d)  At the Time of Delivery, the Property Trustee has not knowingly created any Liens or encumbrances on the Trust Securities.

(e)  No consent, approval, or authorization of, or registration with or notice to, any New York State or federal banking authority is required for the execution, delivery, or performance by the Property Trustee, of this Trust Agreement.

(f)  The Delaware Trustee is duly organized, validly existing, and in good standing under the laws of the State of Delaware, with trust power and authority to execute and deliver, and to carry out and perform its obligations under the terms of, the Trust Agreement.

(g)  The execution, delivery and performance by the Delaware Trustee of this Trust Agreement has been duly authorized by all necessary corporate action on the part of the

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Delaware Trustee; and this Trust Agreement has been duly executed and delivered by the Delaware Trustee, and constitutes a legal, valid and binding obligation of the Delaware Trustee, enforceable against it in accordance with its terms, subject to applicable bankruptcy, reorganization, moratorium, insolvency, and other similar laws affecting creditors’ right generally and to general principles of equity and the discretion of the court (regardless of whether the enforcement of such remedies is considered in a proceeding in equity or at law).

(h) The execution, delivery and performance of this Trust Agreement by the Delaware Trustee does not conflict with or constitute a breach of the certificate of incorporation or by-laws of the Delaware Trustee.

(i) No consent, approval or authorization of, or registration with or notice to any state or Federal banking authority is required for the execution, delivery, or performance by the Delaware Trustee, of this Trust Agreement.

(j) The Delaware Trustee is an entity which has its principal place of business in the State of Delaware.

SECTION 7.2.  Representations and Warranties of the Depositor.

The Depositor hereby represents and warrants for the benefit of the Holders that:

(a)  the Trust Securities Certificates issued at the Time of Delivery on behalf of the Issuer Trust have been duly authorized and will have been duly and validly executed, and, subject to payment therefor, issued and delivered by the Issuer 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 each such date, entitled to the benefits of this Trust Agreement; and

(b)  there are no taxes, fees or other governmental charges payable by the Issuer Trust (or the Issuer Trustees on behalf of the Issuer Trust) under the laws of the State of Delaware or any political subdivision thereof in connection with the execution, delivery and performance by either the Property Trustee or the Delaware Trustee, as the case may be, of this Trust Agreement.

ARTICLE VIII

THE ISSUER TRUSTEES; THE ADMINISTRATORS

SECTION 8.1.  Certain Duties and Responsibilities.

(a)  The duties and responsibilities of the Issuer Trustees and the Administrators shall be as provided by this Trust Agreement and, in the case of the Property Trustee, by the Trust Indenture Act. Notwithstanding the foregoing, no provision of this Trust Agreement shall require the Issuer Trustees or the Administrators to expend or risk their own funds or otherwise incur any financial liability in the performance of any of their duties hereunder, or in the exercise of any of their rights or powers, if they shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably

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assured to it or them. Whether or not therein expressly so provided, every provision of this Trust Agreement relating to the conduct or affecting the liability of or affording protection to the Issuer Trustees or the Administrators shall be subject to the provisions of this Section. Nothing in this Trust Agreement shall be construed to release an Administrator or the Issuer Trustees from liability for his or its own negligent action, his or its own negligent failure to act, or his or its own willful misconduct. To the extent that, at law or in equity, an Issuer Trustee or Administrator has duties and liabilities relating to the Issuer Trust or to the Holders, such Issuer Trustee or Administrator shall not be liable to the Issuer Trust or to any Holder for such Issuer Trustee’s or Administrator’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 Issuer Trustees and Administrators otherwise existing at law or in equity, are agreed by the Depositor and the Holders to replace such other duties and liabilities of the Issuer Trustees and Administrators.

(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 his or its acceptance of a Trust Security, agrees that he or it will look solely to the revenue and proceeds from the Trust Property to the extent legally available for distribution to it or him as herein provided and that neither the Issuer Trustees nor the Administrators are personally liable to it or him for any amount distributable in respect of any Trust Security or for any other liability in respect of any Trust Security. This Section 8.1(b) does not limit the liability of the Issuer Trustees expressly set forth elsewhere in this Trust Agreement or, in the case of the Property Trustee, in the Trust Indenture Act.

(c)  The Property Trustee, before the occurrence of any Event of Default and after the curing of all Events of Default that may have occurred, shall undertake to perform only such duties as are specifically set forth in this Trust Agreement (including pursuant to Section 10.10), and no implied covenants shall be read into this Trust Agreement against the Property Trustee. If an Event of Default has occurred (that has not been cured or waived pursuant to Section 5.13 of the Indenture), the Property Trustee shall enforce this Trust Agreement for the benefit of the Holders and shall 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 thereof, as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs.

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

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

(A)  the duties and obligations of the Property Trustee shall be determined solely by the express provisions of this Trust Agreement (including pursuant to Section 10.10), and the Property Trustee shall not be liable except for

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the performance of such duties and obligations as are specifically set forth in this Trust Agreement (including pursuant to Section 10.10); and

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

(ii)  the Property Trustee shall not be liable for any error of 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;

(iii)  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, or exercising any trust or power conferred upon the Property Trustee under this Trust Agreement;

(iv)  the Property Trustee’s sole duty with respect to the custody, safe keeping and physical preservation of the Junior Subordinated Debentures 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 and the Trust Indenture Act;

(v)  the Property Trustee shall not be liable for any interest on any money received by it except as it may otherwise agree with the Depositor; 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;

(vi)  the Property Trustee shall not be responsible for monitoring the compliance by the Administrators 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 Issuer Trustee, the Administrators or the Depositor; and

(vii)  no provision of this Trust Agreement shall require the Property Trustee to expend or risk its own funds or otherwise incur personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers, if the Property Trustee shall have reasonable grounds for believing that the repayment of such

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funds or liability is not reasonably assured to it under the terms of this Trust Agreement or adequate indemnity against such risk or liability is not reasonably assured to it.

(e)  The Administrators shall not be responsible for monitoring the compliance by the Issuer Trustees or the Depositor with their respective duties under this Trust Agreement, nor shall either Administrator be liable for the default or misconduct of any other Administrator, the Issuer Trustees or the Depositor.

SECTION 8.2.  Certain Notices.

(a)  Within 20 Business Days after the occurrence of any Event of Default relating to Sections 5.1(a) or 5.1(b) of the Indenture actually known to a Responsible Officer of the Property Trustee or within 90 Business Days after the occurrence of any other Event of Default actually known to the Responsible Officer of the Property Trustee, the Property Trustee shall transmit, in the manner and to the extent provided in Section 10.8, notice of such Event of Default to the Holders and the Administrators, unless such Event of Default shall have been cured or waived.

(b)  Within 45 Business Days after the receipt of notice of the Depositor’s exercise of its right to defer the payment of interest on the Junior Subordinated Debentures 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 Administrators, unless such exercise shall have been revoked.

(c)  In the event the Property Trustee receives notice of the Depositor’s exercise of its right to shorten the stated maturity of the Junior Subordinated Debentures as provided in Section 3.16 of the Indenture, the Property Trustee shall give notice of such shortening of the stated maturity to the Holders at least 30 but not more than 60 days before the effective date thereof.

SECTION 8.3  Certain Rights of Property Trustee.

Subject to the provisions of Section 8.1:

(a)  the Property Trustee may rely and shall be fully protected in acting or refraining from acting in good faith upon any resolution, Opinion of Counsel, certificate, written representation of a Holder or transferee, certificate of auditors or any other certificate, statement, instrument, opinion, report, notice, request, 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)  any direction or act of the Depositor contemplated by this Trust Agreement shall be sufficiently evidenced by an Officers’ Certificate;

(c)  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, refiling or re-registration thereof;

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(d)  the Property Trustee may consult with counsel of its own choosing (which counsel may be counsel to 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;

(e)  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 security or indemnity satisfactory to it against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction; provided that, nothing contained in this Section 8.3(e) shall be taken to relieve the Property Trustee, upon the occurrence of an Event of Default, of its obligation to exercise the rights and powers vested in it by this Trust Agreement;

(f)  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, 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;

(g)  the Property Trustee may execute any of the trusts or powers hereunder or perform any of its duties hereunder either directly or by or through its agents or attorneys, provided that the Property Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder;

(h)  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 or taking any other action 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 the terms of the Trust Securities 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 fully protected in acting in accordance with such instructions; and

(i)  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.

No provision of this Trust Agreement shall be deemed to impose any duty or obligation on any Issuer Trustee or Administrator 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 Property Trustee shall be unqualified or incompetent in accordance with applicable

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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 any Issuer Trustee or Administrator shall be construed to be a duty.

SECTION 8.4.  Not Responsible for Recitals or Issuance of Securities.

The recitals contained herein and in the Trust Securities Certificates shall be taken as the statements of the Issuer Trust, and the Issuer Trustees and the Administrators do not assume any responsibility for their correctness. The Issuer Trustees and the Administrators shall not be accountable for the use or application by the Depositor of the proceeds of the Junior Subordinated Debentures.

The Property Trustee may conclusively assume that any funds held by it hereunder are legally available unless a Responsible Officer shall have received written notice from the Depositor, Debenture Guarantor, any Holder or any other Trustee that such funds are not legally available.

SECTION 8.5.  May Hold Securities.

Except as provided in the definition of the term “Outstanding” in Article I, the Administrators, any Issuer Trustee or any other agent of any Issuer Trustee or the Issuer Trust, in its individual or any other capacity, may become the owner or pledgee of Trust Securities and, subject to Sections 8.8 and 8.13, may otherwise deal with the Issuer Trust with the same rights it would have if it were not an Administrator, Issuer Trustee or such other agent.

SECTION 8.6.  Compensation; Indemnity; Fees.

The Depositor agrees:

(a)  to pay to the Issuer Trustees from time to time reasonable compensation for all services rendered by them hereunder (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 Issuer Trustees and the Administrators upon request for all reasonable expenses, disbursements, and advances incurred or made by the Issuer Trustees in accordance with any provision of this Trust Agreement (including the reasonable compensation, expenses and disbursements of its agents and counsel), except any such expense, disbursement, or advance as may be attributable to the Issuer Trustees’ bad faith, negligence or willful misconduct; and

(c)  to the fullest extent permitted by applicable law, to indemnify and hold harmless (i) each Issuer Trustee, (ii) each Administrator, (iii) any Affiliate of any Issuer Trustee, (iv) any officer, director, shareholder, employee, representative or agent of any Issuer Trustee, and (v) any employee or agent of the Issuer Trust, (referred to herein as an “Indemnified Person”) from and against any loss, damage, liability, tax (excluding income taxes, other than taxes referred to in Sections 4.5 and 4.6 hereunder), penalty, expense or claim of any kind or nature

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whatsoever incurred by such Indemnified Person arising out of or in connection with the creation, operation, or dissolution of the Issuer Trust or any act or omission performed or omitted by such Indemnified Person in good faith on behalf of the Issuer Trust and in a manner such Indemnified Person reasonably believed to be within the scope of authority conferred on such Indemnified Person by this Trust Agreement, except that no Indemnified Person shall be entitled to be indemnified in respect of any loss, damage or claim incurred by such Indemnified Person by reason of bad faith, negligence or willful misconduct with respect to such acts or omissions. The indemnification provided to an Indemnified Party in this Trust Agreement shall not be exclusive and nothing in this Trust Agreement shall limit any indemnification for actions taken in connection with this Trust Agreement or otherwise which may be available or provided to such Indemnified Party under other sources.

The provisions of this Section 8.6 shall survive the termination of this Trust Agreement or the resignation or removal of the Indemnified Persons.

No Issuer Trustee may claim any lien or charge on any Trust Property as a result of any amount due pursuant to this Section 8.6.

The Depositor, any Administrator and any Issuer Trustee may engage in or possess an interest in other business ventures of any nature or description, independently or with others, similar or dissimilar to the business of the Issuer Trust, and the Issuer Trust and the Holders of Trust Securities shall have no rights by virtue of this Trust Agreement in and to such independent ventures or the income or profits derived therefrom, and the pursuit of any such venture, even if competitive with the business of the Issuer Trust, shall not be deemed wrongful or improper. Neither the Depositor, any Administrator, nor any Issuer Trustee shall be obligated to present any particular investment or other opportunity to the Issuer Trust even if such opportunity is of a character that, if presented to the Issuer Trust, could be taken by the Issuer Trust, and the Depositor, any Administrator or any Issuer Trustee shall have the right to take for its own account (individually or as a partner or fiduciary) or to recommend to others any such particular investment or other opportunity. Any Issuer Trustee may engage or be interested in any financial or other transaction with the Depositor or any Affiliate of the Depositor, or may act as depository for, trustee or agent for, or act on any committee or body of holders of, securities or other obligations of the Depositor or its Affiliates.

In no event shall the Property Trustee or 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 Property Trustee or the Delaware Trustee have been advised of the likelihood of such loss or damage and regardless of the form of action.

In no event shall the Property Trustee or 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 Agreement.

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SECTION 8.7.  Corporate Property Trustee Required; Eligibility of Trustees and Administrators.

(a)  There shall at all times be a Property Trustee hereunder with respect to the Trust Securities. The Property Trustee shall be a Person that is a national or state chartered bank and eligible pursuant to the Trust Indenture Act to act as such and has a combined capital and surplus of at least $50,000,000. 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, 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 with respect to the Trust Securities shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect hereinafter specified in this Article VIII. At the time of appointment, the Property Trustee must have securities rated in one of the three highest rating categories by a nationally recognized statistical rating organization.

(b)  There shall at all times be one or more Administrators hereunder. Each Administrator 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. An employee, officer, or Affiliate of the Depositor may serve as an Administrator.

(c)  There shall at all times be a Delaware Trustee. 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 with its principal place of business in the State of Delaware and that otherwise meets the requirements of applicable Delaware law that shall act through one or more persons authorized to bind such entity.

SECTION 8.8.  Conflicting Interests.

(a)  If the Property Trustee has or shall acquire a conflicting interest within the meaning of the Trust Indenture Act, the Property Trustee shall either eliminate such interest or resign, to the extent and in the manner provided by, and subject to the provisions of, the Trust Indenture Act and this Trust Agreement.

(b)  The Guarantee Agreement and the Indenture shall be deemed to be specifically described in this Trust Agreement for the purposes of clause (i) of the first proviso contained in Section 310(b) of the Trust Indenture Act.

SECTION 8.9.  Co-Trustees and Separate Trustee.

(a)  Unless an Event of Default shall have occurred and be continuing, at any time or times, for the purpose of meeting the legal requirements of the Trust Indenture Act or of any jurisdiction in which any part of the Trust Property may at the time be located, the Property Trustee shall have power to appoint, and upon the written request of the Property Trustee, the Depositor and the Administrators shall for such purpose join with the Property Trustee in the execution, delivery, and performance of all instruments and agreements necessary or proper to appoint, one or more Persons approved by the Property Trustee either to act as co-trustee, jointly

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with the Property Trustee, of all or any part of such Trust Property, or to the extent required by law to act as separate trustee of any such property, in either case with such powers as may be provided in the instrument of appointment, and to vest in such Person or Persons in the capacity aforesaid, any property, title, right or power deemed necessary or desirable, subject to the other provisions of this Section 8.9. Any co-trustee or separate trustee appointed pursuant to this Section 8.9 shall either be (i) a natural person who is at least 21 years of age and a resident of the United States or (ii) a legal entity with its principal place of business in the United States that shall act through one or more persons authorized to bind such entity.

(b)  Should any written instrument from the Depositor be required by any co-trustee or separate trustee so appointed for more fully confirming to such co-trustee or separate trustee such property, title, right, or power, any and all such instruments shall, on request, be executed, acknowledged and delivered by the Depositor.

(c)  Every co-trustee or separate trustee shall, to the extent permitted by law, but to such extent only, be appointed subject to the following terms, namely:

(i)  The Trust Securities shall be executed by one or more Administrators, and the Trust Securities shall be executed and delivered and all rights, powers, duties, and obligations hereunder in respect of the custody of securities, cash and other personal property held by, or required to be deposited or pledged with, the Property Trustees specified hereunder, shall be exercised, solely by the Property Trustee and not by such co-trustee or separate trustee.

(ii)  The rights, powers, duties, and obligations hereby conferred or imposed upon the Property Trustee in respect of any property covered by such appointment shall be conferred or imposed upon and exercised or performed by the Property Trustee and such co-trustee or separate trustee jointly, as shall be provided in the instrument appointing such co-trustee or separate trustee, except to the extent that under any law of any jurisdiction in which any particular act is to be performed, the Property Trustee shall be incompetent or unqualified to perform such act, in which event such rights, powers, duties, and obligations shall be exercised and performed by such co-trustee or separate trustee.

(iii)  The Property Trustee at any time, by an instrument in writing executed by it, with the written concurrence of the Depositor, may accept the resignation of or remove any co-trustee or separate trustee appointed under this Section, and, in case a Debenture Event of Default has occurred and is continuing, the Property Trustee shall have power to accept the resignation of, or remove, any such co-trustee or separate trustee without the concurrence of the Depositor. Upon the written request of the Property Trustee, the Depositor shall join with the Property Trustee in the execution, delivery and performance of all instruments and agreements necessary or proper to effectuate such resignation or removal. A successor to any co-trustee or separate trustee so resigned or removed may be appointed in the manner provided in this Section 8.9.

