Exhibit 10.1

EXECUTION COPY

HCI Group, Inc.

3.875% Convertible Senior Notes due 2019

Purchase Agreement

December 5, 2013

JMP Securities LLC

600 Montgomery Street

Suite 1100

San Francisco, CA 94111

Ladies and Gentlemen:

 

  Section 1. Introductory.

HCI Group, Inc. (the “Company”), a Florida corporation, proposes, subject to the
terms and conditions stated herein, to issue and sell to the Purchasers named in
Schedule A hereto (the “Purchasers”), for which you are acting as representative
(the “Representative”), an aggregate of $100,000,000 principal amount of its
3.875% Convertible Senior Notes due 2019 (the “Firm Securities”), convertible
into shares of the Company’s common stock, no par value (“Common Stock”), cash
or a combination of shares of Common Stock and cash, and, at the election of the
Purchasers, up to an aggregate of $15,000,000 additional principal amount of its
3.875% Convertible Senior Notes due 2019 (the “Optional Securities”) (the Firm
Securities and the Optional Securities which the Purchasers elect to purchase
pursuant to Section 4 hereof are herein collectively called the “Securities”).

The Company hereby confirms its agreement with the Purchasers as follows:

 

  Section 2. Representations and Warranties of the Company.

The Company represents and warrants to the several Purchasers that:

(a) A preliminary offering memorandum, dated December 5, 2013 (the “Preliminary
Offering Memorandum”) and an offering memorandum, dated December 5, 2013 (the
“Offering Memorandum”), have been prepared in connection with the offering of
the Securities and cash and/or shares of the Common Stock issuable upon
conversion thereof. The Preliminary Offering Memorandum, as amended and
supplemented with the Additional Written Offering Communication (as defined
below) set forth on Schedule B hereto immediately prior to 7:00 P.M., New York
City Time, on December 5, 2013 (the “Applicable Time”), is hereinafter referred
to as the “Pricing Memorandum”. Any reference to the Preliminary Offering
Memorandum, the Pricing Memorandum or the Offering Memorandum shall be deemed to
refer to and include the Company’s most recent Annual Report on Form 10-K and
all subsequent documents filed by the Company with the United States Securities
and Exchange Commission (the “Commission”) pursuant to Section 13(a), 13(c) or
15(d) of the United States Securities Exchange Act of 1934, as amended (the

 

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“Exchange Act”), on or prior to the date of such memorandum, and any reference
to the Preliminary Offering Memorandum or the Offering Memorandum, as the case
may be, as amended or supplemented, as of any specified date, shall be deemed to
include (i) any documents filed with the Commission pursuant to Section 13(a),
13(c) or 15(d) of the Exchange Act after the date of the Preliminary Offering
Memorandum or the Offering Memorandum, as the case may be, and prior to such
specified date and (ii) any written communication (as defined in Rule 405 under
the Securities Act of 1933, as amended (the “1933 Act”)) that constitutes an
offer to sell or a solicitation of an offer to buy the Securities other than the
Preliminary Memorandum or the Offering Memorandum (“Additional Written Offering
Communication”) furnished by the Company prior to the completion of the
distribution of the Securities; and all documents filed under the Exchange Act
and so deemed to be included in the Preliminary Offering Memorandum, the Pricing
Memorandum or the Offering Memorandum, as the case may be, or any amendment or
supplement thereto are hereinafter called the “Exchange Act Reports.” The
Exchange Act Reports, when they were or are filed with the Commission, conformed
or will conform in all material respects to the applicable requirements of the
Exchange Act and the applicable rules and regulations of the Commission
thereunder; and no such documents were filed with the Commission since the
Commission’s close of business on the business day immediately prior to the date
of this Agreement and prior to the execution of this Agreement.

(b) The Preliminary Offering Memorandum or the Offering Memorandum and any
amendments or supplements thereto and the Exchange Act Reports did not and will
not, as of their respective dates, contain an untrue statement of a material
fact or omit to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; provided, however, that this representation and warranty shall not
apply to any statements or omissions made in reliance upon and in conformity
with information furnished in writing to the Company by a Purchaser through the
Representative expressly for use therein (the “Purchaser Information”).

(c) The Pricing Memorandum as of the Applicable Time, did not include any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading; and each Additional Written Offering
Communication does not conflict with the information contained in the Pricing
Memorandum or the Offering Memorandum and each such Additional Written Offering
Communication, as supplemented by and taken together with the Pricing Memorandum
as of the Applicable Time, did not include any untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.

(d) The Company and its subsidiaries have been duly organized or formed and are
validly existing as corporations or limited liability companies in active status
or good standing (as the case may be) under the laws of their respective places
of incorporation or formation, as the case may be, with the corporate power and
authority or the power and authority as a limited liability company, as
applicable, to own their properties and conduct their business as described in
the Pricing Memorandum; the Company and each of its subsidiaries are duly
qualified to do business as foreign corporations or foreign limited liability
companies, as applicable, under the applicable law of, and are in good standing
as such in, each jurisdiction in which they own or lease substantial

 

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properties, have an office, or in which substantial business is conducted and
such qualification is required except in any such case where the failure to so
qualify or be in good standing would not have a material adverse effect upon the
Company and its subsidiaries taken as a whole (a “Material Adverse Effect”); and
no proceeding of which the Company has knowledge has been instituted in any such
jurisdiction, revoking, limiting or curtailing, or seeking to revoke, limit or
curtail, such power and authority or qualification. The State of Florida is the
only jurisdiction in the United States in which the Company or any of its
subsidiaries maintains an office or leases property.

(e) The Company owns directly or indirectly 100 percent of the issued and
outstanding limited liability company interests of each of its subsidiaries,
free and clear of any claims, liens, encumbrances or security interests and all
of such limited liability company interests have been duly authorized and
validly issued and are fully paid.

(f) The issued and outstanding shares of capital stock of the Company as set
forth in the Pricing Memorandum have been duly authorized and validly issued,
are fully paid and nonassessable; the shares of Common Stock initially issuable
upon conversion of the Securities have been duly and validly authorized and
reserved for issuance and, when issued and delivered in accordance with the
provisions of the Securities and the Indenture referred to below, will be duly
and validly issued, fully paid and non-assessable, free of preemptive or similar
rights and will conform in all material respects to the description of the
Common Stock of the Company contained in the Pricing Memorandum and Offering
Memorandum.

(g) The Securities to be sold by the Company have been duly authorized and when
issued, delivered and paid for pursuant to this Agreement, will have been duly
executed, authenticated, issued and delivered and will constitute valid and
legally binding obligations of the Company entitled to the benefits provided by
the indenture to be dated as of December 11, 2013 (the “Indenture”) between the
Company and The Bank of New York Mellon Trust Company, N.A., as trustee (the
“Trustee”), under which they are to be issued; the Indenture has been duly
authorized and, when executed and delivered by the Company and the Trustee, the
Indenture will constitute a valid and legally binding instrument, enforceable in
accordance with its terms, subject, as to enforcement, to bankruptcy,
insolvency, reorganization and other laws of general applicability relating to
or affecting creditors’ rights and to general equity principles; and the
Securities and the Indenture will conform to the descriptions thereof in the
Pricing Memorandum and the Offering Memorandum and will be in substantially the
form previously delivered to the Representative.

(h) The making and performance by the Company of this Agreement, the issuance of
the Securities and issuance of the Common Stock, if any, upon conversion of the
Securities have been duly authorized by all necessary corporate action and will
not (i) violate any provision of the Company’s charter or bylaws, (ii) result,
except as would not have a Material Adverse Effect, in a breach or violation of
any of the terms and provisions of, or constitute a default or change of control
under (A) any agreement, franchise, license, indenture, mortgage, deed of trust,
or other instrument to which the Company or any subsidiary is a party or by
which the Company, any subsidiary or the property of any of them may be bound or
affected, or (B) any statute, rule, regulation or order applicable to the
Company or any of its subsidiaries of any court, regulatory body, administrative
agency or other governmental body having jurisdiction over the Company or any
subsidiary or any of their respective properties, or any order of any court,
regulatory body, administrative agency or

 

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other governmental body entered in any proceeding to which the Company or any
subsidiary was or is now a party or by which it is bound. No consent, approval,
authorization or other order of any court, regulatory body, administrative
agency or other governmental body is required for the execution and delivery of
this Agreement, the issuance of the Securities and the issuance of the Common
Stock, if any, upon conversion of the Securities or the consummation of the
transactions contemplated herein or the Indenture, except as may be required
under state securities or Blue Sky laws or The New York Stock Exchange in
connection with the purchase and distribution of the Securities by the
Purchasers. This Agreement has been duly executed and delivered by the Company.

(i) The accountants who have expressed their opinions with respect to certain of
the consolidated financial statements incorporated by reference in the Pricing
Memorandum are an independent registered public accounting firm as required by
the 1933 Act and the Exchange Act, and such accountants are not in violation of
the auditor independence requirements of the Sarbanes-Oxley Act of 2002 (the
“Sarbanes-Oxley Act”).

(j) The consolidated financial statements of the Company incorporated by
reference in the Pricing Memorandum and the Offering Memorandum present fairly,
in all material respects, the consolidated financial position of the Company as
of the respective dates of such financial statements, and the consolidated
results of operations and cash flows of the Company for the respective periods
covered thereby, all in conformity with U.S. generally accepted accounting
principles consistently applied throughout the periods involved, except as
disclosed therein.

The financial information set forth in the Pricing Memorandum and the Offering
Memorandum under “Summary Financial Data” presents fairly, in all material
respects, on the basis stated in the Pricing Memorandum and the Offering
Memorandum, the information set forth therein.

All disclosures contained in the Pricing Memorandum and the Offering Memorandum
regarding “non-GAAP financial measures” (as such term is defined by the
Commission’s rules and regulations) comply with Regulation G of the Exchange Act
and Item 10 of Regulation S-K under the 1933 Act, to the extent applicable.

(k) Neither the Company nor any subsidiary is (i) in violation of its
organizational documents or (ii) in default under any consent decree, or in
default with respect to any material provision of any lease, loan agreement,
franchise, license, permit or other contract obligation to which it is a party;
and, to the Company’s knowledge, there does not exist any state of facts which
constitutes an event of default as defined in such documents or which, with
notice or lapse of time or both, would constitute such an event of default, in
each case, except in the case of clause (ii) for violations or defaults that
neither singly nor in the aggregate would have a Material Adverse Effect.

(l) There are no material legal or governmental proceedings pending, or to the
Company’s knowledge, threatened to which the Company or any subsidiary is or may
be a party or of which material property owned or leased by the Company or any
subsidiary is or may be the subject, or related to environmental or
discrimination matters that are not disclosed in the Pricing Memorandum and the
Offering Memorandum, or that question the validity of this Agreement or any
action taken or to be taken pursuant hereto.

 

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(m) There are no holders of securities of the Company having rights to
registration thereof or preemptive rights to purchase Common Stock.

