EXHIBIT 10.1


 


EMPLOYMENT AGREEMENT


 


THIS AGREEMENT
(the “Agreement”), dated as of April 4, 2006, is by and between CastlePoint
Holdings, Ltd., a Bermuda exempted company (the “Company”), and Michael H. Lee
(the “Executive”).


 


WITNESSETH THAT


 


WHEREAS, the Company
is a newly formed Bermuda exempted company that proposes to make a private
placement of the Company’s securities with net proceeds to the Company of at
least $100 million (the “Offering”); and


 


WHEREAS,
Executive presently serves as the Chairman, President and Chief Executive
Officer of Tower Group, Inc. (“Tower”) and will continue to provide such
services to Tower while employed by the Company; and


 


WHEREAS, the
Executive and the Company wish to enter into a written agreement setting forth
the terms and conditions of the Executive’s employment with the Company
following completion of the Offering; and


 


WHEREAS, this
Agreement is the entire agreement between the parties concerning the subject
matter hereof and supersedes all prior agreements concerning the same subject.


 


NOW,
THEREFORE, in consideration of the premises and the mutual covenants contained
herein, the Company and the Executive hereby agree as follows:


 


1.                                       Term.


 


(a)                                  Term
of Employment.


 


(i)                                     The
Company shall employ the Executive, and the Executive shall serve the Company,
on the terms and subject to the conditions set forth in this Agreement,
commencing on the date of the closing of the Offering (the “Effective Date”)
and, unless sooner terminated pursuant to section 4, continuing until July 31,
2009 or such later date as provided in subsection 1(a)(ii) below (the
“Term of Employment”).


 


(ii)                                  The
Term of Employment shall be extended automatically for one additional year on
the last day before the fifth anniversary of the Effective Date and for one
additional year on each anniversary thereafter unless and until either party
gives written notice to the other not to extend this Agreement at least one
year before such extension would be effectuated.


 


(b)                                 Term
of the Agreement. This Agreement shall become effective on the Effective
Date and shall continue in effect throughout the Term of Employment; provided,
however, the restrictive covenants contained in section 10 of this
Agreement and, as applicable, the Company’s and the Executive’s obligations
under the other provisions of this Agreement


 

















 


shall survive the Term of
Employment and shall continue in effect through the periods provided therein
and/or until the Company’s and/or the Executive’s obligations, as applicable,
thereunder are satisfied.


 


2.                                       Position
and Duties.


 


(a)                                  Positions,
Duties, and Responsibilities. The Executive shall serve as the Chairman of
the Board of Directors of the Company (the “Board”) and the President and Chief
Executive Officer of the Company. As Chief Executive Officer of the Company,
the Executive shall have such duties and responsibilities as are customarily
assigned to such positions, and such other duties and responsibilities not
inconsistent therewith as may from time to time be assigned to him by the
Board. Unless otherwise determined by the Board, in his capacity as Chief
Executive Officer, the Executive shall report solely to the Board. The
Executive agrees to serve without additional compensation in such capacities
(including, without limitation, as an employee or director) with Company
affiliates (other than Tower and its affiliates) as the Board or a committee of
the Board may in its discretion prescribe. Upon termination of the
Executive’s employment with the Company, the Executive’s position as Chairman of
the Board and any employment, board membership or other service relationship
with any Company affiliate shall automatically terminate unless otherwise
determined by the parties hereto.


 


(b)                                 Time
and Attention. Excluding any periods of vacation and sick leave to which
the Executive is entitled, the Executive shall devote a substantial portion of
his attention and time during normal working hours to the business and affairs
of the Company and its affiliates. The Company agrees and acknowledges that
Executive shall continue to serve Tower as its Chairman, President and Chief
Executive Officer and to devote a substantial portion of his attention and time
during normal working hours to the business and affairs of Tower and its
affiliates. It shall not be considered a violation of the foregoing, however,
for the Executive to (i) serve on corporate, industry, educational,
religious, civic, or charitable boards or committees or (ii) make and
attend to passive personal investments in such form as will not require any
material time or attention to the operations thereof during normal working time
and will not violate the provisions of section 10 hereof, so long as such
activities in clauses (i) and (ii) do not materially interfere with
the performance of the Executive’s responsibilities as an employee of the
Company in accordance with this Agreement or violate section 10 of this
Agreement.


 


3.                                       Compensation.
Except as otherwise expressly set forth below, the Executive’s compensation
shall be determined by, and in the sole discretion of, the Compensation
Committee of the Board (the “Committee”).