(iv)  No co-trustee or separate trustee hereunder shall be personally liable by reason of any act or omission of the Property Trustee or any other trustee hereunder.

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(v)  The Property Trustee shall not be liable by reason of any act of a co-trustee or separate trustee.

(vi)  Any Act of Holders delivered to the Property Trustee shall be deemed to have been delivered to each such co-trustee and separate trustee.

SECTION 8.10.  Resignation and Removal; Appointment of Successor.

(a)  No resignation or removal of any Issuer Trustee (the “Relevant Trustee”) and no appointment of a successor Issuer Trustee pursuant to this Article VIII shall become effective until the acceptance of appointment by the successor Issuer Trustee in accordance with the applicable requirements of Section 8.11.

(b)  Subject to Section 8.10(a), a Relevant Trustee may resign at any time by giving written notice thereof to the Holders. The Administrators shall appoint a successor by requesting from at least three Persons meeting the eligibility requirements its expenses and charges to serve as the successor Issuer Trustee on a form provided by the Administrators, and selecting the Person who agrees to the lowest expenses and charges, subject to the prior consent of the Depositor which consent shall not be unreasonably withheld. If the instrument of acceptance by the successor Issuer Trustee required by Section 8.11 shall not have been delivered to the Relevant Trustee within 60 days after the giving of such notice of resignation, the Relevant Trustee may petition, at the expense of the Issuer Trust, any court of competent jurisdiction for the appointment of a successor Issuer Trustee.

(c)  The Property Trustee or the Delaware Trustee may be removed at any time by Act of the Holders of at least a Majority in Liquidation Amount of the Preferred Securities, delivered to the Relevant Trustee (in its individual capacity and on behalf of the Issuer Trust) (i) for cause, or (ii) if a Debenture Event of Default shall have occurred and be continuing at any time.

(d)  If the Administrators shall fail to appoint a successor, or if a Relevant Trustee shall be removed or become incapable of acting as Issuer Trustee, or if any vacancy shall occur in the office of any Issuer Trustee for any cause, the Holders of the Preferred Securities, by Act of the Holders of record of not less than 25% aggregate Liquidation Amount of the Preferred Securities then Outstanding delivered to such Relevant Trustee, shall promptly appoint a successor Issuer Trustee or Trustees, and such successor Issuer Trustee shall comply with the applicable requirements of Section 8.11. If no successor Issuer Trustee shall have been so appointed by the Holders of the Preferred Securities and accepted appointment in the manner required by Section 8.11, any Holder, on behalf of himself and all others similarly situated, or any other Issuer Trustee, may petition any court in the State of Delaware for the appointment of a successor Issuer Trustee.

(e)  The Property Trustee shall give notice of each resignation and each removal of a Relevant Trustee and each appointment of a successor Issuer Trustee to all Holders in the manner provided in Section 10.8 and shall give notice to the Depositor and to the Administrators. Each notice shall include the name of the Relevant Trustee and the address of its Corporate Trust Office if it is the Property Trustee.

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(f)  Notwithstanding the foregoing or any other provision of this Trust Agreement, in the event any Delaware Trustee who is a natural person dies or becomes, in the opinion of the Holders of the Common Securities, incompetent or incapacitated, the vacancy created by such death, incompetence or incapacity may be filled by the Property Trustee following the procedures regarding expenses and charges set forth above (with the successor in each case being a Person who satisfies the eligibility requirement for Delaware Trustee set forth in Section 8.7).

SECTION 8.11.  Acceptance of Appointment by Successor.

(a)  In case of the appointment hereunder of a successor Issuer Trustee, the retiring Relevant Trustee and each such successor Issuer Trustee with respect to the Trust Securities shall execute, acknowledge and deliver an instrument wherein each successor Issuer Trustee shall accept such appointment and which shall contain such provisions as shall be necessary or desirable to transfer and confirm to, and to vest in, each successor Issuer Trustee all the rights, powers, trusts and duties of the retiring Relevant Trustee with respect to the Trust Securities and the Issuer Trust, and upon the execution and delivery of such instrument the resignation or removal of the retiring Relevant Trustee shall become effective to the extent provided therein and each such successor Issuer Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the Relevant Trustee; but, on request of the Issuer Trust or any successor Issuer Trustee such Relevant Trustee shall duly assign, transfer and deliver to such successor Issuer Trustee all Trust Property, all proceeds thereof and money held by such Relevant Trustee hereunder with respect to the Trust Securities and the Issuer Trust.

(b)  Upon request of any such successor Issuer Trustee, the Issuer Trust shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Issuer Trustee all such rights, powers and trusts referred to in the first or second preceding paragraph, as the case may be.

(c)  No successor Issuer Trustee shall accept its appointment unless at the time of such acceptance such successor Issuer Trustee shall be qualified and eligible under this Article VIII.

SECTION 8.12.  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 Relevant Trustee shall be a party, or any Person succeeding to all or substantially all the corporate trust business of such Relevant Trustee, shall be the successor of such Relevant Trustee hereunder, provided that such Person shall be otherwise qualified and eligible under this Article VIII, without the execution or filing of any paper or any further act on the part of any of the parties hereto.

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SECTION 8.13.  Preferential Collection of Claims Against Depositor or Issuer Trust.

If and when the Property Trustee shall be or become a creditor of the Depositor (or any other obligor upon Junior Subordinated Debentures or the Trust Securities), the Property Trustee shall be subject to the provisions of the Trust Indenture Act regarding the collection of claims against the Depositor or the Issuer Trust (or any such other obligor) as is required by the Trust Indenture Act.

SECTION 8.14.  Trustee May File Proofs of Claim.

In case of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition, or other similar judicial proceeding relative to the Issuer Trust or any other obligor upon the Trust Securities or the property of the Issuer Trust or of such other obligor, 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 Issuer 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:

(a)  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

(b)  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 judicial 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 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.

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.

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SECTION 8.15.  Reports by Property Trustee.

(a)  Within 60 days of January 31 of each year commencing with January 31, 2003, the Property Trustee shall transmit to all Holders in accordance with Section 10.8, and to the Depositor, a brief report dated as of the immediately preceding January 31 with respect to:

(i)  its eligibility under Section 8.7 or, in lieu thereof, if to the best of its knowledge it has continued to be eligible under said Section, a written statement to such effect; and

(ii)  any change in the property and funds in its possession as Property Trustee since the date of its last report and any action taken by the Property Trustee in the performance of its duties hereunder which it has not previously reported and which in its opinion materially affects the Trust Securities.

(b)  In addition, the Property Trustee shall transmit to Holders such reports concerning the Property Trustee and its actions under this Trust Agreement as may be required pursuant to the Trust Indenture Act at the times and in the manner provided pursuant thereto as set forth in Section 10.10 of this Trust Agreement.

(c)  A copy of each such report shall, at the time of such transmission to Holders, be filed by the Property Trustee with the Depositor.

SECTION 8.16.  Reports to the Property Trustee.

The Depositor and the Administrators on behalf of the Issuer Trust shall provide to the Property Trustee such documents, reports and information relating to Depositor and Preferred Securities Guarantor as required by Section 314 of the Trust Indenture Act and the compliance certificate required by Section 314(a) of the Trust Indenture Act in the form, in the manner and at the times required by Section 314 of the Trust Indenture Act, as set forth in Section 10.10 of this Trust Agreement. The Depositor and the Administrators shall annually file with the Property Trustee a certificate specifying whether such Person is in compliance with all the terms and covenants applicable to such Person hereunder.

SECTION 8.17.  Evidence of Compliance with Conditions Precedent.

Each of the Depositor and the Administrators on behalf of the Issuer Trust shall provide to the Property Trustee such evidence of compliance with any conditions precedent, if any, provided for in this Trust Agreement that relate to any of the matters set forth in Section 314(c) of the Trust Indenture Act as set forth in Section 10.10 of this Trust Agreement. Any certificate or opinion required to be given by an officer pursuant to Section 314(c)(1) of the Trust Indenture Act shall be given in the form of an Officers’ Certificate.

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SECTION 8.18.  Number of Issuer Trustees.

(a)  The number of Issuer Trustees shall be two. The Property Trustee and the Delaware Trustee may be the same Person, in which event the number of Issuer Trustees shall be one.

(b)  If an Issuer Trustee ceases to hold office for any reason, a vacancy shall occur. The vacancy shall be filled with an Issuer Trustee appointed in accordance with Section 8.10.

(c)  The death, resignation, retirement, removal, bankruptcy, incompetence or incapacity to perform the duties of an Issuer Trustee shall not operate to dissolve, terminate or annul the Issuer Trust or terminate this Trust Agreement.

SECTION 8.19.  Delegation of Power.

(a)  Any Administrator may, by power of attorney consistent with applicable law, delegate to any other natural person over the age of 21 his or her power for the purpose of executing any documents contemplated in Section 2.7(a) or making any governmental filing.

(b)  The Administrators shall have power to delegate from time to time to such of their number the doing of such things and the execution of such instruments either in the name of the Issuer Trust or the names of the Administrators or otherwise as the Administrators may deem expedient, to the extent such delegation is not prohibited by applicable law or contrary to the provisions of this Trust Agreement.

SECTION 8.20.  Appointment of Administrators.

(a)  The Administrators (other than the initial Administrators) shall be appointed by the Holders of a Majority in Liquidation Amount of the Common Securities and all Administrators (including the initial Administrators) may be removed by the Holders of a Majority in Liquidation Amount of the Common Securities or may resign at any time. Each Administrator shall sign an agreement agreeing to comply with the terms of this Trust Agreement. If at any time there is no Administrator, the Property Trustee or any Holder who has been a Holder of Trust Securities for at least six months may petition any court of competent jurisdiction for the appointment of one or more Administrators.

(b)  Whenever a vacancy in the number of Administrators shall occur, until such vacancy is filled by the appointment of an Administrator in accordance with this Section 8.20, the Administrators in office, regardless of their number (and notwithstanding any other provision of this Trust Agreement), shall have all the powers granted to the Administrators and shall discharge all the duties imposed upon the Administrators by this Trust Agreement.

(c)  Notwithstanding the foregoing or any other provision of this Trust Agreement, in the event any Administrator or a Delaware Trustee who is a natural person dies or becomes, in the opinion of the Holders of a Majority in Liquidation Amount of the Common Securities, incompetent, or incapacitated, the vacancy created by such death, incompetence or incapacity

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may be filled by the remaining Administrators, if there were at least two of them prior to such vacancy and by the Depositor, if there were not two such Administrators immediately prior to such vacancy (with the successor in each case being a Person who satisfies the eligibility requirement for Administrators or Delaware Trustee, as the case may be, set forth in Section 8.7).

(d)  Except as otherwise provided in this Trust Agreement or by applicable law, any one Administrator may execute any document or otherwise take any action which the Administrators are authorized to take under this Trust Agreement.

ARTICLE IX

DISSOLUTION, LIQUIDATION AND MERGER

SECTION 9.1.  Dissolution Upon Expiration Date.

Unless earlier dissolved, the Issuer Trust shall automatically dissolve on             , 2032 (the “Expiration Date”).

SECTION 9.2.  Early Dissolution.

The first to occur of any of the following events is an “Early Termination Event,” upon the occurrence of which the Issuer Trust shall dissolve:

(a)  the occurrence of any Bankruptcy Event with respect to the Depositor or Debenture Guarantor, unless, in the case of a Bankruptcy Event relating to the Depositor, the Depositor shall transfer the Common Securities as provided by Section 5.11, in which case this provision shall refer instead to any Bankruptcy Event with respect to the successor Holder of the Common Securities;

(b)  delivery of the written direction to the Property Trustee from the Holder of the Common Securities at any time to dissolve the Issuer Trust and, after satisfaction of liabilities to creditors of the Issuer Trust as provided by applicable law, to distribute the Junior Subordinated Debentures to Holders in exchange for the Preferred Securities (which direction, subject to Section 9.4(a), is optional and wholly within the discretion of the Holder of the Common Securities);

(c)  the redemption of all of the Preferred Securities in connection with the redemption of all the Junior Subordinated Debentures; or

(d)  the entry of an order for dissolution of the Issuer Trust by a court of competent jurisdiction.

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SECTION 9.3.  Termination.

The respective obligations and responsibilities of the Issuer Trustees, the Administrators and the Issuer Trust created and continued hereby 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 Issuer Trust pursuant to Section 9.4, or upon the redemption of all of the Trust Securities pursuant to Section 4.2, (b) the payment of any expenses owed by the Issuer Trust, (c) the discharge of all administrative duties of the Administrators, including the performance of any tax reporting obligations with respect to the Issuer Trust or the Holders, and (d) the filing of a certificate of cancellation with the Delaware Secretary of State pursuant to Section 3810 of the Delaware Statutory Trust Act.

SECTION 9.4.  Liquidation.

(a)  If an Early Termination Event specified in clause (a), (b) or (d) of Section 9.2 occurs or upon the Expiration Date, the Issuer Trust shall be liquidated by the Property Trustee as expeditiously as the Property Trustee determines to be possible by distributing, after satisfaction of liabilities to creditors of the Issuer Trust as provided by applicable law, to each Holder a Like Amount of Junior Subordinated Debentures, subject to Section 9.4(d). Notice of liquidation shall be given by the Property Trustee by first-class mail, postage prepaid, mailed not later than 15 nor more than 45 days prior to the Liquidation Date to each Holder of Trust Securities at such Holder’s address appearing in the Securities Register. All 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 any Trust Securities Certificates not surrendered for exchange will be deemed to represent a Like Amount of Junior Subordinated Debentures; and

(iii)  provide such information with respect to the mechanics by which Holders may exchange Trust Securities Certificates for Junior Subordinated Debentures, or if Section 9.4(d) applies receive a Liquidation Distribution, as the Administrators or 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 Issuer Trust and distribution of the Junior Subordinated Debentures to Holders, the Property Trustee shall establish a record date for such distribution (which shall be not more than 30 days prior to the Liquidation Date) and, either itself acting as exchange agent or through the appointment of a separate exchange agent, shall establish such procedures as it shall deem appropriate to effect the distribution of Junior Subordinated Debentures in exchange for the Outstanding Trust Securities Certificates.

(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) the Clearing Agency for the

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Preferred Securities or its nominee, as the registered Holder of the Global Preferred Securities Certificate, shall receive a registered global certificate or certificates representing the Junior Subordinated Debentures to be delivered upon such distribution with respect to Preferred Securities held by the Clearing Agency or its nominee, and (iii) any Trust Securities Certificates not held by the Clearing Agency for the Preferred Securities or its nominee as specified in clause (ii) above will be deemed to represent Junior Subordinated Debentures having a principal amount equal to the stated Liquidation Amount of the Trust Securities represented thereby and bearing accrued and unpaid interest in an amount equal to the accumulated and unpaid Distributions on such Trust Securities until such certificates are presented to the Securities Registrar for transfer or reissuance.

(d)  If, notwithstanding the other provisions of this Section 9.4, whether because of an order for dissolution entered by a court of competent jurisdiction or otherwise, distribution of the Junior Subordinated Debentures is not practical, or if any Early Termination Event specified in clause (c) of Section 9.2 occurs, the Trust Property shall be liquidated, and the Issuer Trust shall be liquidated by the Property Trustee in such manner as the Property Trustee determines. In such event, on the date of the dissolution of the Issuer Trust, Holders will be entitled to receive out of the assets of the Issuer Trust available for distribution to Holders, after satisfaction of liabilities to creditors of the Issuer Trust as provided by applicable law, an amount equal to the aggregate of 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 dissolution, the Liquidation Distribution can be paid only in part because the Issuer 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 Issuer Trust on the Trust Securities shall be paid on a pro rata basis (based upon Liquidation Amounts). The Holders of the Common Securities will be entitled to receive Liquidation Distributions upon any such liquidation pro rata (determined as aforesaid) with Holders of Preferred Securities, except that, if a Debenture 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.

(e)  Following the dissolution of the Issuer Trust and after the completion of the winding up of the affairs of the Issuer Trust, one of the Issuer Trustees shall file a certificate of cancellation with the Delaware Secretary of State.

SECTION 9.5.  Mergers, Consolidations, Amalgamations or Replacements of the Issuer Trust.