(n) The Company and each of its subsidiaries have good and marketable title to
all the properties and assets reflected as owned in the financial statements
hereinabove described (or elsewhere in the Pricing Memorandum and the Offering
Memorandum), subject to no lien, mortgage, pledge, charge or encumbrance of any
kind except those, if any, reflected in such financial statements (or elsewhere
in the Pricing Memorandum and the Offering Memorandum) or that are not material
to the Company and its subsidiaries taken as a whole. The Company and each of
its subsidiaries hold their respective leased properties that are material to
the Company and its subsidiaries taken as a whole under valid and binding
leases.

(o) The Company has not taken and will not take during the offering period
(including any time after the date of the Offering Memorandum during which the
Purchasers are deemed to be making a distribution of the Securities), directly
or indirectly, any action designed to or which has constituted or which might
reasonably be expected to cause or result, under the Exchange Act or otherwise,
in stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Securities; provided, however, that any
repurchase of the Company’s common stock pursuant to a publicly announced share
repurchase plan shall not be deemed to be a violation of this provision.

(p) Subsequent to the respective dates as of which information is given in the
Pricing Memorandum and the Offering Memorandum, and except as contemplated by
the Pricing Memorandum and the Offering Memorandum, the Company and its
subsidiaries, taken as a whole, have not incurred any material liabilities or
obligations, direct or contingent, or entered into any material transactions not
in the ordinary course of business and there has not been any material adverse
change in their condition (financial or otherwise) or results of operations nor
any material change in their capital stock, short-term debt or long-term debt.

(q) There is no material document of a character required to be described in the
Pricing Memorandum and the Offering Memorandum or Exchange Act Reports which is
not described as required.

(r) Except as disclosed in the Pricing Memorandum and the Offering Memorandum,
the Company together with its subsidiaries owns and possesses all right, title
and interest in and to, or has duly licensed from third parties, all patents,
patent rights, trade secrets, inventions, know-how, trademarks, trade names,
copyrights, service marks and other proprietary rights (“Trade Rights”) material
to the business of the Company and each of its subsidiaries taken as a whole.
Neither the Company nor any of its subsidiaries has received any notice of
infringement, misappropriation or conflict from any third party as to such
material Trade Rights which has not been resolved or disposed of and neither the
Company nor any of its subsidiaries has infringed, misappropriated or otherwise
conflicted with material Trade Rights of any third parties, which infringement,
misappropriation or conflict would have a Material Adverse Effect.

 

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(s) The conduct of the business of the Company and each of its subsidiaries is
in compliance in all respects with applicable federal, state, local and foreign
laws and regulations, except where the failure to be in compliance would not
have a Material Adverse Effect.

(t) The Company and its subsidiaries possess certificates, authorizations, or
permits issued by appropriate governmental agencies or bodies necessary to
conduct the business now operated by them, and have not received any notice of
proceedings relating to the revocation or modification of any such certificate,
authorization or permit that, if determined adversely to the Company or its
subsidiaries, would, individually or in the aggregate, have a Material Adverse
Effect.

(u) All offers and sales by the Company of the Company’s capital stock or
membership interests of its subsidiaries prior to the date hereof were either
(i) made pursuant to a registration statement filed by the Company with the
Commission under the 1933 Act or (ii) at all relevant times exempt from the
registration requirements of the 1933 Act and, in each case, all such offers and
sales during the twelve months prior to the date hereof were duly registered
with or the subject of an available exemption from the registration requirements
of the applicable state and local securities or blue sky laws.

(v) The Company has filed all necessary federal and state income and franchise
tax returns that were required to be filed prior to the date hereof, after
taking into account all applicable extensions obtained, and has paid all taxes
shown as due thereon and there is no tax deficiency that has been, or to the
knowledge of the Company might be, asserted against the Company or any of its
properties or assets, in each case that would have a Material Adverse Effect.

(w) A registration statement pursuant to Section 12(b) of the Exchange Act to
register the Common Stock thereunder has been declared effective by the
Commission pursuant to the Exchange Act, and the Common Stock is duly registered
thereunder. The Common Stock of the Company is listed on The New York Stock
Exchange.

(x) The Company has established and maintains disclosure controls and procedures
(as defined in Rules 13a-15 and 15d-15 under the Exchange Act) and such controls
and procedures are effective in ensuring that material information relating to
the Company, including its subsidiaries, is made known to the principal
executive officer and the principal financial officer. The Company has utilized
such controls and procedures (to the extent applicable) in preparing and
evaluating the disclosures included in the Pricing Memorandum and the Offering
Memorandum.

(y) The Company and each of its subsidiaries maintain a system of internal
accounting controls sufficient to provide reasonable assurance that:
(i) transactions are executed in accordance with management’s general or
specific authorizations; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain accountability for assets; (iii) access to
assets is permitted only in accordance with management’s general or specific
authorization; and (iv) amounts reflected on the Company’s consolidated balance
sheet for assets are compared with existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.

 

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(z) The Company is not, and after giving effect to the offering and sale of the
Securities and the application of the proceeds thereof as described in the
Pricing Memorandum will not be, and does not intend to conduct its business in a
manner in which it would become, an “investment company” as defined in
Section 3(a) of the Investment Company Act of 1940, as amended (“Investment
Company Act”).

(aa) No transaction has occurred between or among the Company and any of its
officers or directors, stockholders or any affiliate or affiliates of any such
officer or director or stockholder that is required to be described in and is
not described in the Pricing Memorandum and the Offering Memorandum or the
Exchange Act Reports.

(bb) The Company’s board of directors has validly appointed an audit committee
whose composition satisfies the requirements of Section 303A.07 of the Listed
Company Manual of The New York Stock Exchange (the “NYSE Rules”), and the board
of directors or the audit committee has adopted a charter that satisfies the
requirements of the NYSE Rules.

(cc) The Company and its subsidiaries are insured by insurers of recognized
financial responsibility against such losses and risks and in such amounts as
are customary in the businesses in which they are engaged or propose to engage
after giving effect to the transactions described in the Pricing Memorandum and
the Offering Memorandum. To the knowledge of the Company, all policies of
insurance and fidelity or surety bonds insuring the Company, its subsidiaries
and their respective businesses, assets, employees, officers and directors are
in full force and effect; and the Company and its subsidiaries are in compliance
with the terms of such policies and instruments in all material respects.

(dd) The Company is in compliance in all material respects with all applicable
provisions of the Sarbanes-Oxley Act and all rules and regulations promulgated
thereunder.

(ee) None of the Company and its subsidiaries is involved in any labor dispute
nor, to the knowledge of the Company, is any such dispute threatened. The
Company is not aware of any threatened or pending litigation between the Company
and any of its executive officers and has not received notice from any of its
executive officers that such officer does not intend to remain in the employment
of the Company.

(ff) The statements set forth in the Pricing Memorandum and the Offering
Memorandum under the caption “Description of Notes” and “Description of Common
Stock”, insofar as they purport to constitute a summary of the terms of the
Securities and the Common Stock issuable upon conversion of the Securities,
under the caption “Certain U.S. Federal Income Tax Considerations”, and under
the caption “Plan of Distribution”, insofar as they purport to describe the
provisions or provide summaries of the laws and documents referred to therein,
fairly and accurately summarize the matters referred to therein in all material
respects.

(gg) The Company has not sold or issued any shares of Common Stock during the
six-month period preceding the date of the Offering Memorandum, including any
sales pursuant to Regulation D of the Act, other than (i) shares issued pursuant
to employee benefit plans, stock option plans or other employee compensation
plans or pursuant to outstanding options, rights or warrants, or (ii) as
disclosed in the Pricing Memorandum.

 

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(hh) Neither the Company nor any of its subsidiaries, nor, to the Company’s
knowledge, any director, officer, agent, employee or other person associated
with or, to the Company’s knowledge, acting on behalf of the Company or any of
its subsidiaries, has violated or is in violation of any provision of the U.S.
Foreign Corrupt Practices Act of 1977, as amended (the “FCPA”), and the rules
and regulations thereunder, including, without limitation, by making use of
mails or any means or instrumentality of interstate commerce corruptly in
furtherance of an offer, payment, promise to pay or authorization of the payment
of any money, or other property, gift, promise to give, or authorization of the
giving of anything of value to any “foreign official” (as such term is defined
in the FCPA) or any foreign political party or official thereof or any candidate
for foreign political office in contravention of the FCPA.

(ii) The operations of the Company and its subsidiaries are and have been
conducted at all times in compliance with applicable financial recordkeeping and
reporting requirements of the Currency and Foreign Transactions Reporting Act of
1970, as amended, the money laundering statutes of all jurisdictions in which
the Company and its subsidiaries conduct business, the rules and regulations
thereunder and any related or similar rules, regulations or guidelines, issued,
administered or enforced by any governmental agency (collectively, the “Money
Laundering Laws”) and no action, suit or proceeding by or before any court or
governmental agency, authority or body or any arbitrator involving the Company
or any of its subsidiaries with respect to the Money Laundering Laws is pending
or, to the knowledge of the Company, threatened.

(jj) Neither the Company nor any of its subsidiaries nor, to the knowledge of
the Company, any director, officer, agent, employee or affiliate of the Company
or any of its subsidiaries is currently subject to any U.S. sanctions
administered by the Office of Foreign Assets Control of the U.S. Treasury
Department (“OFAC”); and the Company will not directly or indirectly use the
proceeds of the offering of the Securities, or lend, contribute or otherwise
make available such proceeds to any subsidiary, joint venture partner or other
person or entity, for the purpose of financing the activities of any person
currently subject to any U.S. sanctions administered by OFAC.

(kk) None of the transactions contemplated by this Agreement (including, without
limitation, the use of the proceeds from the sale of the Securities) will
violate or result in a violation of Section 7 of the Exchange Act, or any
regulation promulgated thereunder, including, without limitation, Regulations T,
U, and X of the Board of Governors of the Federal Reserve System.

(ll) When the Securities are issued and delivered pursuant to this Agreement,
the Securities will not be of the same class (within the meaning of Rule 144A
under the 1933 Act) as securities which are listed on a national securities
exchange registered under Section 6 of the Exchange Act or quoted in a U.S.
automated inter-dealer quotation system.

(mm) The Company is subject to Section 13 or 15(d) of the Exchange Act and has
filed all the material required to be filed pursuant to Section 13, 14 or 15(d)
of the Exchange Act and has filed in a timely manner all reports required to be
filed thereunder during the 12 calendar months and any portion of a month
immediately preceding the date hereof.

 

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(nn) Neither the Company nor any person acting on its or their behalf (provided,
however, that no representation is made as to the Purchasers or any person
acting on behalf of any Purchaser) has offered or sold the Securities by means
of any general solicitation or general advertising within the meaning of Rule
502(c) under the 1933 Act.