 


(a)                                  Annual
Base Salary. Subject to adjustment pursuant to this subsection 3(a),
the Executive shall receive an annual base salary of $244,688 during the Term
of Employment (the annual base salary in effect from time to time, “Annual Base
Salary”). The Annual Base Salary shall be payable in accordance with the
Company’s regular payroll practices for its senior officers, as in effect from
time to time. The Annual Base Salary shall be reviewed from time to time, but
not less frequently than annually, and, in the discretion of the Committee may be
adjusted but not decreased below the amount set forth in the first sentence of
this subsection 3(a). To the extent Annual Base Salary is adjusted, then
such adjusted salary shall be the Executive’s Annual Base Salary for all
purposes of this Agreement.


 


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(b)                                 Annual
Bonus. The Executive shall have an opportunity to receive annual bonuses
during the Term of Employment (the “Annual Bonus”), subject to such terms and
conditions as the Committee shall prescribe. The Executive’s target Annual
Bonus opportunity shall be $244,688, it being understood that the actual Annual
Bonus received by the Executive will depend on the level of attainment of
performance and other factors used by the Committee to determine Annual Bonus
amounts and that there is no guarantee that an Annual Bonus will be earned. The
Executive’s target Annual Bonus opportunity shall be reviewed from time to
time, but not less frequently than annually, and, in the discretion of the
Committee, may be adjusted but not decreased below the amount set forth in
the second sentence of this subsection 3(b).


 


(c)                                  Employee
Benefits; Fringe Benefits. In addition to the foregoing, during the Term of
Employment,


 


(i)                                     As
soon as reasonably practicable, but effective on the Effective Date, the Committee
shall grant to the Executive an option to acquire 840,000 of the Company’s
common shares at an exercise price per share equal to the offering price per
share of the Company’s common shares in the Offering. The other terms of the
stock option shall be as set forth in the Company’s 2006 Long-Term Equity
Compensation Plan and the option award agreement entered into thereunder. The
stock option award provided for in this subsection (i) is made as an
inducement essential to the Executive’s entering into this Agreement.


 


(ii)                                  to
the extent not duplicative of the specific benefits provided herein, subject to
the following sentence, the Executive shall be eligible to participate in all
incentive compensation, retirement, supplemental retirement, and deferred
compensation plans, policies and arrangements that are provided generally to
other senior officers of the Company.


 


(iii)                               the
Executive and, as applicable, the Executive’s covered dependents shall be
eligible to participate in all of the Company’s health and welfare benefit
plans (within the meaning of Section 3(1) of the Employee Retirement
Income Security Act of 1974, as amended);


 


(iv)                              the
Executive shall be entitled to receive fringe benefits provided for senior
officers of the Company, and shall be entitled to avail himself of paid
holidays, as determined from time to time by the Company; and


 


(v)                                 the
Executive may also participate in certain executive benefit plans, which may include
a paid country club membership in Bermuda up to $10,000 annually and a monthly
car allowance of up to $1,000.


 


(d)                                 Vacation.
The Executive shall be entitled to not less than 6 weeks of paid vacation per
calendar year during the Term of Employment. Executive agrees to make himself
available during such periods of vacation to the extent needed by the Company. Vacation
days not used within the year shall be carried forward to subsequent years, as
determined by the Company and subject to such conditions or restrictions as the
Company may prescribe.


 


(e)                                  Expenses.
The Executive shall be reimbursed by the Company for reasonable business
expenses actually incurred in rendering to the Company the services provided
for hereunder during the Term of Employment, payable in accordance with
customary


 


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Company practice, after
the Executive presents written expense statements or such other supporting
information as the Company may require of its senior officers for
reimbursement of such expenses. If the Executive relocates to Bermuda, the
Company will provide to the Executive benefits, including housing customarily
provided to similarly situated senior executives residing in Bermuda, and travel
to and from Bermuda for Executive’s immediate family pursuant to Company
policies as in effect from time to time.


 


4.                                       Termination
of Employment.


 


(a)                                  Termination
of Employment and Term of Employment. The Company or the Executive may terminate
the Executive’s employment at any time and for any reason in accordance with
subsection 4(b) below. The Term of Employment shall be deemed to have
ended on the last day of the Executive’s employment. The Term of Employment
shall terminate upon the Executive’s death.


 


(b)                                 Notice
of Termination. Any purported termination of the Executive’s employment
(other than by reason of death) shall be communicated by written Notice of
Termination from one party hereto to the other party hereto in accordance with
the notice provisions contained in subsection 15(b) below. For
purposes of this Agreement, a “Notice of Termination” shall mean a notice that
indicates the Date of Termination and, with respect to a termination due to
Disability, Cause or Good Reason, sets forth in reasonable detail the facts and
circumstances that are alleged to provide a basis for such termination. A
Notice of Termination from the Company shall specify whether the termination is
with or without Cause or due to the Executive’s Disability. A Notice of
Termination from the Executive shall specify whether the termination is with or
without Good Reason and, if the termination is without Good Reason, whether the
termination is due to his Disability or retirement. For avoidance of doubt, the
Executive shall not be deemed to have retired for purposes of this Agreement if
his employment is terminated by the Company (whether or not such termination is
with or without Cause or due to the Executive’s Disability), by the Executive
with Good Reason, due to a Disability or due to the Executive’s death.