The Issuer 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 entity, except pursuant to this Section 9.5 and Section 9.4. At the request of the Holders of the Common Securities, and with the consent of the Holders of at least a Majority in Liquidation Amount of the Preferred Securities but without the consent of the Delaware Trustee or the Property Trustee, the Issuer 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, however, that (a) such successor entity either (i) expressly assumes all of the obligations of the Issuer Trust with respect to the Preferred Securities or (ii) substitutes for the Preferred Securities other securities having

53

substantially the same terms as the Preferred 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, (b) a trustee of such successor entity possessing the same powers and duties as the Property Trustee is appointed to hold the Junior Subordinated Debentures, (c) such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease does not cause the Preferred Securities (including any Successor Securities) to be downgraded by any nationally recognized statistical rating organization if the Preferred Securities were rated by any nationally recognized statistical rating organization immediately prior to such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease, (d) 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, (e) such successor entity has a purpose substantially identical to that of the Issuer Trust, (f) prior to such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease, the Issuer Trustee has received an Opinion of Counsel from independent counsel experienced in such matters 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, and (ii) following such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease, neither the Issuer Trust nor such successor entity will be required to register as an “investment company” under the Investment Company Act, and (g) the Depositor or any permitted transferee to whom it has transferred the Common Securities hereunder owns all of the common securities of such successor entity and the Preferred Securities Guarantor 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 Issuer Trust shall not, except with the consent of Holders of 100% in Liquidation Amount 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 entity or permit any other entity to consolidate, amalgamate, merge with or into, or replace it if such consolidation, amalgamation, merger, replacement, conveyance, transfer or lease would cause the Issuer Trust or the successor entity to be taxable as a corporation for United States federal income tax purposes. Any merger or similar agreement shall be executed by the Administrators on behalf of the Issuer Trust.

ARTICLE X

MISCELLANEOUS PROVISIONS

SECTION 10.1.  Limitation of Rights of Holders.

Except as set forth in Section 9.2, the bankruptcy, dissolution, termination, death or incapacity of any Person having an interest, beneficial or otherwise, in Trust Securities shall not operate to terminate this Trust Agreement or dissolve, terminate or annul the Issuer 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

54

of the arrangements contemplated hereby, nor otherwise affect the rights, obligations and liabilities of the parties hereto or any of them.

SECTION 10.2.  Amendment.

(a)  This Trust Agreement may be amended from time to time by the Property Trustee, the Administrators and the Holders of a Majority in Liquidation Amount of the Common Securities, without the consent of any Holder of the Preferred Securities, (i) to cure any ambiguity, correct or supplement any provision herein which may be inconsistent with any other provision herein, or to make any other provisions with respect to matters or questions arising under this Trust Agreement; provided, however, that such amendment shall not adversely affect in any material respect the interests of any Holder or (ii) to modify, eliminate, or add to any provisions of this Trust Agreement to such extent as shall be necessary to ensure that the Issuer Trust will not be taxable as a corporation for United States federal income tax purposes at any time that any Trust Securities are Outstanding or to ensure that the Issuer Trust will not be required to register as an “investment company” under the Investment Company Act.

(b)  Except as provided in Section 6.1(c) or Section 10.2(c), any provision of this Trust Agreement may be amended by the Property Trustee, the Administrators, and the Holders of a Majority in Liquidation Amount of the Common Securities with (i) the consent of Holders of at least a Majority in Liquidation Amount of the Preferred Securities and (ii) receipt by the Issuer Trustees of an Opinion of Counsel to the effect that such amendment or the exercise of any power granted to the Issuer Trustees in accordance with such amendment will not cause the Issuer Trust to be taxable as a corporation for United States federal income tax purposes or affect the Issuer Trust’s exemption from status as an “investment company” under the Investment Company Act.

(c)  In addition to and notwithstanding any other provision in this Trust Agreement, without the consent of each affected Holder (such consent being obtained in accordance with Section 6.3 or 6.6 hereof), this Trust Agreement may not be amended to (i) change the amount or timing of any Distribution on the Trust Securities or otherwise adversely affect the amount of any Distribution required to be made in respect of the Trust Securities as of a specified date or (ii) restrict the right of a Holder to institute suit for the enforcement of any such payment on or after such date. Notwithstanding any other provision herein, without the unanimous consent of the Holders (such consent being obtained in accordance with Section 6.3 or 6.6), this Section 10.2(c) may not be amended.

(d)  Notwithstanding any other provisions of this Trust Agreement, no Issuer Trustee shall enter into or consent to any amendment to this Trust Agreement which would cause the Issuer Trust to fail or cease to qualify for the exemption from status as an “investment company” under the Investment Company Act or be taxable as a corporation for United States federal income tax purposes.

(e)  Notwithstanding anything in this Trust Agreement to the contrary, without the consent of the Depositor and the Administrators, this Trust Agreement may not be amended in a manner which imposes any additional obligation on the Depositor or the Administrators.

55

(f)  In the event that any amendment to this Trust Agreement is made, the Administrators or the Property Trustee shall promptly provide to the Depositor a copy of such amendment.

(g)  Neither the Property Trustee nor the Delaware Trustee shall be required to enter into any amendment to this Trust Agreement which affects its own rights, duties or immunities under this Trust Agreement. The Property Trustee 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.

(h)  Any amendments to this Trust Agreement pursuant to Section 10.2(a) shall become effective when notice of such amendment is given to the Holders of the Trust Securities.

SECTION 10.3.  Separability.

In case any provision in this Trust Agreement or in the Trust 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.

SECTION 10.4.  Governing Law.

THIS TRUST AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF EACH OF THE HOLDERS, THE ISSUER TRUST, THE DEPOSITOR, THE ISSUER TRUSTEES, AND THE ADMINISTRATORS WITH RESPECT TO THIS TRUST AGREEMENT AND THE TRUST SECURITIES SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF DELAWARE, WITHOUT REGARD TO THE CONFLICT OF LAWS PROVISIONS THEREOF; PROVIDED THAT THE RIGHTS, DUTIES, IMMUNITIES AND STANDARDS OF CARE OF THE PROPERTY TRUSTEE SHALL BE GOVERNED BY NEW YORK LAW.

SECTION 10.5.  Payments Due on Non-Business Day.

If the date fixed for any payment on any Trust Security shall be a day that is not a Business Day, then such payment need not be made on such date but may be made on the next succeeding day that is a Business Day (except as otherwise provided in Sections 4.2(d)), except that, if such Business Day is in the next succeeding calendar year, payment on any Trust Security shall be made on the immediately preceding Business Day, in each case, with the same force and effect as though made on the date fixed for such payment, and no Distributions shall accumulate on such unpaid amount for the period after such date.

SECTION 10.6.  Successors.

This Trust Agreement shall be binding upon and shall inure to the benefit of any successor to the Depositor, the Issuer Trust, the Administrators, and any Issuer Trustee,

56

including any successor by operation of law. Except in connection with a consolidation, merger or sale 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 by deposit thereof, first class postage prepaid, in the United States mail, hand delivery or facsimile transmission, in each case, addressed, (i) 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 (ii) in the case of the Holder of Common Securities or the Depositor, to American Safety Holdings Corp., 1845 The Exchange, Atlanta, Georgia 30339, Attention: Office of the Secretary, facsimile no.: (770) 916-1908 or to such other address as may be specified in a written notice by the Depositor to the Property Trustee. Such notice, demand or other communication to or upon a Holder shall be deemed to have been sufficiently given or made, for all purposes, upon hand delivery, mailing or transmission. Such notice, demand or other communication to or upon the Depositor shall be deemed to have been sufficiently given or made only upon actual receipt of the writing by the Depositor.

(b)  Any notice, demand or other communication which by any provision of this Trust Agreement is required or permitted to be given or served to or upon the Issuer Trust, the Property Trustee, the Delaware Trustee, the Administrators, or the Issuer Trust shall be given in writing addressed (until another address is published by the Issuer Trust) as follows: (i) with respect to the Property Trustee to Deutsche Bank Trust Company Americas, Corporate Trust and Agency Services c/o Deutsche Bank Services New Jersey, Inc., 100 Plaza One, MSJCY 03-0603, Jersey City, New Jersey 07311, Attention: Susan Johnson; (ii) with respect to the Delaware Trustee to Deutsche Bank Trust Company Delaware, E.A. Delle Donne Corporate Center, Montgomery Building, 1011 Centre Road, Suite 200, Wilmington, Delaware, 19805-1266, Attention: Elizabeth B. Ferry; and (iii) with respect to the Administrators, to them at the address above for notices to the Depositor, marked “Attention: Office of the Secretary.” Such notice, demand or other communication to or upon the Issuer Trust or the Property Trustee shall be deemed to have been sufficiently given or made only upon actual receipt of the writing by the Issuer Trust, the Property Trustee, or such Administrator.

SECTION 10.9.  Agreement Not to Petition.

Each of the Issuer Trustees, the Administrators and the Depositor agree for the benefit of the Holders that, until at least one year and one day after the Issuer Trust has been terminated in accordance with Article IX, they shall not file, or join in the filing of, a petition against the Issuer

57

Trust under any bankruptcy, insolvency, reorganization or other similar law (including, without limitation, the United States Bankruptcy Code) (collectively, “Bankruptcy Laws”) or otherwise join in the commencement of any proceeding against the Issuer Trust under any Bankruptcy Law. In the event 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 bankruptcy court or otherwise properly contest the filing of such petition by the Depositor against the Issuer 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 Issuer Trustee or the Issuer Trust may assert. If any Issuer Trustee or Administrator takes action in violation of this Section 10.9, the Depositor agrees, for the benefit of the Holders, that at the expense of the Depositor, it shall file an answer with the bankruptcy court or otherwise properly contest the filing of such petition by such Person against the Depositor or the commencement of such action and raise the defense that such Person 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 Depositor or the Issuer Trust may assert. The provisions of this Section 10.9 shall survive the termination of this Trust Agreement.

SECTION 10.10.  Trust Indenture Act; Conflict with Trust Indenture Act.

(a)  Trust Indenture Act; Application.    (i) This Trust Agreement is subject to the provisions of the Trust Indenture Act that are required to be a part of this Trust Agreement and shall, to the extent applicable, be governed by such provisions; (ii) if and to the extent that any provision of this Trust Agreement limits, qualifies or conflicts with the duties imposed by Sections 310 to 317, inclusive, of the Trust Indenture Act, such imposed duties shall control; (iii) for purposes of this Trust Agreement, the Property Trustee, to the extent permitted by applicable law and/or the rules and regulations of the Commission, shall be the only Issuer Trustee which is a trustee for the purposes of the Trust Indenture Act; and (iv) the application of the Trust Indenture Act to this Trust Agreement shall not affect the nature of the Preferred Securities and the Common Securities as equity securities representing undivided beneficial interests in the assets of the Issuer Trust.

(b)  Lists of Holders of Preferred Securities.    (i) Each of the Depositor and the Administrators on behalf of the Issuer Trust shall provide the Property Trustee with such information as is required under Section 312(a) of the Trust Indenture Act at the times and in the manner provided in Section 312(a) and (ii) the Property Trustee shall comply with its obligations under Sections 310(b), 311 and 312(b) of the Trust Indenture Act.

(c)  Reports by the Property Trustee.    Within 60 days after January 31 of each year, commencing January 31, 2003, the Property Trustee shall provide to the Holders of the Trust Securities such reports as are required by Section 313 of the Trust Indenture Act, if any, in the form, in the manner and at the times provided by Section 313 of the Trust Indenture Act. The Property Trustee shall also comply with the requirements of Section 313(d) of the Trust Indenture Act.

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(d)  Periodic Reports to Property Trustee.    Each of the Depositor and the Administrators on behalf of the Issuer Trust shall provide to the Property Trustee, the Commission and the Holders of the Trust Securities, as applicable, such documents, reports and information as required by Section 314(a)(1)-(3) (if any) of the Trust Indenture Act and the compliance certificates required by Section 314(a)(4) and (c) of the Trust Indenture Act (provided that any certificate to be provided pursuant to Section 314(a)(4) of the Trust Indenture Act shall be provided within 120 days of the end of each fiscal year of the Issuer Trust).

(e)  Evidence of Compliance with Conditions Precedent.    Each of the Depositor and the Administrators on behalf of the Issuer Trust shall provide to the Property Trustee such evidence of compliance with any conditions precedent, if any, provided for in this Trust Agreement which relate to any of the matters set forth in Section 314(c) of the Trust Indenture Act. Any certificate or opinion required to be given pursuant to Section 314(c) shall comply with Section 314(e) of the Trust Indenture Act.

(f)  Disclosure of Information.    The disclosure of information as to the names and addresses of the Holders of Trust Securities in accordance with Section 312 of the Trust Indenture Act, regardless of the source from which such information was derived, shall not be deemed to be a violation of any existing law or any law hereafter enacted which does not specifically refer to Section 312 of the Trust Indenture Act, nor shall the Property Trustee be held accountable by reason of mailing any material pursuant to a request made under Section 312(b) of the Trust Indenture Act.

SECTION 10.11.  Acceptance of Terms of Trust Agreement, Guarantees and Indenture.

THE RECEIPT AND ACCEPTANCE OF A TRUST SECURITY OR ANY INTEREST THEREIN BY OR ON BEHALF OF A HOLDER OR ANY BENEFICIAL OWNER, WITHOUT ANY SIGNATURE OR FURTHER MANIFESTATION OF ASSENT, SHALL CONSTITUTE THE UNCONDITIONAL ACCEPTANCE BY THE HOLDER AND ALL OTHERS HAVING A BENEFICIAL INTEREST IN SUCH TRUST SECURITY OF ALL THE TERMS AND PROVISIONS OF THIS TRUST AGREEMENT, THE GUARANTEE AGREEMENT, THE JUNIOR SUBORDINATED DEBENTURE GUARANTEE AGREEMENT AND THE INDENTURE, AND THE AGREEMENT TO THE SUBORDINATION PROVISIONS AND OTHER TERMS OF THE GUARANTEE AGREEMENT, THE JUNIOR SUBORDINATED GUARANTEE AGREEMENT AND THE INDENTURE, AND SHALL CONSTITUTE THE AGREEMENT OF THE ISSUER TRUST, SUCH HOLDER AND SUCH OTHERS THAT THE TERMS AND PROVISIONS OF THIS TRUST AGREEMENT SHALL BE BINDING, OPERATIVE AND EFFECTIVE AS BETWEEN THE ISSUER TRUST AND SUCH HOLDER AND SUCH OTHERS.

SECTION 10.12.  Counterparts.

This Trust Agreement may contain more than one counterpart of the signature page and this Trust Agreement may be executed by the affixing of the signature of each of the Issuer Trustees to one of such counterpart signature pages. All of such counterpart signature pages

59

shall be read as though one, and they shall have the same force and effect as though all of the signers had signed a single signature paper.

[SIGNATURES APPEAR ON THE FOLLOWING PAGE]

60

IN WITNESS WHEREOF, the parties have caused this Amended and Restated Trust Agreement to be duly executed as of the day and year first above written.

AMERICAN SAFETY HOLDINGS CORP., as Depositor
By:
	Lloyd A. Fox President and Chief Executive Officer

DEUTSCHE BANK TRUST COMPANY AMERICAS, as Property Trustee
By:
	Wanda Camacho Vice President

DEUTSCHE BANK TRUST COMPANY DELAWARE as Delaware Trustee
By:
	Elizabeth B. Ferry Assistant Vice President

Steven B. Mathis

as Administrator

Fred J. Pinckney

as Administrator

61

EXHIBIT A

[INSERT CERTIFICATE OF TRUST FILED WITH DELAWARE SECRETARY OF STATE]

EXHIBIT B

[INSERT FORM OF CERTIFICATE DEPOSITARY AGREEMENT]

EXHIBIT C

THIS CERTIFICATE IS NOT TRANSFERABLE EXCEPT TO A

SUCCESSOR IN INTEREST TO THE DEPOSITOR OR AN AFFILIATE

OF THE DEPOSITOR IN COMPLIANCE WITH APPLICABLE LAW

AND SECTION 5.11 OF THE TRUST AGREEMENT

Certificate Number	Number of Common Securities
C-

Certificate Evidencing Common Securities

of

American Safety Capital Trust I

            % Common Securities

(liquidation amount $10 per Common Security)

American Safety Capital Trust I, a statutory trust created under the laws of the State of Delaware (the “Issuer Trust”), hereby certifies that American Safety Holdings Corp., a Georgia corporation (the “Holder”), is the registered owner of                  (            ) common securities of the Issuer Trust representing undivided beneficial interest in the assets of the Issuer Trust and designated the American Safety Capital Trust I         % Common Securities (liquidation amount $10 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 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 Issuer Trust, dated as of                 , 2002, as the same may be amended from time to time (the “Trust Agreement”) among American Safety Holdings Corp., as Depositor, Deutsche Bank Trust Company Americas, as Property Trustee, Deutsche Bank Trust Company Delaware, as Delaware Trustee, Steven B. Mathis and Fred J. Pinckney, as Administrators, and the Holders of Trust Securities, including the designation of the terms of the Common Securities as set forth therein. The Issuer Trust will furnish a copy of the Trust Agreement to the Holder without charge upon written request to the Issuer Trust at its principal place of business.

Upon receipt of this certificate, the Holder is bound by the Trust Agreement and is entitled to the benefits thereunder.

Terms used but not defined herein have the meanings set forth in the Trust Agreement.

IN WITNESS WHEREOF, one of the Administrators of the Issuer Trust has executed this certificate this              day of             , 2002.