(oo) Within the preceding six months, neither the Company nor any other person
acting on behalf of the Company has offered or sold to any person any
Securities, or any securities of the same or a similar class as the Securities,
other than Securities offered or sold to the Purchasers hereunder. The Company
will take reasonable precautions designed to insure that any offer or sale,
direct or indirect, in the United States or to any U.S. person (as defined in
Rule 902 under the 1933 Act) of any Securities or any substantially similar
security issued by the Company, within six months subsequent to the date on
which the distribution of the Securities has been completed, is made under
restrictions and other circumstances reasonably designed not to affect the
status of the offer and sale of the Securities in the United States and to U.S.
persons contemplated by this Agreement as transactions exempt from the
registration provisions of the 1933 Act.

(pp) Assuming the accuracy of the representations and warranties of the
Purchasers contained in Section 3 and their compliance with their agreements set
forth therein, it is not necessary in connection with the offer, sale and
delivery of the Securities to the Purchasers in the manner contemplated by this
Agreement to register the Securities under the 1933 Act or to qualify the
Indenture under the Trust Indenture Act of 1939, as amended.

(qq) The Securities satisfy the requirements set forth in Rule 144A(d)(3) under
the 1933 Act.

 

  Section 3. Representations and Warranties of the Purchasers.

(a) Each Purchaser, severally and not jointly, represents and warrants that such
Purchaser is a qualified institutional buyer as defined in Rule 144A under the
1933 Act (a “QIB”). Each Purchaser, severally and not jointly, agrees with the
Company that (i) it will not solicit offers for, or offer or sell, such
Securities by any form of general solicitation or general advertising (as those
terms are used in Regulation D under the 1933 Act) or in any manner involving a
public offering within the meaning of Section 4(2) of the 1933 Act and (ii) it
will solicit offers for such Securities only from, and will offer such
Securities only to, persons that it reasonably believes to be QIBs that in
purchasing such Securities are deemed to have represented and agreed as provided
in the Offering Memorandum under the captions “Notice to Investors” and
“Transfer Restrictions”.

(b) Each Purchaser, severally and not jointly, represents, warrants, and agrees
with respect to offers and sales outside the United States that:

(i) such Purchaser understands that no action has been or will be taken in any
jurisdiction by the Company that would permit a public offering of the
Securities, or possession or distribution of the Preliminary Offering
Memorandum, the Pricing Memorandum, the Offering Memorandum or any other
offering or publicity material relating to the Securities, in any country or
jurisdiction where action for that purpose is required; and

(ii) the Securities have not been registered under the 1933 Act and may not be
offered or sold within the United States or to, or for the account or benefit
of, U.S. persons except in accordance with Rule 144A under the 1933 Act or
pursuant to another exemption from the registration requirements of the 1933
Act.

 

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  Section 4. Purchase, Sale and Delivery of Securities.

On the basis of the representations, warranties and agreements herein contained,
but subject to the terms and conditions herein set forth, (a) the Company agrees
to sell to the Purchasers named in Schedule A hereto, and the Purchasers agree,
severally and not jointly, to purchase from the Company at a purchase price of
97.0% of the principal amount thereof, of Firm Securities, and (b) in the event
and to the extent that the Representative shall exercise the election to
purchase Optional Securities as provided below, the Company agrees to issue and
sell to each of the Purchasers, and each of the Purchasers agrees, severally and
not jointly, to purchase from the Company, at the same purchase price set forth
in clause (a) of this Section 4, that portion of the aggregate the principal
amount of the Optional Securities as to which such election shall have been
exercised (to be adjusted by the Company so as to eliminate fractions of
$1,000), in each case as set forth opposite the name of such Purchaser in
Schedule A hereto.

The Company hereby grants to the Purchasers the right to purchase at their
election up to $15,000,000 in aggregate principal amount of the Optional
Securities, at the purchase price set forth in clause (a) of the first paragraph
of this Section 4. Any such election to purchase Optional Securities may be
exercised only by written notice from you to the Company, given within a period
of 30 calendar days after the date of this Agreement solely to cover
overallotments, setting forth the aggregate principal amount of Optional
Securities to be purchased and the date on which such Optional Securities are to
be delivered, as determined by the Representative but in no event earlier than
the First Closing Date (as defined below) or, unless the Representative and the
Company otherwise agree in writing, earlier than two or later than ten New York
Business Days after the date of such notice. “New York Business Day” shall mean
each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which
banking institutions in New York are generally authorized or obligated by law or
executive order to close.

The Securities to be purchased by each Purchaser hereunder will be represented
by one or more definitive global Securities in book-entry form which will be
deposited by or on behalf of the Company with The Depository Trust Company
(“DTC”) or its designated custodian. The Company will deliver the Securities to
the Representative for the account of each Purchaser, against payment by or on
behalf of such Purchaser of the purchase price therefor by wire transfer of
Federal (same-day) funds, by causing DTC to credit the Securities to the account
of the Representative at DTC. The Company will cause the certificates
representing the Securities to be made available to the Representative for
checking at least twenty-four hours prior to the Closing Date (as defined below)
at the offices of Wilson Sonsini Goodrich & Rosati, Professional Corporation,
650 Page Mill Road, Palo Alto, California 94304 (the “Closing Location”). The
time and date of such delivery and payment shall be, with respect to the Firm
Securities, 9:30 a.m., New York time, on December 11, 2013 or such other time
and date as the Representative and the Company may agree upon in writing, and,
with respect to the Optional Securities, 9:30 a.m., New York time, on the date
specified by the Representative in the written notice given by the
Representative of the Purchasers’ election to

 

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purchase such Optional Securities, or such other time and date as the
Representative and the Company may agree upon in writing. Such time and date for
delivery of the Firm Securities is herein called the “First Closing Date”, such
time and date for delivery of the Optional Securities, if not the First Closing
Date, is herein called the “Second Closing Date”, and each such time and date
for delivery is herein called a “Closing Date”.

The documents to be delivered at each Closing Date by or on behalf of the
parties hereto pursuant to Section 8 hereof, including the cross receipt for the
Securities and any additional documents requested by the Purchasers pursuant to
Section 8(ix) hereof, will be delivered at the Closing Location, and the
Securities will be delivered at the office of DTC or its designated custodian
(the “Designated Office”), all at such Closing Date. A meeting will be held at
the Closing Location at 5:00 p.m., New York City time, on the New York Business
Day next preceding such Closing Date, at which meeting the final drafts of the
documents to be delivered pursuant to the preceding sentence will be available
for review by the parties hereto.

 

  Section 5. Covenants of the Company.

The Company covenants and agrees as follows:

(a) To furnish to the Representative, on the business day next succeeding the
date of this Agreement and during the period mentioned in Section 5(d) or (e),
PDF copies and, upon request and without charge, as many printed copies of the
Pricing Memorandum, the Offering Memorandum, any documents incorporated by
reference therein and any supplements and amendments thereto as the
Representative may reasonably request.

(b) Before amending or supplementing the Preliminary Offering Memorandum, the
Pricing Memorandum or the Offering Memorandum, to furnish to the Representative
a copy of each such proposed amendment or supplement and not to use any such
proposed amendment or supplement to which the Representative reasonably objects.

(c) To furnish to the Representative a copy of each proposed Additional Written
Offering Communication to be prepared by or on behalf of, used by, or referred
to by the Company and not to use or refer to any proposed Additional Written
Offering Communication to which the Representative reasonably objects.

(d) If the Pricing Memorandum is being used to solicit offers to buy the
Securities at a time when the Offering Memorandum is not yet available to
prospective purchasers and any event shall occur or condition exist as a result
of which it is necessary to amend or supplement the Pricing Memorandum in order
to make the statements therein, in the light of the circumstances under which
they were made, not misleading, or if, in the opinion of counsel for the
Purchasers, it is necessary to amend or supplement the Pricing Memorandum to
comply with applicable law, forthwith to prepare and furnish, at its own
expense, to the Purchasers and to any dealer upon request, either amendments or
supplements to the Pricing Memorandum so that the statements in the Pricing
Memorandum as so amended or supplemented will not, in the light of the
circumstances under which they were made when delivered to a prospective
purchaser, be misleading or so that the Pricing Memorandum, as amended or
supplemented, will comply with applicable law.

 

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(e) If, during such period after the date hereof and prior to the date on which
all of the Securities shall have been sold by the Purchasers, any event shall
occur or condition exist as a result of which it is necessary to amend or
supplement the Offering Memorandum in order to make the statements therein, in
the light of the circumstances under which they are made when the Offering
Memorandum is delivered to a purchaser, not misleading, or if, in the opinion of
counsel for the Purchasers, it is necessary to amend or supplement the Offering
Memorandum to comply with applicable law, forthwith to prepare and furnish, at
its own expense, to the Purchasers, either amendments or supplements to the
Offering Memorandum so that the statements in the Offering Memorandum as so
amended or supplemented will not, in the light of the circumstances under which
they are made when the Offering Memorandum is delivered to a purchaser, be
misleading or so that the Offering Memorandum, as amended or supplemented, will
comply with applicable law.

(f) To endeavor to qualify the Securities for offer and sale under the
securities or Blue Sky laws of such jurisdictions within the United States and
Canada as the Representative shall reasonably request; provided that in
connection therewith the Company shall not be required to qualify as a foreign
corporation or as a dealer in securities or to take any action that would
subject it to general service of process in any such jurisdiction where it is
not presently qualified or where it would be subject to taxation in respect of
doing business in any jurisdiction which it otherwise would not.

(g) Neither the Company nor any of its affiliates (as defined in Rule 144
promulgated under the 1933 Act) will sell, offer for sale or solicit offers to
buy or otherwise negotiate in respect of any security (as defined in the 1933
Act) which could be integrated with the sale of the Securities in a manner which
would require the registration under the 1933 Act of the Securities.

(h) Not to solicit any offer to buy or offer or sell the Securities or the
Common Stock issuable upon conversion of the Securities by means of any form of
general solicitation or general advertising (as those terms are used in
Regulation D under the 1933 Act) or in any manner involving a public offering
within the meaning of Section 4(2) of the 1933 Act.

(i) While any of the Securities or the Common Stock issuable upon conversion of
the Securities remain “restricted securities” within the meaning of the 1933
Act, to make available, upon request, to any seller of such Securities the
information specified in Rule 144A(d)(4) under the 1933 Act, unless the Company
is then subject to Section 13 or 15(d) of the Exchange Act.

(j) During the period of one year after the First Closing Date or Second Closing
Date, if later, the Company will not, and will not permit any of its affiliates
to resell any of the Securities or the Common Stock issuable upon conversion of
the Securities which constitute “restricted securities” under Rule 144 that have
been reacquired by any of them.

(k) Not to take any action prohibited by Regulation M under the Exchange Act in
connection with the distribution of the Securities contemplated hereby.

(l) For so long as the Company is subject to the Exchange Act, the Company will
comply in all material respects with all registration, filing and reporting
requirements of the Exchange Act and The New York Stock Exchange and the Company
will comply in all material respects with all applicable provisions of the
Sarbanes-Oxley Act.