 


(c)                                  Date
of Termination. For purposes of this Agreement, “Date of Termination” shall
mean the date specified in the Notice of Termination (but in no event shall
such date be earlier than the 30th day following the date the Notice of
Termination is given, unless expressly agreed to by the parties hereto) or the
date of the Executive’s death.


 


(d)                                 No
Waiver. The failure to set forth any fact or circumstance in a Notice of
Termination, which fact or circumstance was not known to the party giving the
Notice of Termination when the notice was given, shall not constitute a waiver
of the right to assert such fact or circumstance in an attempt to enforce any
right under or provision of this Agreement.


 


(e)                                  Cause.
For purposes of this Agreement, the term “Cause” means: (i) the Executive’s
gross negligence or gross misconduct or (ii) the Executive’s having been
convicted of, or entered a plea of nolo contendere to, a crime involving moral
turpitude or a felony. No act or failure to act directly related to Company
action or inaction that constitutes Good Reason shall constitute Cause under
this Agreement if the Executive has provided a Notice of Termination based on
such Good Reason event prior to the Company’s giving of the Notice of
Termination


 


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for Cause. The Executive’s
termination for Cause shall be effective when and if a resolution is duly
adopted by an affirmative vote of the entire Board (less the Executive),
stating that, in the good faith opinion of the Board, the Executive is guilty
of the conduct described in the Notice of Termination, and such conduct
constitutes Cause under this Agreement; provided, however, that the Executive shall
have been given the opportunity (i) to cure any act or omission that
constitutes Cause if capable of cure and (ii), together with counsel, during
the 30-day period following the receipt by the Executive of the Notice of
Termination and prior to the adoption of the Board’s resolution, to be heard by
the Board.


 


(f)                                    Disability.
For purposes of this Agreement, the Executive shall be deemed to have a
Disability if the Executive is entitled to long-term disability benefits under
the Company’s long-term disability plan or policy, as the case may be, as
in effect on the Date of Termination.


 


(g)                                 Good
Reason. For purposes of this Agreement, the term “Good Reason” means the
occurrence (without the Executive’s express written consent) of any of the
following acts or failures to act by the Company:


 


(i)                                     the
assignment to the Executive of duties materially inconsistent with the
Executive’s position of Chief Executive Officer or a substantial diminution in
the Executive’s authority and duties, except as provided herein;


 


(ii)                                  any
reduction in the Executive’s Annual Base Salary or target Annual Bonus
opportunity, except as provided herein;


 


(iii)                               requiring
the Executive to be based more than 50 miles away from Bermuda or New York City,
New York;


 


(iv)                              the
material breach by the Company of any of its other obligations under this
Agreement; or


 


(v)                                 the
failure of the Company to obtain the assumption of this Agreement as
contemplated in subsection 13(b) hereof.


 


The Executive’s
continued employment shall not constitute consent to, or a waiver of rights
with respect to, any act or failure to act constituting Good Reason hereunder;
provided, however, that no such event described above shall constitute Good
Reason unless the Executive has given a Notice of Termination to the Company
specifying the condition or event relied upon for such termination within 90
days from the Executive’s actual knowledge of the occurrence of such event and,
if capable of cure, the Company has failed to cure the condition or event
constituting Good Reason within the 30 day period following receipt of the
Executive’s Notice of Termination.


 


5.                                       Obligations
of the Company upon Termination.


 


(a)                                  Termination
by the Company for other than Cause or by the Executive for Good Reason. If
the Executive’s employment is terminated by the Company for any reason other
than Cause or Disability or by the Executive for Good Reason:


 


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(i)                                     The
Company shall pay to the Executive, within thirty business days of the Date of
Termination, any earned but unpaid Annual Base Salary;


 


(ii)                                  The
Company shall pay to the Executive, within thirty business days of the Date of
Termination, a prorated Annual Bonus based on (A) the target Annual Bonus
opportunity in the year in which the Date of Termination occurs or the prior
year if no target Annual Bonus opportunity has yet been determined
(disregarding any reduction in target Annual Bonus opportunity that was the
basis for a termination by the Executive for Good Reason) and (B) the
fraction of the year the Executive was employed.