AMERICAN SAFETY CAPITAL TRUST I
By:
	Name: Administrator

AUTHENTICATED AND REGISTERED: DEUTSCHE BANK TRUST COMPANY AMERICAS, as Property Trustee and Securities Registrar
By:
	Name: Signatory Officer

2

EXHIBIT D

[IF THE PREFERRED SECURITY CERTIFICATE IS TO BE A GLOBAL PREFERRED SECURITY CERTIFICATE, INSERT—This Preferred Security Certificate is a Global Preferred Security Certificate within the meaning of the Trust Agreement hereinafter referred to and is registered in the name of a Depositary or a nominee of a Depositary. This Preferred Security Certificate is exchangeable for Preferred Security Certificates registered in the name of a person other than the Depositary or its nominee only in the limited circumstances described in the Trust Agreement and may not be transferred except as a whole by the Depositary to a nominee of the Depositary or by a nominee of the Depositary to the Depositary or another nominee of the Depositary, except in the limited circumstances described in the Trust Agreement.

Unless this Preferred Security Certificate is presented by an authorized representative of The Depository Trust Company, a New York Corporation (“DTC”), to American Safety Capital Trust I or its agent for registration of transfer, exchange or payment, and any Preferred Security Certificate issued is registered in the name of such nominee as is requested by an authorized representative of DTC (and any payment is made to such entity as is requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO A PERSON IS WRONGFUL inasmuch as the registered owner hereof, has an interest herein.]

CERTIFICATE NUMBER	NUMBER OF PREFERRED SECURITIES
P-

CUSIP NO.             

CERTIFICATE EVIDENCING PREFERRED SECURITIES

OF

AMERICAN SAFETY CAPITAL TRUST I

            % PREFERRED SECURITIES

(LIQUIDATION AMOUNT $10 PER PREFERRED SECURITY)

American Safety Capital Trust I, a statutory business trust created under the laws of the State of Delaware (the “Issuer Trust”), hereby certifies that              (the “Holder”) is the registered owner of $             (            ) aggregate liquidation amount of preferred securities of the Issuer Trust representing a preferred undivided beneficial interest in the assets of the Issuer Trust and designated the American Safety Capital Trust I             % Preferred Securities (liquidation amount $10 per Preferred Security) (the “Preferred Securities”). The Preferred Securities are transferable on the books and the records of the Issuer 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 5.5 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 Issuer Trust, dated as of             , 2002, as the same may be amended from time to time (the “Trust Agreement”), among American Safety Holdings Corp., as Depositor, Deutsche Bank Trust Company Americas, as Property Trustee, Deutsche Bank Trust Company Delaware, as Delaware Trustee, Steven B. Mathis and Fred J. Pinckney, as Administrators, and the Holders of Trust Securities, including the designation of the terms of the Preferred Securities as set forth therein. The Holder is entitled to the benefits of the Guarantee Agreement entered into by American Safety Insurance Group, Ltd., a Bermuda company, and Deutsche Bank Trust Company Americas, as Guarantee Trustee, dated as of             , 2002 as the same may be amended from time to time (the “Guarantee Agreement”), to the extent provided therein. The Issuer Trust will furnish a copy of the Trust Agreement and the Guarantee Agreement to the Holder without charge upon written request to the Issuer 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.

Terms used but not defined herein have the meanings set forth in the Trust Agreement.

IN WITNESS WHEREOF, one of the Administrators of the Issuer Trust has executed this certificate this              day of             , 2002.

AMERICAN SAFETY CAPITAL TRUST I

By:

Name:

Administrator

AUTHENTICATED AND REGISTERED:

DEUTSCHE BANK TRUST COMPANY AMERICAS,

as Property Trustee and Securities Registrar

By:

Name:

Authorized Signatory

2

ASSIGNMENT

FOR VALUE RECEIVED, the undersigned assigns and transfers this Preferred Security Certificate to:

(Insert assignee’s name and social security or tax

identification number)

(Insert address and zip code of assignee)

and irrevocably appoints:

agent to transfer this Preferred Security Certificate on the books of the Issuer 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 Security

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-4.10

EXHIBIT 4.10

PREFERRED SECURITIES GUARANTEE AGREEMENT

Between

AMERICAN SAFETY INSURANCE GROUP, LTD.

(as Guarantor)

and

DEUTSCHE BANK TRUST COMPANY AMERICAS

(as Guarantee Trustee)

dated as of

            , 2002

AMERICAN SAFETY CAPITAL TRUST I

Certain Sections of this Guarantee Agreement relating to

Sections 310 through 318 of the

Trust Indenture Act of 1939:

Trust Indenture Act Section		Guarantee Agreement Section
Section 310	(a) (1)	4.1 (a)
	(a) (2)	4.1 (a)
	(a) (3)	Not Applicable
	(a) (4)	Not Applicable
	(b)	2.8, 4.1 (c)
Section 311	(a)	Not Applicable
	(b)	Not Applicable
Section 312	(a)	2.2 (a)
	(b)	2.2 (b)
	(c)	Not Applicable
Section 313	(a)	2.3
	(a) (4)	2.3
	(b)	2.3
	(c)	2.3
	(d)	2.3
Section 314	(a)	2.4
	(b)	2.4
	(c) (1)	2.5
	(c) (2)	2.5
	(c) (3)	2.5
	(e)	1.1,2.5,3.2
Section 315	(a)	3.1 (d)
	(b)	2.7
	(c)	3.1 (c)
	(d)	3.1 (d)
	(e)	Not Applicable
Section 316	(a)	1.1,2.6,5.4
	(a) (1) (A)	5.4
	(a) (1) (B)	5.4
	(a) (2)	Not Applicable
	(b)	5.3
	(c)	Not Applicable
Section 317	(a) (1)	Not Applicable
	(a) (2)	Not Applicable
	(b)	Not Applicable
Section 318	(a)	2.1

Note: This reconciliation and tie shall not, for any purpose, be deemed to be a part of the Guarantee Agreement.

TABLE OF CONTENTS

ARTICLE I.    DEFINITIONS
	Section 1.1.	Definitions	2
ARTICLE II.    TRUST INDENTURE ACT
	Section 2.1.	Trust Indenture Act; Application	6
	Section 2.2.	List of Holders	6
	Section 2.3.	Reports by the Guarantee Trustee	6
	Section 2.4.	Periodic Reports to the Guarantee Trustee	6
	Section 2.5.	Evidence of Compliance with Conditions Precedent	7
	Section 2.6.	Events of Default; Waiver	7
	Section 2.7.	Event of Default; Notice	7
	Section 2.8.	Conflicting Interests	7
ARTICLE III.    POWERS, DUTIES AND RIGHTS OF THE GUARANTEE TRUSTEE
	Section 3.1.	Powers and Duties of the Guarantee Trustee	8
	Section 3.2.	Certain Rights of Guarantee Trustee	9
	Section 3.3.	Compensation; Fees; Indemnity	11
ARTICLE IV.    GUARANTEE TRUSTEE
	Section 4.1.	Guarantee Trustee; Eligibility	11
	Section 4.2.	Appointment, Removal and Resignation of the Guarantee Trustee	12
ARTICLE V.    GUARANTEE
	Section 5.1.	Guarantee	13
	Section 5.2.	Waiver of Notice and Demand	13
	Section 5.3.	Obligations Not Affected	14
	Section 5.4.	Rights of Holders	14
	Section 5.5.	Guarantee of Payment	15
	Section 5.6.	Subrogation	15
	Section 5.7.	Independent Obligations	15
ARTICLE VI.    COVENANTS AND SUBORDINATION
	Section 6.1.	Subordination	15
	Section 6.2.	Pari Passu Guarantees	16
ARTICLE VII.    TERMINATION
	Section 7.1	Termination	16

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ARTICLE VIII.    MISCELLANEOUS
	Section 8.1.	Successors and Assigns	16
	Section 8.2.	Amendments	17
	Section 8.3.	Notices	17
	Section 8.4.	Benefit	18
	Section 8.5.	Interpretation	18
	Section 8.6.	Governing Law	19
	Section 8.7.	Counterparts	19

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PREFERRED SECURITIES GUARANTEE AGREEMENT

THIS PREFERRED SECURITIES GUARANTEE AGREEMENT, dated as of             , 2002 (this “Guarantee Agreement”), is executed and delivered by AMERICAN SAFETY INSURANCE GROUP, LTD., a Bermuda company (the “Guarantor”), having its principal office at 44 Church Street, P.O. Box HM2064, Hamilton HM HX, Bermuda and DEUTSCHE BANK TRUST COMPANY AMERICAS, a New York banking corporation, having its principal office at 31 West 52nd Street, New York, New York 10019, as trustee, for the benefit of the Holders (as defined herein) from time to time of the Preferred Securities (as defined herein) of American Safety Capital Trust I, a Delaware statutory trust (the “Issuer Trust”).

RECITALS

WHEREAS, pursuant to an Amended and Restated Trust Agreement (the “Trust Agreement”), dated as of                , 2002, among American Safety Holdings Corp., as Depositor (the “Depositor”), Deutsche Bank Trust Company Americas, as Property Trustee (the “Property Trustee”), Deutsche Bank Trust Company Delaware, as Delaware Trustee (the “Delaware Trustee”) (collectively, the “Issuer Trustees”), Fred J. Pinckney and Steven B. Mathis, as Administrators, and the Holders from time to time of preferred undivided beneficial ownership interests in the assets of the Issuer Trust, the Issuer Trust is issuing up to $                 aggregate Liquidation Amount (as defined herein) (or $                 if the Underwriters exercise their over-allotment option) of its         % Preferred Securities, Liquidation Amount $10 per preferred security (the “Preferred Securities”), representing preferred undivided beneficial ownership interests in the assets of the Issuer Trust and having the terms set forth in the Trust Agreement;

WHEREAS, the Preferred Securities will be issued by the Issuer Trust and the proceeds thereof, together with the proceeds from the issuance of the Issuer Trust’s Common Securities (as defined herein), will be used to purchase the Junior Subordinated Debentures due             , 2032 (as defined in the Trust Agreement) (the “Junior Subordinated Debentures”) of the Depositor which will be deposited with Deutsche Bank Trust Company Americas, as Property Trustee under the Trust Agreement, as trust assets; and

WHEREAS, as incentive for the Holders to purchase the 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 of the Preferred Securities by each Holder, which purchase the Guarantor hereby acknowledges shall benefit the Guarantor, and intending to be legally bound hereby, the Guarantor executes and delivers this Guarantee Agreement for the benefit of the Holders from time to time of the Preferred Securities.

ARTICLE I

DEFINITIONS

SECTION 1.1.  Definitions.

As used in this Guarantee Agreement, the terms set forth below shall, unless the context otherwise requires, have the following meanings. Capitalized 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.

“Additional Amount” has the meaning specified in the Trust Agreement.

“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.

“Common Securities” means the securities representing common undivided beneficial interests in the assets of the Issuer Trust.

“Delaware Trustee” shall have the meaning specified in the first recital of this Guarantee Agreement.

“Depositor” shall have the meaning specified in the first recital of this Guarantee Agreement.

“Distributions” means preferential cumulative cash distributions accumulating from             , 2002 and payable quarterly in arrears on March 31, June 30, September 30, and December 31 of each year, commencing December 31, 2002 at the annual rate of             % of the Liquidation Amount.

“Event of Default” means (a) a default by the Guarantor in any of its payment obligations under this Guarantee Agreement, or (b) a default by the Guarantor in any other obligation hereunder that remains unremedied for 30 days.

“Guarantee Agreement” means this Guarantee Agreement, as modified, amended or supplemented from time to time.

“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 Trust: (a) any accrued and unpaid Distributions (as defined in the Trust Agreement) required to be paid on the Preferred Securities, to the extent the Issuer Trust shall have funds on hand available therefor at such time, (b) the Redemption Price, with respect to the

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Preferred Securities called for redemption by the Issuer Trust to the extent that the Issuer Trust shall have funds on hand available therefor at such time, and (c) upon a voluntary or involuntary termination, winding-up or liquidation of the Issuer Trust, unless the Junior Subordinated Debentures are distributed to the Holders, the lesser of (i) the aggregate of the Liquidation Amount and all accumulated and unpaid Distributions to the date of payment to the extent the Issuer Trust shall have funds on hand available to make such payment at such time and (ii) the amount of assets of the Issuer Trust remaining available for distribution to Holders in liquidation of the Issuer Trust (in either case, the “Liquidation Distribution”).

“Guarantor Senior Indebtedness” means, whether recourse is to all or a portion of the assets of the Guarantor and whether or not contingent, (a) every obligation of the Guarantor for money borrowed; (b) every obligation of the Guarantor evidenced by bonds, debentures, notes or other similar instruments, including obligations incurred in connection with the acquisition of property, assets or businesses; (c) every reimbursement obligation of the Guarantor with respect to letters of credit, bankers’ acceptances or similar facilities issued for the account of the Guarantor; (d) every obligation of the Guarantor issued or assumed as the deferred purchase price of property or services (but excluding trade accounts payable or accrued liabilities arising in the ordinary course of business); (e) every capital lease obligation of the Guarantor; (f) every obligation of the Guarantor for claims (as defined in Section 101(4) of the United States Bankruptcy Code of 1978, as amended) in respect of derivative products such as interest and foreign exchange rate contracts, commodity contracts and similar arrangements; and (g) every obligation of the type referred to in clauses (a) through (f) of another person and all dividends of another person the payment of which, in either case, the Guarantor has guaranteed or is responsible or liable, directly or indirectly, as obligor or otherwise. Senior Indebtedness shall not include (a) any obligations which, by their terms, are expressly stated to rank pari passu in right of payment with, or to not be superior in right of payment to the Preferred Securities, (b) any Guarantor Senior Indebtedness which when incurred and without respect to any election under Section 1111(b) of the United States Bankruptcy Code of 1978, as amended, was without recourse to the Guarantor, (c) any indebtedness of the Guarantor to any of its subsidiaries or Affiliates, (d) indebtedness to any executive officer or director of the Guarantor, or (e) any indebtedness in respect of debt securities issued to any trust, or a trustee of such trust, partnership or other entity affiliated with the Guarantor that is a financing entity of the Guarantor in connection with the issuance of such financing entity of securities that are similar to the Preferred Securities.

“Guarantee Trustee” means Deutsche Bank Trust Company Americas, until a Successor Guarantee Trustee 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” shall have the meaning specified in the preamble of this Guarantee Agreement.

“Holder” means any holder, as registered on the books and records of the Issuer Trust, of any Preferred Securities; provided, however, 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.

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“Indenture” means the Junior Subordinated Indenture dated as of             , 2002, between Depositor, Guarantor and Deutsche Bank Trust Company Americas, as trustee, as may be modified, amended or supplemented from time to time.

“Issuer Trust” shall have the meaning specified in the preamble of this Guarantee Agreement.

“Issuer Trustees” shall have the meaning specified in the first recital of this Guarantee Agreement.

“Junior Subordinated Debentures” shall have the meaning specified in the second recital of this Guarantee Agreement.

“Like Amount” means (a) with respect to a redemption of Preferred Securities, Preferred Securities having a Liquidation Amount equal to the principal amount of Junior Subordinated Debentures to be contemporaneously redeemed in accordance with the Indenture, the proceeds of which will be used to pay the Redemption Price of such Preferred Securities, (b) with respect to a distribution of Junior Subordinated Debentures to Holders of Preferred Securities in connection with a dissolution or liquidation of the Issuer Trust, Junior Subordinated Debentures having a principal amount equal to the Liquidation Amount of the Preferred Securities of the Holder to whom such Junior Subordinated Debentures are distributed, and (c) with respect to any distribution of an Additional Amount to Holders of Preferred Securities, Junior Subordinated Debentures having a principal amount equal to the Liquidation Amount of the Preferred Securities in respect of which such distribution is made.

“Liquidation Amount” means the stated amount of $10 per Preferred Security.

“Majority in Liquidation Amount of the Preferred Securities” means, except as provided by the Trust Indenture Act, Preferred Securities representing more than 50% of the aggregate Liquidation Amount of all then outstanding Preferred Securities issued by the Issuer Trust.

“Officers’ Certificate” means, with respect to any Person, a certificate signed by the Chairman of the Board, Chief Executive Officer, President or a Vice President, and by the Chief Financial Officer, Treasurer, an Associate 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 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;

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(c)  a statement that such 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 such 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, or government or any agency or political subdivision thereof, or any other entity of whatever nature.

“Preferred Securities” shall have the meaning specified in the first recital of this Guarantee Agreement.

“Property Trustee” shall have the meaning specified in the first recital of this Guarantee Agreement.

“Redemption Date” means, with respect to any Preferred Security to be redeemed, the date fixed for such redemption by or pursuant to the Trust Agreement; provided that each Junior Subordinated Debenture Redemption Date (as such term is defined in the Indenture) and the stated maturity of the Junior Subordinated Debentures shall be a Redemption Date for a Like Amount of Preferred Securities.

“Redemption Price” shall have the meaning specified in the Trust Agreement.

“Responsible Officer” means, when used with respect to the Guarantee Trustee, any officer assigned to the Corporate Trust Office, including any managing director, principal, vice president, assistant vice president, assistant treasurer, assistant secretary or any other officer of the Guarantee Trustee customarily performing functions similar to those performed by any of the above designated officers and having direct responsibility for the administration of this Guarantee Agreement, and also, with respect to a particular matter, any other officer to whom such matter is referred because of such officer’s knowledge of and familiarity with the particular subject.