 

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(m) The Company will maintain such controls and other procedures, including
without limitation those required by the Sarbanes-Oxley Act and the applicable
regulations thereunder, that are designed to ensure that information required to
be disclosed by the Company in the reports that it files or submits under the
Exchange Act is recorded, processed, summarized and reported within the time
periods specified in the Commission’s rules and forms, including without
limitation, controls and procedures designed to ensure that information required
to be disclosed by the Company in the reports that it files or submits under the
Exchange Act is accumulated and communicated to the Company’s management,
including its principal executive officer and its principal financial officer,
or persons performing similar functions, as appropriate to allow timely
decisions regarding required disclosure, to ensure that material information
relating to the Company, including its subsidiaries, is made known to them by
others within those entities.

(n) For so long as the Company is subject to the Exchange Act, the Company and
its subsidiaries will maintain a system of internal accounting controls designed
to provide reasonable assurance that: (i) transactions are executed in
accordance with management’s general or specific authorizations;
(ii) transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain accountability for assets; (iii) access to assets is permitted only in
accordance with management’s general or specific authorization; and (iv) amounts
reflected on the Company’s consolidated balance sheet for assets is compared
with existing assets at reasonable intervals and appropriate action is taken
with respect to any differences.

The Company also agrees that, without the prior written consent of the
Representative on behalf of the Purchasers, it will not, during the period
ending 60 days after the date of the Offering Memorandum (the “Restricted
Period”), (1) offer, pledge, sell, contract to sell, sell any option or contract
to purchase, purchase any option or contract to sell, grant any option, right or
warrant to purchase, lend, or otherwise transfer or dispose of, directly or
indirectly, any shares of Common Stock or any securities convertible into or
exercisable or exchangeable for Common Stock or (2) enter into any swap or other
arrangement that transfers to another, in whole or in part, any of the economic
consequences of ownership of the common stock, whether any such transaction
described in clause (1) or (2) above is to be settled by delivery of common
stock or such other securities, in cash or otherwise. The foregoing sentence
shall not apply to (a) the sale of the Securities under this Agreement, (b) the
issuance of shares of Common Stock upon conversion of the Securities, if
applicable, (c) the issuance by the Company of any shares of Common Stock upon
the exercise of an option or warrant or the conversion of a security outstanding
on the date hereof, or (d) any grants under the Company’s equity or stock plans
in accordance with the terms of such plans as described in the Offering
Memorandum.

 

  Section 6. Covenants of the Company and the Purchasers.

The Company represents and agrees that, unless it obtains the prior consent of
the Representative, and each Purchaser, severally and not jointly, represents
and agrees that, except for one or more term sheets relating to the Securities
containing customary information and conveyed to

 

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purchasers of Securities, unless it obtains the prior consent of the Company and
the Representative, it has not made and will not make any offer relating to the
Securities that, if the offering of Securities contemplated by this Agreement
were conducted as a public offering pursuant to a registration statement under
the 1933 Act, would constitute an “issuer free writing prospectus,” as defined
in Rule 433, or that would otherwise constitute a “free writing prospectus,” as
defined in Rule 405, required to be filed with the Commission.

 

  Section 7. Payment of Expenses.

Whether or not the transactions contemplated hereunder are consummated or this
Agreement becomes effective as to all of its provisions or is terminated, the
Company agrees to pay (i) all costs, fees and expenses (other than legal fees
and disbursements of counsel for the Purchasers and the expenses incurred by the
Purchasers) incurred in connection with the performance of the obligations of
the Company hereunder, including without limiting the generality of the
foregoing, all fees and expenses of legal counsel for the Company and of the
Company’s independent accountants, all costs and expenses incurred in connection
with the preparation, printing, filing and distribution (including electronic
delivery) of the Preliminary Offering Memorandum, the Pricing Memorandum, the
Offering Memorandum, any Additional Written Offering Communication (including
all exhibits and financial statements) and all amendments and supplements
provided for herein, this Agreement and a blue sky memorandum, (ii) all
reasonable third-party costs, fees and expenses (including reasonable legal fees
and disbursements of outside legal counsel for the Purchasers not to exceed
$15,000) incurred by the Purchasers in connection with qualifying or registering
all or any part of the Securities for offer and sale under blue sky laws;
(iii) all costs and expenses related to the transfer and delivery of the
Securities to the Purchasers, including any transfer or other taxes payable
thereon; (iv) all reasonable costs, fees and expenses (including without
limitation any damages or other amounts payable in connection with legal or
contractual liability) associated with the reforming of any contracts for sale
of the Securities made by the Purchasers caused by a breach of the
representation contained in the second paragraph of Section 2(c); provided,
however, that except as provided in this Section 7 and in Sections 9, 11 and 14
of this Agreement, the Purchasers will pay all of their own costs and expenses,
including fees of their counsel (except as set forth above); (v) any fees
charged by rating agencies for the rating of the Securities; (vi) the fees and
expenses, if any, incurred in connection with the admission of the Securities
for trading any appropriate market system; (vii) the costs and charges of the
Trustee and any transfer agent, registrar or depositary; (viii) the cost of the
preparation, issuance and delivery of the Securities; (ix) the costs and
expenses of the Company relating to investor presentations on any “road show”
undertaken in connection with the marketing of the offering of the Securities,
including, without limitation, expenses associated with the preparation or
dissemination of any electronic road show, expenses associated with production
of road show slides and graphics and fees and expenses of any consultants
engaged in connection with the road show presentations with the prior approval
of the Company; (x) the document production charges and expenses associated with
printing this Agreement; and (xi) all other cost and expenses incident to the
performance of the obligations of the Company hereunder for which provision is
not otherwise made in this Section.

 

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  Section 8. Conditions of the Obligations of the Purchasers.

The obligations of the several Purchasers to purchase and pay for the Firm
Securities on the First Closing Date and the Optional Securities on the Second
Closing Date shall be subject to the accuracy of the representations and
warranties on the part of the Company herein set forth as of the date hereof and
as of the First Closing Date or the Second Closing Date, as the case may be, to
the accuracy of the statements of officers of the Company made pursuant to the
provisions hereof, to the performance by the Company of its obligations
hereunder, and to the following additional conditions:

(a) The Securities shall have been qualified for sale under the blue sky laws of
such states as shall have been specified by the Representative.

(b) The legality and sufficiency of the authorization, issuance and sale or
transfer and sale of the Securities hereunder, the validity and form of the
certificates representing the Securities, the execution and delivery of this
Agreement, and all corporate proceedings and other legal matters incident
thereto, and the form of the Preliminary Offering Memorandum, Pricing Memorandum
and Offering Memorandum shall have been approved by counsel for the Purchasers
exercising reasonable judgment.

(c) You shall not have advised the Company that the Pricing Memorandum, or the
Offering Memorandum or any amendment or supplement thereto, contains an untrue
statement of fact, which, in the opinion of counsel for the Purchasers, is
material or omits to state a fact which, in the opinion of such counsel, is
material and is required to be stated therein or necessary to make the
statements therein not misleading.

(d) Subsequent to the execution and delivery of this Agreement, there shall not
have occurred any material adverse change, or any development involving a
prospective material adverse change, in or affecting particularly the business
or properties of the Company or its subsidiaries, taken as a whole, whether or
not arising in the ordinary course of business, which, in the judgment of the
Representative, makes it impractical or inadvisable to proceed with the public
offering or purchase of the Securities as contemplated hereby.

(e) There shall have been furnished to you, as Representative of the Purchasers,
on the First Closing Date or the Second Closing Date, as the case may be, except
as otherwise expressly provided below:

(i) An opinion of Foley & Lardner LLP, counsel for the Company, addressed to the
Purchasers and dated the First Closing Date or the Second Closing Date, as the
case may be, that:

(1) The Company has been duly incorporated and is existing and in active status
under the laws of the State of Florida, with corporate power and authority to
own its properties and conduct its business as described in the Pricing
Memorandum and the Company’s 2013 Exchange Act Reports.

(2) Each U.S. subsidiary of the Company that is a corporation or limited
liability company has been duly incorporated or formed and is existing and in
active status or

 

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good standing (as applicable) under the laws of the state of its incorporation
or formation, with power and authority (corporate or limited liability company,
as applicable) to own its properties and conduct its business as described in
the Pricing Memorandum; all of the issued and outstanding capital stock of each
such U.S. subsidiary of the Company has been duly authorized and validly issued
and is fully paid and nonassessable; and all outstanding shares of capital stock
or other equity interests of each such U.S. subsidiary are owned of record by
the Company, either directly or through subsidiaries.

(3) The Indenture has been duly authorized, executed and delivered by the
Company and, assuming due authorization, execution, and delivery thereof by the
Trustee, constitutes a valid and legally binding obligation of the Company
enforceable against the Company in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors’ rights
and to general equity principles.

(4) The Securities have been duly authorized, executed, and delivered by the
Company and, assuming the due authorization, execution, and delivery of the
Indenture and authentication of the Securities by the Trustee as provided in the
Indenture, when delivered to and paid for by the Purchasers as provided for
under this Agreement, will be validly issued, fully paid and nonassessable and
will constitute valid and legally binding obligations of the Company enforceable
against the Company 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, and entitled to the benefits provided by the Indenture.

(5) The Securities conform in all material respects as to legal matters to the
description of such Securities contained in the Pricing Memorandum under the
heading “Description of Notes”; and the authorized capital stock of the Company
is as set forth in the Pricing Memorandum under the heading “Description of
Capital Stock.”

(6) The stockholders of the Company have no preemptive rights contained in the
Articles of Incorporation or Bylaws and, to our knowledge, have no preemptive
rights with respect to the shares of Common Stock initially issuable upon
conversion of the Securities.

(7) The shares of Common Stock initially issuable upon conversion of the
Securities (i) have been duly authorized and reserved for issuance, (ii) upon
such conversion, conform to the description of such Common Stock contained in
the Offering Memorandum under the heading “Description of Capital Stock”, and
(iii) when issued upon conversion the Securities, will be validly issued, fully
paid and nonassessable.

 

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(8) The Company is not and, after giving effect to the offering and sale of the
Securities and the application of the proceeds thereof as described in the
Pricing Memorandum, will not be an “investment company” as defined in the
Investment Company Act.

(9) No consent, approval, authorization, or order of, or filing with, any
governmental agency or body or any court is required for the issuance and sale
of the Securities and shares of Common Stock of the Company that may be issuable
upon conversion of the Securities, except such as have been already made,
obtained, or rendered, as applicable, and such as may be required under state
securities laws or blue sky laws or Canadian provincial securities laws or other
foreign laws.

(10) To our knowledge, there are no pending or threatened actions, suits, or
proceedings against or affecting the Company, any of its subsidiaries or any of
their respective properties that are not disclosed in the Company’s 2013
Exchange Act Reports and that, if determined adversely to the Company or any of
its subsidiaries, would individually or in the aggregate have a Material Adverse
Effect, or would materially and adversely affect the ability of the Company to
perform its obligations under the Indenture or this Agreement, or which are
otherwise material in the context of the sale of the Securities.