 


(iii)                               The
Company shall pay to the Executive, within thirty business days of the Date of
Termination, a lump-sum payment equal to the sum of 300% of (x) the Executive’s
Annual Base Salary in effect immediately prior to the Date of Termination
(disregarding any reduction in Annual Base Salary that was the basis for a
termination by the Executive for Good Reason), and (y) the average of the Annual
Bonuses paid to the Executive within the three years preceding his termination
of employment or, if none, the most recent target Annual Bonus opportunity for
Executive;


 


(iv)                              For
a three (3) year period after the Date of Termination, the Company will
arrange to provide the Executive (and any covered dependents), without cost to
the Executive, with life, accident and health insurance benefits substantially
similar to those the Executive and any covered dependents were receiving
immediately prior to the Notice of Termination, except for any such benefits
that were waived by the Executive in writing. If the Company arranges to
provide the Executive and covered dependents with life, accident and health
insurance benefits, those benefits will be reduced to the extent comparable
benefits are actually received by, or made available to, the Executive by a
subsequent employer or Tower without cost during the three (3) year period
following the Executive’s Date of Termination. The Executive must report to the
Company any such benefits that he actually receives or are made available. In lieu
of the benefits described in this subsection 5(a)(iv), the Company, in its
sole discretion, may elect to pay to the Executive a lump sum cash payment
equal to the total premiums that would have been paid by the Company to provide
such benefits to the Executive (determined based on the premiums paid by the
Company immediately prior to the Date of Termination). Nothing in this subsection 5(a)(iv) will
affect the Executive’s right to elect COBRA continuation coverage in accordance
with applicable law or extend the COBRA continuation coverage period; and


 


(v)                                 The
Executive shall have at least three (3) months (or until the last day of
the stock option term, whichever occurs first) to exercise any then vested
outstanding stock options.


 


(b)                                 Termination
in Connection with a Change in Control.


 


(i)                                     If,
in anticipation of or within the 24 month period following a Change in Control
(as defined below), the Executive’s employment is terminated by the Company for
any reason other than Cause or Disability or by the Executive for Good Reason,
the Executive shall receive the payments and benefits described in subsection 5(a) and,
in addition,


 


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all of the Executive’s
outstanding equity-based awards shall become fully vested on the Date of
Termination.


 


(ii)                                  For
purposes of this Agreement, the term “Change in Control” means the occurrence
of any of the following events:


 


A.                                   any
“person” (within the meaning ascribed to such term in Section 3(a)(9) of
the Securities Exchange Act of 1934, as amended from time to time (the “Exchange
Act”) and used in Sections 13(d) and 14(d) thereof, including a “group”
as used in Section 13(d) thereof), other than the Company, any
trustee or other fiduciary holding securities under an employee benefit plan of
the Company, or any corporation owned directly or indirectly by the
stockholders of the Company in substantially the same proportion as the
ownership of stock of the Company, (a “Person”) that is not on the Effective
Date the “beneficial owner” (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of the Company representing more
than 35% of the combined voting power of the Company’s then outstanding
securities becomes after the Effective Date the beneficial owner, directly or
indirectly, of securities of the Company representing more than 35% of the
combined voting power of the Company’s then outstanding securities;


 


B.                                     individuals
who, as of the Effective Date, constitute the Board (the “Incumbent Board”)
cease for any reason to constitute at least a majority of the Board of the
Company, provided that any person becoming a director subsequent to the date
hereof whose election, or nomination for election by the Company’s
stockholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board (other than an election or nomination of an
individual whose initial assumption of office is in connection with an actual
or threatened election contest relating to the election of the directors of the
Company) shall be, for purposes of this definition, considered as though such
person were a member of the Incumbent Board;


 


C.                                     consummation
of a merger, consolidation, reorganization, share exchange or similar
transaction (a “Transaction”) of the Company with any other entity, other than
(I) a Transaction that would result in the voting securities of the Company
outstanding immediately prior thereto directly or indirectly continuing to
represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity or a parent company) more than 80% of the
combined voting power of the voting securities of the Company or such surviving
entity or parent company outstanding immediately after such Transaction or (II)
a Transaction effected to implement a recapitalization of the Company (or
similar transaction) in which no Person acquires more than 35% of the combined
voting power of the Company’s then outstanding securities;


 


D.                                    the
sale, transfer or other disposition (in one transaction or a series of
related transactions) of more than 50% of the operating assets of the Company;
or


 


E.                                      the
approval by the shareholders of a plan or proposal for the liquidation or
dissolution of the Company.


 


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Notwithstanding
anything to the contrary contained in the foregoing definition, the Offering or
an initial public offering of the Company’s shares shall not constitute a
Change in Control for purposes of this Agreement. Any transaction with Tower and
its affiliates shall not constitute a Change in Control.