“Successor Guarantee Trustee” means a successor Guarantee Trustee possessing the qualifications to act as Guarantee Trustee under Section 4.1.

“Trust Agreement” shall have the meaning specified in the Recitals to this Guarantee Agreement.

“Trust Indenture Act” means the Trust Indenture Act of 1939, as amended by the Trust Indenture Reform Act of 1990, or any successor statute, in each case as amended from time to time.

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ARTICLE II

TRUST INDENTURE ACT

SECTION 2.1.    Trust Indenture Act; Application.

If any provision hereof limits, qualifies or conflicts with a provision of the Trust Indenture Act that is required to be a part of and govern this Guarantee Agreement, the provision of the Trust Indenture Act shall control. If any provision of this Guarantee Agreement modifies or excludes any provision of the Trust Indenture Act that may be so modified or excluded, the latter provision shall be deemed to apply to this Guarantee Agreement as so modified or excluded, as the case may be.

SECTION 2.2.    List of Holders.

(a)  The Guarantor will furnish or cause to be furnished to the Guarantee Trustee:

(i)  quarterly, not more than 15 days after March 15, June 15, September 15 and December 15 in each year, 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 such date; and

(ii)  at such other times as the Guarantee Trustee may request in writing, within 30 days after the receipt by the Guarantor of any such request, a list of similar form and content as of a date not more than 15 days prior to the time such list is furnished; provided that, the Guarantor shall not be obligated to provide such List of Holders at any time the List of Holders does not differ from the most recent List of Holders given to the Guarantee Trustee by the Guarantor upon written notification to the Guarantee Trustee that no such changes in the List of Holders has occurred or at any time the Guarantee Trustee is the Securities Register under the Trust Agreement.

(b)  The Guarantee Trustee shall comply with the requirements of Section 312(b) of the Trust Indenture Act.

SECTION 2.3.    Reports by the Guarantee Trustee.

Within 60 days of January 31 of each year commencing January 31, 2003, the Guarantee Trustee shall provide to the Holders such reports, if any, as are required by Section 313 of the Trust Indenture Act in the form and in the manner provided by Section 313 of the Trust Indenture Act. The Guarantee Trustee shall also comply with the requirements of Section 313(d) of the Trust Indenture Act.

SECTION 2.4.    Periodic Reports to the Guarantee Trustee.

The Guarantor shall provide to the Guarantee Trustee and the Holders such documents, reports and information, if any, relating to Guarantor and Depositor as required by Section 314

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of the Trust Indenture Act (if any) and the compliance certificate required by Section 314 of the Trust Indenture Act, in the form, in the manner and at the times required by Section 314 of the Trust Indenture Act.

SECTION 2.5.    Evidence of Compliance with Conditions Precedent.

The Guarantor shall provide to the Guarantee Trustee such evidence of compliance with such conditions precedent, if any, provided for in this Guarantee Agreement that relate to any of the matters set forth in Section 314(c) of the Trust Indenture Act. Any certificate or opinion required to be given by an officer pursuant to Section 314(c)(1) may be given in the form of an Officers’ Certificate.

SECTION 2.6.    Events of Default; Waiver.

The Holders of a Majority in Liquidation Amount of the Preferred Securities may, by vote, 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 2.7.    Event of Default; Notice.

(a)  The Guarantee Trustee shall, within 90 days after the occurrence of an Event of Default, transmit by mail, first class postage prepaid, to the Holders, notices of all Events of Default known to the Guarantee Trustee, unless such Events of Default have been cured before the giving of such notice; provided that, except in the case of a default in the payment of a Guarantee Payment, the Guarantee Trustee shall be protected in withholding such 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 Guarantee Trustee in good faith determines that the withholding of such notice is in the interests of the Holders.

(b)  The Guarantee Trustee shall not be deemed to have knowledge of any Event of Default unless (i) a Responsible Officer charged with the administration of this Guarantee Agreement shall have received written notice of such Event of Default, or (ii) a Responsible Officer of the Guarantee Trustee charged with administration of the Trust Agreement shall have obtained actual knowledge thereof.

SECTION 2.8.    Conflicting Interests.

The Trust Agreement shall be deemed to be specifically described in this Guarantee Agreement for the purposes of clause (i) of the first proviso contained in Section 310(b) of the Trust Indenture Act.

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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 to a Holder exercising his or her rights pursuant to Section 5.4(d) or to a Successor Guarantee Trustee on acceptance by such Successor Guarantee Trustee of its appointment to act as Successor Guarantee Trustee hereunder. The right, title and interest of the Guarantee Trustee, as such, hereunder shall automatically vest in any Successor Guarantee Trustee, upon acceptance by such Successor Guarantee Trustee of its appointment hereunder, and such vesting and cessation of title shall be effective whether or not conveyancing documents have been executed and delivered pursuant to the appointment of such Successor Guarantee Trustee.

(b)  If an Event of Default has occurred and is continuing, the Guarantee Trustee shall enforce this Guarantee Agreement for the benefit of the Holders.

(c)  The Guarantee Trustee, before the occurrence of any Event of Default and after the curing of all Events of Default that may have occurred, shall be obligated to perform only such duties as are specifically set forth in this Guarantee Agreement (including pursuant to Section 2.1), and no implied covenants shall be read into this Guarantee Agreement against the Guarantee Trustee. If an Event of Default has occurred (that has not been cured or waived pursuant to Section 2.6), the Guarantee Trustee shall exercise such of the rights and powers vested in it by this Guarantee Agreement, and use the same degree of care and skill in its exercise thereof, as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs.

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

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

(A)  the duties and obligations of the Guarantee Trustee shall be determined solely by the express provisions of this Guarantee Agreement (including pursuant to Section 2.1), and the Guarantee Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Guarantee Agreement (including pursuant to Section 2.1); and

(B)  in the absence of bad faith on the part of the Guarantee Trustee, the Guarantee Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any certificates or opinions

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furnished to the Guarantee Trustee and conforming to the requirements of this Guarantee Agreement; but in the case of any such certificates or opinions that by any provision hereof or of the Trust Indenture Act are specifically required to be furnished to the Guarantee Trustee, the Guarantee Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Guarantee Agreement;

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

(iii)  the Guarantee Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the 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 Guarantee Trustee, or exercising any trust or power conferred upon the Guarantee Trustee under this Guarantee Agreement; and

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

SECTION 3.2.  Certain Rights of 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 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)  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 conclusively rely upon an Officers’ Certificate which, upon receipt of such request from the Guarantee Trustee, shall be promptly delivered by the Guarantor;

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(iv)  the Guarantee Trustee may consult with legal counsel, and the written advice or opinion of such legal counsel with respect to legal matters 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 accordance with such advice or opinion. Such legal counsel may be legal counsel to 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;

(v)  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 such security and indemnity as would satisfy a reasonable person in the position of the Guarantee Trustee, against the costs, expenses (including 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, however, that nothing herein shall relieve the Guarantee Trustee of its obligations upon the occurrence of an Event of Default that has not been cured or waived to exercise the rights and powers vested in the Guarantee Trustee by this Guarantee, and to use the same degree of care and skill in exercising such rights and powers as a reasonably prudent person would use under the circumstances in the conduct of his own affairs;

(vi)  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;

(vii)  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 or attorneys, and the Guarantee Trustee shall not be responsible for any negligence or willful misconduct on the part of any such agent or attorney appointed with due care by it hereunder. Nothing herein shall be construed as limiting or restricting the right of the Guarantor to bring any action directly against any agent or attorney appointed by the Guarantee Trustee for any negligence or willful misconduct on the part of such agent or attorney; and

(viii)  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 or taking any other action hereunder, the Guarantee Trustee (A) may request instructions from the Holders, (B) may refrain from enforcing such remedy or right or taking such other action until such instructions are received and (C) shall be fully protected in acting in accordance with such instructions.

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(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; Fees; Indemnity.

The Guarantor agrees:

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

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

(c)  to indemnify the Guarantee Trustee (which for purposes of this Section 3.3 shall include its directors, officers, employees and agents) for, and to hold the Guarantee Trustee harmless against, any and all loss, damage, claims, liability or expense incurred without negligence or bad faith on its part, arising out of or in connection with the acceptance or administration of this Guarantee Agreement, including the reasonable 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;

(d)  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; and

(e)  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 (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 Guarantee Agreement.

The provisions of this Section 3.3 shall survive the payment in full of the Preferred Securities, the termination of this Agreement or the resignation or removal of the Guarantee Trustee for a period equal to the statute of limitations applicable to a claim based hereon.

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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 or the Depositor; and

(ii)  be a Person that is eligible pursuant to the Trust Indenture Act to act as such and has a combined capital and surplus of at least $50,000,000, and shall be a corporation meeting the requirements of Section 310(a) of the Trust Indenture Act. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the supervising or examining authority, then, for the purposes of this Section and to the extent permitted by the Trust Indenture Act, 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(b).

(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 and Guarantor shall in all respects comply with the provisions of Section 310(b) of the Trust Indenture Act.

SECTION 4.2. Appointment, Removal and Resignation of the Guarantee Trustee.

(a)  No resignation or removal of the Guarantee Trustee and no appointment of a Successor Guarantee Trustee pursuant to this Article IV shall become effective until the acceptance of appointment by the Successor Guarantee Trustee by written instrument executed by the Successor Guarantee Trustee and delivered to the Holders and the Guarantee Trustee.

(b)  Subject to Section 4.2(a), a Guarantee Trustee may resign at any time by giving written notice thereof to the Holders. The Guarantor shall appoint a successor by requesting from at least three Persons meeting the eligibility requirements such Person’s expenses and charges to serve as the Guarantee Trustee, and selecting the Person who agrees to the lowest expenses and charges. If the instrument of acceptance by the Successor Guarantee Trustee shall not have been delivered to the Guarantee Trustee within 60 days after the giving of such notice of resignation, the Guarantee Trustee may petition, at the expense of the Guarantor, any court of competent jurisdiction for the appointment of a Successor Guarantee Trustee.

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(c)  The Guarantee Trustee may be removed for cause at any time by Act (within the meaning of Section 6.8 of the Trust Agreement) of the Holders of at least a Majority in Liquidation Amount of the Preferred Securities, delivered to the Guarantee Trustee.

(d)  If the Guarantor shall fail to appoint a Successor Guarantee Trustee, or if a Guarantee Trustee shall be removed or become incapable of acting as Guarantee Trustee, or if any vacancy shall occur in the office of any Guarantee Trustee for any cause, the Holders of the Preferred Securities, by Act of the Holders of record of not less than 25% in aggregate Liquidation Amount of the Preferred Securities then outstanding delivered to such Guarantee Trustee, shall promptly appoint a successor Guarantee Trustee. If no Successor Guarantee Trustee shall have been so appointed by the Holders of the Preferred Securities and such appointment accepted by the Successor Guarantee Trustee, any Holder, on behalf of himself and all others similarly situated, may petition any court of competent jurisdiction for the appointment of a Successor Guarantee Trustee.

ARTICLE V

GUARANTEE

SECTION 5.1.  Guarantee.

The Guarantor irrevocably and unconditionally agrees to pay in full on a subordinated basis as set forth in Section 6.1 hereof to the Holders the Guarantee Payments (without duplication of amounts theretofore paid by or on behalf of the Issuer Trust), as and when due, regardless of any defense, right of set-off or counterclaim which the Issuer Trust may have or assert, except the defense of payment. 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 Trust 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 hereunder.

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, Depositor, the Issuer Trust 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.

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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 Trust of any express or implied agreement, covenant, term or condition relating to the Preferred Securities to be performed or observed by the Issuer Trust;

(b)  the extension of time for the payment by the Issuer Trust 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 Junior Subordinated Debentures as so 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 Trust 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 Trust or any of the assets of the Issuer Trust;

(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 (other than payment of the underlying obligation), 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

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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, or request or direct that action be taken by, the Guarantor to enforce its rights under this Guarantee Agreement, without first instituting a legal proceeding against the Guarantee Trustee, the Issuer Trust, Depositor 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 Trust) or upon the distribution of Junior Subordinated Debentures to Holders as provided in the Trust Agreement.

SECTION 5.6.  Subrogation.

The Guarantor shall be subrogated to all rights (if any) of the Holders against the Issuer Trust in respect of any amounts paid to the Holders by the Guarantor under this Guarantee Agreement; provided, however, that the Guarantor shall not (except to the extent required by mandatory provisions of law) be entitled to enforce or exercise any rights which 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.

The Guarantor acknowledges that its obligations hereunder are independent of the obligations of the Issuer Trust 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 hereof.

ARTICLE VI

COVENANTS AND SUBORDINATION

SECTION 6.1.  Subordination.

This Guarantee Agreement will constitute an unsecured obligation of the Guarantor and will rank (i) subordinate and junior in right of payment to Guarantor Senior Indebtedness, it being understood that the terms of Article 13 of the Indenture shall apply to the obligations of the Guarantor under this Guarantee Agreement as if (w) such Article 13 were set forth herein in full, (x) such guarantee obligations provided were substituted for the term “Securities” appearing in such Article 13 (y) Guarantor Senior Indebtedness were substituted for the term “Senior

15

Indebtedness” appearing in such Article 13 and (z) the Guarantor were substituted for the term “Company” appearing in such Article 13, (ii) pari passu in right of payments made pursuant to the “Guarantee” (as defined in the Indenture) and (iii) senior to the Guarantor’s common shares.

SECTION 6.2.  Pari Passu Guarantees.

The obligations of the Guarantor under this Guarantee Agreement shall rank pari passu with any similar guarantee agreements issued by the Guarantor on behalf of the holders of preferred or capital securities issued by the Issuer Trust and with any other security, guarantee or other obligation that is expressly stated to rank pari passu with the obligations of the Guarantor under this Guarantee Agreement.

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 Junior Subordinated Debentures to the Holders in exchange for all of the Preferred Securities or (c) full payment of the amounts payable in accordance with Article IX of the Trust Agreement upon liquidation of the Issuer Trust. 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 is required to repay any sums paid with respect to the Preferred Securities or this Guarantee Agreement.

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, conveyance, transfer or sale involving the Guarantor that is permitted under Article VIII of the Indenture and pursuant to which the assignee agrees in writing to perform the Guarantor’s obligations hereunder, the Guarantor shall not assign its obligations hereunder, and any purported assignment that is not in accordance with these provisions shall be void.

SECTION 8.2.  Amendments.

Except with respect to any changes that do not materially adversely affect the rights of the Holders (in which case no consent of the Holders will be required), this Guarantee

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Agreement may only be amended with the prior approval of 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 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 (confirmed by delivery of the original) or mailed by first class mail as follows:

(a)  if given to the Guarantor, to the address or telecopy number set forth below or such other address or telecopy number or to the attention of such other Person as the Guarantor may give notice to the Holders:

American Safety Insurance Group, Ltd.

44 Church Street

P.O. Box HM2064

Hamilton HM HX, Bermuda

with a copy to:

American Safety Holdings Corp.

1845 The Exchange

Atlanta, Georgia 30339

Facsimile No.: (770) 485-4346

Attention: Fred J. Pinckney

(b)  if given to the Issuer Trust, in care of the Guarantee Trustee, at the Issuer Trust’s (and the Guarantee Trustee’s) address set forth below or such other address or telecopy number or to the attention of such other Person as the Guarantee Trustee on behalf of the Issuer Trust may give notice to the Holders:

American Safety Capital Trust I

c/o American Safety Holdings Corp.

1845 The Exchange

Atlanta, Georgia 30339

Facsimile No.: (770) 485-4346

Attention: Fred J. Pinckney

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with a copy to:

Deutsche Bank Trust Company Americas

Corporate Trust and Agency Services

c/o Deutsche Bank Services New Jersey, Inc.

100 Plaza One—MSJCY 03-0603

Jersey City, NJ 07311

Facsimile No.: (201) 593-6527

Attention: Susan Johnson

(c)  if given to the Guarantee Trustee:

Deutsche Bank Trust Company Americas

Corporate Trust and Agency Services

c/o Deutsche Bank Services New Jersey, Inc.

100 Plaza One—MSJCY 03-0603

Jersey City, NJ 07311

Facsimile No.: (201) 593-6527

Attention: Susan Johnson

(d)  if given to any Holder, at the address set forth on the books and records of the Issuer Trust.

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.  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 1.1;

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

(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;

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(d)  all references in this Guarantee Agreement to Articles and Sections are to Articles and Sections of this Guarantee Agreement unless otherwise specified;

(e)  a term defined in the Trust Indenture Act has the same meaning when used in this Guarantee Agreement unless otherwise defined in this Guarantee Agreement or unless the context otherwise requires;

(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 8.6.  Governing Law.

THIS GUARANTEE AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE CONFLICT OF LAW PRINCIPLES THEREOF.

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.

[SIGNATURES APPEAR ON THE FOLLOWING PAGE]

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

AMERICAN SAFETY INSURANCE GROUP, LTD., as Guarantor
By:
	Lloyd A. Fox President and Chief Executive Officer

DEUTSCHE BANK TRUST COMPANY AMERICAS

as Guarantee Trustee and not in its individual capacity

By:

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EX-4.11

EXHIBIT 4.11

JUNIOR SUBORDINATED DEBENTURES GUARANTEE AGREEMENT

Between

AMERICAN SAFETY INSURANCE GROUP, LTD.