(11) The execution, delivery and performance of the Indenture and this Agreement
and the issuance and sale of the Securities and compliance with the terms and
provisions thereof will not result in a breach or violation of any of the terms
and provisions of, or constitute a default under, (i) any applicable statute,
rule, regulation or order known to us of any U.S. federal or New York or Florida
state governmental agency or body or any U.S. federal or New York or Florida
state court having jurisdiction over the Company or any of its U.S.
subsidiaries, or any of their properties, or any agreement or instrument to
which the Company or any of its subsidiaries is a party or by which the Company
or any of its subsidiaries is bound or to which any of the properties of the
Company or any of its subsidiaries is subject and that is filed with or
incorporated by reference as an exhibit to any of the Company’s 2013 Exchange
Act Reports, or (ii) the Articles of Incorporation or Bylaws of the Company or
the organizational documents of any of its subsidiaries, except, in the case of
clause (i), for any such breaches, violations, or defaults that would not,
individually or in the aggregate, have a Material Adverse Effect.

(12) The Company has full power and authority to authorize, issue and sell the
Securities as contemplated by this Agreement.

(13) This Agreement has been duly authorized by all requisite corporate action
on the part of the Company and has been executed and delivered by the Company.

(14) It is not necessary in connection with (i) the offer, sale and delivery of
the Securities by the Company to the Purchasers pursuant to this Agreement or
(ii) the resales of the Securities by the Purchasers in the manner contemplated
by this Purchase Agreement, to register the Securities under the 1933 Act or to
qualify an indenture in respect thereof under the Trust Indenture Act of 1939.

 

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(15) The statements in the Offering Memorandum under the heading “Certain U.S.
Federal Income Tax Considerations”, insofar as such statements summarize legal
matters, agreements, documents or proceedings discussed therein, are accurate
and fair summaries of such legal matters, agreements, documents or proceedings.

(16) Although such counsel is not passing upon and does not assume any
responsibility for the accuracy, completeness or fairness of the statements
contained in the Offering Memorandum, including the documents incorporated by
reference therein and any supplements or amendments thereto, nothing has come to
such counsel’s attention that causes it to believe that (i) the Offering
Memorandum (or any amendment or supplement thereto) or any of the Company’s 2013
Exchange Act Reports contained any untrue statement of a material fact or
omitted to state any material fact necessary to make the statements therein, not
misleading, or (ii) the Pricing Memorandum, as of the Applicable Time and as of
the date hereof, contained any untrue statement of a material fact necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading; it being understood that we express no opinion as to the
financial statements, or schedules or notes thereto, or other financial,
accounting, or statistical data contained in the Pricing Memorandum, the
Offering Memorandum, or any of the Company’s 2013 Exchange Act Reports.

(ii) An opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation,
counsel for the Purchasers, dated the First Closing Date or the Second Closing
Date, as the case may be, in form and substance reasonably acceptable to the
Representative, and the Company shall have furnished to such counsel such
documents and shall have exhibited to them such papers and records as they may
reasonably request for the purpose of enabling them to pass upon such matters.

(iii) A certificate of the chief executive officer and the principal financial
officer of the Company, dated the First Closing Date or the Second Closing Date,
as the case may be, to the effect that:

(1) the representations and warranties of the Company set forth in Section 2 of
this Agreement are true and correct as of the date of this Agreement and as of
the First Closing Date or the Second Closing Date, as the case may be, and the
Company has complied with all the agreements and satisfied all the conditions on
its part to be performed or satisfied at or prior to such Closing Date;

(2) there shall not have occurred any downgrading, nor shall any notice have
been given of any intended or potential downgrading or of any review for a
possible change that does not indicate the direction of the possible change, in
the rating accorded any of the securities of the Company by any “nationally
recognized statistical rating organization,” as such term is defined in
Section 3(a)(62) of the Exchange Act;

 

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(3) there shall not have occurred any change, or any development involving a
prospective change, in the condition, financial or otherwise, or in the
earnings, business or operations of the Company and its subsidiaries, taken as a
whole, from that set forth in the Pricing Memorandum provided to the prospective
purchasers of the Securities that, in the Representative’s judgment, is material
and adverse and that makes it, in the Representative’s judgment, impracticable
to market the Securities on the terms and in the manner contemplated in the
Pricing Memorandum; and

(4) subsequent to the date of the most recent financial statements included in
the Pricing Memorandum, and except as set forth or contemplated in the Pricing
Memorandum, (A) none of the Company and its consolidated subsidiaries has
incurred any material liabilities or obligations, direct or contingent, or
entered into any material transactions not in the ordinary course of business,
and (B) there has not been any change that has had or would reasonably be
expected to have a Material Adverse Effect or any material change in short-term
debt or long-term debt of the Company and its subsidiaries.

The delivery of the certificate provided for in this subparagraph shall be and
constitute a representation and warranty of the Company as to the facts required
in the immediately foregoing clauses (1), (2), (3) and (4) to be set forth in
said certificate.

(iv) On the date hereof and also on the First Closing Date or the Second Closing
Date, as the case may be, there shall be delivered to you a letters addressed to
you, from (1) Dixon Hughes Goodman LLP and (2) Hacker, Johnson & Smith PA, each
an independent registered public accountant firm, the first one to be dated the
date hereof, the second one to be dated the First Closing Date and the third one
(in the event of a second closing) to be dated the Second Closing Date, in form
and substance reasonably satisfactory to the Purchasers. There shall not have
been any change or decrease specified in the letters referred to in this
subparagraph which makes it impractical or inadvisable in the judgment of the
Representative to proceed with the public offering or purchase of the Securities
as contemplated hereby.

(v) A certificate of the chief executive officer and the principal financial
officer of the Company, dated the First Closing Date or the Second Closing Date,
as the case may be, verifying the truth and accuracy of such statistical or
financial figures regarding the Company included in the Pricing Memorandum which
you may reasonably request and which have not been otherwise verified by the
letters referred to in clause (v) above, such verification to include the
provision of documentary evidence supporting any such statistical or financial
figure.

(vi) The “lock-up” agreements, each substantially in the form of Exhibit A
hereto, between the Representative and each of the officers and directors of the
Company named in Schedule C hereto relating to sales and certain other
dispositions of shares of Common Stock or certain other securities, delivered to
the Representative on or before the date hereof, shall be in full force and
effect on the Closing Date.

 

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(vii) An application for the listing of the Common Stock issuable upon
conversion of the Securities (assuming the Company elects to physically settle
the Securities) shall have been submitted to The New York Stock Exchange.

(viii) Such further certificates and documents as you may reasonably request.

All such opinions, certificates, letters and documents shall be in compliance
with the provisions hereof only if they are satisfactory to you and to Wilson
Sonsini Goodrich & Rosati, Professional Corporation, counsel for the Purchasers,
which approval shall not be unreasonably withheld. The Company shall furnish you
with such manually signed or conformed copies of such opinions, certificates,
letters and documents as you request.

If any condition to the Purchasers’ obligations hereunder to be satisfied prior
to or at the First Closing Date is not so satisfied, this Agreement at your
election will terminate upon notification to the Company without liability on
the part of any Purchaser or the Company, except for the expenses to be paid or
reimbursed by the Company pursuant to Sections 7 and 9 hereof and except to the
extent provided in Section 10 hereof.

 

  Section 9. Reimbursement of Purchasers’ Expenses.

If the sale to the Purchasers of the Firm Securities on the First Closing Date
is not consummated because any condition of the Purchasers’ obligations
hereunder is not satisfied or because of any refusal, inability or failure on
the part of the Company to perform any agreement herein or to comply with any
provision hereof, unless such failure to satisfy such condition or to comply
with any provision hereof is due to the default or omission of any Purchaser,
the Company agrees to reimburse you and the other Purchasers upon demand for all
out-of-pocket expenses (including reasonable fees and disbursements of counsel)
that shall have been reasonably incurred by you and them in connection with the
proposed purchase and the sale of the Securities. Any such termination shall be
without liability of any party to any other party except that the provisions of
Section 7, Section 9 and Section 10 shall at all times be effective and shall
apply.

 

  Section 10. Indemnification.

(a) The Company agrees to indemnify and hold harmless each Purchaser and each
person, if any, who controls any Purchaser within the meaning of the 1933 Act or
the Exchange Act against any losses, claims, damages or liabilities, joint or
several, to which such Purchaser or such controlling person may become subject
under the 1933 Act, the Exchange Act or other federal or state statutory law or
regulation, at common law or otherwise (including in settlement of any
litigation if such settlement is effected with the written consent of the
Company), insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the Preliminary Offering
Memorandum, the Pricing Memorandum or any amendment or supplement thereto, any
Additional Written Offering Communication prepared by or on behalf of, used by,
or referred to by the Company, any road show or the Offering Memorandum or any
amendment or supplement thereto, or arise out of or are based upon the omission
or alleged omission to state therein a material

 

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fact required to be stated therein or necessary to make the statements therein
not misleading in light of the circumstances under which they were made; and
will reimburse each Purchaser and each such controlling person for any legal or
other expenses reasonably incurred by such Purchaser or such controlling person
in connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Company will not be liable in
any such case to the extent that any such loss, claim, damage or liability
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in the Preliminary Offering Memorandum, the
Pricing Memorandum or any amendment or supplement thereto, any Additional
Written Offering Communication prepared by or on behalf of, used by, or referred
to by the Company, any road show or the Offering Memorandum or any amendment or
supplement thereto in reliance upon and in conformity with written information
furnished to the Company by or on behalf of any Purchaser through the
Representative, specifically for use therein. In addition to its other
obligations under this Section 10(a), the Company agrees that, as an interim
measure during the pendency of any claim, action, investigation, inquiry or
other proceeding arising out of or based upon any statement or omission, or any
alleged statement or omission, described in this Section 10(a), it will
reimburse the Purchasers on a monthly basis for all reasonable legal and other
expenses incurred in connection with investigating or defending any such claim,
action, investigation, inquiry or other proceeding, notwithstanding the absence
of a judicial determination as to the propriety and enforceability of the
Company’s obligation to reimburse the Purchasers for such expenses and the
possibility that such payments might later be held to have been improper by a
court of competent jurisdiction. This indemnity agreement will be in addition to
any liability which the Company may otherwise have.