 


(c)                                  Termination
by the Company for Cause or by the Executive without Good Reason. If the
Executive’s employment is terminated by the Company for Cause the Company shall
pay to the Executive, within thirty business days of the Date of Termination,
any earned but unpaid Annual Base Salary and all outstanding stock options
(whether or not then exercisable), restricted stock and other incentive awards
shall be forfeited. If the Executive’s employment is terminated by the
Executive without Good Reason (and not due to death, Disability or retirement),
(i) the Company shall pay to the Executive, within thirty business days of
the Date of Termination, (A) any earned but unpaid Annual Base Salary and (B) the
Company shall pay to the Executive, within thirty business days of the Date of
Termination, a prorated Annual Bonus based on (I) the target Annual Bonus
opportunity in the year in which the Date of Termination occurs or the prior year
if no target Annual Bonus opportunity has yet been determined and (II) the
fraction of the year the Executive was employed, and (ii) the Executive
shall have three months (or until the last day of the stock option term,
whichever occurs first) to exercise any outstanding vested stock options and
all of the Executive’s unvested equity-based awards shall be forfeited as of
the Date of Termination.


 


(d)                                 Termination
due to Death or Disability. If the Executive’s employment is terminated due
to death or Disability, (i) the Company shall pay to the Executive (or to
the Executive’s estate or personal representative in the case of the Executive’s
death), within thirty business days after the Date of Termination, (A) any
earned but unpaid Annual Base Salary and (B) a prorated Annual Bonus based
on (I) the target Annual Bonus opportunity in the year in which the Date of
Termination occurs or the prior year if no target Annual Bonus opportunity has
yet been determined and (II) the fraction of the year the Executive was
employed, and (ii) all of the Executive’s outstanding equity-based awards
shall vest on the Date of Termination and the Executive’s outstanding stock
options shall remain exercisable for three years following the Date of
Termination (or until the last day of the stock option term, whichever occurs
first).


 


(e)                                  Retirement.
If the Executive retires with at least 15 years of combined service with Tower
and the Company and after having attained age 55, (i) the Company shall
pay to the Executive, within thirty business days after the Date of
Termination, any earned but unpaid Annual Base Salary, (ii) the Company
shall pay to the Executive, within thirty business days after the Date of
Termination, a prorated Annual Bonus based on (A) the target Annual Bonus opportunity
in the year in which the Date of Termination occurs or the prior year if no
target Annual Bonus opportunity has yet been determined and (B) the
fraction of the year the Executive was employed, (iii) the Executive shall
receive applicable retiree benefits, if any, provided at such time by the
Company to retirees or as the Company shall determine, and (iv)  the
Executive’s vested stock options shall remain exercisable until the last day of
the option term thereof. All unvested equity-based awards shall be forfeited. If
the Executive retires on or after age 62, the Executive shall receive the
amounts set forth in this subsection 5(e) and, in addition, all outstanding
unvested equity-based awards shall vest on the date of retirement and Executive’s
outstanding stock options shall remain exercisable until the last day of the
option term thereof. The Executive shall only be deemed to have retired for
purposes of this Agreement if he has


 


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satisfied the conditions
set forth in this Section 5(e) and the Executive specifies in the
Notice of Termination that the termination is due to retirement. For avoidance
of doubt, the Executive shall not be entitled to receive benefits pursuant to
this Section 5(e) if he receives benefits under Section 5(a),
(b), (c) or (d).


 


6.                                       Certain
Tax Consequences.


 


(a)                                  The
Excise Tax and Gross-Up Payment. If any payments or benefits paid or
provided or to be paid or provided to the Executive or for his benefit pursuant
to the terms of this Agreement or otherwise in connection with, or arising out
of, his employment with the Company (a “Payment” or “Payments”) would be
subject to any excise tax (the “Excise Tax”) imposed by section 4999 of
the Internal Revenue Code of 1986, as amended (the “Code”), then the Executive
will be entitled to receive an additional payment (a “Gross-Up Payment”) in an
amount such that after payment by the Executive of all taxes (including any
interest, penalties, additional tax, or similar items imposed with respect
thereto and the Excise Tax), including any such taxes imposed upon the Gross-Up
Payment, the Executive retains an amount of the Gross-Up Payment equal to the
Excise Tax imposed upon the Payments.


 


(b)                                 Determination
of Excise Tax and Gross-Up Payment. An initial determination as to whether
a Gross-Up Payment is required pursuant to this Agreement and the amount of
such Gross-Up Payment will be made at the Company’s expense by an accounting
firm selected by the Company. The accounting firm will provide its
determination, together with detailed supporting calculations and
documentation, to the Company and the Executive within 10 days after the Date
of Termination, or such other time as requested by the Company or by the
Executive. If the accounting firm determines that no Excise Tax is payable by
the Executive with respect to a Payment or Payments, it will furnish the
Executive with an opinion reasonably acceptable to the Executive to that
effect. The Gross-Up Payment, if any, will be paid by the Company to the
Executive within thirty business days of the receipt of the accounting firm’s
determination. Within 10 days after the accounting firm delivers its
determination to the Executive, the Executive will have the right to dispute
the determination. The existence of a dispute will not in any way affect the
Executive’s right to receive the Gross-Up Payment in accordance with the
determination. If there is no dispute, the determination will be binding,
final, and conclusive upon the Company and the Executive. If there is a
dispute, the Company and the Executive will together select a second accounting
firm, which will review the determination and the Executive’s basis for the
dispute and then will render its own determination, which will be binding,
final, and conclusive on the Company and on the Executive. The Company will
bear all costs associated with that determination, unless the determination is
not greater than the initial determination, in which case all such costs will
be borne by the Executive.


 


(c)                                  Tax
Rate. For purposes of determining the amount of the Gross-Up Payment, the
Executive will be deemed to pay federal income taxes at the highest marginal
rate of federal income taxation in the calendar year in which the Gross-Up
Payment is to be made and applicable state and local income taxes at the
highest marginal rate of taxation in the state and locality of the Executive’s
residence on the Date of Termination, net of the maximum reduction in federal
income taxes that would be obtained from deduction of those state and local
taxes.


 


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(d)                                 Withholding.
Notwithstanding anything contained in this Agreement to the contrary, in the
event that, according to the accounting firm’s determination, an Excise Tax will
be imposed on any Payment or Payments, the Company will pay to the applicable
government taxing authorities as Excise Tax withholding, the amount of the
Excise Tax that the Company has actually withheld from the Payment or Payments
in accordance with law.


 


(e)                                  Section 409A.
The Company and Executive acknowledge that certain amounts payable under this
Agreement may be treated as non-qualified deferred compensation subject to
Section 409A. The parties agree to confer about modifications to this
Agreement to the extent required to comply with Code Section 409A and the
regulations thereunder. The Company may delay payments under this
Agreement for the period required by Code Section 409A to avoid penalties
and interest to Executive under Code Section 409A.


 


7.                                       Release.
Notwithstanding any provision herein to the contrary, the Company will require
that, prior to payment of any amount or provision of any benefit under section 5
of this Agreement (other than due to the Executive’s death), the Executive
shall have executed a complete release of the Company and its affiliates and
related parties in such form as is reasonably required by the Company, and
any waiting periods contained in such release shall have expired.


 


8.                                       Non-Exclusivity
of Rights. Except as otherwise provided in this Agreement, nothing in this
Agreement shall prevent or limit the Executive’s continuing or future
participation in any plan, program, policy or practice provided by the Company
or any of its affiliated companies for which the Executive may qualify
(other than severance policies). Vested benefits and other amounts that the
Executive is otherwise entitled to receive under any other plan, program,
policy, or practice of, or any contract or agreement with, the Company or any
of its affiliated companies on or after the Date of Termination shall be
payable in accordance with the terms of each such plan, program, policy,
practice, contract or agreement, as the case may be, except as expressly
modified by this Agreement.


 


9.                                       Full
Settlement. In no event shall the Executive be obligated to seek other
employment or take any other action by way of mitigation of the amounts payable
to the Executive under any of the provisions of this Agreement and, except as
otherwise provided in subsections 5(a)(iv) and 15(e), the amount of any
payment or benefit provided for in this Agreement shall not be reduced by any
compensation earned by the Executive as the result of employment by another
employer, by retirement benefits, by offset against any amount claimed to be
owed by the Executive to the Company, or otherwise.


 


10.                                 Non-Competition;
Confidential Information; and Non-Solicitation.


 


(a)                                  Non-Competition.
During the Term of Employment and for the three (3) year period following
the Date of Termination for any reason, the Executive shall not, without the
prior written consent of the Company, as a shareholder, officer, director,
partner, consultant, employee or otherwise, engage in any business or
enterprise which is “in competition” (as defined below) with the Company, its
affiliates, or their successors or assigns (such entities collectively referred
to hereinafter in this section 10 as the “Company”) in Bermuda and the
states of New York and New Jersey; provided, however, that the Executive’s
ownership of less


 


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than five percent of the
issued and outstanding voting securities of a publicly traded company shall
not, in and of itself, be deemed to constitute such competition. A business or
enterprise is deemed to be “in competition” if it is engaged in any business in
which the Company either (i) is engaged in as of the Date of Termination
or (ii) as of the Date of Termination, contemplates engaging in within three
(3) years following the Date of Termination. Notwithstanding the
foregoing, upon termination of employment by the Company for any reason,
Executive shall not be prohibited from becoming employed by Tower and its
affiliates in any capacity.


 


(b)                                 Confidential
Information. The Executive shall hold in a fiduciary capacity for the
benefit of the Company all secret or confidential information, knowledge, trade
secrets, methods, know-how or data relating to the Company or its affiliates
and their businesses or acquisition prospects that the Executive obtained or obtains
during the Executive’s employment by the Company (“Confidential Information”),
provided that “Confidential Information” shall not include any secret or
confidential information, knowledge, trade secrets, methods, know-how or data
that is or becomes generally known to the public (other than as a result of the
Executive’s violation of this section 10). Except as may be required
and appropriate in connection with carrying out his duties under this
Agreement, the Executive shall not communicate, divulge, or disseminate any
material Confidential Information at any time during or after the Executive’s
employment with the Company, except with the prior written consent of the
Company or as otherwise required by law or legal process; provided, however,
that if so required, the Executive will provide the Company with reasonable
notice to contest such disclosure.


 


(c)                                  Non-Solicitation.
During the Term of Employment and for the three (3) year period following
the Date of Termination for any reason, the Executive will not, directly or
indirectly, initiate any action to solicit or recruit anyone who is then an
employee of the Company for the purpose of being employed by him or by any
business, individual, partnership, firm, corporation or other entity on whose
behalf he is acting as an agent, representative, employee or otherwise.


 


(d)                                 Non-Interference
with Customers or Producers. During the Term of Employment and for the three
(3) year period following the Date of Termination for any reason, the
Executive will not interfere with any business relationship between the Company
and any of its customers or agents or brokers that produce insurance business
for the Company.


 


(e)                                  Remedies;
Severability.


 


(i)                                     The
Executive acknowledges that if the Executive shall breach or threaten to breach
any provision of subsections 10(a) through (d), the damages to the Company
may be substantial, although difficult to ascertain, and money damages
will not afford the Company an adequate remedy. Therefore, if the provisions of
subsections 10(a) through (d) are violated, in whole or in part, the
Company shall be entitled to specific performance and injunctive relief,
without prejudice to other remedies the Company may have at law or in
equity.


 


(ii)                                  If
any term or provision of this section 10, or the application thereof to
any person or circumstances shall, to any extent, be invalid or unenforceable,
the remainder of this section 10, or the application of such term or
provision to persons or circumstances other than those as to which it is held invalid
or unenforceable, shall not be


 


11

















 


affected thereby, and
each term and provision of this section 10 shall be valid and enforceable
to the fullest extent permitted by law. Moreover, if a court of competent
jurisdiction deems any provision of subsections 10(a) through (d) to
be too broad in time, scope, or area, it is expressly agreed that such
provision shall be reformed to the maximum degree that would not render it
unenforceable.


 


11.                                 Attorneys’
Fees. Each party shall pay its own legal fees, court costs, litigation
expenses and/or arbitration expenses (as applicable) in connection with any
dispute, litigation or arbitration regarding the validity or enforceability of,
or liability under or otherwise involving, any provision of this Agreement,
except that if the Executive prevails on the majority of material claims
disputed, the Company shall pay all reasonable legal fees, court cost,
litigation expenses and/or arbitration expenses.


 


12.                                 Indemnification.
The Executive shall be indemnified by the Company for actions taken in his
position as an officer, director, employee and agent of the Company to the
greatest extent permitted by applicable law. The Executive shall also be
covered as an insured by a liability insurance policy secured by and maintained
by the Company covering acts of officers and members of the Board.


 


13.                                 Successors.


 


(a)                                  Assignment
of Agreement. This Agreement is personal to the Executive and, without the
prior written consent of the Company, shall not be assignable by the Executive
otherwise than by will or the laws of descent and distribution.


 


(b)                                 Successors
of the Company. No rights or obligations of the Company under this
Agreement may be assigned or transferred except that the Company will
require any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business and/or
assets of the Company to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform it if no such succession had taken place. As used in
this Agreement, “Company” shall mean the Company as herein before defined and
any successor that executes and delivers the agreement provided for in this section 13
or which otherwise becomes bound by all the terms and provisions of this
Agreement by operation of law.


 


14.                                 Arbitration.
Except for matters covered under section 10, in the event of any dispute
or difference between the Company and the Executive with respect to the subject
matter of this Agreement and the enforcement of rights hereunder, either the
Executive or the Company may, by written notice to the other, require such
dispute or difference to be submitted to arbitration. The arbitrator or
arbitrators shall be selected by agreement of the parties or, if they cannot
agree on an arbitrator or arbitrators within 30 days after the date arbitration
is required by either party, then the arbitrator or arbitrators shall be selected
by the American Arbitration Association upon the application of the Executive
or the Company. The determination reached in such arbitration shall be final
and binding on both parties without any right of appeal or further dispute.
Execution of the determination by such arbitrator may be sought in any
court of competent jurisdiction. The arbitrators shall not be bound by judicial
formalities and may abstain from following the strict rules of
evidence and shall interpret this Agreement as an honorable


 


12

















 


engagement and not merely
as a legal obligation. Unless otherwise agreed by the parties, any such
arbitration shall take place in New York, New York.


 


15.                                 Miscellaneous.


 


(a)                                  Governing
Law and Captions. This Agreement shall be governed by, and construed in
accordance with, the laws of New York without reference to principles of
conflict of laws. The captions of this Agreement are not part of the
provisions hereof and shall have no force or effect.


 


(b)                                 Notices.
All notices and other communications under this Agreement shall be in writing
and shall be given by hand delivery or by facsimile (provided confirmation of
receipt of such facsimile is received) to the other party or by registered or
certified mail, return receipt requested, postage prepaid, or by Federal
Express or other nationally-recognized overnight courier that requires
signatures of recipients upon delivery and provides tracking services,
addressed as follows:


 


If to the Executive:


 


Michael H. Lee

65 East 90th Street

New York, New York 10128


 


If to the Company:


 


CastlePoint Holdings Ltd.

Clarendon House


2 Church Street


Hamilton HM 11, Bermuda

Attention:  The Secretary

Facsimile:  (441)-292-4720


 


or to such other address as
either party furnishes to the other in writing in accordance with this subsection 15(b).
Copies (which shall not constitute notice) of notices to the Company shall also
be sent to: Roslyn Tom, Baker & McKenzie, 1114 Avenue of Americas, New
York, New York 10036, or to such other address or to the attention of such
other person as the recipient party has specified by prior written notice to
the sending party. Notices and communications shall be effective when actually
received by the addressee.


 


(c)                                  Amendment.
This Agreement may not be amended or modified except by a written
agreement executed by the parties hereto or their respective successors and
legal representatives.


 


(d)                                 Severability.
The invalidity or unenforceability of any provision of this Agreement shall
not affect the validity or enforceability of any other provision of this
Agreement. If any provision of this Agreement shall be held invalid or
unenforceable in part, the remaining portion of such provision, together with
all other provisions of this Agreement, shall


 


13

















 


remain valid and
enforceable and continue in full force and effect to the fullest extent
consistent with law.


 


(e)                                  Withholding.
Notwithstanding any other provision of this Agreement, the Company may withhold
from amounts payable under this Agreement all federal, state, local, and
foreign taxes that are required to be withheld by applicable laws or
regulations.


 


(f)                                    Waiver.
The Executive’s or the Company’s failure to insist upon strict compliance with
any provision of, or to assert any right under, this Agreement (including,
without limitation, the right of the Executive to terminate employment for Good
Reason) shall not be deemed to be a waiver of such provision or right or of any
other provision of or right under this Agreement.


 


(g)                                 Entire
Understanding; Counterparts. The Executive and the Company acknowledge that
this Agreement supersedes and terminates any other severance and/or employment
agreements between the Executive and the Company or any Company affiliates. This
Agreement may be executed in several counterparts, each of which shall be
deemed an original, and said counterparts shall constitute but one and the same
instrument.


 


(h)                                 Rights
and Benefits Unsecured. The rights and benefits of the Executive under this
Agreement may not be anticipated, assigned, alienated, or subject to
attachment, garnishment, levy, execution, or other legal or equitable process
except as required by law. Any attempts by the Executive to anticipate,
alienate, assign, sell, transfer, pledge or encumber the same shall be void.
Payments hereunder shall not be considered assets of the Executive in the event
of insolvency or bankruptcy.


 


(i)                                     Noncontravention.
The Company represents that the Company is not prevented from entering into, or
performing this Agreement by the terms of any law, order, rule or
regulation, its by-laws or declaration of trust, or any agreement to which it
is a party.


 


(j)                                     Section and
Subsection Headings. The section and subsection headings in
this Agreement are for convenience of reference only; they form no part of
this Agreement and shall not affect its interpretation.


 


14

















 


IN WITNESS
WHEREOF, the Executive has hereunto set the Executive’s hand and, pursuant to
the authorization of the Board, the Company has caused this Agreement to be
executed, all as of the day and year first above written.


 


	
   

  	
  CASTLEPOINT
  HOLDINGS, LTD.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Joel S.
  Weiner

  	
   

  
	
   

  	
  Name: Joel
  S. Weiner

  
	
   

  	
  Its: Senior
  Vice President and Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
    /s/
  Michael H. Lee

  	
   

  
	
   

  	
  Michael H.
  Lee

  



 


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