(as Guarantor)

and

DEUTSCHE BANK TRUST COMPANY AMERICAS

(as Guarantee Trustee)

dated as of

                        , 2002

AMERICAN SAFETY CAPITAL TRUST I

Certain Sections of this Guarantee Agreement relating to

Sections 310 through 318 of the

Trust Indenture Act of 1939:

Trust Indenture Act Section		Guarantee Agreement Section
Section 310	(a) (1)	4.1 (a)
	(a) (2)	4.1 (a)
	(a) (3)	Not Applicable
	(a) (4)	Not Applicable
	(b)	2.8, 4.1 (c)
Section 311	(a)	Not Applicable
	(b)	Not Applicable
Section 312	(a)	2.2 (a)
	(b)	2.2 (b)
	(c)	Not Applicable
Section 313	(a)	2.3
	(a) (4)	2.3
	(b)	2.3
	(c)	2.3
	(d)	2.3
Section 314	(a)	2.4
	(b)	2.4
	(c) (1)	2.5
	(c) (2)	2.5
	(c) (3)	2.5
	(e)	1.1, 2.5, 3.2
Section 315	(a)	3.1 (d)
	(b)	2.7
	(c)	3.1 (c)
	(d)	3.1 (d)
	(e)	Not Applicable
Section 316	(a)	1.1, 2.6, 5.4
	(a) (1) (A)	5.4
	(a) (1) (B)	5.4
	(a) (2)	Not Applicable
	(b)	5.3
	(c)	Not Applicable
Section 317	(a) (1)	Not Applicable
	(a) (2)	Not Applicable
	(b)	Not Applicable
Section 318	(a)	2.1

Note: This reconciliation and tie shall not, for any purpose, be deemed to be a part of the Guarantee Agreement.

TABLE OF CONTENTS

		Page
ARTICLE I.    DEFINITIONS
Section 1.1.	Definitions	2
ARTICLE II.    TRUST INDENTURE ACT
Section 2.1.	Trust Indenture Act; Application	4
Section 2.2.	List of Holders	4
Section 2.3.	Reports by the Guarantee Trustee	5
Section 2.4.	Periodic Reports to the Guarantee Trustee	5
Section 2.5.	Evidence of Compliance with Conditions Precedent	5
Section 2.6.	Events of Default; Waiver	5
Section 2.7.	Event of Default; Notice	6
Section 2.8.	Conflicting Interests	6
ARTICLE III.    POWERS, DUTIES AND RIGHTS OF THE GUARANTEE TRUSTEE
Section 3.1.	Powers and Duties of the Guarantee Trustee	6
Section 3.2.	Certain Rights of Guarantee Trustee	8
Section 3.3.	Compensation; Fees; Indemnity	9
ARTICLE IV.    GUARANTEE TRUSTEE
Section 4.1.	Guarantee Trustee; Eligibility	10
Section 4.2.	Appointment, Removal and Resignation of the Guarantee Trustee	10
ARTICLE V.    GUARANTEE
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
ARTICLE VI.    COVENANTS AND SUBORDINATION
Section 6.1.	Subordination	14
Section 6.2.	Pari Passu Guarantees	14
ARTICLE VII.    TERMINATION
Section 7.1.	Termination	14

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ARTICLE VIII.    MISCELLANEOUS
Section 8.1.	Successors and Assigns	15
Section 8.2.	Amendments	15
Section 8.3.	Notices	15
Section 8.4.	Benefit	16
Section 8.5.	Interpretation	17
Section 8.6.	Governing Law	17
Section 8.7.	Counterparts	17

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JUNIOR SUBORDINATED DEBENTURES GUARANTEE AGREEMENT

THIS JUNIOR SUBORDINATED DEBENTURE GUARANTEE AGREEMENT, dated as of                     , 2002 (this “Guarantee Agreement”), is executed and delivered by AMERICAN SAFETY INSURANCE GROUP, LTD., a Bermuda company (the “Guarantor”), having its principal office at 44 Church Street, P.O. Box HM2064, Hamilton HM HX, Bermuda and DEUTSCHE BANK TRUST COMPANY AMERICAS, a New York banking corporation, having its principal office at 31 West 52nd St., New York, NY 10019, as trustee (the “Guarantee Trustee”), for the benefit of the Holders (as defined herein) from time to time of the Debentures (as defined herein) of American Safety Holding Corp., a Georgia corporation (the “Issuer”).

RECITALS

WHEREAS, pursuant to a Junior Subordinated Indenture, dated as of                     , 2002 (the “Indenture”), among the Issuer, Guarantor and Deutsche Bank Trust Company Americas, a New York banking corporation, as trustee thereunder, the Issuer is issuing $             aggregate principal amount of its unsecured junior subordinated debentures (the “Debentures”), which will be deposited with Deutsche Bank Trust Company Americas, as property trustee (the “Property Trustee”), as trust assets of American Safety Capital Trust I (the “Issuer Trust”) pursuant to the terms of the Amended and Restated Trust Agreement dated as of                         , 2002 (the “Trust Agreement”) among the Issuer, as depositor, the Property Trustee, Deutsche Bank Trust Company Delaware, as Delaware trustee (the “Delaware Trustee”), and the Administrators therein named.

WHEREAS, as incentive for the Holders (as defined in the Indenture) to purchase such Debentures, the Guarantor desires irrevocably and unconditionally, to guarantee the obligations of the Issuer under the Indenture.

NOW, THEREFORE, in consideration of the purchase by the Property Trustee on behalf of the Trust of the Debentures, which purchase the Guarantor hereby agrees shall benefit the Guarantor, the Guarantor executes and delivers this Guarantee Agreement for the benefit of the Holders.

ARTICLE I

DEFINITIONS

SECTION 1.1.  Definitions.

As used in this Guarantee Agreement, the terms set forth below shall, unless the context otherwise requires, have the following meanings. Capitalized terms used but not otherwise defined herein shall have the meanings assigned to such terms in the Indenture as in effect on the date hereof.

“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.

“Debentures” shall have the meaning specified in the first recital of this Guarantee Agreement.

“Delaware Trustee” shall have the meaning specified in the first recital of this Guarantee Agreement.

“Event of Default” means a default by the Guarantor in any of its payment or other obligations under this Guarantee Agreement; provided however, that, except with respect to a payment default, the Guarantor shall have received notice of default and shall not have cured such default within 60 days after receipt of such notice.

“Guarantee Agreement” means this Guarantee Agreement, as modified, amended or supplemented from time to time.

“Guarantor Senior Indebtedness” means, whether recourse is to all or a portion of the assets of the Guarantor and whether or not contingent, (a) every obligation of the Guarantor for money borrowed; (b) every obligation of the Guarantor evidenced by bonds, debentures, notes or other similar instruments, including obligations incurred in connection with the acquisition of property, assets or businesses; (c) every reimbursement obligation of the Guarantor with respect to letters of credit, bankers’ acceptances or similar facilities issued for the account of the Guarantor; (d) every obligation of the Guarantor issued or assumed as the deferred purchase price of property or services (but excluding trade accounts payable or accrued liabilities arising in the ordinary course of business); (e) every capital lease obligation of the Guarantor; (f) every obligation of the Guarantor for claims (as defined in Section 101(4) of the United States Bankruptcy Code of 1978, as amended) in respect of derivative products such as interest and foreign exchange rate contracts, commodity contracts and similar arrangements; and (g) every obligation of the type referred to in clauses (a) through (f) of another person and all dividends of another person the payment of which, in either case, the Guarantor has guaranteed or is responsible or liable, directly or indirectly, as obligor or otherwise. Senior Indebtedness shall not include (a) any obligations which, by their terms, are expressly stated to rank pari passu in right of payment with, or to not be superior in right of payment to the Securities (as such term is defined in the Indenture), (b) any Guarantor Senior Indebtedness which when incurred and without respect to any election under Section 1111(b) of the United States Bankruptcy Code of 1978, as amended, was without recourse to the Guarantor, (c) any indebtedness of the Guarantor to any of its subsidiaries or Affiliates, (d) indebtedness to any executive officer or director of the Guarantor, or (e) any indebtedness in respect of debt securities issued to any trust, or a trustee of such trust, partnership or other entity affiliated with the Guarantor that is a financing entity of the Guarantor in connection with the issuance of such financing entity of securities that are similar to the Preferred Securities.

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“Guarantee Trustee” means Deutsche Bank Trust Company Americas, until a Successor Guarantee Trustee 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” shall have the meaning specified in the preamble of this Guarantee Agreement.

“Indenture” shall have the meaning specified in the first recital of this Guarantee Agreement.

“Issuer” shall have the meaning specified in the preamble of this Guarantee Agreement.

“Issuer Trust” shall have the meaning specified in the first recital of this Guarantee Agreement.

“Liquidation Amount” means the stated amount of $10 per Preferred Security.

“Majority in Liquidation Amount of the Preferred Securities” means, except as provided by the Trust Indenture Act, Preferred Securities representing more than 50% of the aggregate Liquidation Amount of all then outstanding Preferred Securities issued by the Issuer Trust.

“Officers’ Certificate” means, with respect to any Person, a certificate signed by the Chairman of the Board, Chief Executive Officer, President or a Vice President, and by the Chief Financial Officer, Treasurer, an Associate 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 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 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.

“Person” means a legal person, including any individual, corporation, estate, partnership, joint venture, association, joint stock company, limited liability company, trust, unincorporated

3

association, or government or any agency or political subdivision thereof, or any other entity of whatever nature.

“Property Trustee” shall have the meaning specified in the first recital of this Guarantee Agreement.

“Responsible Officer” means, when used with respect to the Guarantee Trustee, any officer assigned to the Corporate Trust Office, including any managing director, principal, vice president, assistant vice president, assistant treasurer, assistant secretary or any other officer of the Guarantee Trustee customarily performing functions similar to those performed by any of the above designated officers and having direct responsibility for the administration of this Guarantee Agreement, and also, with respect to a particular matter, any other officer to whom such matter is referred because of such officer’s knowledge of and familiarity with the particular subject.

“Successor Guarantee Trustee” means a successor Guarantee Trustee possessing the qualifications to act as Guarantee Trustee under Section 4.1.

“Trust Agreement” shall have the meaning specified in the first recital to this Guarantee Agreement.

“Trust Indenture Act” means the Trust Indenture Act of 1939, as amended by the Trust Indenture Reform Act of 1990, or any successor statute, in each case as amended from time to time.

ARTICLE II

TRUST INDENTURE ACT

SECTION 2.1.  Trust Indenture Act; Application.

If any provision hereof limits, qualifies or conflicts with a provision of the Trust Indenture Act that is required to be a part of and govern this Guarantee Agreement, the provision of the Trust Indenture Act shall control. If any provision of this Guarantee Agreement modifies or excludes any provision of the Trust Indenture Act that may be so modified or excluded, the latter provision shall be deemed to apply to this Guarantee Agreement as so modified or excluded, as the case may be.

SECTION 2.2.  List of Holders.

(a)  The Guarantor will furnish or cause to be furnished to the Guarantee Trustee:

(i)  quarterly, not more than 15 days after March 15, June 15, September 15 and December 15 in each year, 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 such date; and

4

(ii)  at such other times as the Guarantee Trustee may request in writing, within 30 days after the receipt by the Guarantor of any such request, a list of similar form and content as of a date not more than 15 days prior to the time such list is furnished; provided that, the Guarantor shall not be obligated to provide such List of Holders at any time the List of Holders does not differ from the most recent List of Holders given to the Guarantee Trustee upon written notification to the Guarantee Trustee that no such changes in the List of Holders has occurred or at any time the Guarantee Trustee is the Securities Registrar under the Trust Agreement.

(b)  The Guarantee Trustee shall comply with the requirements of Section 312(b) of the Trust Indenture Act.

SECTION 2.3.  Reports by the Guarantee Trustee.

Within 60 days of January 31 of each year commencing January 31, 2003, the Guarantee Trustee shall provide to the Holders such reports, if any, as are required by Section 313 of the Trust Indenture Act in the form and in the manner provided by Section 313 of the Trust Indenture Act. The Guarantee Trustee shall also comply with the requirements of Section 313(d) of the Trust Indenture Act.

SECTION 2.4.  Periodic Reports to the Guarantee Trustee.

The Guarantor shall provide to the Guarantee Trustee and the Holders such documents, reports and information, if any, relating to Guarantor and Issuer as required by Section 314 of the Trust Indenture Act (if any) and the compliance certificate required by Section 314 of the Trust Indenture Act, in the form, in the manner and at the times required by Section 314 of the Trust Indenture Act.

SECTION 2.5.  Evidence of Compliance with Conditions Precedent.

The Guarantor shall provide to the Guarantee Trustee such evidence of compliance with such conditions precedent, if any, provided for in this Guarantee Agreement that relate to any of the matters set forth in Section 314(c) of the Trust Indenture Act. Any certificate or opinion required to be given by an officer pursuant to Section 314(c)(1) may be given in the form of an Officers’ Certificate.

SECTION 2.6.  Events of Default; Waiver.

The Holders of a Majority in Liquidation Amount of the Preferred Securities may, by vote, 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.

5

SECTION 2.7.  Event of Default; Notice.

(a)  The Guarantee Trustee shall, within 90 days after the occurrence of an Event of Default, transmit by mail, first class postage prepaid, to the Holders, notices of all Events of Default known to the Guarantee Trustee, unless such Events of Default have been cured before the giving of such notice; provided that, except in the case of a default in the payment of a Guarantee Payment, the Guarantee Trustee shall be protected in withholding such 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 Guarantee Trustee in good faith determines that the withholding of such notice is in the interests of the Holders.

(b)  The Guarantee Trustee shall not be deemed to have knowledge of any Event of Default unless (i) a Responsible Officer charged with the administration of this Guarantee Agreement shall have received written notice of such Event of Default, or (ii) a Responsible Officer of the Guarantee Trustee charged with administration of the Trust Agreement shall have obtained actual knowledge thereof.

SECTION 2.8.  Conflicting Interests.

The Trust Agreement shall be deemed to be specifically described in this Guarantee Agreement for the purposes of clause (i) of the first proviso contained in Section 310(b) of the Trust Indenture Act.

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 to a Holder exercising his or her rights pursuant to Section 5.4(d) or to a Successor Guarantee Trustee on acceptance by such Successor Guarantee Trustee of its appointment to act as Successor Guarantee Trustee hereunder. The right, title and interest of the Guarantee Trustee, as such, hereunder shall automatically vest in any Successor Guarantee Trustee, upon acceptance by such Successor Guarantee Trustee of its appointment hereunder, and such vesting and cessation of title shall be effective whether or not conveyancing documents have been executed and delivered pursuant to the appointment of such Successor Guarantee Trustee.

(b)  If an Event of Default has occurred and is continuing, the Guarantee Trustee shall enforce this Guarantee Agreement for the benefit of the Holders.

(c)  The Guarantee Trustee, before the occurrence of any Event of Default and after the curing of all Events of Default that may have occurred, shall be obligated to perform only such duties as are specifically set forth in this Guarantee Agreement (including pursuant to

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Section 2.1), and no implied covenants shall be read into this Guarantee Agreement against the Guarantee Trustee. If an Event of Default has occurred (that has not been cured or waived pursuant to Section 2.6), the Guarantee Trustee shall exercise such of the rights and powers vested in it by this Guarantee Agreement, and use the same degree of care and skill in its exercise thereof, as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs.

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

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

(A)  the duties and obligations of the Guarantee Trustee shall be determined solely by the express provisions of this Guarantee Agreement (including pursuant to Section 2.1), and the Guarantee Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Guarantee Agreement (including pursuant to Section 2.1); and

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

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

(iii)  the Guarantee Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the 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 Guarantee Trustee, or exercising any trust or power conferred upon the Guarantee Trustee under this Guarantee Agreement; and

(iv)  no provision of this Guarantee Agreement shall require the Guarantee Trustee to expend or risk its own funds or otherwise incur personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers if the Guarantee Trustee shall have reasonable grounds for believing that the repayment of such

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funds or liability is not assured to it under the terms of this Guarantee Agreement or adequate indemnity against such risk or liability is not reasonably assured to it.

SECTION 3.2.  Certain Rights of 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 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)  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 conclusively rely upon an Officers’ Certificate which, upon receipt of such request from the Guarantee Trustee, shall be promptly delivered by the Guarantor;

(iv)  the Guarantee Trustee may consult with legal counsel, and the written advice or opinion of such legal counsel with respect to legal matters 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 accordance with such advice or opinion. Such legal counsel may be legal counsel to 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;

(v)  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 such security and indemnity as would satisfy a reasonable person in the position of the Guarantee Trustee, against the costs, expenses (including 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, however, that nothing herein shall relieve the Guarantee Trustee of its obligations upon the occurrence of an Event of Default that has not been cured or waived to exercise the rights and powers vested in the Guarantee Trustee by this Guarantee, and to use the same degree of care and skill in exercising such rights and powers as a reasonably prudent person would use under the circumstances in the conduct of his own affairs;

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(vi)  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;

(vii)  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 or attorneys, and the Guarantee Trustee shall not be responsible for any negligence or willful misconduct on the part of any such agent or attorney appointed with due care by it hereunder. Nothing herein shall be construed as limiting or restricting the right of the Guarantor to bring any action directly against any agent or attorney appointed by the Guarantee Trustee for any negligence or willful misconduct on the part of such agent or attorney; and

(viii)  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 or taking any other action hereunder, the Guarantee Trustee (A) may request instructions from the Holders, (B) may refrain from enforcing such remedy or right or taking such other action until such instructions are received and (C) shall be fully protected in acting in accordance with such instructions.