(b) Each Purchaser will severally indemnify and hold harmless the Company, each
of its directors, each of its officers, and each person, if any, who controls
the Company within the meaning of the 1933 Act or the Exchange Act, against any
losses, claims, damages or liabilities to which the Company, or any such
director, officer, or controlling person may become subject under the 1933 Act,
the Exchange Act or other federal or state statutory law or regulation, at
common law or otherwise (including in settlement of any litigation, if such
settlement is effected with the written consent of such Purchaser), insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue or alleged untrue statement of any
material fact contained in the Preliminary Offering Memorandum, the Pricing
Memorandum or any amendment or supplement thereto, any Additional Written
Offering Communication prepared by or on behalf of, used by, or referred to by
the Company, any road show or the Offering Memorandum or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances under which they were made to the extent, but only to the extent,
that such untrue statement or alleged untrue statement or omission or alleged
omission was made in the Preliminary Offering Memorandum, the Pricing Memorandum
or any amendment or supplement thereto, any Additional Written Offering
Communication prepared by or on behalf of, used by, or referred to by the
Company, any road show or the Offering Memorandum or any amendment or supplement
thereto in reliance upon and in conformity with Section 3 of this Agreement or
any other written information furnished to the Company by such Purchaser through
the Representative specifically for use in the preparation thereof, it being
understood and agreed that the only such information consists of the following:
the first sentence of the sixth paragraph, the fourth sentence of the seventh
paragraph and the fourteenth

 

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paragraph, each under the heading “Plan of Distribution” in the Preliminary
Offering Memorandum and the Offering Memorandum; and will reimburse any legal or
other expenses reasonably incurred by the Company, or any such director,
officer, or controlling person in connection with investigating or defending any
such loss, claim, damage, liability or action. In addition to their other
obligations under this Section 10(b), the Purchasers agree that, as an interim
measure during the pendency of any claim, action, investigation, inquiry or
other proceeding arising out of or based upon any statement or omission, or any
alleged statement or omission, described in this Section 10(b), they will
reimburse the Company on a monthly basis for all reasonable legal and other
expenses incurred in connection with investigating or defending any such claim,
action, investigation, inquiry or other proceeding, notwithstanding the absence
of a judicial determination as to the propriety and enforceability of the
Purchasers’ obligation to reimburse the Company for such expenses and the
possibility that such payments might later be held to have been improper by a
court of competent jurisdiction. This indemnity agreement will be in addition to
any liability which such Purchaser may otherwise have.

(c) Promptly after receipt by an indemnified party under this Section 10 of
notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against an indemnifying party under this
Section 10, notify the indemnifying party of the commencement thereof; but the
omission so to notify the indemnifying party will not relieve it from any
liability which it may have to any indemnified party except to the extent that
the indemnifying party was prejudiced by such failure to notify. In case any
such action is brought against any indemnified party, and it notifies an
indemnifying party of the commencement thereof, the indemnifying party will be
entitled to participate in, and, to the extent that it may wish, jointly with
all other indemnifying parties similarly notified, to assume the defense
thereof, with counsel reasonably satisfactory to such indemnified party;
provided, however, if the defendants in any such action include both the
indemnified party and the indemnifying party and the indemnified party shall
have reasonably concluded, based on the advice of outside counsel, that there
may be legal defenses available to it and/or other indemnified parties which are
different from or additional to those available to the indemnifying party, or
the indemnified and indemnifying parties may have conflicting interests which
would make it inappropriate for the same counsel to represent both of them, the
indemnified party or parties shall have the right to select separate counsel to
assume such legal defense and otherwise to participate in the defense of such
action on behalf of such indemnified party or parties. Upon receipt of notice
from the indemnifying party to such indemnified party of its election so to
assume the defense of such action and approval by the indemnified party of
counsel, the indemnifying party will not be liable to such indemnified party
under this Section 10 for any legal or other expenses subsequently incurred by
such indemnified party in connection with the defense thereof unless (i) the
indemnified party shall have employed such counsel in connection with the
assumption of legal defense in accordance with the proviso to the next preceding
sentence (it being understood, however, that the indemnifying party shall not be
liable for the expenses of more than one separate counsel, approved by the
Representative in the case of paragraph (a) representing all indemnified parties
not having different or additional defenses or potential conflicting interest
among themselves who are parties to such action), (ii) the indemnifying party
shall not have employed counsel reasonably satisfactory to the indemnified party
to represent the indemnified party within a reasonable time after notice of
commencement of the action or (iii) the indemnifying party has authorized the
employment of counsel for the indemnified party at the expense of the
indemnifying party. No indemnifying party shall, without the prior written
consent of the

 

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indemnified party, effect any settlement of any pending or threatened proceeding
in respect of which any indemnified party is or could have been a party and
indemnity could have been sought hereunder by such indemnified party, unless
such settlement includes an unconditional release of such indemnified party from
all liability arising out of such proceeding.

(d) If the indemnification provided for in this Section 10 is unavailable to an
indemnified party under paragraphs (a) or (b) hereof in respect of any losses,
claims, damages or liabilities referred to therein, then each applicable
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages or liabilities (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company and the
Purchasers from the offering of the Securities or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause (i) above but also the relative fault of the Company and the
Purchasers in connection with the statements or omissions which resulted in such
losses, claims, damages or liabilities, as well as any other relevant equitable
considerations. The respective relative benefits received by the Company and the
Purchasers shall be deemed to be in the same proportion, in the case of the
Company, as the total price paid to the Company for the Securities by the
Purchasers (net of discount but before deducting expenses) bears to, and in the
case of the Purchasers, as the discount received by them bears to, the total of
such amounts paid to the Company and received by the Purchasers as discount, in
each case as contemplated by Section 4. The relative fault of the Company and
the Purchasers shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission to
state a material fact relates to information supplied by the Company or the
Purchasers and the parties’ relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission. The amount
paid or payable by a party as a result of the losses, claims, damages and
liabilities referred to above shall be deemed to include any legal or other fees
or expenses reasonably incurred by such party in connection with investigating
or defending any action or claim.

The Company and the Purchasers agree that it would not be just and equitable if
contribution pursuant to this Section 10(d) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 10(d), no Purchaser shall be
required to contribute any amount in excess of the amount by which the total
price at which the Securities purchased by it and distributed exceeds the amount
of any damages which such Purchaser has otherwise been required to pay by reason
of such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the 1933 Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The Purchasers’
obligations to contribute pursuant to this Section 10(d) are several in
proportion to their respective commitments and not joint.

(e) The provisions of this Section 10 shall survive any termination of this
Agreement.

 

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  Section 11. Default of Purchasers.

It shall be a condition to the agreement and obligation of the Company to sell
and deliver the Securities hereunder, and of each Purchaser to purchase the
Securities hereunder, that, except as hereinafter in this paragraph provided,
each of the Purchaser shall purchase and pay for all Securities agreed to be
purchased by such Purchaser hereunder upon tender to the Representative of all
such Securities in accordance with the terms hereof. If any Purchaser or
Purchasers default in their obligations to purchase Securities hereunder on the
First Closing Date and the aggregate principal amount of Securities which such
defaulting Purchaser or Purchasers agreed but failed to purchase does not exceed
10 percent of the total aggregate principal amount of Securities which the
Purchasers are obligated to purchase on the First Closing Date, the
Representative (or, if the Representative is in default, the non-defaulting
Purchasers) may make arrangements satisfactory to the Company for the purchase
of such Securities by other persons, including any of the Purchasers, but if no
such arrangements are made by such date the nondefaulting Purchasers shall be
obligated severally, in proportion to their respective commitments hereunder, to
purchase the Securities which such defaulting Purchasers agreed but failed to
purchase on such date. If any Purchaser or Purchasers so default and the
aggregate principal amount of Securities with respect to which such default or
defaults occur is more than the above percentage and arrangements satisfactory
to the Representative (or, if the Representative is in default, the
non-defaulting Purchasers) and the Company for the purchase of such Securities
by other persons are not made within 36 hours after such default, this Agreement
will terminate without liability on the part of any nondefaulting Purchaser or
the Company, except for the expenses to be paid by the Company pursuant to
Sections 7 and 9 hereof and except to the extent provided in Section 10 hereof.

In the event that Securities to which a default relates are to be purchased by
the nondefaulting Purchasers or by another party or parties, the Representative
(or, if the Representative is in default, the non-defaulting Purchasers) or the
Company shall have the right to postpone the First Closing Date for not more
than seven business days in order that the necessary changes in the Pricing
Memorandum and Offering Memorandum and any other documents, as well as any other
arrangements, may be effected. As used in this Agreement, the term “Purchaser”
includes any person substituted for an Purchaser under this Section 11. Nothing
herein will relieve a defaulting Purchaser from liability for its default.

 

  Section 12. Effective Date.

This Agreement shall become effective upon the execution and delivery hereof by
the parties hereto.

 

  Section 13. Termination.

Without limiting the right to terminate this Agreement pursuant to any other
provision hereof:

(a) This Agreement may be terminated by the Company by notice to you or by you
by notice to the Company at any time prior to the time this Agreement shall
become effective as to all its provisions, and any such termination shall be
without liability on the part of the Company to any Purchaser (except for the
expenses to be paid or reimbursed pursuant to Sections 7 and 9 hereof and except
to the extent provided in Section 10 hereof) or of any Purchaser to the Company.

 

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(b) This Agreement may also be terminated by you prior to the First Closing
Date, and the option referred to in Section 4, if exercised, may be cancelled at
any time prior to the Second Closing Date, if (i) trading in securities on the
New York Stock Exchange or The Nasdaq Stock Market shall have been suspended or
minimum prices shall have been established on such exchange or market, or (ii) a
banking moratorium shall have been declared by Florida, New York, or United
States authorities, or (iii) there shall have been any material adverse change
in financial markets or any material adverse change in political, economic or
financial conditions which, in the opinion of the Representative, either renders
it impracticable or inadvisable to proceed with the offering and sale of the
Securities on the terms set forth in the Pricing Memorandum or materially and
adversely affects the market for the Securities, or (iv) there shall have been
an outbreak of major armed hostilities between the United States and any foreign
power or terrorist organization which in the opinion of the Representative makes
it impractical or inadvisable to offer or sell the Securities. Any termination
pursuant to this paragraph (b) shall be without liability on the part of any
Purchaser to the Company or on the part of the Company to any Purchaser (except
for expenses to be paid or reimbursed pursuant to Sections 7 and 9 hereof and
except to the extent provided in Section 10 hereof).

 

  Section 14. Representations and Indemnities to Survive Delivery.

The respective indemnities, agreements, representations, warranties and other
statements of the Company, of its officers and of the several Purchasers set
forth in or made pursuant to this Agreement will remain in full force and
effect, regardless of any investigation made by or on behalf of any Purchaser or
the Company or any of its or their partners, principals, members, officers or
directors or any controlling person, and will survive delivery of and payment
for the Securities sold hereunder.

 

  Section 15. Notices.

All communications hereunder will be in writing and, if sent to the Purchaser
will be mailed, delivered or telegraphed and confirmed to you c/o JMP Securities
LLC, 600 Montgomery Street, Suite 1100, San Francisco, CA 94111, with a copy to
John A. Fore, c/o Wilson Sonsini Goodrich & Rosati, Professional Corporation,
Palo Alto, California 94304; if sent to the Company will be mailed, delivered or
telegraphed and confirmed to the Secretary of the Company at its corporate
headquarters, 5300 West Cypress Street, Suite 100, Tampa, FL 33607, with a copy
to Curt P. Creely, c/o Foley & Lardner LLP, 100 North Tampa St., Suite 2700,
Tampa, Florida 33602.

 

  Section 16. No Advisory or Fiduciary Relationship.

The Company acknowledges and agrees that (a) the purchase and sale of the
Securities pursuant to this Agreement, including the determination of the
offering price of the Securities and any related discounts and commissions, is
an arm’s-length commercial transaction between the Company, on the one hand, and
the several Purchasers, on the other hand, (b) in connection with the offering
of the Securities contemplated by this Agreement and the process leading to such
transaction each Purchaser is and has been acting solely as a principal and is
not the agent or fiduciary of the Company, or its stockholders, creditors,
employees or any other party, (c) no Purchaser has assumed or will assume an
advisory or fiduciary responsibility in favor of the

 

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Company with respect to the offering of the Securities contemplated by this
Agreement or the process leading thereto (irrespective of whether such Purchaser
has advised or is currently advising the Company on other matters) and no
Purchaser has any obligation to the Company with respect to the offering of the
Securities contemplated by this Agreement except the obligations expressly set
forth in this Agreement, (d) the Purchasers and their respective affiliates may
be engaged in a broad range of transactions that involve interests that differ
from those of the Company and (e) the Purchasers have not provided any legal,
accounting, regulatory or tax advice with respect to the offering of the
Securities contemplated by this Agreement and the Company has consulted its own
legal, accounting, regulatory and tax advisors to the extent it deemed
appropriate.

 

  Section 17. Successors.

This Agreement will inure to the benefit of and be binding upon the parties
hereto and their respective successors, personal representatives and assigns,
and to the benefit of the officers and directors and controlling persons
referred to in Section 10, and no other person will have any right or obligation
hereunder. The term “successors” shall not include any purchaser of the
Securities as such from any of the Purchasers merely by reason of such purchase.

 

  Section 18. Representation of Purchasers.

You will act as Representative for the several Purchasers in connection with
this financing, and any action under or in respect of this Agreement taken by
you will be binding upon all the Purchasers.

 

  Section 19. Partial Unenforceability.

If any section, paragraph or provision of this Agreement is for any reason
determined to be invalid or unenforceable, such determination shall not affect
the validity or enforceability of any other section, paragraph or provision
hereof.

 

  Section 20. Applicable Law.

This Agreement shall be governed by and construed in accordance with the laws of
the State of New York.

[Signature Page Follows]

 

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If the foregoing is in accordance with your understanding of our agreement,
kindly sign and return to us the enclosed duplicates hereof, whereupon it will
become a binding agreement between the Company and the several Purchasers
including you, all in accordance with its terms.

 

Very truly yours, HCI Group, Inc. By:  

/s/ Andrew L. Graham

  Andrew L. Graham,   As General Counsel

 

[SIGNATURE PAGE TO PURCHASE AGREEMENT]

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The foregoing Agreement is hereby confirmed and accepted as of the date first
above written.

 

JMP Securities LLC Acting as Representative of the several Purchasers named in
Schedule A. By:   JMP Securities LLC By:  

/s/ Thomas Kilian

  Name: /s/ Thomas Kilian   Title: Managing Director

 

[SIGNATURE PAGE TO PURCHASE AGREEMENT]

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Schedule A

 

Purchaser

   Number of Firm
Securities to be
Purchased  

JMP Securities LLC

   $ 86,000,000   

Sterne, Agee & Leach, Inc.

     12,000,000   

Gilford Securities Incorporated

     2,000,000      

 

 

 

Total

   $ 100,000,000   

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Schedule B

 

  1. Pricing term sheet, dated December 5, 2013

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

PRICING TERM SHEET    STRICTLY CONFIDENTIAL DATED December 5, 2013   

HCI GROUP, INC.

$100,000,000 3.875% CONVERTIBLE SENIOR NOTES DUE 2019

The information in this pricing term sheet supplements HCI Group, Inc.’s
preliminary offering memorandum, dated December 5, 2013 (the “Preliminary
Offering Memorandum”), and supersedes the information in the Preliminary
Offering Memorandum to the extent inconsistent with the information in the
Preliminary Offering Memorandum. In all other respects, this term sheet is
qualified in its entirety by reference to the Preliminary Offering Memorandum,
including all other documents incorporated by reference therein. References to
“we,” “our” and “us” refer to HCI Group, Inc. and not to its consolidated
subsidiaries. Terms used herein but not defined herein shall have the respective
meanings as set forth in the Preliminary Offering Memorandum. All references to
dollar amounts are references to U.S. dollars.

 

Issuer:    HCI Group, Inc. Ticker/Exchange for Common Stock (“common stock”):   
“HCI”/ The New York Stock Exchange. Securities:    3.875% Convertible Senior
Notes due 2019 (the “notes”). Principal Amount:    $100,000,000. Option to
Purchase Additional Notes:    $15,000,000. Denominations:    $1,000 and
multiples of $1,000 in excess thereof. Ranking:    Senior unsecured. Maturity:
   March 15, 2019, unless earlier repurchased or converted. No Redemption at Our
Option:    We may not redeem the notes prior to the maturity date, and no
“sinking fund” is provided for the notes, which means that we are not required
to redeem or retire the notes periodically. Fundamental Change:    If we undergo
a “fundamental change” (as defined in the Preliminary Offering Memorandum under
the caption “Description of Notes—Fundamental Change Permits Holders to Require
Us to Repurchase Notes”) prior to the maturity date of the notes, subject to
certain conditions, holders may require us to repurchase for cash all or part of
their notes in principal amounts of $1,000 or a multiple thereof. The
fundamental change repurchase price will be equal to 100% of the principal
amount of the notes to be repurchased, plus accrued and unpaid interest to, but
excluding, the fundamental change repurchase date. Interest and Interest Payment
Dates:    3.875% per year.    Interest will accrue from December 11, 2013 and
will be payable semiannually in arrears on March 15 and September 15 of each
year, beginning on March 15, 2014. Regular Record Dates:    March 1 and
September 1 of each year, immediately preceding the relevant March 15 or
September 15 interest payment date, as the case may be.

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Issue Price:    100% of principal, plus accrued interest, if any, from
December 11, 2013 if settlement occurs after that date. Last Reported Sale Price
of Our Common Stock on December 5, 2013:    $48.05. Initial Conversion Rate:   
16.0090 shares of common stock per $1,000 principal amount of notes, subject to
adjustment. Initial Conversion Price:    Approximately $62.47 per share, subject
to adjustment. Conversion Premium:    Approximately 30% above the last reported
sale price of our common stock on December 5, 2013. Settlement Method:    Cash,
shares of our common stock or a combination of cash and shares of our common
stock, at our election, as described in the Preliminary Offering Memorandum.
Sole Book-Running Manager:    JMP Securities LLC Co-Managers:   

Sterne, Agee & Leach, Inc.

Gilford Securities Incorporated

Pricing Date:    December 5, 2013. Trade Date:    December 6, 2013. Expected
Settlement Date:    December 11, 2013. CUSIP Number (144A):    40416E AA1 ISIN
(144A):    US40416EAA10 Listing:    None.

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Net Proceeds:    We estimate that the net proceeds from this offering will be
approximately $96.5 million ($111.1 million if the initial purchaser exercises
its option to purchase additional notes in full), after deducting the initial
purchaser’s discount and commissions and estimated offering expenses payable by
us. Use of Proceeds:    We intend to use:       •       up to $30 million of the
net proceeds of the offering to repurchase shares of our common stock
concurrently with the pricing of this offering pursuant to a prepaid forward
contract; and       •       remaining proceeds from the offering for general
corporate purposes.    See “Use of Proceeds” in the Preliminary Offering
Memorandum.

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Ratio of Earnings to Fixed Charges

 

     Year Ended December 31,     

Nine Months Ended

September 30,

       2010      2011      2012      2012      2013  

Ratio of earnings to fixed charges (1)

     139.5         206.1         282.7         232.8         34.2   

Ratio of earnings to combined fixed charges and preferred stock dividends (1)

     139.5         11.7         71.1         48.7         32.4   

 

(1) For purposes of calculating these ratios, earnings consist of net income to
which has been added income taxes and fixed charges. Fixed charges consist of
interest on all indebtedness and one-third of rental expense (approximating the
portion which represents interest). The ratio of earnings to fixed charges is
computed by dividing earnings by the sum of fixed charges and the ratio of
earnings to combined fixed charges and preferred stock dividends is computed by
dividing earnings by the sum of fixed charges and preferred stock dividends.

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CAPITALIZATION

The following table sets forth our cash and cash equivalents and short-term
investments, short-term debt and capitalization at September 30, 2013 (i) on an
actual basis and (ii) as adjusted to give effect to the sale of the notes
offered hereby in the aggregate principal amount of $100 million and the use of
proceeds therefrom as described in “Use of Proceeds,” and the deposit of the net
proceeds in cash and cash equivalents.

You should read this table in conjunction with the information included under
the heading “Use of Proceeds” and with our audited consolidated financial
statements and related notes thereto and unaudited consolidated financial
statements and related notes thereto incorporated by reference in this offering
memorandum.

 

     As of September 30, 2013
       Actual      As
Adjusted       

(unaudited)

(in thousands, except
share amounts)

 

Cash and cash equivalents and short-term investments:

     

Cash and cash equivalents

   $ 273,878       $ 340,408   

Short-term investments

     13,770         13,770      

 

 

    

 

 

 

Total cash and cash equivalents and short-term investments

   $ 287,648       $ 354,178      

 

 

    

 

 

 

Notes offered hereby(1)

     —         $ 100,000      

 

 

    

 

 

 

Total debt

     40,250         140,250      

 

 

    

 

 

 

Stockholders’ equity:

     

7% Series A cumulative convertible preferred stock (liquidation preference
$10.00 per share), no par value, 1,500,000 shares authorized, 149,919 shares
issued and outstanding at September 30, 2013

     —           —     

Preferred stock (no par value, 18,500,000 shares authorized, no shares issued or
outstanding)

     —           —     

Common stock, no par value, authorized 40,000,000 shares, issued 11,476,835
shares issued and outstanding at September 30,
2013(2)

     —           —     

Additional paid-in capital(3)

     67,292         37,292   

Retained earnings

     98,070         98,070   

Accumulated other comprehensive income

     1,171         1,171      

 

 

    

 

 

 

Total stockholders’ equity(3)

     166,533         136,533      

 

 

    

 

 

 

Total capitalization(3)

   $ 468,354       $ 276,783      

 

 

    

 

 

 

 

(1)  In accordance with ASC 470-20, a convertible debt instrument (such as the
notes) that may be wholly or partially settled in cash is required to be
separated into liability and equity components, such that non-cash interest
expense reflects our nonexchangeable debt interest rate. Upon issuance, a debt
discount is recognized as a decrease in debt and an increase in equity. The debt
component accretes up to the principal amount over the expected term of the
debt. ASC 470-20 does not affect the actual amount that we are required to
repay, and the amount shown in the table above for the notes is the aggregate
principal amount of the notes without reflecting the debt discount or fees and
expenses that we are required to recognize or the increase in paid-in capital on
our consolidated balance sheet.

(2)  The common stock shown in the table above excludes approximately
(i) 280,000 shares of common stock issuable upon exercise of options, having a
weighted average exercise price of $2.91; (ii) approximately 700,000 shares with
respect to restricted stock awards granted under our equity incentive plans; and
(iii) approximately 4.4 million additional shares of our common stock reserved
for issuance under our equity incentive plans. In addition, the common stock
shown excludes the shares of common stock reserved for issuance upon conversion
of the notes offered by this offering memorandum.

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(3)  Issuance of the notes (giving effect to the application of ASC 470-20 as
described in note (1) above) will result in a net increase in additional paid-in
capital and, therefore, a net increase in total stockholders’ equity and total
capitalization, which is not reflected in the table above.

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

Description of Notes—Conversion Rights—Adjustment to Conversion Rate Upon
Conversion Upon a Make-Whole Fundamental Change

Holders who convert their notes in connection with a make-whole fundamental
change occurring prior to the maturity date of the notes may be entitled to an
increase in the conversion rate for the notes so surrendered for conversion.

Make-Whole Table: The following table sets forth the number of additional shares
by which the conversion rate will be increased per $1,000 principal amount of
notes for each stock price and effective date set forth below:

 

     Stock Price  

Effective Date

   $48.05      $50.00      $55.00      $60.00      $65.00      $70.00     
$75.00      $80.00      $90.00      $100.00      $110.00      $120.00  

December 11, 2013

     4.8031         4.3526         3.3876         2.6392         2.0525        
1.5890         1.2205         0.9264         0.5029         0.2678        
0.1366         0.0678   

December 15, 2014

     4.8031         4.2342         3.2571         2.5110         1.9363        
1.4909         1.1437         0.8728         0.4953         0.2353        
0.1220         0.0050   

December 15, 2015

     4.8031         4.0810         3.0838         2.3385         1.7785        
1.3547         1.0312         0.7796         0.4142         0.2162        
0.0772         0.0000   

December 15, 2016

     4.8031         3.9354         2.8840         2.1160         1.5474        
1.1143         0.7824         0.5471         0.2873         0.1061        
0.0000         0.0000   

December 15, 2017

     4.8031         3.8086         2.6158         1.7788         1.2008        
0.8059         0.5400         0.3646         0.1760         0.0977        
0.0000         0.0000   

December 15, 2018

     4.8031         3.7960         2.1473         1.0232         0.4375        
0.1996         0.1065         0.0695         0.0452         0.0386        
0.0000         0.0000   

March 15, 2019

     4.8031         3.7834         1.9536         0.3860         0.0000        
0.0000         0.0000         0.0000         0.0000         0.0000        
0.0000         0.0000   

The exact stock prices and effective dates may not be set forth in the table
above, in which case

 

  •   If the stock price is between two stock prices in the table or the
effective date is between two effective dates in the table, the number of
additional shares by which the conversion rate will be increased will be
determined by a straight-line interpolation between the number of additional
shares set forth for the higher and lower stock prices and the earlier and later
effective dates, as applicable, based on a 365-day year.

 

  •   If the stock price is greater than $120.00 per share (subject to
adjustment in the same manner as the stock prices set forth in the column
headings of the table above), no additional shares will be added to such
conversion rate.

 

  •   If the stock price is less than $48.05 per share (subject to adjustment in
the same manner as the stock prices set forth in the column headings of the
table above), no additional shares will be added to such conversion rate.

Notwithstanding the foregoing, in no event will the conversion rate per $1,000
principal amount of notes exceed 20.8121 shares of common stock, subject to
adjustment in the same manner as the conversion rate as set forth in the
Preliminary Offering Memorandum under the caption “Description of Notes —
Conversion Rights —Conversion Rate Adjustments.”

[Remainder of Page Intentionally Blank]

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This communication is intended for the sole use of the person to whom it is
provided by the sender. This material is confidential and is for your
information only and is not intended to be used by anyone other than you. This
information does not purport to be a complete description of the notes or the
offering. This communication does not constitute an offer to sell or the
solicitation of an offer to buy any notes in any jurisdiction to any person to
whom it is unlawful to make such offer or solicitation in such jurisdiction.

The notes and any shares of common stock issuable upon conversion of the notes
have not been and will not be registered under the U.S. Securities Act of 1933,
as amended (the “Securities Act”), or any other securities laws, and may not be
offered or sold within the United States or any other jurisdiction, except
pursuant to an exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act and any other applicable
securities laws. The initial purchasers are initially offering the notes only to
qualified institutional buyers as defined in, and in reliance on, Rule 144A
under the Securities Act.

The notes and any shares of common stock issuable upon conversion of the notes
are not transferable except in accordance with the restrictions described under
“Notice to Investors” and “Transfer Restrictions” in the Preliminary Offering
Memorandum.

A copy of the Preliminary Offering Memorandum for the offering of the notes may
be obtained by contacting JMP Securities LLC, Attn: Claire Cornell, 600
Montgomery Street, Suite 1000, San Francisco, California 94111, by telephone at
(415) 835-8985 or email at ccornell@jmpsecurities.com.

Any legends, disclaimers or other notices that may appear below are not
applicable to this communication and should be disregarded. Such legends,
disclaimers or other notices have been automatically generated as a result of
this communication having been sent via Bloomberg or another system.

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Schedule C

Signatories to Lock-up Agreement

Paresh Patel

Richard R. Allen

Andrew L. Graham

Sanjay Madhu

Scott R. Wallace

Martin A. Traber

Harish Patel

James Macchiarola

Wayne Burks

George Apostolou

Gregory Politis

Anthony Saravanos

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EXHIBIT A

[FORM OF LOCK-UP LETTER]

December 5, 2013

JMP Securities LLC

600 Montgomery Street

Suite 1100

San Francisco, CA 94111

Ladies and Gentlemen:

The undersigned understands that JMP Securities LLC (the “Representative”)
propose to enter into a Purchase Agreement (the “Purchase Agreement”) with HCI
Group, Inc., a Florida corporation (the “Company”), providing for the placement
(the “Placement”) by the several Purchasers, including the Representative (the
“Purchasers”), of its Convertible Senior Notes due 2019 (the “Securities”). The
Securities will be convertible into cash, shares of common stock of the Company,
no par value (the “Common Stock”) or a combination of cash and Common Stock, at
the Company’s election.

To induce the Purchasers that may participate in the Placement to continue their
efforts in connection with the Placement, the undersigned hereby agrees that,
without the prior written consent of the Representative on behalf of the
Purchasers, it will not, during the period commencing on the date hereof and
ending 60 days after the date of the final offering memorandum (the “Restricted
Period”) relating to the Placement, (1) offer, pledge, sell, contract to sell,
sell any option or contract to purchase, purchase any option or contract to
sell, grant any option, right or warrant to purchase, lend, or otherwise
transfer or dispose of, directly or indirectly, any shares of Common Stock
beneficially owned (as such term is used in Rule 13d-3 of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), by the undersigned or any
other securities so owned convertible into or exercisable or exchangeable for
Common Stock or (2) enter into any swap or other arrangement that transfers to
another, in whole or in part, any of the economic consequences of ownership of
the Common Stock, whether any such transaction described in clause (1) or
(2) above is to be settled by delivery of Common Stock or such other securities,
in cash or otherwise. The foregoing sentence shall not apply to (a) transfers of
shares of Common Stock or any security convertible into Common Stock as a bona
fide gift,(b) to the extent applicable, distributions of shares of Common Stock
or any security convertible into Common Stock to limited partners or
stockholders of the undersigned, (c) transfers of shares of Common Stock or any
security convertible into Common Stock to any trust, partnership or limited
liability company for the direct or indirect benefit of the undersigned or the
immediate family of the undersigned, (d) transfers of shares of Common Stock or
any security convertible into

 

B-1

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Common Stock to a wholly owned subsidiary of the undersigned or to the direct or
indirect members or partners of the undersigned, (e) transfers of shares of
Common Stock or any security convertible into Common Stock by will or intestate,
(f) transfers of shares of Common Stock or any security convertible into Common
Stock to a nominee or custodian of a person or entity to whom a transfer would
be permissible under clauses (a) through (f); provided that in the case of any
transfer or distribution pursuant to clauses (a) thru (f) (i) each donee or
distributee shall sign and deliver a lock-up letter substantially in the form of
this letter and (ii) no filing under Section 16(a) of the Exchange Act,
reporting a reduction in beneficial ownership of shares of Common Stock, shall
be required or shall be voluntarily made during the Restricted Period, (g) in
connection with the surrender or forfeiture of shares to the Company solely to
satisfy tax withholding obligations upon exercise or vesting of stock options or
awards, (h) the establishment of a trading plan pursuant to Rule 10b5-1 under
the Exchange Act for the transfer of shares of Common Stock, provided that
(A) such plan does not provide for the transfer of Common Stock during the
Restricted Period and (B) to the extent a public announcement or filing under
the Exchange Act, if any, is required of or voluntarily made by or on behalf of
the undersigned or the Company regarding the establishment of such plan, such
announcement or filing shall include a statement to the effect that no transfer
of Common Stock may be made under such plan during the Restricted Period, or
(i) sales of shares of Common Stock pursuant to a trading plan established
pursuant to Rule 10b5-1 under the Exchange Act, provided that such trading plan
was established prior to the date hereof and made available to the
Representative or its counsel. In addition, the undersigned agrees that, without
the prior written consent of the Representative on behalf of the Purchasers, it
will not, during the Restricted Period, make any demand for or exercise any
right with respect to, the registration of any shares of Common Stock or any
security convertible into or exercisable or exchangeable for Common Stock. The
undersigned also agrees and consents to the entry of stop transfer instructions
with the Company’s transfer agent and registrar against the transfer of the
undersigned’s shares of Common Stock except in compliance with the foregoing
restrictions.

It is understood that the undersigned will be released from its obligations
under this “lock-up” agreement if the Company notifies the undersigned that it
does not intend to proceed with the Placement, if the Purchase Agreement (other
than the provisions thereof that survive termination) shall terminate or be
terminated prior to payment for and delivery of the Securities or if the
Placement shall not have occurred by January 15, 2014.

The undersigned understands that the Company and the Purchasers are relying upon
this agreement in proceeding toward consummation of the Placement. The
undersigned further understands that this agreement is irrevocable and shall be
binding upon the undersigned’s heirs, legal representatives, successors and
assigns.

Whether or not the Placement actually occurs depends on a number of factors,
including market conditions. Any Placement will only be made pursuant to the
Purchase Agreement, the terms of which are subject to negotiation between the
Company and the Purchasers.

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Very truly yours,

 

(Name)

 

(Address)