(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; Fees; Indemnity.

The Guarantor agrees:

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

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

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(c)  to indemnify the Guarantee Trustee (which for purposes of this Section 3.3 shall include its directors, officers, employees and agents) for, and to hold the Guarantee Trustee harmless against, any and all loss, damage, claims, liability or expense incurred without negligence or bad faith on its part, arising out of or in connection with the acceptance or administration of this Guarantee Agreement, including the reasonable 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;

(d)  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 Trustee has been advised of the likelihood of such loss or damage and regardless of the form of action; and

(e)  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 (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 Guarantee Agreement.

The provisions of this Section 3.3 shall survive the payment in full of the Debentures, the termination of this Guarantee Agreement or the resignation or removal of the Guarantee Trustee for a period equal to the statute of limitations applicable to a claim based hereon.

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 Person that is eligible pursuant to the Trust Indenture Act to act as such and has a combined capital and surplus of at least $50,000,000, and shall be a corporation meeting the requirements of Section 310(a) of the Trust Indenture Act. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the supervising or examining authority, then, for the purposes of this Section and to the extent permitted by the Trust Indenture Act, 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(b).

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(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 and Guarantor shall in all respects comply with the provisions of Section 310(b) of the Trust Indenture Act.

SECTION 4.2.  Appointment, Removal and Resignation of the Guarantee Trustee.

(a)  No resignation or removal of the Guarantee Trustee and no appointment of a Successor Guarantee Trustee pursuant to this Article IV shall become effective until the acceptance of appointment by the Successor Guarantee Trustee by written instrument executed by the Successor Guarantee Trustee and delivered to the Holders and the Guarantee Trustee.

(b)  Subject to Section 4.2(a), a Guarantee Trustee may resign at any time by giving written notice thereof to the Holders. The Guarantee Trustee shall appoint a successor by requesting from at least three Persons meeting the eligibility requirements such Person’s expenses and charges to serve as the Guarantee Trustee, and selecting the Person who agrees to the lowest expenses and charges. If the instrument of acceptance by the Successor Guarantee Trustee shall not have been delivered to the Guarantee Trustee within 60 days after the giving of such notice of resignation, the Guarantee Trustee may petition, at the expense of the Guarantor, any court of competent jurisdiction for the appointment of a Successor Guarantee Trustee.

(c)  The Guarantee Trustee may be removed for cause at any time by Act (within the meaning of Section 6.8 of the Trust Agreement) of the Holders of at least a Majority in Liquidation Amount of the Preferred Securities, delivered to the Guarantee Trustee.

(d)  If a resigning Guarantee Trustee shall fail to appoint a successor, or if a Guarantee Trustee shall be removed or become incapable of acting as Guarantee Trustee, or if any vacancy shall occur in the office of any Guarantee Trustee for any cause, the Holders of the Preferred Securities, by Act of the Holders of record of not less than 25% in aggregate Liquidation Amount of the Preferred Securities then outstanding delivered to such Guarantee Trustee, shall promptly appoint a successor Guarantee Trustee. If no Successor Guarantee Trustee shall have been so appointed by the Holders of the Preferred Securities and such appointment accepted by the Successor Guarantee Trustee, any Holder, on behalf of himself and all others similarly situated, may petition any court of competent jurisdiction for the appointment of a Successor Guarantee Trustee.

ARTICLE V

GUARANTEE

SECTION 5.1.  Guarantee.

The Guarantor hereby irrevocably and unconditionally guarantees to each Holder the due and punctual payment of the principal of, any premium and interest (including any Additional Interest) and Additional Sums on the Debentures when and as the same shall become due and payable, whether at maturity, by acceleration, redemption, repayment or otherwise, in

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accordance with the terms of such Debenture and of the Indenture. The Guarantor further agrees that, as between the Guarantor, on the one hand, and the Holders and the Guarantee Trustee, on the other hand, the maturity of the Debentures guaranteed hereby may be accelerated as provided in Article 5 of the Indenture for the purposes of this Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the Debentures guaranteed hereby.

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, the Issuer Trust, 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 be as if were a principal debtor, not merely a surety, and 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 Debentures to be performed or observed by the Issuer;

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

(c)  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;

(d)  any invalidity of, or defect or deficiency in, the Debentures;

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

(f)  any other circumstance whatsoever that might otherwise constitute a legal or equitable discharge or defense of a guarantor (other than payment of the underlying obligation), 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.

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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 hereby 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 Debentures 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, or requesting or directing that action be taken by, the Guarantee Trustee, the Issuer or any other Person. The Guarantor waives any right or remedy to require that any action on this Guarantee Agreement be brought first against the Issuer or any other Person or entity before proceeding directly against the Guarantor.

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 in full (without duplication of amounts theretofore paid by the Issuer) owed under the Debentures.

SECTION 5.6.  Subrogation.

The Guarantor shall be subrogated to all rights (if any) of the Holders against the Issuer Trust in respect of any amounts paid to the Holders by the Guarantor under this Guarantee Agreement; provided, however, that the Guarantor shall not (except to the extent required by mandatory provisions of law) be entitled to enforce or exercise any rights which 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.

The Guarantor acknowledges that its obligations hereunder are independent of the obligations of the Issuer with respect to the Debentures, and that the Guarantor shall be liable as principal and as debtor hereunder to make all payments with respect to the Debentures pursuant to the terms of this Guarantee Agreement notwithstanding the occurrence of any event referred to in subsections (a) through (f), inclusive, of Section 5.3 hereof.

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ARTICLE VI

COVENANTS AND SUBORDINATION

SECTION 6.1.  Subordination.

This Guarantee Agreement will constitute an unsecured obligation of the Guarantor and will rank (i) subordinate and junior in right of payment to Guarantor Senior Indebtedness, it being understood that the terms of Article 13 of the Indenture shall apply to the obligations of the Guarantor under this Guarantee Agreement as if (w) such Article 13 were set forth herein in full, (x) such guarantee obligations provided were substituted for the term “Securities” appearing in such Article 13 (y) Guarantor Senior Indebtedness were substituted for the term “Senior Indebtedness” appearing in such Article 13 and (z) the Guarantor were substituted for the term “Company” appearing in such Article 13, (ii) pari passu in right of payments made pursuant to the “Guarantee” (as defined in the Trust Agreement) and (iii) senior to the Guarantor’s common shares.

SECTION 6.2.  Pari Passu Guarantees.

This Guarantee Agreement shall rank pari passu with any similar guarantee agreements issued by the Guarantor on behalf of holders of junior subordinated debentures issued by any entity affiliated with the Guarantor in connection with the issuance by such other entity of preferred securities or other securities which are similar to preferred securities, which junior subordinated debentures are guaranteed by the Guarantor pursuant to an instrument that ranks pari passu in right of payment to this Guarantee Agreement.

ARTICLE VII

TERMINATION

SECTION 7.1.  Termination.

This Guarantee shall terminate and be of no further force and effect upon (i) full payment of the Redemption Price of all Debentures and all other amounts then due and payable under the Indenture, or (ii) the full payment of the amounts payable in accordance with the Trust Agreement upon liquidation of the Trust. 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 the Debentures or under this Guarantee Agreement.

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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 Debentures then outstanding. Except in the case of the Guarantor in connection with a consolidation, merger, conveyance, transfer or sale involving the Guarantor that is permitted under Article VIII of the Indenture and pursuant to which the assignee agrees in writing to perform the Guarantor’s obligations hereunder, the Guarantor shall not assign its obligations hereunder, and any purported assignment that is not in accordance with these provisions shall be void.

SECTION 8.2.  Amendments.

Except with respect to any changes that do not materially adversely affect the rights of the Holders (in which case no consent of the Holders will be required), this Guarantee Agreement may only be amended with the prior approval of the Holders of not less than a Majority in Liquidation Amount of the Preferred Securities.

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 (confirmed by delivery of the original) or mailed by first class mail as follows:

(a)  if given to the Guarantor, to the address or telecopy number set forth below or such other address or telecopy number or to the attention of such other Person as the Guarantor may give notice to the Holders:

American Safety Insurance Group, Ltd.

44 Church Street

P.O. Box HM2064

Hamilton HM HX, Bermuda

with a copy to:

American Safety Holding Corp.

1845 The Exchange

Atlanta, Georgia 30339

Facsimile No.: (770) 485-4346

Attention: Fred J. Pinckney

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(b)  if given to the Issuer, in care of the Guarantee Trustee, at the Issuer’s (and the Guarantee Trustee’s) address set forth below or such other address or telecopy number or to the attention of such other Person as the Guarantee Trustee on behalf of the Issuer may give notice to the Holders:

American Safety Capital Trust I

c/o American Safety Holdings Corp.

1845 The Exchange

Atlanta, Georgia 30339

Facsimile No.: (770) 485-4346

Attention: Fred J. Pinckney

with a copy to:

Deutsche Bank Trust Company Americas

Corporate Trust and Agency Services

c/o Deutsche Bank Services New Jersey, Inc.

100 Plaza One—MSJCY 03-0603

Jersey City, NJ 07311

Facsimile No.: (201) 593-6527

Attention: Susan Johnson

(c)  if given to the Guarantee Trustee:

Deutsche Bank Trust Company Americas

Corporate Trust and Agency Services

c/o Deutsche Bank Services New Jersey, Inc.

100 Plaza One—MSJCY 03-0603

Jersey City, NJ 07311

Facsimile No.: (201) 593-6527

Attention: Susan Johnson

(e)  if given to any Holder, at the address set forth on the books and records of the Issuer Trust.

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 Debentures.

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SECTION 8.5.  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 1.1;

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

(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)  a term defined in the Trust Indenture Act has the same meaning when used in this Guarantee Agreement unless otherwise defined in this Guarantee Agreement or unless the context otherwise requires;

(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 8.6.  Governing Law.

THIS GUARANTEE AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE CONFLICT OF LAW PRINCIPLES THEREOF.

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.

[SIGNATURES APPEAR ON THE FOLLOWING PAGE]

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

AMERICAN SAFETY INSURANCE GROUP, LTD., as Guarantor
By:
	Lloyd A. Fox President and Chief Executive Officer

DEUTSCHE BANK TRUST COMPANY AMERICAS,

as Guarantee Trustee and not in its individual capacity

By:

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EX-10.2

EXHIBIT 10.2

EMPLOYMENT AGREEMENT

EMPLOYMENT AGREEMENT (the “Agreement”) dated as of January 1, 2001, between Rivermar Contracting Company, a Florida corporation, with its principal place of business at 4620 S. Peninsula Drive, Ponce Inlet, Florida 32127 (the “Company”) and Frederick C. Treadway, residing at 8945 Antioch Way, Las Vegas, Nevada 89117 (“Executive”).

W I T N E S S E T H:

WHEREAS, the Company is engaged in the construction of certain property located at Ponce Inlet, Volusia County, Florida known as Harbour Village Golf & Yacht Club (the “Project”);

WHEREAS, Executive was elected as President of the Company on August 31, 2000 and has served without compensation to date;

WHEREAS, the Company desires to employ Executive and Executive desires to be employed for compensation by the Company under the terms and provisions of this Agreement; and

WHEREAS, the Company and Executive believe their mutual best interests can be best served by entering into this Agreement;

NOW THEREFORE, for and in consideration of the mutual premises contained herein and other good and valuable consideration, including any and all compensation and benefits to be paid to Executive hereunder, the Company and Executive hereby agree as follows:

1. Employment. The Company hereby employs Executive as President and Executive hereby accepts such employment by the Company, upon the terms and conditions set forth. Executive shall report to the Board of Directors of Company.

2. Term. Subject to the provisions for earlier termination hereinafter provided, Executive’s employment term shall be for a period of five years, commencing on January 1, 2001 and ending on December 31, 2005 (such period hereinafter being referred to as the “Employment Term”).

3. Duties. In addition to performing those duties reasonably requested by or pursuant to the direction and control of the Board of Directors of the Company, Executive shall perform such services and duties necessary and appropriate to the office of President, including, but not limited to:

(a) The competent and diligent management of the daily operations and the performance of the normal duties and responsibilities of a President of the Company which is engaged in the construction of the Project (including all duties outlined in Exhibit “A”, attached hereto and incorporated herein by reference).

(b) During the Employment Term, Executive shall devote substantial time and best efforts to the business and affairs of the Company, to the exclusion of all other

1

employment activities, except as the owner of Treadway Racing and Specialty Systems, Inc., so long as his involvement in these activities does not interfere materially with performance of his duties under this Agreement.

(c) At the request of the Company, Executive agrees to serve in an executive capacity for the Company’s corporate parent and its affiliates, without additional consideration.

4. Compensation and Other Benefits.

(a) Compensation. In consideration of the services rendered by Executive under this Agreement, the Company shall pay Executive a salary of $100,000 per year during the term of this Agreement, which salary shall be paid in equal installments in arrears on a twice-monthly basis.

(b) Key Man Life Insurance. The Company shall purchase a $5,000,000 key-man life insurance policy on Executive the ownership of which shall remain with the Company. Executive agrees to submit to medical examinations for such insurance and supply such information as may be required in connection therewith.

(c) Business Expenses. The Company shall reimburse Executive within 30 days of submission of expense statements for all reasonable and necessary business expenses by Executive in the performance of his duties hereunder in connection with the business affairs of the Company subject to such limitations as may from time to time be prescribed by the Board of Directors. Executive will present such expense reports in compliance with the procedures established by the Company from time to time.

(d) Stock Options. Executive shall be issued non-incentive stock options for 300,000 shares of American Safety Insurance Group, Ltd., which options are immediately exercisable at a $6.00 exercise price over a ten year term for all prior and future services of Executive in connection with the development and construction of the Project through the date of completion of the entire Project or through the date of any possible sale of the Project before completion, whichever occurs first.

5. Vacation. Executive shall be entitled to a vacation period or periods each year during the Employment Term for an aggregate annualized duration of four weeks. Such vacation shall be taken at a time convenient to the Company. Any vacation time to which Executive is entitled in accordance with the foregoing that is not taken by Executive in any year during the Employment Term shall not be cumulative, and Executive shall not receive any cash or non-cash benefit in lieu of vacation time not taken by him.

6. Termination. This Agreement may be terminated as follows:

(a) Death. In the event of the death of Executive, this Agreement shall terminate effective on the date of his death.

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(b) Total Disability.    In the event that the Executive is “totally disabled,” which shall mean that he is unable to perform his duties hereunder by reason of illness, accident or other cause, including mental disability, for a period of three consecutive calendar months, or an aggregate of 180 days during any continuous eighteen month period, the Company shall have the right to terminate Executive’s employment effective as of the last day of the third month, or at the end of 180 days, as the case may be, of such period of total disability, upon 10 days’ written notice thereof the Executive.

7. Rights Upon Termination.    In the event of termination of this Agreement pursuant to Sections 6(a) or 6(b) hereof, Executive, or his legal representative or estate, as the case may be shall have the right to receive any unpaid salary under this Agreement (either in lump sum or annual installments, at the option of Company), and a reimbursement for any expenses reasonably incurred with respect to periods prior to the date of termination.

8. Return of Company Property.    Upon expiration of this Agreement and/or termination of Executive’s employment (or at any other time upon request by the Company), Executive will immediately return to the Company all Company property (including, but not limited to all documents, electronic files/records, keys, records, computer disks, or other tangible or intangible things that may or may not relate to or otherwise constitute Confidential Information (as herein defined) or trade secrets (as defined by applicable law) that Executive created, used, possessed, or maintained while in the employ of the Project or the Company, from whatever source. All ideas, concepts, information, inventions developed by the Executive during the Employment Term are the property of the Company. This provision does not apply to purely personal documents of Executive, but does apply to business calendars, Rolodexes, customer lists, contact sheets, computer programs, disks, and their contents, and like information that may contain some personal matters of Executive.

9. Voluntariness of Agreement.    Executive acknowledges that he has read this Agreement, understands its terms, and voluntarily enters into this Agreement and those restrictions set forth herein. Executive has had the right and opportunity to consult with legal and other professional counsel of his choice.

10. Miscellaneous.

(a) Benefit; Assignability.    This Agreement shall be binding upon and inure to the benefit of Executive and his heirs and personal representatives, and the Company and its successors, assigns and legal representatives. This Agreement and the responsibilities/benefits hereunder are personal to Executive and are not assignable or transferable by Executive. In the event of a sale of the Project by Company, either Executive or Company shall have the right to immediately terminate this Agreement and in such event Company shall be released from such obligations and responsibilities.

(b) Offset.    The Company shall have the right to offset against amounts due to Executive hereunder, any amounts owed by Executive to Company, including any advances.

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(c) Entire Agreement.    This Agreement constitutes the entire agreement between the Company and Executive with respect to the subject matter hereof. This Agreement may not be changed or amended without the prior written consent of both of the parties hereto.

(d) Notices.    All notices hereunder shall be in writing and shall be deemed given on the third day after mailing through the United States mail, certified mail, return receipt requested, postage prepaid, or by overnight delivery to the persons listed below or to such other person(s) and/or addresses as may be designated from time to time in writing:

if to the Company:

Board of Directors

Rivermar Contracting Company

1845 The Exchange

Suite 200

Atlanta, Georgia 30339

with copies to:

Mr. Fred J. Pinckney, General Counsel

American Safety Insurance Services, Inc.

1845 The Exchange

Suite 200

Atlanta, Georgia 30339

if to Executive:

Mr. Frederick C. Treadway

8945 Antioch Way

Las Vegas, Nevada 89117

(e) Governing Law.    This Agreement shall be governed by and construed in accordance with the laws of the State of Florida, and the venue for any legal action shall be Volusia County, Florida. The Company and Executive each consent and submit to the jurisdiction and venue of the state or federal courts located in, or having jurisdiction over, Volusia County, Florida.

(f) Waiver.    Any waiver by either party of any breach of any of the terms of this Agreement must be in writing shall not be considered a waiver of any subsequent breach.

(g) Severability.    In the event that any provision of this Agreement is held to be unenforceable, then such enforceability shall in no way affect the other terms and provisions of this Agreement which shall remain in full force and effect.

(h) Captions.    The captions herein are for the convenience of the parties and are not to be construed as part of the terms of this Agreement.

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(i) Amendment and Modification.    This Agreement may be amended, modified or supplemented only by written agreement of the parties hereto, which Agreement shall have been duly authorized and approved by the President or the Board of Directors of the Company.

(j) Enforceability.    The failure of the Company at any time or from time to time to require performance of any of Executive’s obligations under this Agreement shall in no manner affect the Company’s right to enforce any provision of this Agreement at any subsequent time, and the waiver by the Company of any right arising out of any breach shall be in writing in order to be effective and not be construed as a waiver of any right arising out of any subsequent breach.

(k) Adequate Consideration.    Executive acknowledges that the consideration furnished by the Company in this Agreement, the sufficiency and adequacy of which is hereby acknowledged, is in lieu of anything of value, if any, to which Executive may already be entitled.

(l) Legal Fees.    In the event that any legal action relating to this Agreement is brought by a party, the party ultimately prevailing in such legal action shall be entitled to receive from the non-prevailing party, in addition to any other damages or relief, reasonable attorneys’ fees and costs incurred as a result of such action(s) which shall include legal fees and costs relating to any appeal(s). The term “party ultimately prevailing” shall mean the party awarded the greater damage or other relief pursuant to the judicial determination by a court of last resort or by a lower court for whose final order no appeal has been taken or the time therefor has elapsed.

(m) Construction.    This Agreement is the product of negotiation of and preparation by and among each party. Therefore, the parties acknowledge and agree that this Agreement shall not be deemed prepared or drafted by one party or the other and should be construed accordingly.

IN WITNESS WHEREOF, the parties hereto have signed and sealed this Agreement as of the day and year first above written.

COMPANY:
RIVERMAR CONTRACTING COMPANY
By:	/S/    DAVID V. BRUEGGEN
	David V. Brueggen Director on behalf of the Board of Directors
[Corporate Seal]

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EXECUTIVE:

/S/    FREDERICK C. TREADWAY

Frederick C. Treadway

6

Exhibit “A”

to Employment Agreement

Frederick C. Treadway

President

Job Description Overview:

To manage and direct all aspects of Project construction and development including but not limited to:

1. Construction Management:

(a) Oversee and direct all construction activities with respect to Project.

(b) Make recommendations to Company’s management on construction issues relating to Project and implement decisions and procedures.

2. Site Planning:

(a) Interact with architect, engineers and governmental regulatory authorities as required.

(b) Make recommendations to Company’s management and implement accepted modifications.

(c) Report to Company’s management.

3. Product Design:

(a) Make recommendations to Company’s management regarding Project architectural design, unit floor plans, unit specifications and amenities.

(b) Interact with architect, engineers and political environment as required.

(c) Establish budgetary guidelines and timelines.

(d) Report to corporate Management.

4. Marketing:

(a) Implement with Project staff and sales force advertising, marketing and public relations plan. Identify markets; promotable elements; vehicles for initiating the objectives; plans for achieving the objectives; establish the organizational process for implementation; and time table for occurrence. Specific tasks include:

(i) Research:

Development of buyer profiles.

Define strategic market scope.

Target feeder markets and market demographics.

Develop key market strategies.

Set credible sales objectives.

(ii) Advertising:

Develop market positioning.

Media research, planning, budget and tracking indicators.

Conceptual and creative development, production planning and budget recommendations.

Develop external and internal marketing promotions.

Track effectiveness of advertising campaign.

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5. Sales Management:

Oversee Project’s sales force, including:

(a) Establish budgetary guidelines and timelines

(b) Estimate demand and prepare sales forecasts.

(c) Establish sales force objectives and quotas.

(d) Establish size and organization of sales force.

(e) Recruit, select, hire and train the sales force.

(f) Compensate and motivate sales force, including development of sales promotions and staff activities designed to enhance motivation and increase productivity.

(g) Set specific tasks and operating procedures as well as short term and seasonal production indicators.

(h) Orient sales staff and supervise Sales Director to assure procedures are followed.

(i) Control and evaluate performance.

6. Association Management:

Oversee all Association Management activities of developer, including:

(a) Qualify corporate brokerage company.

(b) Establish and implement all policies and procedures.

(c) Oversee and direct Community Association Manager.

(d) Until “turnover”, preside at all Homeowner Association meetings as a Director of the Board representing Company’s management.

7. Administrative:

(a) Prepare and/or review any attorney prepared documentation relating to sales, marketing and construction, including, but not limited to:

(i) Condominium Documents:

1.    Declaration of Covenants, Conditions and Restrictions.

2.    Articles of Incorporation.

3.    By-laws.

4.    Prospectus and all applicable exhibits.

(ii) Reservation Agreements (with applicable Escrow Agreement).

(iii) Contracts for Sale and Purchase (with applicable Escrow Agreement).

(iv) Association Budgets.

(v) Management Agreements.

(vi) Construction Documents.

(b) Supervise all sales force personnel.

(c) Establish liaison with all applicable governmental agencies for the benefit of Company’s management.

(d) Attend and participate (when required) all governmental meetings and hearings.

(e) Establish, implement and direct activities relating to:

(i) Signage.

(ii) Model Units.

(iii) Follow-up procedures for prospects.

(iv) Personality Selections.

(v) Buyer Orientations and Inspections.

(vi) Homeowner’s Manuals.

(vii) Creative Consultant Services.

(viii) Production Resources.

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(ix) Media

(x) Homeowner’s Warranty and Maintenance.

(f) Design and implement all necessary computer accounting, spreadsheet and tracing systems.

(g) Prepare and implement all financial and business plans as directed by Company’s management.

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AMERICAN SAFETY INSURANCE GROUP, LTD.

NON-INCENTIVE STOCK OPTION AGREEMENT

To: Frederick C. Treadway

The Board of Directors of American Safety Insurance Group, Ltd. (the “Company”) hereby notifies you (the “Employee”) of the Company’s grant to you of an non-incentive stock option (the “Option”) to purchase shares of the Company’s common stock (the “Shares”) as an employment incentive and to encourage stock ownership in the Company, on the terms and conditions set forth herein. Unless otherwise indicated by the context herein, references to the “Company” includes the Company and its subsidiaries.

1. Plan. This Option is granted within the numerical authorization set forth in Section 4 of the Company’s Stock Option Plan, as amended (the “Plan”); provided, however, for all other purposes the provisions of the Plan shall not apply to this Option.

2. Option. The Company hereby grants to the Employee the Option to purchase all or any part of the aggregate of such number of Shares as set forth on Exhibit A attached hereto and incorporated herein by reference.

3. Non-transferable Option. This Option and all rights hereunder are neither assignable nor transferable by the Employee other than to Treadway Associates, L.P., a family limited partnership or another family partnership or trust for direct descendants of the Employee. Except as otherwise provided in the foregoing sentence, this Option shall not be transferred, assigned, pledged or hypothecated in any way (whether by operation of law or otherwise) and shall not be subject to execution, attachment or similar process. This Option shall be null and void and of no further effect in the event an assignment or transfer occurs contrary to the foregoing provisions hereof. The terms and conditions of this Option are binding on the permitted transferees.

4. Notice of Exercise of Option. This Option may be exercised by the Employee by written notice in substantially the form of “Notice of Exercise” attached hereto as Exhibit B, and accompanied by a check or money order payable to the Company in payment of the Option exercise price applicable to such Shares as provided herein. Upon receipt of such notice and accompanying payment, subject to the terms hereof, the Company shall cause to be issued to the Employee a certificate for the number of Shares purchased hereunder which will be registered in the name of the person or entity exercising this Option.

Acceptance by the Employee of the certificate representing the Shares purchased hereunder shall constitute a confirmation by the Employee that the representations,

10

warranties, acknowledgments and agreements made herein shall be true and correct at that time.

5. Restrictions on Shares Transfer. The Employee represents and warrants to the Company that he will acquire the Shares for his own account, for investment purposes only and not with a view to sale or distribution thereof, in whole or in part, and that he has such knowledge and experience in the business and financial matters of the Company that he is capable of evaluating the merits and risks of an investment in the Shares. The Employee acknowledges and agrees that the Shares have not been registered under the Securities Act of 1933 in reliance on an exemption thereunder for transactions not involving a public offering; that the undersigned shall have no right to require that the Company register the Shares under the Securities Act of 1933; and that the Employee can bear the economic risks of the investment for an indefinite period of time as there may not be an active public market for the Shares.

A legend, in substantially the following form, shall be placed on the certificate representing the Shares purchased by the Employee hereunder:

THESE SECURITIES HAVE BEEN ISSUED OR SOLD IN RELIANCE UPON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS UNDER FEDERAL AND STATE SECURITIES LAWS. THESE SECURITIES MAY NOT BE SOLD OR TRANSFERRED EXCEPT IN A TRANSACTION WHICH IS (1) EXEMPT UNDER FEDERAL OR STATE SECURITIES LAWS OR PURSUANT TO AN EFFECTIVE REGISTRATION UNDER FEDERAL OR STATE SECURITIES LAWS OR THAT IS OTHERWISE IN COMPLIANCE WITH FEDERAL OR STATE SECURITIES LAWS AND (2) UPON RECEIPT OF AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY WITH RESPECT TO COMPLIANCE WITH FEDERAL AND STATE SECURITIES LAWS.

6. Not an Employment Agreement. Nothing contained herein shall be construed to constitute or be evidence of an agreement or understanding, directly or indirectly, on the part of the Company to employ or retain the Employee for any specific period of time. Furthermore, nothing contained herein shall (i) confer upon the Employee the right to continue in the employ of the Company or (ii) interfere in any way with the right of the Company to terminate the employment of the Employee. However, nothing contained herein shall affect the right of any party under any existing employment agreement.

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7. Other Matters: This Option is subject to, and the Employee agrees to be bound by, all of the terms and conditions of the Company’s Policy Prohibiting Insider Trading and Use of Confidential Information, as the same shall have been amended from time to time.

Please execute this Non-Incentive Stock Option Agreement in the space provided below to evidence your acceptance hereof.

American Safety Insurance Group, Ltd.

By:         /s/    Lloyd A. Fox

Title:   President

READ AND AGREED TO:

/s/    Frederick C. Treadway

Frederick C. Treadway

Employee

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Exhibit A

TO NON-INCENTIVE STOCK OPTION AGREEMENT

BETWEEN AMERICAN SAFETY INSURANCE GROUP, LTD.

AND FREDERICK C. TREADWAY

1. Number of Shares Subject to Option:    300,000 Shares.

2. Option Exercise Price:    $6.00 price per Share.

3. Date of Grant:    January 16, 2001.

4. Option Vesting Schedule:    Options are exercisable immediately.

5. Option Exercise Period:    All Options expire and are void unless exercised on or before January 16, 2011.

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Exhibit B

NOTICE OF EXERCISE

(To be Executed Upon Exercise of Stock Options)

To:    American Safety Insurance Group, Ltd.

The undersigned hereby exercises the right to purchase              shares of common stock (the “Shares”) pursuant to that certain Non-Incentive Stock Option Agreement and herewith makes payment of the Option Exercise Price for such Shares in full. The undersigned hereby directs that the certificates for such Shares be issued in the name of, and delivered to the undersigned whose address is set forth below. If the number of Shares so purchased shall not be all of the Shares purchasable under such Non-Incentive Stock Option Agreement, a new Non-Incentive Stock Option Agreement for the balance remaining of the Shares thereunder shall be issued in the name of and delivered to the undersigned at the address shown below.

This              day of                         ,             .

(Signature must conform in all respects to name as specified in the Stock Option Agreement)

Street Address

City, State, Zip Code

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EX-10.4(B)

EXHIBIT 10.4(B)

FIRST AMENDMENT TO THE

AMERICAN SAFETY INSURANCE GROUP, LTD.

1998 INCENTIVE STOCK OPTION PLAN

This First Amendment is made effective as of June 23, 2000 by American Safety Insurance Group, Ltd. (the “Company”).

The Company maintains a 1998 Incentive Stock Option Plan (the “Plan”) which is hereby amended pursuant to Section 14 of the Plan following action by the Board of Directors and approval by the shareholders of the Company as follows:

The second sentence of Section 4 of the Plan is hereby amended by deleting the words “750,000 Common Shares” and substituting in lieu thereof the words “1,500,000 Common Shares”.

Except as specifically amended hereby, the Plan shall remain in full force and effect.

IN WITNESS WHEREOF, the Company has caused this First Amendment to the Plan to be executed as of the day and year first above written.

American Safety Insurance Group, Ltd.

By:                 

    Lloyd A. Fox,

    Chief Executive Officer and President

EX-10.7(B)

EXHIBIT 10.7(B)

ALLOCATION AGREEMENT

By and Among

American Safety Insurance Services, Inc.

American Safety Casualty Insurance Company

American Safety Indemnity Company, and

American Safety Risk Retention Group

THIS ALLOCATION AGREEMENT entered into as of the 31^st day of March 2002, and made effective January 1, 2002, by and between American Safety Insurance Services, Inc., a Georgia corporation (hereinafter referred to as “ASIS”), American Safety Casualty Insurance Company, a Delaware stock insurance company, American Safety Indemnity Company, an Oklahoma stock insurance company, and American Safety Risk Retention Group, Inc., a Vermont risk retention group (each a “Company” and, collectively, the “Companies”).

WHEREAS, each of the Companies has separately entered into substantively similar program management agreements (each a “Program Management” and, collectively, the “Program Management Agreements”) with ASIS for the performance of certain technical and administrative services; and

WHEREAS, Section “D” of each Program Management Agreement sets forth compensation to be paid to ASIS by the counterparty thereto; and

WHEREAS, the parties hereto have determined that it serves to increase efficiency and decrease costs to collectively share and allocate the costs and expenses arising out of the Program Management Agreements;

NOW, THEREFORE, for and in consideration of these premises and the mutual benefits accruing to the parties, it is hereby agreed as follows:

I. Amendment of Program Management Agreements.

Each of the Program Management Agreements is amended by deleting Section “D” thereof entitled “Compensation.”

II. Sharing of Cost and Expenses Incurred in Connection with the Program Management Agreements.

The Companies agree to share and allocate costs and expenses incurred by ASIS, as reasonably determined by ASIS, in connection with the performance of its duties under the Program Management Agreement. Costs and expenses so determined shall be allocated based upon the following: 1) where practical, ASIS shall allocate specific costs and expenses to the entity ASIS reasonably deems appropriate to bear such cost or expense; or 2) ASIS may allocate costs and expenses on the basis of direct written premium.

III. Term of Agreement

This agreement is effective the 1^st day of January 2002 and shall remain in effect through the last day of the current calendar year. Thereafter, this Agreement shall automatically be renewed on the same terms and conditions for successive one (1) year terms unless any party terminates this agreement as provided in Article III below. On or before each annual anniversary, this agreement will be submitted to the Oklahoma Insurance Department for review and approval.

IV. Termination

This agreement may be terminated by any party upon written notice given to the other parties.

V. Miscellaneous

This agreement may be modified from time to time by written agreement of the parties.

IN WITNESS WHEREOF, the parties have caused this instrument to be executed and attested by their respective proper officers on the day and date first hereinabove set out, and made effective January 1, 2002.

AMERICAN SAFETY INSURANCE SERVICES, INC.

BY:

TITLE:

AMERICAN SAFETY CASUALTY INSURANCE COMPANY

BY:

TITLE:

AMERICAN SAFETY INDEMNITY COMPANY                        

BY:

TITLE:

AMERICAN SAFETY RISK RETENTION GROUP, INC.            

BY:

TITLE: