Document:

Exhibit 10.26

 

Execution Copy

 

STOCK PURCHASE AGREEMENT

 

This Stock
Purchase Agreement (this “Agreement”) is made and entered into as of November
13, 2006, by and between TOWER GROUP, INC., a Delaware corporation (the “Company”),
and CASTLEPOINT REINSURANCE COMPANY, LTD, a Bermuda corporation (the “Purchaser”).

 

RECITALS

 

WHEREAS,
the Company has authorized the sale and issuance of up to an aggregate of
40,000 shares of its Series A Preferred Stock (the “Shares”) to the Purchaser;
and

 

WHEREAS,
the Purchaser desires to purchase the Shares and the Company desires to issue
and sell the Shares to the Purchaser on the terms and conditions set forth
herein;

 

AGREEMENT

 

NOW,
THEREFORE, in consideration of the foregoing recitals
and the mutual promises, representations, warranties, and covenants hereinafter
set forth and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:

 

1.                                      CERTAIN DEFINITIONS.

 

For all
purposes of this Agreement, the following terms shall have the respective
meanings set forth in this Article 1 (such definitions to be equally applicable
to both the singular and plural forms of the terms herein defined):

 

“8-K Filing”
has the meaning ascribed to such term in Section 6.3.

 

“2005 Annual
Report” has the meaning ascribed to such term in Section 4.6(a).

 

“Action” means
any legal, administrative, arbitration or other similar suit, inquiry, notice
of violation, investigation, proceeding, claim, or action.

 

“Affiliate”
means any Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common control with a
Person, as such terms are used in and construed under Rule 144 under the Securities
Act.

 

“Agreement”
has the meaning ascribed to such term in the Recitals.

 

“Applicable
Law” means any federal, state, local or foreign statute, law, ordinance, rule,
regulation, order, writ, injunction, judgment, decree, directive, principle of
common law or interpretation of any of the foregoing by a Governmental
Authority

 

 

applicable to a Person or any such Person’s subsidiaries, properties,
assets, officers, directors, employees or agents.

 

“Bylaws” has
the meaning ascribed to such term in Section 4.4.

 

“Certificate
of Designations” has the meaning ascribed to such term in Section 2.1.

 

“Certificate
of Incorporation” has the meaning ascribed to such term in Section 2.1.

 

“Closing” has
the meaning ascribed to such term in Section 3.1.

 

“Closing Date”
has the meaning ascribed to such term in Section 3.1.

 

“Common Stock”
has the meaning ascribed to such term in Section 2.1.

 

“Contracts”
shall mean all written agreements, contracts, commitments and undertakings,
indentures, notes, bonds, loans, instruments, treaties, leases, mortgages and
other binding arrangements.

 

“Conversion
Shares” has the meaning ascribed to such term in Section 2.1.

 

“Disclosure
Schedule” has the meaning ascribed to such term in the preamble to Article 4.

 

“Domiciliary
Regulators” means the Governmental Authorities responsible for regulating
insurance companies in the Insurance Companies’ respective states of domicile.

 

“DTC” has the
meaning ascribed to such term in Section 7.1.

 

“DTC Transfer
Conditions” has the meaning ascribed to such term in Section 7.1.

 

“Encumbrance”
means any lien, pledge, security interest, easement or encumbrance of any kind
or nature whatsoever, and any agreement to give or grant or permit any of the
foregoing; provided that this definition of “Encumbrance”
shall not include: (i) liens for current Taxes and assessments not yet due and payable,
including, without limitation, liens for non-delinquent ad valorem Taxes,
non-delinquent statutory liens arising other than by reason of any default on
the part of the Company or the Subsidiaries and liens for Taxes being contested
by the Company in good faith, (ii) such liens, minor imperfections of title or
easements on real property, leasehold estates or personal property as do not in
any material respect detract from the value thereof and do not in any material
respect interfere with the present use of the property subject thereto, (iii)
materialmen’s, mechanics’, workmen’s, repairmen’s, employees’, carriers’, warehousemen’s
and other like liens arising in the ordinary course of business or relating to
any construction, rebuilding or repair of any property leased, so long as the
obligations to which such liens relate are not delinquent and also so long as
any such lien does not

 

2

 

materially impair the value of such leased property, (iv) any such
lien, pledge, security interest, easement or encumbrance arising solely as a
result of any action taken by Purchaser or any of its Affiliates and (v) any
limitation or restriction imposed upon the transfer of the Securities by any
registration provision of the Securities Act of 1933, as amended, or any
applicable state securities law regulating the disposition of the Securities.

 

“Exchange Act”
has the meaning ascribed to such term in Section 4.6.

 

“GAAP” has the
meaning ascribed to such term in Section 4.6.

 

“Global Select
Market” has the meaning ascribed to such term in Section 4.13.

 

“Governmental
Authority” means any nation or government, any state or other political
subdivision thereof, any entity exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government or any
self-regulatory agency, commissioner or authority.

 

“Indemnities”
has the meaning ascribed to such term in Section 9.11.

 

“Indemnified
Liabilities” has the meaning ascribed to such term in Section 9.11.

 

“Insurance
Company” means any Subsidiary that is engaged in the business of issuing
insurance policies.

 

“Insurance
Contract” means any insurance policy, annuity contract, or guaranteed investment
contract entered into with a customer whether directly or by reinsurance.

 

“Investigation”
means any governmental or regulatory investigation.

 

“Lock-Up
Period” has the meaning ascribed to such term in Section 7.5.

 

“Material
Adverse Effect” has the meaning ascribed to such term in Section 4.1.

 

“Non-Domiciliary
Regulators” means the Governmental Authorities responsible for regulating
insurance companies outside of the Insurance Companies’ respective states of
domicile.

 

“Permits”
means all licenses, permits, orders, consents, approvals, registrations,
authorizations, qualifications and filings with and under all Applicable Laws
and Governmental Authorities and all industry or other non-governmental
self-regulatory organizations.

 

“Person” means
any individual, corporation, company, partnership (limited or general), joint
venture, limited liability company, association, trust, a government, any
department or agency thereof or any other entity.

 

“Press Release”
has the meaning ascribed to such term in Section 6.3.

 

“Purchaser”
has the meaning ascribed to such term in the Recitals.

 

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“Registration
Rights Agreement” has the meaning ascribed to such term in Section 3.2.

 

“Regulation D”
has the meaning ascribed to such term in the Recitals.

 

“Required
Minimum” means, as of any date, 125% of the maximum aggregate number of shares
of Common Stock then issuable in the future pursuant to the Transaction
Documents, including any Conversion Shares issuable upon the exchange of all
Shares, ignoring any exchange, conversion or exercise limits set forth therein,
determined on the basis of the Exchange Rate (as defined in the Certificate of
Designation), in each case as in effect on the Trading Day immediately prior to
the date of determination.

 

“Rule 144”
means Rule 144 promulgated by the SEC pursuant to the Securities Act, as such
Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the SEC having substantially the same effect as such Rule.

 

“SEC” has the
meaning ascribed to such term in Section 4.3(b).

 

“SEC Reports”
has the meaning ascribed to such term in Section 4.6.

 

“Securities
Act” has the meaning ascribed to such term in Section 4.6.

 

“Security” and
“Securities” have the meaning ascribed to such terms in Section 2.1.

 

“Select SEC
Reports” has the meaning ascribed to such term in Section 4.6.

 

“Shares” has
the meaning ascribed to such term in the Recitals.

 

“Subsidiaries”
has the meaning ascribed to such term in Section 4.1.

 

“Tax” means
(i) all federal, state, local and foreign taxes, charges, fees, imposts, levies
and other assessments, including, without limitation, all income, gross
receipts, capital, sales, use, ad valorem, value added, transfer, franchise,
profits, inventory, capital stock, license, payroll, employment, social
security, unemployment, excise, severance, stamp, occupation, property and
estimated taxes, all taxes which are required to be withheld, customs duties,
fees, assessments and charges of any kind whatsoever, (ii) all interest, penalties,
fines, additions to tax and additional amounts imposed by any Taxing Authority
in connection with any item described in clause (i), and (iii) any transferee
liability in respect of any items described in clauses (i) or (ii) payable by
reason of contract, assumption, transferee liability, operation of law,
Treasury Regulation Section 1.1502-6(a) (or any predecessor or successor thereof
of any analogous or similar provision under law) or otherwise.

 

“Taxing
Authority” means the Internal Revenue Service or any other Governmental
Authority responsible for the administration of any Tax.

 

4

 

“Trading Day”
means a day on which the Common Stock is traded on the Global Select Market.

 

“Transaction
Documents” has the meaning ascribed to such term in Section 3.2.

 

2.                                      AGREEMENT TO SELL AND PURCHASE.

 

2.1                               Authorization of Shares. The
Company has authorized (a) the sale and issuance to Purchaser of the Shares and
(b) the issuance of such shares of its common stock, par value $0.01 per share
(the “Common Stock”) to be issued upon conversion of the Shares (the “Conversion
Shares”). The Shares and the Conversion Shares are collectively referenced
herein as the “Securities” and each of them may individually be referred to
herein as a “Security.” The Securities have the rights, preferences, privileges
and restrictions set forth in the Amended and Restated Certificate of Incorporation
of the Company (the “Certificate of Incorporation”) and the Certificate of
Designations of the Series A Preferred Stock attached hereto as Exhibit A
(the “Certificate of Designations”).

 

2.2                               Sale and
Purchase.
Subject to the terms and conditions hereof, at the Closing (as hereinafter
defined), the Company hereby agrees to issue and sell to the Purchaser, and the
Purchaser agrees to purchase from the Company, the Shares. The purchase price
to be paid by the Purchaser to the Company for the Shares to be sold and
purchased hereunder shall be $40,000,000.

 

3.                                      CLOSING, DELIVERY AND PAYMENT.

 

3.1                               Closing. Subject to the satisfaction (or
waiver) of the conditions set forth in Article 8 hereof, the closing of the
sale and purchase of the Shares (the “Closing”) shall take place at 10:00 a.m.,
New York City time, on December 4, 2006, at the offices of the Company, 120
Broadway, New York, New York 10271 or at such other time or place as the
Company and the Purchaser shall mutually agree (such date is hereinafter
referred to as the “Closing Date”).

 

3.2                               Delivery. At the Closing, subject to the
terms and conditions hereof, (i) the Company will deliver to the Purchaser a
certificate representing the Shares, against payment by the Purchaser of the
purchase price therefor by check or wire transfer made payable to the order of
the Company and (ii) the Company and the Purchaser shall execute and deliver
the Registration Rights Agreement in the form attached hereto as Exhibit B
(the “Registration Rights Agreement”). This Agreement, the Registration Rights
Agreement and the Certificate of Designations are collectively referred to
herein as the “Transaction Documents.”

 

3.3                               Placement Fee. The Company shall pay to the
Purchaser a placement fee equal to $400,000. Such amount shall be deducted from
the purchase price payable pursuant to Section 2.2.

 

3.4                               Fees and
Expenses.
Subject to Section 3.3 or as otherwise set forth herein or the Registration
Rights Agreement, the Company and the Purchaser shall

 

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each be responsible for the fees and expenses
incurred by it in connection with this Agreement and the transactions
contemplated hereby.

 

4.                                      REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

 

Except as set
forth under the corresponding section of the disclosure schedule delivered to
the Purchaser concurrently herewith (the “Disclosure Schedule”), the Company
hereby represents and warrants as of the date hereof to Purchaser as follows:

 

4.1                               Organization,
Good Standing and Qualification. The Company and each of its direct and indirect
subsidiaries (collectively, the “Subsidiaries”) is a corporation duly
incorporated, validly existing and in good standing under the laws of the
jurisdiction in which it is incorporated, and has all requisite corporate power
and authority to own and operate its properties and assets, to carry on its
business as presently conducted. The Company and each of its Subsidiaries is
duly qualified to do business and is in good standing as a foreign corporation
in all jurisdictions in which the nature of its activities and of its properties
(both owned and leased) makes such qualification necessary, except for those
jurisdictions in which failure to do so would not have or reasonably be
expected to have a Material Adverse Effect. For purposes of this Agreement, “Material
Adverse Effect” means any effect which, individually or in the aggregate with
all other effects, reasonably would be expected to be materially adverse to (i)
the legality, validity or enforceability any of the Transaction Documents or
the Securities, (ii) the ability of the Company to perform on a timely basis
its obligations under this Agreement or any of the other Transaction Documents
or (iii) the business, operations, assets, properties, prospects, reputation, financial
condition or results of operations of the Company and its Subsidiaries, taken
as a whole.

 

4.2                               Authorization;
Binding Obligations.
(i) The Company has the requisite corporate power and authority to execute and
deliver this Agreement and the other Transaction Documents, to issue and sell
the Securities in accordance with the terms thereof and to carry out the
provisions of this Agreement and the other Transaction Documents, and (ii) all
corporate action on the part of the Company, its officers, directors and
stockholders necessary for the authorization, execution and delivery of this
Agreement and each of the other Transaction Documents, the performance of all
obligations of the Company hereunder and thereunder and the authorization,
sale, issuance and delivery of the Shares pursuant hereto and the Conversion
Shares pursuant to the Certificate of Incorporation and the Certificate of
Designations has been taken. Assuming that this Agreement and the Registration
Rights Agreement have been duly authorized, executed and delivered by the
Purchaser and constitute valid and binding obligations of the Purchaser, this
Agreement is, and the other Transaction Documents will be at the Closing, valid
and binding obligations of the Company enforceable in accordance with their
terms, except (a) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application affecting
enforcement of creditors’ rights, (b) general principles of equity that
restrict the availability of equitable remedies, and (c) to the extent that the
enforceability of the indemnification provisions in the Registration Rights
Agreement may be limited by Applicable Law.

 

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4.3                               Capitalization;
Voting Rights.

 

(a)                                  The authorized capital stock of
the Company consists of 40 million shares of Common Stock and two million
shares of preferred stock, par value $0.01 per share (“Preferred Stock”), of
which 40,000 shares are (or upon filing of the Certificate of Designation, will
be) designated as Series A Preferred Stock. As of November 1, 2006, 19,982,038
shares of Common Stock were issued and outstanding and no shares of Preferred
Stock were issued and outstanding.

 

(b)                                  Except as provided in the
Company’s filings with the United States Securities and Exchange Commission (the
“SEC”), and except for the Securities, there are no outstanding options,
warrants, scrip, rights (including conversion, anti-dilution or preemptive
rights and rights of first refusal or similar rights), or contracts,
commitments, understandings or agreements of any kind by which the Company or
any of its Subsidiaries is or may become bound to issue any of its securities,
nor are any such issuances, contracts, commitments, understandings or
arrangements contemplated.

 

(c)                                  All issued and outstanding shares
of capital stock of the Company (i) have been duly authorized and validly
issued and are fully paid and nonassessable, and (ii) were issued in compliance
with all applicable state and federal laws concerning the issuance of
securities.

 

(d)                                  The Company does not have any
shareholder rights plan, “poison pill” or other anti-takeover plans or similar
arrangements.

 

(e)                                  Except as set forth in the
Company’s filings with the SEC, there are no proxy, stockholder agreements,
voting agreements or other similar agreements with respect to the Company’s
capital stock to which the Company is a party or, to the knowledge of the
Company, between or among any of the Company’s stockholders.

 

(f)                                    The Company or one of its
Subsidiaries has the unrestricted right to vote, and (subject to limitations
imposed by Applicable Law) to receive dividends and distributions on, all
shares of capital stock of its Subsidiaries as owned by the Company or any such
Subsidiary.

 

(g)                                 The rights, preferences,
privileges and restrictions of the Securities are as stated in the Certificate
of Incorporation and the Certificate of Designations. The Securities are duly
authorized and when issued in compliance with the provisions of this Agreement,
the Certificate of Designations and the Certificate of Incorporation, (i) the
Securities will be validly issued, fully paid and non-assessable, and will be
free of any liens, taxes, claims or other Encumbrances and (ii) will not be
subject to preemptive rights, rights of first refusal or other similar rights
of stockholders of the Company or any other person provided,
however, that the Shares and the Conversion Shares may be subject to
restrictions on transfer under the Registration Rights Agreement, state and/or
federal securities laws as set forth herein or as otherwise required by such
laws at the time a transfer is proposed. As of the Closing Date, the Company

 

7

 

shall have reserved from its duly authorized capital
stock a number of shares of Common Stock for issuance of the Conversion Shares
at least equal to the Required Minimum on the date hereof.

 

4.4                               Compliance with
Other Instruments; Absence of Conflicts. Neither the Company nor any of its Subsidiaries is in
violation or default of, and the execution, delivery, and performance of and
compliance with this Agreement and the other Transaction Documents by the
Company, and, assuming the accuracy of the warranties and representations of
the Purchaser herein, the issuance and sale of the Shares pursuant hereto and
of the Conversion Shares pursuant to the Certificate of Incorporation and the
Certificate of Designations, will not, with or without the passage of time or
giving of notice, result in any violation of, or be in conflict with or
constitute a default under, (i) any term of the Certificate of Incorporation or
the Company’s bylaws as in effect on the date hereof (the “Bylaws”) or the
Subsidiaries’ organizational documents, (ii) any provision of any Contract to
which the Company or any of its Subsidiaries is party or by which it or any of
them or any of its or their respective properties is bound or affected, or
(iii) any Applicable Law to which the Company or any of its Subsidiaries is
subject (including United States federal and state securities laws, rules and regulations
and rules and regulations of any self-regulatory organizations to which either
the Company or its securities are subject) or by which any property or asset of
the Company or any of its Subsidiaries is bound or affected, other than, in the
case of clauses (ii) and (iii), any such violation, default, conflict that
would not, individually or in the aggregate, have a Material Adverse Effect.
The execution, delivery, and performance by the Company of and compliance by
the Company with this Agreement and the other Transaction Documents, and the
issuance and sale of the Shares pursuant hereto and of the Conversion Shares
pursuant to the Certificate of Incorporation and the Certificate of
Designations, will not, with or without the passage of time or giving of
notice, result in the creation of any Encumbrance or charge upon any of the
properties or assets of the Company or any of its Subsidiaries or the suspension,
revocation, impairment, forfeiture or nonrenewal of any Permit applicable to
the Company or any of its Subsidiaries or any of its or their assets or
properties, other than any such Encumbrances, charges, suspensions, revocations,
impairments, forfeitures or nonrenewals that would not, individually or in the
aggregate, have a Material Adverse Effect.

 

4.5                               Consents. No governmental orders,
permissions, consents, approvals or authorizations are required to be obtained
by the Company and no registrations or declarations are required to be filed by
the Company in connection with the execution and delivery of this Agreement or
the issuance of the Shares or the Conversion Shares, except such as have been
duly and validly obtained or filed, or with respect to any filings that must be
made after the Closing, as will be filed in a timely manner.

 

4.6                               SEC Reports;
Financial Statements.
The Company has filed in a timely manner (within applicable extension periods)
all documents that the Company was required to file with the SEC under the
Securities Act of 1933, as amended (the “Securities Act”) and the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), preceding the date of
this Agreement (all of the foregoing filed prior to the date

 

8

 

hereof and all exhibits included therein and financial
statements and schedules thereto and documents incorporated by reference
therein, the “SEC Reports”). The SEC Reports complied in all material respects
with the applicable requirements of the Exchange Act or the Securities Act, as
the case may be, and the rules and regulations of the SEC as of their respective
filing dates, and the information contained therein as of the date thereof did
not contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.
Except as disclosed on Section 4.6 of the Disclosure Schedule, none of the
statements made in any such SEC Reports is, or has been, required to be amended
or updated under Applicable Law (except for such statements as have been
amended or updated in subsequent filings made prior to the date hereof). As of
their respective dates, the financial statements of the Company included in the
SEC Reports complied as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC applicable with
respect thereto. Such financial statements have been prepared in accordance
with U.S. generally accepted accounting principles (“GAAP”), consistently
applied, during the periods involved (except as may be otherwise indicated in
such financial statements or the notes thereto or, in the case of unaudited
interim statements, to the extent they may not include footnotes or may be
condensed or summary statements) and fairly present in all material respects
the consolidated financial position of the Company and its consolidated
Subsidiaries as of the dates thereof and the consolidated results of their
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments). Except as set
forth in the most recent financial statements of the Company included in the
Select SEC Reports, the Company has no liabilities, contingent or otherwise,
other than (i) liabilities incurred in the ordinary course of business
subsequent to the date of such financial statements and (ii) liabilities
incurred in the ordinary course of business and not required under GAAP to be
reflected in such financial statements, which liabilities and obligations
referred to in clauses (i) and (ii), individually or in the aggregate, are not
material to the financial condition or operating results of the Company. For
purposes of this Agreement, “Select SEC Reports” means the Company’s (A) Proxy
Statement for its 2006 Annual Meeting, (B) Annual Report on Form 10-K/A for the
fiscal year ended December 31, 2005 (the “2005 Annual Report”), (C) Quarterly
Reports on Form 10-Q for the fiscal quarters ended March 31, 2006, June 30,
2006, September 30, 2006 and (D) Current Reports on Form 8-K filed since
September 30, 2006.

 

4.7                               Absence of
Certain Changes; No Material Adverse Effect. Except as set forth in the Select SEC Reports, since
December 31, 2005, there has been no event or occurrence which has had or would
reasonably be expected to have a Material Adverse Effect. The Company has not
taken any steps, and does not currently expect to take any steps, to seek
protection pursuant to any bankruptcy or receivership law, nor does the Company
or any of its Subsidiaries have any knowledge or reason to believe that its
creditors intend to initiate involuntary bankruptcy proceedings with respect to
the Company or any of its Subsidiaries.

 

4.8                               Filings. Except as set forth in the
Select SEC Reports or in Section 4.8 of the Disclosure Schedule, since January
1, 2004, (i) the Company and the

 

9

 

Subsidiaries have filed all material reports,
statements, documents, registrations, filings and submissions required to be
filed with any Governmental Authority, and all such reports, statements,
documents, registrations, filing and submissions complied in all material
respects with Applicable Law in effect when filed, and (ii) no material
deficiencies have been asserted in writing by, nor have any material comments
been received from, nor any material penalties imposed by, any such
Governmental Authorities with respect to such reports, statements, documents,
registrations, filings or submissions.

 

4.9                               Permits. The Company and its
Subsidiaries have all Permits in each of the jurisdictions in which the Company
and the Subsidiaries conduct or operate their respective businesses as now
being conducted, and all such Permits are in full force and effect, with such
exceptions which singularly and in the aggregate have not and would not
reasonably be expected to have a Material Adverse Effect, and the Company
believes it or its Subsidiaries can obtain, without undue burden or expense, any
similar authority for the conduct of their respective businesses as planned to
be conducted. The Company and the Subsidiaries are, and at all times since
January 1, 2004 have been, in compliance in all material respects with the
terms of the Permits. No event has occurred or circumstance exists that (with
or without the giving of notice or lapse of time or both) (1) constitutes or
would reasonably be expected to result in, directly or indirectly, a violation
of, or a failure to comply with any Permit, or (2) has resulted or would
reasonably be expected to result, directly or indirectly, in the revocation,
withdrawal, suspension, cancellation, or termination of, or any modification
to, any Permit, except for such violations or failures to comply or revocations,
withdrawals, suspensions, cancellations, terminations or modifications that
would not reasonably be expected to have a Material Adverse Effect. The
consummation of the transactions contemplated by this Agreement and the other
Transaction Documents will not result in any revocation, cancellation,
suspension or nonrenewal of any such material Permit.

 

4.10                        Litigation.

 

(a)                                  Except as disclosed in the
Select SEC Reports and other than Actions arising in the ordinary course of
business from or related to the obligations of the Company under any Insurance
Contract or similar contract written, assumed or reinsured by the Company,
there are no pending or, to the knowledge of the Company, threatened Actions
against and to the knowledge of the Company, no pending or threatened
Investigations of, the Company, any Subsidiary or any of their properties or
assets challenging the validity or propriety of, or that have the effect of
preventing, delaying, making illegal or otherwise interfering with any of the
transactions contemplated by this Agreement or the other Transaction Documents.

 

(b)                                  As of the date of this
Agreement, there are no pending Actions or, to the knowledge of the Company,
threatened material Actions against, and to the knowledge of the Company, no pending
or threatened Investigations of, any current or former officer or director of
any of the Company or the Subsidiaries in his or her capacity as an officer or
director of any of the Company or the Subsidiaries.

 

10

 

4.11                        Registration
Rights. Except
as required pursuant to the Registration Rights Agreement and except as
disclosed in the SEC Reports, the Company is presently not under any
obligation, and has not granted any rights, to register under the Securities
Act, any of the Company’s presently outstanding securities or any of its
securities that may hereafter be issued.

 

4.12                        Broker’s Fees. No agent, broker, investment
banker, person or firm acting on behalf of or under the authority of the
Company is or will be entitled to any fee or commission from the Purchaser
directly or indirectly in connection with the transactions contemplated herein.

 

4.13                        Listing and
Maintenance Requirements.
The Common Stock is registered pursuant to Section 12(b) of the Exchange Act,
and the Company has taken no action designed to, or which to its knowledge is
likely to have the effect of, terminating the registration of the Common Stock
under the Exchange Act nor has the Company received any notification that the
Commission is contemplating terminating such registration. The Common Stock is
currently listed for trading on the Nasdaq Global Select Market (the “Global
Select Market”). The Company has not received notice from the Global Select
Market on which the Common Stock is or has been listed or quoted to the effect
that the Company is not in compliance with the listing or maintenance
requirements of the Global Select Market. The Company is, and has no reason to
believe that it will not continue to be, in compliance with all such listing
and maintenance requirements. Prior to the conversion of the Shares, the
Company shall secure the listing of the Conversion Shares on the Global Select
Market and on each other national securities exchange, automated quotation
system or over-the-counter market upon which the shares of Common Stock are
then listed (subject to official notice of issuance). The issuance and delivery
of the Shares pursuant hereto and the Conversion Shares pursuant to the Certificate
of Incorporation and the Certificate of Designations will not constitute a
change of control under the rules of the Global Select Market.

 

4.14                        Anti-Takeover
Provisions. The
Company and its board of directors have taken all necessary action, if any, in
order to render inapplicable any control share acquisition, business
combination, poison pill (including any distribution under a rights agreement)
or other similar anti-takeover provision under its Certificate of Incorporation
or the laws of the state of its incorporation (including ss.203 of the Delaware
General Corporation Law) which is or could become applicable to Purchaser as a
result of the transactions contemplated by this Agreement, including, without
limitation, the Company’s issuance of the Securities and Purchaser’s ownership
of the Securities.

 

4.15                        Private
Placement.
Assuming the accuracy of the Purchaser’s representations and warranties set
forth in Section 5.3, no registration under the Securities Act or any state
securities laws is required for the offer and sale of the Securities by the
Company to Purchaser as contemplated hereby. The issuance and sale of the
Securities hereunder does not contravene the rules and regulations of the
Global Select Market or any state securities laws.

 

11

 

4.16                        No General
Solicitation or Integrated Offering. Neither the Company nor any distributor participating on
the Company’s behalf in the transactions contemplated hereby (if any) nor any
Person acting for the Company, or any such distributor, has conducted any “general
solicitation” (as such term is defined in Regulation D) or general advertising
with respect to any of the Securities being offered hereby. Neither the Company
nor any of its Affiliates, nor any person acting on its or their behalf, has
directly or indirectly made any offers or sales of any security or solicited
any offers to buy any security under circumstances that would require
registration of the Securities being offered hereby under the Securities Act or
cause this offering of Securities to be integrated with any prior offering of
securities of the Company for purposes of the Securities Act, which result of
such integration would require registration under the Securities Act, or that
would be integrated with the offer or sale of the Securities for the purpose of
the rules and regulations of the Global Select Market or any applicable
stockholder approval provisions.

 

5.                                      REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.

 

The Purchaser
hereby represents and warrants to the Company as follows (provided that such
representations and warranties do not lessen or obviate the representations and
warranties of the Company set forth in this Agreement):

 

5.1                               Organization
and Good Standing.
The Purchaser is duly organized, validly existing and in good standing under
the laws of the Islands of Bermuda. The Purchaser has all requisite corporate
power and authority to own and operate its properties and assets, to carry on
its business as presently conducted, to execute and deliver this Agreement and the
Registration Rights Agreement and to carry out the provisions of this Agreement
and the Registration Rights Agreement.

 

5.2                               Requisite Power
and Authority.
All corporate action on the part of the Purchaser, its officers, directors and
stockholders necessary for the authorization, execution and delivery of this
Agreement and the Registration Rights Agreement and the performance of all
obligations of the Purchaser hereunder and thereunder has been taken. Assuming
that this Agreement and the Registration Rights Agreement have been duly
authorized, executed and delivered by the Company and constitute valid and
binding obligations of the Company, this Agreement is, and the Registration
Rights Agreement will be at the Closing, valid and binding obligations of the
Purchaser enforceable in accordance with their terms, except (a) as limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws of
general application affecting enforcement of creditors’ rights, (b) general
principles of equity that restrict the availability of equitable remedies, and
(c) to the extent that the enforceability of the indemnification provisions in
the Registration Rights Agreement may be limited by applicable laws.

 

5.3                               Investment
Representations.
The Purchaser understands that neither the Shares nor the Conversion Shares
have been registered under the Securities Act or under any state or non-U.S.
securities law. The Purchaser also understands that the Shares are being
offered and sold pursuant to an exemption from registration contained in

 

12

 

the Securities Act based in part upon the Purchaser’s
representations contained in this Agreement. The Purchaser hereby represents
and warrants as follows:

 

(a)                                  The Purchaser Bears
Economic Risk.
The Purchaser is knowledgeable, sophisticated and experienced in making, and is
qualified to make decisions with respect to investments in shares presenting an
investment decision like that involved in the purchase of the Shares capable of
evaluating the merits and risks of its investment in the Company and has the
capacity to protect its own interests. The Purchaser understands that it must
bear the economic risk of this investment indefinitely unless the Shares (or
the Conversion Shares) are transferred in a transaction that is registered
pursuant to the Securities Act or exempt from registration. The Purchaser
understands that the Company has no present intention of registering the Shares
or the Conversion Shares except as provided in the Registration Rights
Agreement. The Purchaser also understands that there is no assurance that any
exemption from registration under the Securities Act will be available for any
proposed transfer of the Shares or the Conversion Shares and that, even if
available, such exemption may not allow the Purchaser to transfer all or any
portion of the Shares or the Conversion Shares under the circumstances, in the
amounts or at the times the Purchaser might propose.

 

(b)                                  Acquisition for
Own Account.
The Purchaser is acquiring the Shares and the Conversion Shares for the
Purchaser’s own account for investment only, and not with a view towards their
distribution.

 

(c)                                  Accredited
Investor. The
Purchaser represents that it is an institutional “accredited investor” within
the meaning of Regulation D under the Securities Act.

 

(d)                                  Company
Information.
The Purchaser has received and read the SEC Reports and has had an opportunity
to discuss the Company’s business, management and financial affairs with
directors, officers and management of the Company and has had the opportunity
to review the Company’s operations and facilities. The Purchaser has also had
the opportunity to ask questions of and receive answers from, the Company and
its management regarding the terms and conditions of this investment. The
Purchaser has, in connection with the decisions to purchase the Shares, relied
only upon the SEC Reports and the representations and warranties of the Company
set forth in the Transaction Documents.

 

(e)                                  No Action
Outside the United States.
The Purchaser acknowledges that the Company has taken no action or will take
any action in any jurisdiction outside the United States to permit an offering
of the Shares or the Conversion Shares, or possession or distribution of
offering materials in connection with the issuance of the Shares or the
Conversion Shares, in any jurisdiction outside the United States where legal
action by the Company for that purpose is required. The Purchaser will comply
with all applicable laws and regulations in each jurisdiction outside the
United States in which it purchases, offers, sells or delivers Shares or
Conversion Shares or has in its possession or distributes any offering
material, in each case at its own expense.

 

13

 

5.4                               Transfer
Restrictions.
The Purchaser acknowledges and agrees that the Shares and, if issued, the
Conversion Shares are subject to restrictions on transfer as set forth herein
and in the Registration Rights Agreement.

 

5.5                               Covering Short
Positions. The
Purchaser will not use the Shares or the Conversion Shares to cover any short
position in the Common Stock if doing so would be in violation of applicable
securities laws.

 

5.6                               No Legal, Tax
or Investment Advice.
The Purchaser understands that nothing in the SEC Reports, this Agreement, the
Registration Rights Agreement or any other materials presented to the Purchaser
in connection with the purchase and sale of the Shares constitutes legal, tax
or investment advice. The Purchaser has consulted such legal, tax and
investment advisors as it, in its sole discretion, has deemed necessary or
appropriate in connection with its purchase of the Shares.

 

5.7                               Ownership of
Company Stock.
None of the Purchaser or the Purchaser’s subsidiaries beneficially owns (as
such term is defined for purposes of Section 13(d) of the Exchange Act) any
shares of the Common Stock of the Company or any other class or series of the
Company’s capital stock.

 

5.8                               Broker’s Fees. Except for the fee of the
Purchaser’s financial advisor referred to in Section 3.3, no agent, broker,
investment banker, person or firm acting on behalf of or under the authority of
the Purchaser is or will be entitled to any fee or commission from the Company
directly or indirectly in connection with the transactions contemplated herein.

 

6.                                      COVENANTS

 

6.1                               Best Efforts. The parties shall use their
respective best efforts timely to satisfy each of the conditions described in
Sections 8.1 and 8.2 of this Agreement.

 

6.2                               Form D. The Company shall file with the
SEC a Form D with respect to the Securities as required under Regulation D and
provide a copy thereof to Purchaser promptly after such filing.

 

6.3                               Press Release;
Form 8-K; Publicity.
The Company shall issue on or before the next business day following the date
hereof a press release (the “Press Release”) announcing the entry into the
transactions contemplated hereby and shall within two days following the date
hereof file a Current Report on Form 8-K with the SEC concerning this Agreement
and the transactions contemplated hereby (the “8-K Filing”). The Company and
the Purchaser shall consult with each other in issuing any other press releases
with respect to the transactions contemplated hereby, and neither the Company
nor the Purchaser shall issue any such press release or otherwise make any such
public statement without the prior consent of the Company, with respect to any
press release of the Purchaser, or without the prior consent of the Purchaser,
with respect to any press release of the Company, which consent shall not
unreasonably be withheld, except if such disclosure is required by law, in
which case the disclosing party shall

 

14

 

promptly provide the other party with prior
notice of such public statement or communication.

 

6.4                               Reservation of
Shares. The
Company shall, if applicable: (i) in the time and manner required by the Global
Select Market, but in any event prior to the conversion of the Shares into
Common Stock, prepare and file with the Global Select Market an additional
shares listing application covering a number of shares of Common Stock at least
equal to the Required Minimum on the date of such application, (ii) take all
steps necessary to cause such shares of Common Stock to be approved for listing
on the Global Select Market as soon as possible thereafter, (iii) provide to
the Purchaser evidence of such listing, and (iv) from and after the conversion
of the Shares into Common Stock, maintain the listing of such Common Stock on
the Global Select Market.

 

6.5                               No Integrated
Offerings. The
Company shall not make any offers or sales of any security (other than the
Securities) under circumstances that would require registration of the
Securities being offered or sold hereunder under the Securities Act or cause
this offering of the Securities to be integrated with any other offering of
securities by the Company for purposes of any stockholder approval provision
applicable to the Company or its securities.

 

6.6                               Legal
Compliance. The
Company shall conduct its business and the business of its Subsidiaries in
compliance with all Applicable Laws, except where the failure to do so would
not have a Material Adverse Effect.

 

6.7                               Information. So long as Purchaser (or any of
its Affiliates) beneficially owns any of the Securities, the Company shall
furnish to Purchaser the information the Company must deliver to any holder or
to any prospective transferee of Securities in order to permit the sale or
other transfer of such Securities pursuant to Rule 144A of the SEC or any
similar rule then in effect. The Company shall keep at its principal executive
office a true copy of this Agreement (as at the time in effect), and cause the
same to be available for inspection at such office during normal business hours
by any holder of Securities or any prospective transferee of Securities
designated by a holder thereof.

 

6.8                               Pledge of
Securities. The
Company acknowledges and agrees that the Securities may be pledged by Purchaser
in connection with a bona fide margin agreement or other loan or financing
arrangement that is secured by the Securities. The pledge of Securities shall
not be deemed to be a transfer, sale or assignment of the Securities hereunder,
and if Purchaser effects a pledge of Securities, it shall not be required to
provide the Company with any notice thereof or otherwise make any delivery to
the Company pursuant to this Agreement or any other Transaction Document. The
Company shall execute and deliver such documentation as a pledgee of the
Securities may reasonably request in connection with a pledge of the Securities
to such pledgee by Purchaser.

 

15

 

6.9                               Investment
Company Act.
The Company shall conduct its business in a manner so that it will not be required
to register as an investment company under the Investment Company Act.

 

7.                                      SECURITIES TRANSFER MATTERS.

 

7.1                               Conversion and
Exercise. Upon
conversion of the Shares by any person, (i) if the DTC Transfer Conditions (as
defined below) are satisfied, the Company shall cause its transfer agent to
electronically transmit all Conversion Shares by crediting the account of such
person or its nominee with the Depository Trust Company (“DTC”) through its
Deposit Withdrawal Agent Commission system; or (ii) if the DTC Transfer
Conditions are not satisfied, the Company shall issue and deliver, or instruct
its transfer agent to issue and deliver, certificates (subject to the legend
and other applicable provisions hereof and the Certificate of Designation),
registered in the name of such person its nominee, physical certificates
representing the Conversion Shares. Even if the DTC Transfer Conditions are
satisfied, any person effecting a conversion of Shares may instruct the Company
to deliver to such person or its nominee physical certificates representing the
Conversion Shares, in lieu of delivering such shares by way of DTC Transfer.
For purposes of this Agreement, “DTC Transfer Conditions” means that (A) the
Company’s transfer agent is participating in the DTC Fast Automated Securities
Transfer program and (B) the certificates for the Conversion Shares required to
be delivered do not bear a legend and the person effecting such conversion or
exercise is not then required to return such certificate for the placement of a
legend thereon.

 

7.2                               Transfer or
Resale.
Purchaser understands that (i) except as provided in the Registration Rights
Agreement, the sale or resale of the Securities have not been and are not being
registered under the Securities Act or any state securities laws, and the
Securities may not be transferred unless (A) the transfer is made pursuant to
and as set forth in an effective registration statement under the Securities
Act covering the Securities; or (B) Purchaser shall have delivered to the Company
an opinion of counsel reasonably satisfactory to the Company (which opinion
shall be in form, substance and scope customary for opinions of counsel in
comparable transactions) to the effect that the Securities to be sold or
transferred may be sold or transferred pursuant to an exemption from such
registration; or (C) sold or transferred to an affiliate of Purchaser that
agrees to be bound by this Article 7; and (ii) neither the Company nor any
other person is under any obligation to register such Securities under the
Securities Act or any state securities laws (other than pursuant to the terms
of the Registration Rights Agreement). Notwithstanding the foregoing or
anything else contained herein to the contrary, the Securities may be pledged
as collateral in connection with a bona fide margin account or other lending
arrangement, provided such pledge is consistent with Applicable Laws.

 

7.3                               Legends. Purchaser understands that the
Shares and, until such time as the Conversion Shares have been registered under
the Securities Act (including registration pursuant to Rule 416 thereunder) as
contemplated by the Registration Rights Agreement or otherwise may be sold by
such Purchaser under Rule 144, the Certificates for the Conversion Shares may
bear a restrictive legend in substantially the following form:

 

16

 

THE SECURITIES
REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR THE LAWS OF ANY STATE OF THE UNITED STATES OR IN
ANY OTHER JURISDICTION. THE SECURITIES REPRESENTED HEREBY MAY NOT BE OFFERED,
OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SECURITIES UNDER APPLICABLE SECURITIES LAWS UNLESS OFFERED, SOLD OR TRANSFERRED
PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THOSE
LAWS.

 

The Company
shall, immediately prior to a registration statement covering the Securities
(including, without limitation, the Registration Statement contemplated by the
Registration Rights Agreement) being declared effective, deliver to its
transfer agent an opinion letter of counsel, opining that at any time such
registration statement is effective, the transfer agent may issue, in connection
with the issuance of the Conversion Shares, certificates representing such
Conversion Shares without the restrictive legend above, provided such Conversion
Shares are to be sold pursuant to the prospectus contained in such registration
statement. Upon receipt of such opinion, the Company shall cause the transfer
agent to confirm, for the benefit of the holders, that no further opinion of
counsel is required at the time of transfer in order to issue such shares
without such restrictive legend.

 

The legend set
forth above shall be removed and the Company shall issue a certificate without
such legend to the holder of any Security upon which it is stamped, if, unless
otherwise required by state securities laws, (i) the sale of such Security is
registered under the Securities Act (including registration pursuant to Rule
416 thereunder) or (ii) such holder provides the Company with an opinion of
counsel, in form, substance and scope customary for opinions of counsel in
comparable transactions, to the effect that a public sale or transfer of such
Security may be made without registration under the Securities Act. If the
holder of any Security is an affiliate of the Company, the legend on any such
Security shall not be so removed. In the event the above legend is removed from
any Security and thereafter the effectiveness of a registration statement covering
such Security is suspended or the Company determines that a supplement or
amendment thereto is required by applicable securities laws, then upon reasonable
advance written notice to Purchaser the Company may require that the above
legend be placed on any such Security that cannot then be sold pursuant to an
effective registration statement or under Rule 144 and Purchaser shall cooperate
in the replacement of such legend. Such legend shall thereafter be removed when
such Security may again be sold pursuant to an effective registration statement
or under Rule 144.

 

7.4                               Transfer Agent
Instruction.
Upon compliance by Purchaser with the provisions of this Article 7 with respect
to the transfer of any Securities, the Company shall permit the transfer of
such Securities and, in the case of the transfer of Conversion Shares, promptly
instruct its transfer agent to issue one or more certificates (or effect a DTC
Transfer) in such name and in such denominations as specified by Purchaser. The
Company shall not give any instructions to its transfer agent with respect to
the

 

17

 

Securities, other than any permissible or
required instructions provided in this Article 7, and the Securities shall
otherwise be freely transferable on the books and records of the Company as and
to the extent provided in this Agreement.

 

7.5                               Lock-Up Period. During the period from the date
hereof until 180 days from such date (the “Lock-Up Period”), the Purchaser will
not (a) directly or indirectly, offer, sell, agree to offer or sell, solicit
offers to purchase, grant any call option or purchase any put option with
respect to, pledge, borrow or otherwise dispose of any Registrable Security, as
defined in the Registration Rights Agreement, (b) establish or increase any “put
equivalent position” or liquidate or decrease any “call equivalent position”
with respect to any Registrable Security (in each case within the meaning of
Section 16 of the Exchange Act and the rules and regulations promulgated
thereunder), or (c) otherwise enter into any swap, derivative or other
transaction or arrangement that transfers to another, in whole or in part, any
of the economic consequence of ownership of a Registrable Security, whether or
not such transaction is to be settled by delivery of Registrable Securities,
other securities, cash or other consideration.

 

8.                                      CONDITIONS TO CLOSING.

 

8.1                               Conditions to
the Purchaser’s Obligations to Purchase the Shares. The Purchaser’s obligations to
purchase the Shares at the Closing are subject to the satisfaction or waiver on
or prior to the Closing Date of the following conditions:

 

(a)                                  Representations
and Warranties True; Performance of Obligations. The representations and warranties
made by the Company in Article 4 shall be true and correct in all material
respects as of the Closing Date, with the same force and effect as if they had
been made on and as of said date, and the Company shall have performed,
satisfied and complied with all obligations, covenants and conditions herein
required to be performed, satisfied or complied with by it on or prior to the
Closing.

 

(b)                                  Legal
Investment. On
the Closing Date, the sale and issuance of the Shares and the proposed issuance
of the Conversion Shares shall be legally permitted by all laws and regulations
to which the Purchaser and the Company are subject.

 

(c)                                  Consents,
Permits, Waivers and Approvals. The Company and the Purchaser shall have obtained any and
all consents, permits, waivers and approvals necessary or appropriate for
consummation of the transactions contemplated by this Agreement and the other
Transaction Documents and such consents, permits, waivers and approvals shall
be in full force and effect.

 

(d)                                  Compliance
Certificate.
The Company shall have delivered to the Purchaser a Compliance Certificate,
executed by the Senior Vice President and CFO of the Company, dated the Closing
Date to the effect that the conditions specified in subsections (a) and (c) (as
it pertains to the Company) of this Section 8.1 have been satisfied.

 

18

 

(e)                                  Listing. The Common Stock shall be
authorized for quotation and listed on the Global Select Market and trading in
the Common Stock (or on the Global Select Market generally) shall not have been
suspended by the SEC or the Global Select Market.

 

(f)                                    Certificate of
Designations.
The Certificate of Designations, substantially in the form attached hereto as
Exhibit A, shall have been approved and adopted by the Company.

 

(g)                                 Registration
Rights Agreement.
The Registration Rights Agreement, substantially in the form attached hereto as
Exhibit B, shall have been executed and delivered by the Company.

 

8.2                               Conditions to
Obligations of the Company to Issue and Sell the Shares. The Company’s obligation to
issue and sell the Shares to the Purchaser at the Closing is subject to the
satisfaction or waiver of the following conditions:

 

(a)                                  Representations
and Warranties True.
The representations and warranties in Article 5 made by the Purchaser shall be
true and correct in all material respects as of the Closing Date, with the same
force and effect as if they had been made on and as of said date, and the
Purchaser shall have performed all obligations and conditions herein required
to be performed or observed by it on or prior to the Closing.

 

(b)                                  Consents,
Permits, Waivers and Approvals. The Company and the Purchaser shall have obtained any and
all consents, permits, waivers and approvals necessary or appropriate for consummation
of the transactions contemplated by this Agreement and the other Transaction
Documents and such consents, permits, waivers and approvals shall be in full
force and effect.

 

(c)                                  Compliance
Certificate.
The Purchaser shall have delivered to the Company a Compliance Certificate,
executed by an executive officer of the Purchaser, dated the Closing Date to
the effect that the conditions specified in subsections (a) and (b) (as it
pertains to the Purchaser) of this Section 8.2 have been satisfied.

 

9.                                      MISCELLANEOUS.

 

9.1                               Governing Law. This Agreement shall be
governed by and construed under the laws of the State of Delaware. The parties
agree that any action brought by either party under or in relation to this
Agreement, including without limitation to interpret or enforce any provision
of this Agreement, shall be brought in, and each party agrees to and does
hereby submit to the jurisdiction and venue of, any state or federal court
located in the County of New Castle, State of Delaware. The Company irrevocably
waives the defense of an inconvenient forum to the maintenance of such suit or
proceeding in such forum. The Company further agrees that service of process
upon the Company mailed by first class mail shall be deemed in every respect
effective service of process upon the Company in any such suit or proceeding.
Nothing herein shall affect

 

19

 

the right of Purchaser to serve process in
any other manner permitted by law. The Company agrees that a final non-appealable
judgment in any such suit or proceeding shall be conclusive and may be enforced
in other jurisdictions by suit on such judgment or in any other lawful manner.

 

9.2                               Successors and
Assigns. The
Purchaser may assign its right to purchase the Shares to any one or more direct
or indirect majority-owned subsidiaries; provided that no such assignment shall
relieve the Purchaser of its obligations hereunder to the extent that the
assignee fails to fulfill the same. Upon any such permitted assignment, the
references in this Agreement to the Purchaser shall also apply to any such
assignee unless the context otherwise requires. Except as otherwise expressly
provided herein, the provisions hereof shall inure to the benefit of and be
binding upon the parties hereto and their respective successors, assigns,
heirs, executors and administrators; provided, however, that prior to the
receipt by the Company of adequate written notice of the transfer of any Shares
specifying the full name and address of the transferee, the Company may deem
and treat the person listed as the holder of such Shares in its records as the
absolute owner and holder of such Shares for all purposes.

 

9.3                               Entire
Agreement. This
Agreement, the Disclosure Schedule and the other Transaction Documents and the
other documents delivered pursuant hereto or thereto constitute the full and
entire understanding and agreement between the parties with regard to the
subjects hereof.

 

9.4                               Severability. In the event one or more of the
provisions of this Agreement should, for any reason, be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provisions of this Agreement, and
this Agreement shall be construed as if such invalid, illegal or unenforceable
provision had never been contained herein.

 

9.5                               Amendment and
Waiver. This
Agreement may be amended or modified, and the rights and obligations of the
Company and the Purchaser may be waived, only upon the written consent of the Company
and the holders of at least a majority of the Shares purchased or agreed to be
purchased pursuant to this Agreement.

 

9.6                               Notices. All notices or other
communications required or permitted hereunder shall be in writing and shall be
deemed effectively given: (i) upon personal delivery to the party to be
notified, (ii) upon receipt, if sent by facsimile during normal business hours
of the recipient or, if not sent by facsimile during normal business hours of
the recipient, then on the next business day; (iii) three days after having
been sent, if sent by registered or certified mail, return receipt requested,
postage prepaid; or (iv) one day after deposit with a nationally recognized
overnight courier, if sent by such a courier, specifying next day delivery,
with written verification of receipt. Notices to the Company shall be addressed
to:

 

20

 

Tower Group, Inc.

120 Broadway, 31st Floor

New York, New York 10271

Attention:  Stephen L.
Kibblehouse, Esq.

Fax Number: (646) 514-8612

 

with a copy to:

 

LeBoeuf, Lamb, Greene & MacRae LLP

125 West 55th Street

New York, New York 10019

Attention:  Matthew Ricciardi,
Esq.

Fax Number: (212) 424-8500

 

Notices to the
Purchaser shall be addressed to:

 

CastlePoint Reinsurance Company, Ltd.

Victoria House

11 Victoria House

Hamilton HM 11  Bermuda

Attention:  Joel Weiner

Fax Number:  (441) 292-4720

 

with a copy to:

 

CastlePoint Holdings, Ltd.

120 Broadway

New York, NY 10271

Attention: Roger A. Brown

Fax Number: (212) 847-9549

 

9.7                               Titles and
Subtitles. The
titles of the sections and subsections of the Agreement are for convenience of
reference only and are not to be considered in construing this Agreement.

 

9.8                               Third Party
Beneficiaries.
This Agreement is intended for the benefit of the parties hereto and their
respective permitted successors and assigns, and is not for the benefit of, nor
may any provision hereof be enforced by, any other person.

 

9.9                               Survival. The representations and
warranties of the Company and the agreements and covenants set forth in
Sections 4, 6, 7 and 9 hereof shall survive until the one year anniversary of
the Closing notwithstanding any due diligence investigation conducted by or on
behalf of Purchaser. Moreover, none of the representations and warranties made
by the Company herein shall act as a waiver of any rights or remedies Purchaser
may have under applicable U.S. federal or state securities laws.

 

21

 

9.10                        Further
Assurances.
Each party shall do and perform, or cause to be done and performed, all such
further acts and things, and shall execute and deliver all such other
agreements, certificates, instruments and documents, as the other party may
reasonably request in order to carry out the intent and accomplish the purposes
of this Agreement and the consummation of the transactions contemplated hereby.

 

9.11                        Indemnification. In consideration of Purchaser’s
execution and delivery of this Agreement and the other Transaction Documents
and purchase of the Securities hereunder, and in addition to all of the Company’s
other obligations under this Agreement and the other Transaction Documents,
from and after the Closing, the Company shall defend, protect, indemnify and
hold harmless Purchaser and all of its officers, directors and employees and
any of the foregoing persons’ agents or other representatives (including,
without limitation, those retained in connection with the transactions
contemplated by this Agreement, collectively, the “Indemnitees”) from and against
any and all actions, causes of action, suits, claims, losses, costs, penalties,
fees, liabilities and damages, and expenses in connection therewith
(irrespective of whether any such Indemnitee is a party to the action for which
indemnification hereunder is sought), and including reasonable attorneys’ fees
and disbursements (the “Indemnified Liabilities”), incurred by any Indemnitee
as a result of, or arising out of, or relating to (i) any misrepresentation or
breach of any representation or warranty made by the Company in this Agreement,
any other Transaction Document or any other certificate, instrument or document
delivered by the Company at the Closing or (ii) any breach of any covenant,
agreement or obligation of the Company contained in this Agreement, any other
Transaction Document or any other certificate, instrument or document delivered
by the Company at the Closing. To the extent that the foregoing undertaking by
the Company may be unenforceable for any reason, the Company shall make the
maximum contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under Applicable Law. Except as otherwise set forth
herein, the procedures with respect to the rights and obligations under this
Section 9.11 shall be the same as those set forth in Section 6 of the Registration
Rights Agreement.

 

9.12                        Payment Set
Aside. To the
extent that the Company makes a payment or payments to Purchaser, or the
Purchaser makes a payment or payments to the Company, hereunder or pursuant to
any of the other Transaction Documents or Purchaser or the Company enforces or
exercises its respective rights hereunder or thereunder, and such payment or
payments or the proceeds of such enforcement or exercise or any part thereof
are subsequently invalidated, declared to be fraudulent or preferential, set
aside, recovered from, disgorged by or are required to be refunded, repaid or
otherwise restored to the Company or Purchaser, as applicable, a trustee,
receiver or any other person under any Applicable Law (including, without
limitation, any bankruptcy law, state or federal law, common law or equitable
cause of action), then to the extent of any such restoration the obligation or
part thereof originally intended to be satisfied shall be revived and continued
in full force and effect as if such payment had not been made or such
enforcement or setoff had not occurred.

 

9.13                        Joint
Participation in Drafting.
Each party to this Agreement has participated in the negotiation and drafting
of this Agreement and the other Transaction

 

22

 

Documents. As such, the language used herein
and therein shall be deemed to be the language chosen by the parties hereto to
express their mutual intent, and no rule of strict construction will be applied
against any party to this Agreement.

 

9.14                        Remedies. No provision of this Agreement
or any other Transaction Document providing for any remedy to Purchaser shall
limit any other remedy which would otherwise be available to Purchaser at law,
in equity or otherwise. Nothing in this Agreement or any other Transaction
Document shall limit any rights Purchaser may have under any applicable federal
or state securities laws with respect to the investment contemplated hereby.

 

9.15                        Knowledge. As used in this Agreement, the
term “knowledge” of any person or entity shall mean and include (i) actual
knowledge and (ii) that knowledge which a reasonably prudent business person
could have obtained in the management of his or her business affairs after
making due inquiry and exercising due diligence which a prudent business person
should have made or exercised, as applicable, with respect thereto.

 

9.16                        Arms-Length
Transaction.
Each of the Parties acknowledges and agrees that they are acting on their own
behalf and in the capacity of an arm’s-length purchaser or seller, as
applicable. Each Party further acknowledges and agrees that it has
independently evaluated the merits of the transactions contemplated by this
Agreement and the other Transaction Documents, that it has independently
determined to enter into the transactions contemplated hereby and thereby, that
it is not relying on any advice from or evaluation by any other person (other
than its representatives), and that it is not acting in concert with any other
person in making its purchase of securities hereunder or in monitoring its
investment in the Company.

 

9.17                        Counterparts. This Agreement may be executed
in any number of counterparts, each of which shall be an original, but all of which
together shall constitute one instrument. Facsimile signatures shall be as
effective as original signatures.

 

23

 

IN WITNESS
WHEREOF, the parties hereto have executed the Stock
Purchase Agreement as of the date set forth in the first paragraph hereof.

 

	
   

  	
  TOWER GROUP, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Francis M. Colalucci

  	
   

  
	
   

  	
   

  	
  Name: Francis M. Colalucci

  
	
   

  	
   

  	
  Title: Senior Vice President and Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  CASTLEPOINT REINSURANCE

  
	
   

  	
  COMPANY, LTD.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Joel S. Weiner

  	
   

  
	
   

  	
   

  	
  Name: Joel S. Weiner

  
	
   

  	
   

  	
  Title: Senior Vice President and Chief Financial Officer

  

 

24

 

Exhibit A

CERTIFICATE
OF DESIGNATIONS

 

 

 

CERTIFICATE
OF DESIGNATIONS

OF

SERIES A PREFERRED STOCK

OF

TOWER GROUP, INC.

 

Pursuant to Section 151 of
the General Corporation Law of the State of Delaware

 

 

Tower Group, Inc., a Delaware corporation (the “Company”),
in accordance with the provisions of Sections 103 and 151 of the General
Corporation Law of the State of Delaware (the “DGCL”) thereof, does
hereby make this Certificate of Designations and DOES HEREBY CERTIFY:

 

That the board of directors of the Company (the “Board”) has the
authority, pursuant to the Amended and Restated Certificate of Incorporation of
the Company (the “Certificate of Incorporation”) and the DGCL, to adopt
resolutions providing for the designations, preferences and relative, participating,
optional and other special rights, and qualifications, limitations or restrictions
of one or more series of preferred stock, par value $0.01 per share, of the
Company (the “Preferred Stock”).

 

That pursuant to resolutions of the Board of Directors adopted on   ,
2006, the creation of the Series A Preferred Stock, $0.01 par value per
share (the “Series A Preferred Stock”), was authorized and the
designations, preferences and relative, participating, optional and other
special rights and qualifications, limitations and restrictions of such Series A
Preferred Stock, in addition to those set forth in the Certificate of
Incorporation and Amended and Restated By-Laws (the “By-Laws”) of the
Company, were fixed as follows:

 

1.                                      Designation.

 

The designation of the Series A Preferred Stock shall be “Series A
Preferred Stock,” and the number of shares constituting the Series A
Preferred Stock shall be 40,000. The Series A Preferred Stock shall have a
liquidation preference of $1,000 per share. The Company may from time to time,
without notice to or the consent of holders of the Series A Preferred
Stock, issue additional preferred stock. No such issuance shall affect the due
authorization of any issued and outstanding shares of the Series A
Preferred Stock.

 

2.                                      Definitions.

 

“Board” shall mean the Board of Directors of the Company or any
duly authorized committee of the Board of Directors.

 

 

“Business Day” shall mean a day that is a Monday, Tuesday,
Wednesday, Thursday or Friday and is not a day on which banking institutions in
New York City generally are authorized or obligated by law or executive order
to close.

 

“Certificate of Designations” shall mean this Certificate of
Designations relating to the Series A Preferred Stock, as amended from
time to time.

 

“Change in Control” shall have the meaning assigned to such term
in Section 6(a).

 

“Common Stock” shall mean the common stock, par value $0.01 per
share, of the Company.

 

“Conversion” shall have the meaning set forth in Section 5(a) hereof.

 

“Conversion Date” shall have the meaning set forth in Section 5(a) hereof.

 

“Dividend Payment Date” shall have the meaning assigned to such
term in Section 3(a)(i).

 

“Dividend Period” shall have the meaning assigned to such term
in Section 3(c).

 

“Dividend Rate” shall mean 8.66% per annum.

 

“Dividend Record Date” shall have the meaning assigned to such
term in Section 3(b).

 

“Issue Date” shall mean the initial date of delivery of the Series A
Preferred Stock.

 

“Junior Stock” shall mean the Common Stock and any other class or
series of shares of the Company that ranks junior to the Series A
Preferred Stock either as to the payment of dividends or as to the distribution
of assets upon any liquidation, dissolution or winding up of the Company.

 

“Liquidation Preference” shall have the meaning assigned to such
term in Section 8(b).

 

“Nonpayment” shall have the meaning assigned to such term in Section 10(b).

 

“Optional Conversion Shares” shall have the meaning assigned to
such term in Section 5(a).

 

“Parity Stock” shall mean any class or series of preferred
shares of the Company that ranks equally with the Series A Preferred Stock
in the payment of dividends and in the distribution of assets on any
liquidation, dissolution or winding up of the Company.

 

“Person” shall mean any individual, corporation, partnership,
joint venture, trust, limited liability company or corporation, unincorporated organization
or government or any agency or political subdivision thereof.

 

2

 

“Preferred Stock Director” shall have the meaning assigned to
such term in Section 10(b).

 

“solvent” shall have the meaning assigned to such term in Section 3(a).

 

“Value of Consideration” shall have the meaning assigned to such
term in Section 6(a).

 

“Voting Preferred Stock” shall mean any other class or series of
preferred stock of the Company ranking equally with the Series A Preferred
Stock either as to dividends or the distribution of assets upon liquidation,
dissolution or winding up and upon which voting rights similar to those granted
to the holders of the Series A Preferred Stock have been conferred and are
exercisable.

 

3.                                      Dividends.

 

(a)                                  Dividend Payment Dates. The holders of the Series A
Preferred Stock shall be entitled to receive cash dividends when, as and if
declared by the Board or a duly authorized committee of the Board, out of
assets legally available for that purpose and to the extent the Company is able
to pay its debts as they fall due (“solvent”) after giving effect thereto, at
the applicable Dividend Rate set forth below in this Section 3. Dividends
on the Series A Preferred Stock shall be payable on a non-cumulative
basis, quarterly in arrears on the 27th day of March, June, September and December of
each year, the Mandatory Conversion Date and, if applicable, the date of
consummation of any Change in Control (each, a “Dividend Payment Date”),
subject to Section 3(e).

 

(b)                                 Dividend Record Date. Each such dividend shall be paid to
the holders of record of the Series A Preferred Stock as they appear on
the share register of the Company on the applicable record date (each, a “Dividend
Record Date”), which shall be a record date fixed by the Board that is not more
than 60 nor less than 10 days prior to such Dividend Payment Date. The Dividend
Record Date shall apply regardless of whether any particular Dividend Record
Date is a Business Day.

 

(c)                                  Dividend Period. Each dividend period (a “Dividend Period”)
shall commence on and include a Dividend Payment Date and shall run to but
excluding the next Dividend Payment Date, except that the initial Dividend
Period will commence on and include the Issue Date, and will run to and exclude
the first Dividend Payment Date thereafter.

 

(d)                                 Day Count Convention. The amount of dividends payable per
share of Series A Preferred Stock on each Dividend Payment Date will be
calculated using the per annum Dividend Rate and on the basis of a 360-day year
consisting of twelve 30-day months.

 

(e)                                  Business Day Convention. If any Dividend Payment Date is not
a Business Day, then dividends will be payable on the first Business Day
following such Dividend Payment Date unless such day is in the next calendar
month, in which case

 

3

 

dividends shall be payable on the first
Business Day preceding such Dividend Payment Date and dividends, in each case,
shall accrue to the actual payment date.

 

(f)                                    Junior Stock. So long as any shares of Series A
Preferred Stock remain outstanding for any Dividend Period, unless the full
dividends for the current Dividend Period on all outstanding Series A
Preferred Stock and Parity Stock have been declared and paid (or declared and a
sum sufficient for the payment thereof has been set aside): (i) no
dividend whatsoever shall be paid or declared during such Dividend Period on
the Common Stock or other Junior Stock (other than a dividend payable solely in
Common Stock or other Junior Stock); and (ii) no Common Stock or other
Junior Stock shall be purchased, redeemed or otherwise acquired for
consideration by the Company, directly or indirectly (other than as a result of
a reclassification of such Junior Stock for or into other Junior Stock, or the
exchange or conversion of one share of Junior Stock for or into another share
of Junior Stock) during such Dividend Period.

 

(g)                                 Pro Rata Adjustments. When dividends are not paid in full
(or duly provided for) on any Dividend Payment Date (or, in the case of Parity
Stock having dividend payment dates different from the Dividend Payment Dates,
on a dividend payment date falling within a Dividend Period) upon the Series A
Preferred Stock and any Parity Stock, all dividends declared upon the Series A
Preferred Stock and all such Parity Stock payable on such Dividend Payment Date
(or, in the case of Parity Stock having dividend payment dates different from the
Dividend Payment Dates, on a dividend payment date falling within the Dividend
Period related to such Dividend Payment Date) shall be declared pro rata so
that the respective amounts of such dividends shall bear the same ratio to each
other as all accrued but unpaid dividends per share of Series A Preferred
Stock and all Parity Stock payable on such Dividend Payment Date (or, in the
case of Parity Stock having dividend payment dates different from the Dividend
Payment Dates, on a dividend payment date falling within the related Dividend
Period) bear to each other.

 

(h)                                 Additional Series A Preferred Stock. In the event that
additional shares of the Series A Preferred Stock are issued after the
original issue date, dividends on such shares may accrue from the original
issue date or any other date specified by the Company at the time such
additional shares are issued. These dividends will accrue, with respect to each
Dividend Period, in the manner set forth in Sections 3(a)(i) and 3(b).

 

(i)                                     Non-Cumulative Dividends. Dividends on Series A
Preferred Stock shall be non-cumulative. To the extent that any dividends
payable on the Series A Preferred Stock on any Dividend Payment Date are
not declared and paid, in full or otherwise, on such Dividend Payment Date,
then such unpaid dividends shall not cumulate and shall cease to accrue and be
payable and the Company shall have no obligation to pay dividends accrued for
the applicable Dividend Period subsequent to such Dividend Payment Date or to
pay interest with respect to such dividends, whether or not dividends are
declared on Series A Preferred Stock for any subsequent Dividend Period.

 

4

 

4.                                      Redemption.

 

(a)                                  The
Company, at its option, may redeem, in whole at any time or in part from time
to time, the Series A Preferred Stock at the time outstanding, upon notice
given as provided in Section 4(c) below, at a redemption price equal
to $1,000 per share of Series A Preferred Stock, together with an amount
equal to any dividends that have been declared but not paid prior to the
redemption date (but with no amount in respect of any dividends that have not
been declared prior to such date). The redemption price for the Series A
Preferred Stock shall be payable on the redemption date to the holder of such
shares against surrender of the certificate(s) evidencing such shares to the
Company or its agent. If the redemption date occurs subsequent to the Dividend
Record Date for a Dividend Period, any declared but unpaid dividends payable on
such redemption date shall not be paid to the holder entitled to receive the
redemption price on the redemption date, but rather shall be paid to the holder
of record of the redeemed shares on such Dividend Record Date relating to the
Dividend Payment Date as provided in Section 3.

 

(b)                                 Notice
of redemption shall be given to the holders of record of the Series A
Preferred Stock in accordance with Section 13(a) hereof. Such mailing
shall be not less than 30 days and not more than 60 days before the date fixed for
redemption. Notwithstanding the above, in the case of redemption concurrent with
a Conversion in which the holders have elected not to convert the Optional Election
Shares, such notice shall be given not later than the date of the underwriting
agreement with respect to the underwritten public offering giving rise to such
Conversion. Any notice delivered as provided in Section 13(a) shall be
conclusively presumed to have been duly given, whether or not the holder receives
such notice, but failure to duly give such notice, or any defect in such notice
or in the mailing thereof, to any holder of Series A Preferred Stock designated
for redemption shall not affect the validity of the proceedings for the
redemption of any other Series A Preferred Stock. Each such notice given
to a holder shall state: (i) the redemption date; (ii) the number of
shares of Series A Preferred Stock to be redeemed and, if less than all
the shares of the Series A Preferred Stock held by such holder are to be
redeemed, the number of such shares of Series A Preferred Stock to be
redeemed from such holder; (iii) the redemption price; and (iv) the
place or places where holders may surrender certificates evidencing the shares
of Series A Preferred Stock for payment of the redemption price.

 

(c)                                  If
notice of redemption has been duly given and if on or before the redemption
date specified in the notice all funds necessary for the redemption have been
set aside by the Company for the benefit of the holders of the Series A
Preferred Stock called for the redemption, then on and after the redemption date
dividends shall cease to accrue on such shares of Series A Preferred Stock
so called for redemption, all such shares of Series A Preferred Stock so
called for redemption shall no longer be deemed outstanding and all rights with
respect to such shares of Series A Preferred Stock shall forthwith on such
redemption date cease and terminate, except only the right of the holders
thereof to receive the amount payable on such redemption, without interest.

 

(d)                                 In
case of any redemption of only part of the Series A Preferred Stock at the
time outstanding, the shares to be redeemed shall be selected either pro rata
or in such

 

5

 

other manner as the Board may determine to be
fair and equitable. Subject to the provisions hereof, the Board shall have full
power and authority to prescribe the terms and conditions upon which the Series A
Preferred Stock shall be redeemed from time to time. In case fewer than all the
shares of Series A Preferred Stock represented by any certificate are
redeemed, a new certificate shall be issued representing the unredeemed shares
without cost to the holder thereof.

 

5.                                      Conversion in Connection with a Public Offering.

 

(a)                                  On
the closing date of the Company’s first underwritten public offering of its
common stock after October 31, 2006 (other than offers made to employees, officers
or directors of the Company registered on a Form S-8 or offers made to agents
of the Company pursuant to shares registered on a Form S-3 filed with the United
States Securities and Exchange Commission (the “SEC”)) (the “Conversion Date”),
30,000 shares of Series A Preferred Stock will automatically convert (the “Conversion”)
into a number of shares of Common Stock per share of Series A Preferred
Stock equal to the liquidation preference amount of a share of Series A
Preferred Stock divided by the offering price of the Common Stock in such offering
or private placement (the “Conversion Price”). The remaining 10,000 shares of Series A
Preferred Stock (the “Optional Conversion Shares”) shall be convertible on the
Conversion Date at the election of the holders of the shares of the Series A
Preferred Stock. Such Optional Conversion Shares shall be converted into a
number of shares of Common Stock per Optional Conversion Share based on the
Conversion Price as defined above. Notice of such election shall be delivered
to the Company in accordance with the provisions of Section 14(a) not
later than the date on which the preliminary prospectus pertaining to the underwritten
public offering is filed with the SEC.

 

(b)                                 The
holders of the Series A Preferred Stock to be converted on the Conversion
Date shall have the right to receive, in addition to the number of shares of
Common Stock specified in Section 5(a), an amount in cash equal to any dividends
that have been declared but not paid prior to the Conversion Date (but with no
amount in respect of any dividends that have not been declared prior to such
date), such amount to be paid at the time of the Conversion, to the extent that
the Company has sufficient lawful funds to pay such amount at such time. If the
Conversion Date occurs subsequent to the Dividend Record Date for a Dividend Period,
any declared but unpaid dividends payable on the Conversion Date shall not be
paid to the holder entitled to receive the redemption price on the Mandatory
Conversion Date, but rather shall be paid to the holder of record of the
redeemed shares on such Dividend Record Date relating to the Dividend Payment
Date as provided in Section 3.

 

(c)                                  To
the extent that the Company does not have sufficient lawful funds to pay in
cash the amount equal to all of such dividends that have been declared but not
paid prior to the Conversion Date, the holders of Series A Preferred Stock
to be converted on the Conversion Date shall be entitled to receive, upon conversion
of such Series A Preferred Stock on the Conversion Date, an additional
number of shares of Common Stock per share of Series A Preferred Stock
equal to the amount of such dividends that have been declared but not paid prior
to the Conversion Date in cash divided by the

 

6

 

Conversion Price. Any resulting fractional
shares of Common Stock shall be settled in cash as provided below, subject to
the availability of sufficient lawful funds to make such settlement.

 

(d)                                 From
and after the Conversion Date, all shares of Series A Preferred Stock that
have been converted on such Conversion Date shall no longer be deemed outstanding
and all rights with respect to such shares of Series A Preferred Stock
shall forthwith cease and terminate, except only the right of the holders thereof
to receive the Common Stock and any cash due and owing on conversion of the Series A
Preferred Stock, without interest.

 

(e)                                  No
fractional shares of Common Stock will be issued to holders of Series A
Preferred Stock as a result of any Conversion of shares of Series A Preferred
Stock pursuant to this Section 5. In lieu of any fractional share of Common
Stock otherwise issuable in respect of any Conversion pursuant to this Section 5,
the Company shall pay an amount in cash (computed to the nearest cent) equal to
the same fraction of the Conversion Price.

 

(f)                                    Notwithstanding
this Section 5, if the Conversion shall result in the issuance of shares
of common stock of the Company that would require the vote of the stockholders
of the outstanding shares of common stock pursuant to the listing rules of
the Nasdaq Global Select Market, the number of shares of Series A
Preferred Stock to be initially converted into Common Stock shall be limited to
a number that would not require such a vote and the remaining shares of Series A
Preferred Stock shall not be converted until the required stockholder vote is
obtained.

 

(g)                                 The
issuance of certificates for shares of Common Stock on Conversion of the Series A
Preferred Stock pursuant to this Section 5 shall be made without charge to
the holder of the Series A Preferred Stock for any documentary stamp or
similar taxes that may be payable in respect of the issue or delivery of such certificate,
provided that the Company shall not be required to pay any tax that may be
payable in respect of any transfer involved in the issuance and delivery of any
such certificate upon conversion in a name other than that of the holder of
such shares of Series A Preferred Stock so converted and the Company shall
not be required to issue or deliver such certificates unless or until the
person or persons requesting the issuance thereof shall have paid to the
Company the amount of such tax or shall have established to the satisfaction of
the Company that such tax has been paid.

 

6.                                      Conversion Upon Change in Control.

 

(a)                                  Immediately
prior to the consummation of any Change in Control (as defined below) that is
consummated at a time when CastlePoint Reinsurance Company, Ltd. or one of its
subsidiaries holds any shares of Series A Preferred Stock, each share of Series A
Preferred Stock held by CastlePoint Reinsurance Company, Ltd. or one of its
subsidiaries shall be converted into a number of shares of Common Stock equal
to the liquidation preference amount of a share of Series A Preferred
Stock, determined in accordance with Section 8(a), divided by the Value of
the Consideration (as defined

 

7

 

below) per share of Common Stock in such
Change in Control. A “Change in Control” means (i) any merger or consolidation
of the Company with and into another company, other than a merger or
consolidation in which (x) the Company is the surviving entity and (y) the holders
of the Company’s Common Stock immediately prior to the consummation of such
merger or consolidation own more than 50% of the voting equity interests of the
surviving entity immediately after the consummation of such merger or consolidation;
(ii) any transaction by which any person or group of persons (within the
meaning of Rule 13d-5 under the Securities Exchange Act of 1934, as amended,
or any successor or replacement rule) acquires beneficial ownership (as defined
in Rule 13d-3 under the Securities Exchange Act of  1934, as amended, or any successor or
replacement rule) of securities of the Company representing more than 50% of
the voting power of the Company holder of at the time of such Change in
Control. The “Value of Consideration” means the value of any
consideration paid per share of Common Stock or value of the consideration into
which a share of Common Stock is converted in a Change in Control transaction
or, if such Change in Control Value does not involve a merger or consolidation
of the Company or the acquisition of shares of Common Stock, the equivalent
value placed upon a share of Common Stock in such transaction; provided, that (i) in
the case of any publicly traded securities payable per share of Common Stock or
into which a share of Common Stock shall be converted, the value of such
securities shall be the last price at which such securities are traded on a
public market immediately prior to the closing of the Change in Control and (ii) in
the case of any securities that are not publicly traded or any other property
payable per share of Common Stock or into which a share of Common Stock shall
be converted, the value of such securities shall be fixed in good faith by the
Board.

 

(b)                                 The
holders of the Series A Preferred Stock to be converted in connection with
a Change in Control shall have the right to receive, in addition to the number
of shares of Common Stock specified in Section 6(a), an amount in cash
equal to any dividends that have been declared but not paid prior to the consummation
of such Change in Control (but with no amount in respect of any dividends that
have not been declared prior to such date), such amount to be paid at the time
of the consummation of such Change in Control, to the extent that the Company
has sufficient lawful funds to pay such amount at such time. If the
consummation of such Change in Control occurs subsequent to the Dividend Record
Date for a Dividend Period, any declared but unpaid dividends payable upon the
consummation of such Change in Control shall not be paid to the holder entitled
to receive the redemption price on the date of the consummation of such Change
in Control, but rather shall be paid to the holder of record of the redeemed
shares on such Dividend Record Date relating to the Dividend Payment Date as
provided in Section 3.

 

(c)                                  To
the extent that the Company does not have sufficient lawful funds to pay in
cash the amount equal to all of such dividends that have been declared but not
paid prior to the consummation of a Change in Control, the holders of Series A
Preferred Stock to be converted in connection with a Change in Control shall be
entitled to receive, upon conversion of such Series A Preferred Stock upon
the consummation of such Change in Control, an additional number of shares of
Common Stock per share of Series A Preferred Stock equal to the amount of such
dividends that have been declared but not paid prior to the consummation of such
Change in Control in cash divided by the Value

 

8

 

of Consideration. Any resulting fractional
shares of Common Stock shall be settled in cash as provided below, subject to
the availability of sufficient lawful funds to make such settlement.

 

(d)                                 From
and after the consummation of a Change in Control, all shares of Series A
Preferred Stock that have been converted in connection with such Change in
Control shall no longer be deemed outstanding and all rights with respect to such
shares of Series A Preferred Stock shall forthwith cease and terminate, except
only the right of the holders thereof to receive the Common Stock and any cash
due and owing on conversion of the Series A Preferred Stock, without interest.

 

(e)                                  No
fractional shares of Common Stock will be issued to holders of Series A
Preferred Stock as a result of any Conversion of shares of Series A Preferred
Stock pursuant to this Section 6. In lieu of any fractional share of
Common Stock otherwise issuable in respect of any conversion pursuant to this Section 6,
the Company shall pay an amount in cash (computed to the nearest cent) equal to
the same fraction of the Value of Conversion.

 

(f)                                    The
issuance of certificates for shares of Common Stock on conversion of the Series A
Preferred Stock pursuant to this Section 6 shall be made without charge to
the holder of the Series A Preferred Stock for any documentary stamp or
similar taxes that may be payable in respect of the issue or delivery of such certificate,
provided that the Company shall not be required to pay any tax that may be
payable in respect of any transfer involved in the issuance and delivery of any
such certificate upon conversion in a name other than that of the holder of
such shares of Series A Preferred Stock so converted and the Company shall
not be required to issue or deliver such certificates unless or until the
person or persons requesting the issuance thereof shall have paid to the
Company the amount of such tax or shall have established to the satisfaction of
the Company that such tax has been paid.

 

7.                                      Conversion Upon Regulatory Change.

 

If both (a) and (b) below occur:

 

(a)                                  after
the date of the issuance of the Series A Preferred Stock, the criteria
used by A.M. Best Company, Inc. for determining whether and to what extent
a security qualifies as permanent equity capital shall change such that the Series A
Preferred Stock no longer qualifies for treatment as favorable as the treatment
afforded to the Series A Preferred Stock on its date of issuance, and

 

(b)                                 the
Company affirmatively elects to qualify the Series A Preferred Stock for
treatment as permanent equity capital by A.M. Best Company, Inc. without
any sublimit or other quantitative restriction on the inclusion of the Series A
Preferred Stock in permanent equity capital (other than any limitation the
Company elects to accept and any limitation requiring that common equity or a
specified form of common equity constitute the dominant form of permanent equity
capital) under such criteria,

 

then, upon such affirmative election, the Series A
Preferred Stock shall be convertible at the

 

9

 

Company’s option into a new series of
preferred stock having terms and provisions substantially identical to those of
the Series A Preferred Stock, except that such new series may have such
additional or modified rights, preferences, privileges and voting powers, and
limitations and restrictions thereof, as are necessary in the judgment of the
Board (after consultation with legal counsel of recognized standing) to comply
with the Required Equity Capital Provisions (as defined below), provided that
the Company will not cause any such conversion unless the Board determines that
the rights, preferences, privileges and voting powers, and the qualifications,
limitations and restrictions thereof, of such new series of preferred stock,
taken as a whole, are not materially less favorable to the holders thereof than
the rights, preferences, privileges and voting powers, and the qualifications,
limitations and restrictions thereof, of the Series A Preferred Stock,
taken as a whole.

 

As used above, the term “Required Equity Capital Provisions” means such
terms and provisions as are, in the judgment of the Company (after consultation
with legal counsel of recognized standing), required for preferred stock to
qualify for equity capital treatment by A.M. Best Company, Inc. that
is as favorable as the treatment afforded to the Series A Preferred Stock
on its date of issuance, without any sublimit or other quantitative restriction
on the inclusion of such preferred stock in permanent equity capital (other
than any limitation the Company elects to accept and any limitation requiring
that common equity or a specified form of common equity constitute the dominant
form of permanent equity capital) pursuant to the applicable criteria used by A.M.
Best Company, Inc.

 

8.                                      Liquidation Rights.

 

(a)                                  Upon
the voluntary or involuntary dissolution, liquidation or winding up of the
Company, the holders of the Series A Preferred Stock shall be entitled to
receive and to be paid out of the assets of the Company available for distribution
to its stockholders, before any payment or distribution shall be made on the
Common Stock or on any other Junior Stock the liquidation preference of $1,000
per share of Series A Preferred Stock, plus any declared and unpaid dividends
for the then-current Dividend Period, without accumulation of any undeclared
dividends.

 

(b)                                 If
in any distribution described in Section 5(a) above the assets of the
Company or proceeds thereof are not sufficient to pay the Liquidation Preferences
(as defined below) in full to all holders of the Series A Preferred Stock
and all holders of any Parity Stock, the amounts paid to the holders of the Series A
Preferred Stock and to the holders of all such other Parity Stock shall be paid
pro rata in accordance with the respective aggregate Liquidation Preferences of
the holders of the Series A Preferred Stock and the holders of all such
other Parity Stock. In any such distribution, the “Liquidation Preference”
of any holder of Series A Preferred Stock or Parity Stock shall mean the
amount otherwise payable to such holder in such distribution, including any declared
but unpaid dividends (and, in the case of any holder of shares other than Series A
Preferred Stock and on which dividends accrue on a cumulative basis, an amount
equal to any unpaid, accrued cumulative dividends, whether or not declared, as
applicable).

 

10

 

(c)                                  If
the Liquidation Preference has been paid in full to all holders of the Series A
Preferred Stock, the holders of other shares of the Company shall be entitled
to receive all remaining assets of the Company according to their respective
rights and preferences and the holders of the Series A Preferred Stock as
such shall have no right or claim to any of the remaining assets of the Company.

 

(d)                                 Neither
the sale, lease, exchange, transfer or conveyance of all or substantially all
of the assets of the Company for cash, securities or other property, nor the
merger or consolidation of the Company into or with any other corporation or
the merger or consolidation of any other corporation into or with the Company,
shall be deemed to be a dissolution, liquidation or winding up, voluntary or
involuntary, for the purposes of this Section 8.

 

9.                                      Ranking.

 

The Series A Preferred Stock shall rank, with respect to the
payment of dividends and distributions prior to or upon the liquidation,
dissolution or winding up of the Company:

 

(i)                                     senior
to all Common Stock outstanding and other Junior           Stock, and each other series of
Junior Stock that the Company may           later issue;

 

(ii)                                  equally
with Parity Stock and each other series of Parity Stock that the Company may
later issue; and

 

(iii)                               junior
to any series of senior shares that the Company may later issue, subject to
compliance with Section 11(b).

 

10.                               Voting and Certain Other Rights.

 

(a)                                  Except
as set forth herein or required by applicable law, holders of Series A
Preferred Stock shall have no voting rights.

 

(b)                                 Whenever
dividends on any Series A Preferred Stock shall have not been declared and
paid for the equivalent of six or more dividend payments, whether or not for
consecutive Dividend Periods (a “Nonpayment”), the holders of such Series A
Preferred Stock, voting together as a single class with holders of any and all
other series of Voting Preferred Stock then outstanding, will be entitled to
vote for the election of a total of one additional member to the Board (the “Preferred
Stock Director”), provided that the election of any such director shall not
cause the Company to violate the corporate governance requirement of the Nasdaq
Global Select Market (or any other exchange on which the securities of the
Company may be listed) that listed companies must have a majority of
independent directors. The Preferred Stock Director shall be elected by simple
majority at a special meeting called at the request of the holders of record of
at least 20% of the shares of Series A Preferred Stock or of any other series
of Voting Preferred Stock then outstanding (unless such request for a special
meeting is received less than 90 days before the date fixed for the next annual
meeting or special meeting of

 

11

 

the stockholders of the Company, in which event
such election shall be held only at such next annual or special meeting of stockholders),
and at each subsequent annual meeting of stockholders of the Company. For this
purpose, the Board shall reserve one vacant place on the Board of the Company
to accommodate such election and pass such resolutions as are necessary to give
effect to such election.

 

(c)                                  If
the holders of the Series A Preferred Stock become entitled to elect a
director to the Board, the Company shall promptly give notice to all holders and
take all action necessary, including calling a meeting or circulating a consent
to permit the nomination and election of such director. Applicable provisions
of the Company’s Certificate of Incorporation shall be applicable to the
holders of Series A Preferred Stock and any other Voting Preferred Stock
as a class, provided that any written consents
approved by the holders of record of a majority of the Series A Preferred
Stock and any other Voting Preferred Stock outstanding shall be effective and
shall bind all holders of Series A Preferred Stock. If and when dividends
for at least four Dividend Periods, whether or not consecutive, following a
Nonpayment have been paid in full (or declared and a sum sufficient for such
payment has been set aside), then the right of the holders of the Series A
Preferred Stock to elect the Preferred Stock Director shall cease (but subject
to revesting of such voting rights in the event of any future Nonpayment
pursuant to this Section 10) and the number of Dividend Periods in which
dividends have not been declared and paid shall be reset to zero and, if and
when any rights of holders of the Series A Preferred Stock to elect the
Preferred Stock Director shall have ceased, the terms of office of the
Preferred Stock Director shall terminate forthwith and the number of directors
constituting the Board shall automatically be reduced by one.

 

(d)                                 The
Preferred Stock Director may be removed at any time without cause by the
holders of record of a majority of the outstanding Series A Preferred Stock
and any other shares of Voting Preferred Stock, when they have the voting rights
described above (voting together as a single class). So long as a Nonpayment
shall continue, any vacancy in the office of the Preferred Stock Director
(other than prior to the initial election of a Preferred Stock Director after a
Nonpayment) may be filled by a vote of the holders of record of a majority of
the shares of Series A Preferred Stock outstanding and any other Voting
Preferred Stock then outstanding (voting together as a single class), when they
have the voting rights described above. The Preferred Stock Director shall be
entitled to one vote on any matter.

 

(e)                                  Holders
of the Series A Preferred Stock shall be entitled to vote on matters as
described in Section 11.

 

11.                               Modification.

 

(a)                                  With the Consent of Holders. Except as provided below in
this Section 11(a), this Certificate of Designations may be amended,
modified or supplemented, and noncompliance in any particular instance with any
provision of this Certificate of Designations or the Series A Preferred
Stock may be waived, in each case with the written consent or affirmative vote
of the holders of at least two-thirds of the shares of

 

12

 

Series A Preferred Stock at the time outstanding,
including any modification occurring in connection with any merger or
consolidation of the Company or otherwise.

 

Subject to Sections 6 and 7, without the written consent or the
affirmative vote or consent of the holders of at least two-thirds of the
outstanding shares of Series A Preferred Stock, given in person or by
proxy, either in writing or at a meeting, an amendment or waiver under this Section 11(a) may
not:

 

(i) amend, alter or repeal the provisions of the Company’s Certificate
of Incorporation, By-Laws or this Certificate of Designations so as to
materially and adversely affect the special rights, preferences, privileges and
voting powers of the Series A Preferred Stock, taken as a whole; or

 

(ii) consummate a binding share exchange or reclassification involving the
Series A Preferred Stock or a merger or consolidation of the Company with
another entity, unless in each case the Series A Preferred Stock (x)
remains outstanding or (y) in the case of any such merger or consolidation with
respect to which the Company is not surviving or resulting entity, is converted
into or exchanged for preference securities of the surviving or resulting
entity or its ultimate parent having such rights, preferences, privileges and
voting powers, taken as a whole, as are not materially less favorable to the
holders thereof than the rights, preferences, privileges and voting powers of the
Series A Preferred Stock, taken as a whole;

 

provided, however, that
for all purposes of this Section 11(a), any increase in the amount of the
authorized or issued Series A Preferred Stock, or the creation and
issuance, or an increase in the authorized or issued amount, of any other series
of preferred stock ranking equally with and/or junior to the Series A Preferred
Stock with respect to the payment of dividends (whether such dividends are
cumulative or non-cumulative) and/or the distribution of assets upon liquidation,
dissolution or winding up of the Company will not be deemed to adversely affect
the special rights, preferences, privileges or voting powers of the Series A
Preferred Stock.

 

(b)                                 Changes after Provision for Redemption. No vote or consent
of the holders of the Series A Preferred Stock shall be required pursuant
to Sections 10(b) and 11(a) above if, at or prior to the time when
any such vote or consent would otherwise be required pursuant to such Section,
all outstanding Series A Preferred Stock shall have been redeemed, or
called for redemption upon proper notice and sufficient funds shall have been
set aside by the Company for the benefit of holders of such Series A
Preferred Stock called for redemption, in each case pursuant to Section 4
above.

 

12.                               Currency of Payments.

 

Any cash payments with respect to the Series A Preferred Stock
shall be paid in United States dollars in immediately available funds.

 

13

 

13.                               No Preemptive Rights.

 

No holder of Series A Preferred Stock shall have any preemptive
right as to any additional issue of shares of capital stock of the Company, or
to any security convertible, exercisable or exchangeable into such shares.

 

14.                               Miscellaneous.

 

(a)                                  Notices. Any and all notices or other communications or
deliveries to be provided by the holders hereunder shall be in writing and
delivered personally, by facsimile, sent by a nationally recognized overnight
courier service, addressed to the Company, at 120 Broadway, 31st Floor, New
York, New York 10271, facsimile number (646) 514-8612, Attn: General Counsel,
or such other address or facsimile number as the Company may specify for such
purposes by notice to the holders delivered in accordance with this Section.
Any and all notices or other communications or deliveries to be provided by the
Company hereunder shall be in writing and delivered personally, by facsimile,
sent by a nationally recognized overnight courier service addressed to each
holder of record of the Series A Preferred Stock at the facsimile
telephone number or address of such holder of record at their respective last
addresses or facsimile telephone number appearing on the share register of the
Company, or if no such facsimile telephone number or address appears, at the
principal place of business of the holder. Any notice or other communication or
deliveries hereunder shall be deemed given and effective on the earliest of (i) the
date of transmission, if such notice or communication is delivered via
facsimile at the facsimile telephone number specified in this Section prior
to 5:30 p.m. (New York City time), (ii) the date after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified in this Section later than 5:30 p.m.
(New York City time) on any date and earlier than 11:59 p.m. (New York
City time) on such date, (iii) the second Business Day following the date
of mailing, if sent by nationally recognized overnight courier service, or (iv) upon
actual receipt by the party to whom such notice is required to be given.

 

(b)                                 Lost or Mutilated Preferred Stock Certificate. If a holder’s
Series A Preferred Stock certificate shall be mutilated, lost, stolen or
destroyed, the Company shall execute and deliver, in exchange and substitution
for and upon cancellation of a mutilated certificate, or in lieu of or in
substitution for a lost, stolen or destroyed certificate, a new certificate for
the shares of Series A Preferred Stock so mutilated, lost, stolen or
destroyed but only upon receipt of evidence of such loss, theft or destruction
of such certificate, and of the ownership hereof, and indemnity, if requested,
all reasonably satisfactory to the Company.

 

(c)                                  Waiver. Any waiver by the Company or the holder of a breach
of any provision of this Certificate of Designations shall not operate as or be
construed to be a waiver of any other breach of such provision or of any breach
of any other provision of this Certificate of Designations. The failure of the Company
or the holder to insist upon strict adherence to any term of this Certificate
of Designations on one or more occasions

 

14

 

shall not be considered a waiver or deprive that party of the right
thereafter to insist upon strict adherence to that term or any other term of
this Certificate of Designations. Any waiver must be in writing.

 

(d)                                 Status of Converted or Redeemed Preferred Stock. In case any
shares of Series A Preferred Stock shall be converted, redeemed or
reacquired by the Company, such shares shall resume the status of authorized
but unissued shares of preferred stock and shall no longer be designated as Series A
Preferred Stock

 

(e)                                  Other Rights. Except as provided in Sections 5, 6 and 7, the
Series A Preferred Stock will not be convertible into, or exchangeable
for, any other class or series of securities of the Company, and holders of the
Series A Preferred Stock will have no subscription rights to acquire
additional shares of the Company. Holders of the Series A Preferred Stock
shall have no right to require the redemption or repurchase of the Series A
Preferred Stock.

 

[Signature
appears on subsequent page.]

 

IN WITNESS WHEREOF, I have affixed my signature hereto this     
day of [November], 2006.

 

	
   

  	
  TOWER GROUP, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Corporate
  Secretary

  	
   

  
	
   

  	
   

  	
   

  

 

15

 

 

 

Exhibit B

REGISTRATION RIGHTS AGREEMENT

 

 

REGISTRATION RIGHTS AGREEMENT

 

THIS REGISTRATION RIGHTS AGREEMENT (this “Agreement”) is made
and entered into as of o, 2006 by and between CASTLEPOINT REINSURANCE COMPANY,
LTD., a Bermuda company (the “Investor”), and TOWER GROUP, INC., a
Delaware corporation (the “Company”).

 

RECITALS

 

                                                WHEREAS,
the Investor and the Company have entered into a Stock Purchase Agreement,
dated November 14, 2006 (the “Purchase Agreement”), pursuant to
which the Investor has agreed to purchase from the Company, and the Company has
agreed to sell to the Investor, 40,000 shares of the Company’s Series A Preferred
Stock, par value $0.01 per share (the “Preferred Stock”);

 

                                                WHEREAS,
the Preferred Stock is convertible into shares (the “Conversion Shares”)
of common stock, par value $0.01 per share, of the Company (the “Common
Stock”), as set forth in the Certificate of Designations of the Preferred
Stock (the “Certificate of Designations”); and

 

                                                WHEREAS,
in consideration of the Investor’s entry into the Purchase Agreement, the
Company has agreed to execute and deliver to the Investor this Agreement;

 

AGREEMENT

 

                                                NOW,
THEREFORE, in consideration of the foregoing, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto hereby agree as follows:

 

1. Definitions. (a) In addition to the terms defined
elsewhere in this Agreement, as used in this Agreement, the following terms
shall have the meanings set forth below:

 

(i) “Affiliate” of any specified Person means any other Person who
directly, or indirectly through one or more intermediaries, is in control of,
is controlled by, or is under common control with, such specified Person. For
purposes of this definition, control of a Person means the power, directly or
indirectly, to direct or cause the direction of the management and policies of
such Person whether by contract, securities ownership or otherwise; and the
terms “controlling” and “controlled” have the respective meanings correlative to
the foregoing.

 

 

(ii) “Agreement” means this Registration Rights Agreement, as the
same may be amended, supplemented or modified from time to time in accordance
with the terms hereof.

 

(iii) “Closing Date” means December 4, 2006, or such other
time or such other date as the Company and the Investor may agree.

 

(iv) “Commission” means the Securities and Exchange Commission.

 

(v) “Exchange Act” means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission thereunder, or
any similar successor statute.

 

(vi) “Free Writing Prospectus” means a free writing prospectus (as
such term is defined in Rule 405 under the Securities Act) relating to
Registrable Securities.

 

(vii) “Investor” means the Investor and any permitted transferee
or assignee of Registrable Securities who agrees to become bound by all of the
terms and provisions of this Agreement.

 

(viii) “Person” means any individual, partnership, corporation, limited
liability company, joint stock company, association, trust, unincorporated
organization, or a government agency or political subdivision thereof.

 

(ix) “Prospectus” means the prospectus (including any preliminary
prospectus and/or any final prospectus filed pursuant to Rule 424(b) under
the Securities Act and any prospectus that discloses information previously
omitted from a prospectus filed as part of an effective registration statement
in reliance on Rule 430A, Rule 430B or Rule 430C under the
Securities Act) included in a Registration Statement, as amended or
supplemented by any prospectus supplement or any Issuer Free Writing Prospectus
(as defined in Rule 433(h) under the Securities Act) with respect to
the terms of the offering or any portion of the Registrable Securities covered
by such Registration Statement and by all other amendments and supplements to
such prospectus, including all material incorporated by reference in such prospectus
and all documents filed after the date of such prospectus by the Company under
the Exchange Act and incorporated by reference therein.

 

(x) “Public Offering” means an offer registered with the Commission
and the appropriate state securities commissions by the Company of its Common
Stock and made pursuant to the Securities Act.

 

(xi) “Registrable Securities” means (i) the Conversion
Shares and (ii) any shares or other securities issued in respect of such Registrable
Securities by reason of or in connection with any share dividend, share
distribution, share split, purchase in any rights offering or in connection
with any exchange for or replacement of such Registrable Securities or any
combination of shares, recapitalization, amalgamation, merger or consolidation,
any other equity securities issued in respect of Registrable Securities
pursuant to any other pro rata distribution with respect to the Common Stock; provided,

 

2

 

however, that a
Conversion Share shall cease to be a Registrable Security for purposes of this
Agreement when it no longer is a Security.

 

(xii) “Registration Expenses” means any and all expenses
incident to the performance of or compliance with this Agreement, including, without
limitation: (i) all Commission, securities exchange, NASD registration,
listing, inclusion and filing fees, (ii) all fees and expenses incurred in
connection with compliance with international, federal or state securities or blue
sky laws (including, without limitation, any registration, listing and filing
fees and reasonable fees and disbursements of counsel in connection with blue
sky qualification of any of the Registrable Securities and the preparation of a
blue sky memorandum and compliance with the rules of the NASD), (iii) all
expenses in preparing or assisting in preparing, word processing, duplicating,
printing, delivering and distributing any Registration Statement, any
Prospectus, any amendments or supplements thereto, any underwriting agreements,
securities sales agreements, certificates and any other documents relating to
the performance under and compliance with this Agreement, (iv) all fees
and expenses incurred in connection with the listing or inclusion of any of the
Registrable Securities on any securities exchange pursuant to Section 3(h) of
this Agreement, (v) the fees and disbursements of counsel for the Company and
of the independent public accountants of the Company (including, without
limitation, the expenses of any special audit and “cold comfort” letters
required by or incident to such performance), and (vi) any fees and
disbursements customarily paid in issues and sales of securities (including the
fees and expenses of any experts retained by the Company in connection with any
Registration Statement); provided, however,
that Registration Expenses shall exclude brokers’ or underwriters’ discounts
and commissions, if any, relating to the sale or disposition of Registrable
Securities by the Investor.

 

(xiii) “Registration Statement” means any registration statement
of the Company, which covers any of the Registrable Securities pursuant to the
provisions of this Agreement, including the Prospectus, amendments and
supplements to such registration statement or Prospectus, including pre- and
post-effective amendments, all exhibits thereto, and all material incorporated
by reference or deemed to be incorporated by reference, if any, in such
registration statement.

 

(xiv) “Restricted Security” means any Conversion Share except any that (i) has
been registered pursuant to an effective registration statement under the
Securities Act and sold in a manner contemplated by the prospectus included in
such registration statement, (ii) has been transferred by the Investor in compliance
with the resale provisions of Rule 144 under the Securities Act (or any
successor provision thereto) or is transferable by the Investor pursuant to
paragraph (k) of Rule 144 under the Securities Act (or any successor
provision thereto), or (iii) otherwise has been transferred by the
Investor and a new certificate representing a share of Common Stock not subject
to transfer restrictions under the Securities Act has been delivered by or on
behalf of the Company.

 

(xv) “Securities Act” means the Securities Act of 1933, as amended,
and the rules and regulations of the Commission thereunder, or any similar
successor statute.

 

3

 

(xvi) “Underwritten Offering” means a sale of securities of the Company
to an underwriter or underwriters for reoffering to the public.

 

2. Registration.  (a) 
Demand Registration Rights.

 

(i) At any time after the six-month anniversary of the date on which
the Investor purchases the Preferred Stock, upon the receipt by the Company of
the written request of the Investor, and in no event later than 60 days after
the receipt of such request (but subject to any applicable Blackout Periods),
the Company shall prepare and file with the Commission (the “Filing Deadline”)
a Registration Statement under the Securities Act on Form S-3 (or such
other form as may be available for use by the Company) relating to the offer
and sale of the Registrable Securities by the Investor and will promptly take
all actions that are necessary or advisable in connection with such registration,
including without limitation, providing written responses to any comments made
by the Commission regarding such registration statement and filing any
necessary pre-effective amendments and all necessary exhibits thereto, and will
use its commercially reasonable efforts to cause such Registration Statement to
be declared effective by the Commission as soon as possible after the initial
filing thereof. The Company will, subject to any applicable Blackout Periods,
use its commercially reasonable efforts to keep such Registration Statement effective
for the period beginning on the date such Registration Statement becomes
effective (the “Effectiveness Date”) and terminating on the earlier of
(x) two years from the Effectiveness Date and (y) the date upon which all
Registrable Securities then held by the Investor either (i) may be resold
without restriction of any kind and without need for such Registration
Statement to be effective or (ii) have been disposed of pursuant to transactions
contemplated by the Registration Statement. The Company’s obligation to file a
Registration Statement under this Section 2(a) shall terminate on the
date upon which all Registrable Securities then held by the Investor either (i) may
be resold without restriction of any kind and without need for a Registration
Statement to be effective or (ii) have been disposed of pursuant to
transactions contemplated by the Registration Statement.

 

(ii) If a registration pursuant to this Section 2(a) involves
a Public Offering that is an Underwritten Offering, the Company and each other
selling security holder participating in such Public Offering shall agree to
sell any shares of Common Stock to be sold by them to the underwriters on the
same terms as apply to the shares of Common Stock to be sold by the Investor.
If the managing underwriter thereof advises the Company and the Investor that,
in its view, the number of shares of Common Stock that the Company and the
Investor and other selling security holders (if any) intend to include in such registration
exceeds the largest number of shares of Common Stock that can be sold without
having an adverse effect on such Public Offering, including with respect to the
price at which such shares can be sold (the “Maximum Offering Size”),
the Company will include in such registration only that number of shares of
Common Stock which does not exceed the Maximum Offering Size, in the following
order of priorities: (1) first, all Registrable Securities of the Investor
and (2) second, the securities proposed to be registered by the Company
and by other holders of securities entitled to participate in the registration,
drawn from them pro-rata based on the number of shares each has requested to be
included in such registration.

 

4

 

(iii) The Company shall be required to register the Registrable Securities
not more than two (2) times pursuant to this Section 2(a).

 

(iv) At any time before a Registration Statement requested by the
Investor pursuant to this Section 2(a) has become effective, the Investor
may withdraw its request by written notice to the Company and upon receipt of
such notice the Company shall, at its option, either withdraw the Registration
Statement (if any) that it previously filed in connection with such request or
amend such Registration Statement to remove any Registrable Securities included
therein at the Investor’s request and in either case shall be relieved of all
obligations under this Section 2(a) with respect to such request; provided
that if the Investor reimburses the Company for all of the Company’s costs and expenses
incurred in complying with such request through the time the Company receives
notice of the Investor’s withdrawal of such request, such request shall not
count as a request to register Registrable Securities for purposes of Section 2(a)(iii).

 

(b) Piggyback Registration Rights. (i) If the Company
proposes to register any of its Common Stock under the Securities Act (other
than a registration on Form S-8 or S-4 or any successor or similar forms),
whether or not for sale for its own account, it will at such time, give prompt
written notice at least 20 calendar days prior to the anticipated filing date
of the registration statement relating to such registration to the Investor,
which notice shall set forth such Investor’s rights under this Section 2(b) and
shall offer the Investor the opportunity to include in such registration
statement such number of Registrable Securities as the Investor may request. Upon
the written request of the Investor made within 15 calendar days of the notice
from the Company (which request shall specify the number of Registrable Securities
such Investor seeks to register), the Company will use commercially reasonable
efforts to effect the registration under the Securities Act of all Registrable
Securities that the Company has been so requested to register by the Investor,
to the extent requisite to permit the disposition of the Registrable Securities
to be so registered; provided, however, that (A) if such
registration involves an underwritten Public Offering, the Investor must sell
its Registrable Securities to the underwriters on the same terms and conditions
as apply to the Company or other selling security holders, (B) if such registration
does not involve an underwritten Public Offering, the Investor must sell its
Registrable Securities in accordance with the plan of distribution set forth on
Exhibit A and (C) if, at any time after giving written
notice of its intention to register any Registrable Securities pursuant to this
Section 2(b) and prior to the effective date of the Registration
Statement filed in connection with such registration, the Company shall
determine for any reason not to register such Registrable Securities, the
Company shall give written notice to the Investor and, thereupon, shall be
relieved of its obligation to register any Registrable Securities in connection
with such registration.

 

(ii) If a registration pursuant to this Section 2(b) involves
an Underwritten Offering and the managing underwriter thereof advises the Company
that, in its view, the number of shares of Common Stock that the Company and
the Investor and other selling security holders (if any) intend to include in
such registration exceeds the Maximum Offering Size, the Company will include
in such registration only that number of shares of Common Stock which does not
exceed the Maximum Offering Size, in the following order of priorities: (A) if
such registration of the Common Stock is initiated by the

 

5

 

Company for its own account, (1) first,
all securities the Company proposes to sell for its own account and (2) second,
the securities requested to be registered by other holders of securities entitled
to participate in the registration (including Registrable Securities of the
Investor), drawn from them pro-rata based on the number of shares each has requested
to be included in such registration; and (B) if such registration of the
Common Stock is initiated at the request of a selling stockholder, (1) first,
all securities of such selling stockholder that the selling stockholder
proposes to sell for its account and (2) second, the securities to be
registered by the Company and those requested to be registered by other holders
of securities entitled to participate in the registration (including
Registrable Securities of the Investor), drawn from them pro-rata based on the number
of shares each has requested to be included in such registration.

 

(iii) If as a result of the proration provisions of this Section 2(b),
the Investor is not entitled to include all such Registrable Securities in such
registration, the Investor may elect to withdraw its request to include any
Registrable Securities in such registration.

 

(iv) If the Investor decides not to include all of its Registrable
Securities in any Registration Statement thereafter filed by the Company but
before the Registration Statement becomes effective, the Investor shall
nevertheless continue to have the right under this Section 2(b) to
include any Registrable Securities then held by it in any subsequent
Registration Statement as may be filed by the Company with respect to offerings
of its Common Stock.

 

(v) Notwithstanding the foregoing, the Company shall have no obligations
under this Section 2(b) hereof at any time that the Registrable
Securities that the Investor seeks to include in a Registration Statement are
the subject of an effective registration statement.

 

(c) Blackout Period.

 

(i) Subject to the provisions of this Section 2(c) and a good
faith determination by a majority of the independent members of the Board of
Directors of the Company that it is in the best interests of the Company to
suspend the use of the Registration Statement, prior to the filing of a
Registration Statement or following the effectiveness of a Registration
Statement (and the filings with any international, federal or state securities
commissions), the Company, by written notice to managing underwriter (if any)
and the Investor, may suspend its obligation to file the Registration Statement
with the Commission or direct the Investor to suspend sales of the Registrable
Securities pursuant to a Registration Statement, as the case may be, for such times
as the Company reasonably may determine is necessary and advisable (but in no
event for more than (x) an aggregate of ninety (90) days in any rolling twelve
(12)- month period commencing on the Closing Date or (y) more than sixty (60)
days in any rolling ninety (90)-day period), if any of the following events
shall occur: (1) the representative of the underwriters of an Underwritten
Offering of primary shares by the Company has advised the Company that the sale
of Registrable Securities pursuant to the Registration Statement would have a material
adverse effect on the Company’s primary offering; (2) the majority of the
independent members of the Board of Directors of the Company shall have
determined in good faith that (A) the offer or sale of any Registrable
Securities would materially

 

6

 

impede, delay or interfere with any proposed
financing, offer or sale of securities, acquisition, amalgamation, merger,
tender offer, business combination, corporate reorganization or other significant
transaction involving the Company or (B) after obtaining the advice of
counsel, the sale of Registrable Securities pursuant to the Registration
Statement would require disclosure of non-public material information not
otherwise required to be disclosed under applicable law, and (C) (x) the
Company has a bona fide business purpose for preserving the confidentiality of the
proposed transaction, (y) disclosure would have a material adverse effect on
the Company or the Company’s ability to consummate the proposed transaction, or
(z) the proposed transaction renders the Company unable to comply with
Commission requirements, in each case under circumstances that would make it
impractical or inadvisable to cause the Registration Statement (or such
filings) to become effective or to promptly amend or supplement the
Registration Statement on a post-effective basis, as applicable; or (3) the
majority of the independent members of the Board of Directors of the Company
shall have determined in good faith, after obtaining the advice of counsel, that
the Company is required by law, rule or regulation or that it is in the
best interests of the Company to supplement the Registration Statement or file
a post-effective amendment to the Registration Statement in order to
incorporate information into the Registration Statement for the purpose of (A) including
in the Registration Statement any prospectus required under Section 10(a)(3) of
the Securities Act; (B) reflecting in the prospectus included in the Registration
Statement any facts or events arising after the effective date of the
Registration Statement (or of the most recent post-effective amendment) that,
individually or in the aggregate, represent a fundamental change in the
information set forth therein; or (C) including in the prospectus included
in the Registration Statement any material information with respect to the plan
of distribution not disclosed in the Registration Statement or any material
change to such information. Any period in which the Company’s obligation to
file the Registration Statement or the use of the Registration Statement has
been suspended in accordance with this Section 2(c) is sometimes
referred to herein as a “Blackout Period.” Upon the occurrence of any
such suspension, the Company shall use its commercially reasonable best efforts
to file the Registration Statement, to cause the Registration Statement to
become effective or to promptly amend or supplement the Registration Statement
on a post-effective basis or to take such action as is necessary to make resumed
use of the Registration Statement compatible with the Company’s best interests,
as applicable, so as to permit the Investor to resume sales of the Registrable
Securities as soon as possible.

 

(ii) In the case of an event that causes the Company to suspend the use
of a Registration Statement (a “Suspension Event”), the Company shall
give written notice (a “Suspension Notice”) to the managing underwriter
(if any) and the Investor to suspend sales of the Registrable Securities and
such notice shall state generally the basis for the notice and that such
suspension shall continue only for so long as the Suspension Event or its
effect is continuing (but in no event longer than the periods specified in Section 2(c)(i))
and the Company is using its commercially reasonable best efforts and taking
all reasonable steps to file the Registration Statement or to terminate suspension
of the use of the Registration Statement as promptly as possible. The Investor
shall not effect any sales of the Registrable Securities pursuant to such
Registration Statement (or such filings) at any time after it has received a
Suspension Notice from the Company and prior to receipt

 

7

 

of an End of Suspension Notice (as defined
below). If so directed by the Company, the Investor will deliver to the Company
(at the expense of the Company) all copies (other than permanent file copies)
then in the Investor’s possession of the Prospectus covering the Registrable
Securities at the time of receipt of the Suspension Notice. The Investor may
recommence effecting sales of the Registrable Securities pursuant to the
Registration Statement (or such filings) following further notice to such
effect (an “End of Suspension Notice”) from the Company, which End of
Suspension Notice shall be given by the Company to the Investor and the
managing underwriter in the manner described above promptly following the
conclusion of any Suspension Event and its effect.

 

(iii) Notwithstanding any provision herein to the contrary, if the
Company shall give a Suspension Notice pursuant to this Section 2, the
Company agrees that it shall extend the period of time during which the
applicable Registration Statement shall be maintained effective pursuant to this
Agreement by the number of days during the period from the date of receipt by
the Investor of the Suspension Notice to and including the date of receipt by
the Investor of the End of Suspension Notice and copies of the supplemented or
amended Prospectus necessary to resume sales.

 

3. Obligations of the Company. In connection with the
registration of the Registrable Securities, the Company shall use commercially
reasonable efforts to:

 

(a) (i)                    Prepare
and file with the Commission a Registration Statement, within the relevant time
period specified in Section 2, on the appropriate form under the
Securities Act (as shall be selected by the Company), which Registration
Statement (1) shall be available for the sale of the Registrable Securities
by the Investor, (2) shall comply as to form in all material respects with
the requirements of the applicable form and include or incorporate by reference
all financial statements required by the Commission to be filed therewith or
incorporated by reference therein, and (3) shall comply in all respects
with the requirements of Regulation S-T under the Securities Act, and (ii) cause
such Registration Statement to become effective and remain effective in
accordance with Section 2 of this Agreement.

 

(b) Prepare and file with the Commission such amendments and post-effective
amendments to each Registration Statement as may be necessary under applicable
law to keep such Registration Statement effective for the applicable period;
and cause each Prospectus to be supplemented by any required prospectus
supplement or Issuer Free Writing Prospectus (as defined in Rule 433(h) under
the Securities Act), and cause the Prospectus as so supplemented or any such
Issuer Free Writing Prospectus, as the case may be, to be filed pursuant to Rule 424
or Rule 433, respectively (or any similar provision then in force) under
the Securities Act and comply with the provisions of the Securities Act, the
Exchange Act and the rules and regulations thereunder applicable to it
with respect to the disposition of all securities covered by each Registration
Statement during the applicable period in accordance with the intended method
or methods of distribution by the Investor thereof (including sales by any
broker-dealer);

 

8

 

(c) Not to prepare, use or file any Issuer Free Writing Prospectus (as defined
in Rule 433(h) under the Securities Act) with respect to Registrable Securities
unless such Issuer Free Writing Prospectus has been approved by the Investor
(such approval not be unreasonably withheld);

 

(d) During such time as a Registration Statement is effective or such shorter
period that will terminate when all the Registrable Securities have been sold
(the “Registration Period”), comply with the provisions of the Securities Act
with respect to the Registrable Securities of the Company covered by the Registration
Statement;

 

(e)(i)                       Prior
to the filing with the Commission of any Registration Statement (including any
amendments thereto) and the distribution or delivery of any Prospectus
(including any supplements thereto) or Issuer Free Writing Prospectus, provide
draft copies thereof (including a copy of the accountant’s consent letter to be
included in the filing) to the Investor and reflect in such documents all such
comments relating to the Investor and the plan of the distribution of the
Registrable Securities as the Investor reasonably may propose; and

 

(ii) Furnish to the Investor (A) promptly after the same is
prepared and publicly distributed, filed with the Commission, or received by
the Company, one copy of the Registration Statement, each Prospectus, each
Issuer Free Writing Prospectus, and each amendment or supplement to any of the
foregoing, and (B) such number of copies of the Prospectus, each Issuer
Free Writing Prospectus, and all amendments and supplements thereto and such
other documents, as the Investor may reasonably request in order to facilitate
the disposition of the Registrable Securities owned by the Investor;

 

(f)(i)                         Register
or qualify the Registrable Securities covered by a Registration Statement under
such securities or “blue sky” laws of all jurisdictions requiring blue sky
registration or qualification,

 

(ii) Prepare and file in such jurisdictions such amendments (including post-effective
amendments) and supplements to such registrations and qualifications as may be
necessary to maintain the effectiveness thereof at all times during the
Registration Period,

 

(iii) Take all such other lawful actions as may be necessary to
maintain such registrations and qualifications in effect at all times during
the Registration Period, and

 

(iv) Take all such other lawful actions reasonably necessary or
advisable to qualify the Registrable Securities for sale in such jurisdictions;

 

provided, however,
that the Company shall not be required in connection with any of its
obligations under this Section 3(f) to (A) qualify to do
business in any jurisdiction where it would not otherwise be required to
qualify but for this Section 3(f), (B) subject itself to general
taxation in any such jurisdiction or (C) file a general consent to service
of process in any such jurisdiction;

 

(g) As promptly as practicable after becoming aware of such event,
notify the Investor of the occurrence of any event, as a result of which the
Prospectus included in a Registration Statement, as then in effect, or any
Issuer Free Writing Prospectus, taken as a whole with the Prospectus, includes
an untrue statement of a material fact or omits to

 

9

 

state a material fact required to be stated
therein or necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading, and promptly prepare an amendment
to a Registration Statement and supplement to the Prospectus to correct such
untrue statement or omission, and deliver a number of copies of such supplement
and amendment to the Investor as the Investor may reasonably request;

 

(h) Notify the Investor of the issuance by the Commission of any stop order
or other suspension of the effectiveness of a Registration Statement on the
date of receipt of any such stop order or other suspension, and take all lawful
action to effect the withdrawal, recession or removal of such stop order or
other suspension;

 

(i) Cause all the Registrable Securities covered by a Registration Statement
to be listed on a principal national securities exchange, or included in an
inter-dealer quotation system of a registered national securities association,
on or in which securities of the same class or series issued by the Company are
then listed or included;

 

(j) Maintain a transfer agent and registrar, which may be a single
entity, for the Registrable Securities not later than the effective date of the
first Registration Statement;

 

(k) Cooperate with the Investor to facilitate the timely preparation
and delivery of certificates for the Registrable Securities to be offered
pursuant to a Registration Statement and enable such certificates for the
Registrable Securities to be in such denominations or amounts, as the case may
be, as the Investor reasonably may request and registered in such names as the
Investor may request; and, within three business days after a registration
statement which includes Registrable Securities is declared effective by the
Commission, deliver to the transfer agent for the Registrable Securities (with
copies to the Investor) an appropriate instruction and, to the extent
necessary, cause legal counsel selected by the Company to deliver an opinion of
such counsel to such transfer agent;

 

(l) Take all such other lawful actions reasonably necessary to expedite
and facilitate the disposition by the Investor of its Registrable Securities in
accordance with the intended methods therefor provided in the Prospectus which are
customary under the circumstances, including without limitation, by making senior
management available to participate in road shows and meeting with potential
investors as the Investor shall reasonably request.

 

4. Obligations of the investor. In connection with the
registration of the Registrable Securities, the Investor shall have the
following obligations:

 

(a) It shall be a condition precedent to the obligations of the Company
to complete the registration pursuant to this Agreement with respect to the Registrable
Securities that such Investor shall furnish to the Company such information
regarding itself, the Registrable Securities held by it and the intended method
of disposition of the Registrable Securities held by it as shall be reasonably
required to effect the registration of such

 

10

 

Registrable Securities and shall execute such
documents in connection with such registration as the Company may reasonably
request. At least ten business days prior to the first anticipated filing date
of a Registration Statement, the Company shall notify the Investor and its
counsel, whether in-house or otherwise (“Counsel”) of the information
relating to the Investor and the Registrable Securities the Company requires
from the Investor in order to prepare and file a Registration Statement that
complies with the Securities Act (the “Requested Information”). If four business
days prior to the anticipated filing date the Company has not received the
Requested Information from the Investor or its Counsel, then the Company shall
send the Investor and its Counsel a reminder of such information request. If
two business days prior to the anticipated filing date the Company still has not
received the Requested Information from the Investor or its Counsel, then the
Company may file the Registration Statement without including Registrable Securities
of the Investor. However, promptly upon receipt of the Requested Information,
and at the Investor’s expense, the Company shall file such amendment(s) to the
Registration Statement as may be necessary to include therein the Registrable
Securities.

 

(b) The Investor agrees to cooperate with the Company in connection
with the preparation and filing of such Registration Statement hereunder,
unless the Investor has notified the Company in writing of its election in
accordance with the terms and conditions of this Agreement to exclude all of
its Registrable Securities from such Registration Statement.

 

(c) The Investor shall not prepare or use any Free Writing Prospectus
(as such term is defined in Rule 405 under the Securities Act) unless any
and all issuer information included therein has been approved by the Company
(such approval not be unreasonably withheld).

 

(d) As promptly as practicable after becoming aware of such event, the Investor
shall notify the Company of the occurrence of any event, as a result of which
the Prospectus included in a Registration Statement, as then in effect, includes
an untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.

 

(e) The Investor agrees that, upon receipt of any notice from the Company
of the occurrence of any event of the kind described in Section 3(g) or
3(h), it shall immediately discontinue its disposition of Registrable
Securities pursuant to a Registration Statement covering such Registrable
Securities until the Investor’s receipt of the copies of the supplemented or
amended Prospectus contemplated by Section 3(g) and, if so directed
by the Company, the Investor shall deliver to the Company (at the expense of
the Company) or destroy (and deliver to the Company a certificate of destruction)
all copies (other than permanent file copies) in the Investor’s possession of
the Prospectus covering such Registrable Securities current at the time of
receipt of such notice.

 

5. Expenses of Registration. All Registration Expenses shall be
paid by the Company. The Investor shall pay the

 

11

 

underwriting discount attributable to such Investor’s
Registrable Securities, any transfer taxes payable with respect thereto, and
all fees and expenses, including fees and expenses of such Investor’s counsel,
incurred by the Investor.

 

6. Indemnification and Contribution. (a) the Company agrees
to indemnify and hold harmless (i) the Investor, (ii) each Person, if any, who
controls (within the meaning of Section 15 of the Securities Act or Section 20(a) of
the Exchange Act), any such Person described in clause (i) (any of the Persons
referred to in this clause (ii) being hereinafter referred to as a “Controlling
Person”), and (iii) the respective officers, directors, partners,
employees, representatives and agents of any such Person or any Controlling Person
(any Person referred to in clause (i), (ii) or (iii) may hereinafter be
referred to as a “Purchaser Indemnitee”), to the fullest extent lawful,
from and against any and all losses, claims, damages, judgments, actions,
out-of-pocket expenses, and other liabilities (the “Liabilities”), including
without limitation and as incurred, reimbursement of all reasonable costs of
investigating, preparing, pursuing or defending any claim or action, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, including the reasonable fees and expenses of counsel to any Purchaser
Indemnitee, joint or several, directly or indirectly related to, based upon,
arising out of or in connection with any untrue statement or alleged untrue
statement of a material fact contained in any Registration Statement or Prospectus
(as amended or supplemented if the Company shall have furnished to such Purchaser
Indemnitee any amendments or supplements thereto), or any preliminary Prospectus
or Issuer Free Writing Prospectus taken as a whole with the preliminary Prospectus,
or any omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading, except insofar as
such Liabilities arise out of or are based upon (i) any untrue statement or
omission or alleged untrue statement or omission made in reliance upon and in
conformity with information relating to any Purchaser Indemnitee furnished to
the Company or any underwriter in writing by such Purchaser Indemnitee
expressly for use therein, or (ii) any untrue statement contained in or
omission from or alleged untrue statement contained in or alleged omission from
a preliminary Prospectus if a copy of the preliminary Prospectus (as then
amended or supplemented, if the Company shall have furnished or made available
to or on behalf of the Investor participating in the distribution

 

12

 

relating to the relevant Registration Statement
any amendments or supplements thereto) was not sent or given by or on behalf of
the Investor to the Person asserting any such Liabilities who purchased the
shares of Common Stock, if such preliminary Prospectus (or preliminary Prospectus
as amended or supplemented) is furnished or made available to the Investor
prior to the time of sale of such shares of Common Stock to such Person and the
untrue statement contained in or omission from or alleged untrue statement
contained in or alleged omission from such preliminary Prospectus was corrected
in the preliminary Prospectus, as amended or supplemented. The Company shall
notify the Investor promptly of the institution, threat or assertion of any
claim, proceeding (including any governmental investigation), or litigation of
which it shall have become aware in connection with the matters addressed by
this Agreement which involves the Company or a Purchaser Indemnitee. The
indemnity provided for herein shall remain in full force and effect regardless
of any investigation made by or on behalf of any Purchaser Indemnitee.

 

(b) Indemnification by the Investor. In connection with any
Registration Statement in which a holder of Registrable Securities is
participating, the Investor agrees, severally and not jointly, to indemnify and
hold harmless the Company, each Person who controls the Company within the
meaning of Section 15 of the Securities Act or Section 20(a) of
the Exchange Act and the respective partners, directors, officers, members,
representatives, employees and agents of such Person or Controlling Person to
the same extent as the foregoing indemnity from the Company to each Purchaser
Indemnitee, but only with reference to untrue statements or omissions or
alleged untrue statements or omissions made in reliance upon and in strict
conformity with information relating to such Purchaser Indemnitee furnished to
the Company in writing by such Purchaser Indemnitee expressly for use in any
Registration Statement or Prospectus, any amendment or supplement thereto or
any preliminary Prospectus or Issuer Free Writing Prospectus. The liability of
any Purchaser Indemnitee pursuant to this paragraph shall in no event exceed the
net proceeds received by such Purchaser Indemnitee from sales of Registrable Securities
giving rise to such obligations.

 

(c) Notice of Claims, etc. If any suit, action, proceeding
(including any governmental or regulatory investigation), claim or demand shall
be brought or asserted against any Person in respect of which indemnity may be
sought pursuant to paragraph (a) or (b) above, such Person (the “Indemnified
Party”), shall promptly notify the Person against whom such indemnity may
be sought (the “Indemnifying Party”), in writing of the commencement
thereof (but the failure to so notify an Indemnifying Party shall not relieve
it from any liability which it may have under this Section 6, except to
the extent the Indemnifying Party is materially prejudiced by the failure to
give notice), and the Indemnifying Party, upon request of the Indemnified
Party, shall retain counsel reasonably satisfactory to the Indemnified Party to
represent the Indemnified Party and

 

13

 

any others the Indemnifying Party may
reasonably designate in such action, suit, proceeding, claim or demand and
shall pay the reasonable fees and expenses actually incurred by such counsel
related to such proceeding. Notwithstanding the foregoing, in any such
proceeding, any Indemnified Party shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of
such Indemnified Party, unless (i) the Indemnifying Party and the
Indemnified Party shall have mutually agreed in writing to the contrary, (ii) the
Indemnifying Party failed within a reasonable time after notice of commencement
of the action to assume the defense and employ counsel reasonably satisfactory
to the Indemnified Party, or (iii) the named parties to any such action
(including any impleaded parties) include both such Indemnified Party and the
Indemnifying Party, or any Affiliate of the Indemnifying Party, and such Indemnified
Party shall have been reasonably advised by counsel that either (x) there may
be one or more legal defenses available to it which are different from or
additional to those available to the Indemnifying Party or such Affiliate of the
Indemnifying Party or (y) a conflict may exist between such Indemnified Party
and the Indemnifying Party or such Affiliate of the Indemnifying Party (in which
case the Indemnifying Party shall not have the right to assume nor direct the
defense of such action on behalf of such Indemnified Party, it being understood,
however, that the Indemnifying Party shall not, in connection with any one such
action or separate but substantially similar or related actions arising out of
the same general allegations or circumstances, be liable for the fees and
expenses of more than one separate firm of attorneys (in addition to any local
counsel), for all such Indemnified Parties, and any such separate firm for the
Indemnifying Party, the directors, the officers and such control Persons of the
Indemnified Party as shall be designated in writing by the Indemnifying Party).
The Indemnifying Party shall not be liable for any settlement of any proceeding
effected without its written consent, which consent shall not be unreasonably
withheld, but if settled with such consent or if there is a final judgment for
the plaintiff, the Indemnifying Party agrees to indemnify any Indemnified Party
from and against any loss or liability by reason of such settlement or
judgment. No Indemnifying Party shall, without the prior written consent of the
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 on claims that are the subject matter of such
proceeding.

 

(d) Contribution. If the indemnification provided for in
paragraphs (a) and (b) of this Section 6 is for any reason held
to be unavailable to an Indemnified Party in respect of any Liabilities
referred to therein (other than by reason of the exceptions provided therein)
or is insufficient to hold harmless a party indemnified thereunder, then each
Indemnifying Party under such paragraphs, in lieu of indemnifying such
Indemnified Party thereunder, shall contribute to the amount paid or payable by
such Indemnified Party as a result of such Liabilities (i) in such
proportion as is appropriate to reflect the relative benefits of the
Indemnified Party on the one hand and the Indemnifying Party(ies) on the other
in connection with the statements or omissions that resulted in such
Liabilities, 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 Indemnifying Party(ies)

 

14

 

and the Indemnified Party, as well as any
other relevant equitable considerations. The relative fault of the Company on
the one hand and any Purchaser Indemnitees on the other shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company or by such Purchaser Indemnitees
and the parties’ relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.

 

(e) The parties agree that it would not be just and equitable if contribution
pursuant to this Section 6 were determined by pro
rata allocation (even if such
Indemnified Parties were treated as one entity for such purpose), or by any
other method of allocation that does not take account of the equitable considerations
referred to in paragraph 6(d) above. The amount paid or payable by an
Indemnified Party as a result of any Liabilities referred to paragraph 6(d) shall
be deemed to include, subject to the limitations set forth above, any reasonable
legal or other expenses actually incurred by such Indemnified Party in
connection with investigating or defending any such action or claim. Notwithstanding
the provisions of this Section 6, in no event shall a Purchaser Indemnitee
be required to contribute any amount in excess of the amount by which proceeds
received by such Purchaser Indemnitee from sales of Registrable Securities
exceeds the amount of any damages that such Purchaser Indemnitee has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. For purposes of this Section 6, each Person,
if any, who controls (within the meaning of Section 15 of the Act or Section 20(a) of
the Exchange Act) the Investor shall have the same rights to contribution as
the Investor and each Person, if any, who controls (within the meaning of Section 15
of the Act or Section 20(a) of the Exchange Act) the Company, and
each officer, director, partner, employee, representative, agent or manager of
the Company shall have the same rights to contribution as the Company. Any
party entitled to contribution will, promptly after receipt of notice of
commencement of any action, suit or proceeding against such party in respect of
which a claim for contribution may be made against another party or parties,
notify each party or parties from whom contribution may be sought, but the
omission to so notify such party or parties shall not relieve the party or parties
from whom contribution may be sought from any obligation it or they may have
under this Section 6 or otherwise, except to the extent that any party is materially
prejudiced by the failure to give notice. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities
Act) shall be entitled to contribution from any Person who was not guilty of
such fraudulent misrepresentation.

 

(f) The indemnity and contribution agreements contained in this Section 6
will be in addition to any liability which the Indemnifying Parties may otherwise
have to the Indemnified Parties referred to above. The Purchaser Indemnitees’
obligations to contribute pursuant to this Section 6 are several in proportion
to the respective number of Shares sold by each of the Purchaser Indemnitees
hereunder and not joint.

 

7. Assignment. The rights to have the Company register Registrable
Securities pursuant to this Agreement may be

 

15

 

assigned or transferred only with the prior
written consent of the Company, and any such assignment or transfer without
such consent shall be void and of no effect. In the event of any such permitted
assignment or transfer by the Investor to any permitted transferee of all or
any portion of such Registrable Securities, such transfer will be allowed only
if: (a) the Investor agrees in writing with the transferee or assignee to
assign such rights, and a copy of such agreement is furnished to the Company within
a reasonable time after such assignment, (b) the Company is, within a
reasonable time after such transfer or assignment, furnished with written
notice of (i) the name and address of such transferee or assignee and (ii) the Registrable
Securities with respect to which such registration rights are being transferred
or assigned, (c) immediately following such transfer or assignment, the Registrable
Securities so transferred or assigned to the transferee or assignee constitute
Restricted Securities, (d) at or before the time the Company received the
written notice contemplated by clause (b) of this sentence the transferee
or assignee agrees in writing with the Company to be bound by all of the
provisions contained herein, and (e) the Company is furnished with an
opinion of counsel, which counsel and opinion shall be reasonably satisfactory
to the Company, to the effect that the permitted assignment would be in
compliance with the Securities Act and any applicable state or other securities
laws.

 

8. Amendment and Waiver. Any provision of this Agreement may be
amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Company and the Investor. Any amendment or waiver
effected in accordance with this Section 8 shall be binding upon the Investor
and the Company.

 

9.                                       Miscellaneous.

 

(a) A person or entity shall be deemed to be a holder of Registrable Securities
whenever such person or entity owns of record such Registrable Securities. If
the Company receives conflicting instructions, notices or elections from two or
more persons or entities with respect to the same Registrable Securities, the
Company shall act upon the basis of instructions, notice or election received
from the registered owner of such Registrable Securities.

 

(b) Except as may be otherwise provided herein, any notice or other communication
or delivery required or permitted hereunder shall be in writing and shall be
delivered personally or sent by certified mail, postage prepaid, by a
nationally recognized overnight 

 

16

 

courier service or by facsimile as follows, and shall be deemed given
when actually received.

 

If to the Company, to:

 

Tower Group, Inc.

120 Broadway, 31st Floor

New York, New York 10271

Attention: 
Stephen L. Kibblehouse, Esq.

Fax: 
(646) 514-8612

 

With a copy (which shall not constitute
notice) to:

 

LeBoeuf, Lamb, Greene & MacRae LLP

125 West 55th Street

New York, New York 10019

Attention: Matthew M. Ricciardi, Esq.

Fax: 
(212) 649-9483

 

If to the Investor, to:

 

CastlePoint Reinsurance Company, Ltd.

Victoria House

11 Victoria House

Hamilton HM 11  Bermuda

Attention: 
Joel Weiner

Fax Number: 
(441) 292-4720

 

With a copy (which shall not constitute
notice) to:

 

CastlePoint Holdings, Ltd.

120 Broadway

New York, NY 10271

Attention: Roger A. Brown

Fax Number: (212) 847-9549

 

The Company or the Investor may change the foregoing address by notice given
pursuant to this Section 9(b).

 

(c) Failure of any party to exercise any right or remedy under this Agreement
or otherwise, or delay by a party in exercising such right or remedy, shall not
operate as a waiver thereof.

 

(d) This Agreement shall be governed by and interpreted in accordance
with the laws of the State of New York, without regard to conflicts of laws principles.

 

17

 

(e) The remedies provided in this Agreement are cumulative and not exclusive
of any remedies provided by law. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions, covenants
and restrictions set forth herein shall remain in full force and effect and
shall in no way be affected, impaired or invalidated, and the parties hereto
shall use good faith efforts to find and employ an alternative means to achieve
the same or substantially the same result as that contemplated by such term,
provision, covenant or restriction. It is hereby stipulated and declared to be
the intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that may
be hereafter declared invalid, illegal, void or unenforceable.

 

(f) This Agreement constitutes the entire agreement among the parties hereto
with respect to the subject matter hereof. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein.
This Agreement supersedes all prior agreements and undertakings among the
parties hereto with respect to the subject matter hereof.

 

(g) Subject to the requirements of Section 7 hereof, this
Agreement shall inure to the benefit of and be binding upon the successors and
assigns of each of the parties hereto.

 

(h) All pronouns and any variations thereof refer to the masculine, feminine
or neuter, singular or plural, as the context may require.

 

(i) The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning thereof.

 

(j) From and after the date of this Agreement, upon the request of the Investor
or the Company, the Company and the Investor shall execute and deliver such
instruments, documents or other writings as may be reasonably necessary or desirable
to confirm and carry out and to effectuate fully the intent and purposes of
this Agreement.

 

(k) This Agreement may be signed in any number of counterparts, each of
which shall be an original, with the same effect as if the signatures thereto and
hereto were upon the same instrument. Signatures delivered by facsimile shall
be deemed to be original signatures.

 

[Signature Page Follows]

 

18

 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.

 

	
   

  	
  TOWER GROUP, INC.

  
	
   

  	
  a Delaware corporation

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  CASTLEPOINT REINSURANCE

  
	
   

  	
  COMPANY, LTD.

  
	
   

  	
  a Bermuda company

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  

 

19

 

Exhibit A

 

Plan of Distribution

 

The selling stockholder and any of its donees, transferees, pledgees, assignees
and successors-in-interest may sell, from time to time, any or all of their
common stock on any stock exchange, market or trading facility on which the
shares are traded or in private transactions. These sales may be at fixed or negotiated
prices. The selling stockholder may use any one or more of the following
methods when selling shares:

 

•                                          ordinary
brokerage transactions and transactions in which the broker-dealer solicits
purchasers;

 

•                                          block
trades in which the broker-dealer so engaged will attempt to sell the shares as
agent but may position and resell a portion of the block as principal to
facilitate the transaction;

 

•                                          purchases
by a broker-dealer as principal and resale by the broker-dealer for its
account;

 

•                                          over-the-counter
distribution in accordance with the rules of the Nasdaq Stock Market;

 

•                                          privately
negotiated transactions;

 

•                                          short
sales;

 

•                                          broker-dealers
may agree with the selling stockholder to sell a specified number of such
shares at a stipulated price per share;

 

•                                          a
combination of any such methods of sale; and

 

•                                          any
other method permitted pursuant to applicable law.

 

Under applicable rules and regulations under the Securities
Exchange Act of 1934, as amended (the “Securities Exchange Act”), any person
engaged in a distribution of the shares of common stock covered by this prospectus
may be limited in its ability to engage in market activities with respect to
such shares. The selling stockholder, for example, will be subject to
applicable provisions of the Securities Exchange Act and the rules and
regulations under it, including, without limitation, Regulation M, which
provisions may restrict certain activities of the selling stockholder and limit
the timing of purchases and sales of any shares of common stock by the selling
stockholder. Furthermore, under Regulation M, persons engaged in a distribution
of securities are prohibited from simultaneously engaging in market making and
certain other activities with respect to such securities for a specified period
of time prior to the commencement of such distributions, subject to specified
exceptions or exemptions. The foregoing may affect the marketability of the
shares offered by this prospectus.

 

 

To the extent required, this prospectus may be amended or supplemented from
time to time to describe a specific plan of distribution. In connection with
distributions of the shares or otherwise, the selling stockholders may enter
into hedging transactions with broker-dealers or other financial institutions.
In connection with such transactions, broker-dealers or other financial
institutions may engage in short sales of our common stock in the course of
hedging the positions they assume with selling stockholders. The selling
stockholders may also sell our securities short and redeliver the shares to
close out such short positions. The selling stockholders may also enter into option
or other transactions with broker-dealers or other financial institutions that
require the delivery to such broker-dealer or other financial institution of
shares offered by this prospectus, which shares the broker-dealer or other financial
institution may resell pursuant to this prospectus, as supplemented or amended
to reflect such transaction.

 

The selling stockholder may also engage in short sales against the box,
puts and calls and other transactions in our securities or derivatives of our
securities and may sell or deliver shares in connection with these trades. The
selling stockholder may pledge its shares to its brokers under the margin provisions
of customer agreements. If the selling stockholder defaults on a margin loan,
the broker may offer and sell, from time to time, the pledged shares.

 

The selling stockholder may sell shares directly to market makers acting
as principals and/or broker-dealers acting as agents for itself or its customers.
Broker-dealers engaged by the selling stockholder may arrange for other
broker-dealers to participate in sales. Broker-dealers may receive commissions,
concessions or discounts from the selling stockholder (or, if any broker-dealer
acts as agent for the purchaser of shares, from the purchaser) in amounts to be
negotiated. The selling stockholder does not expect these commissions and
discounts to exceed what is customary in the types of transactions involved.
Market makers and block purchasers that purchase the shares will do so for
their own account and at their own risk. It is possible that a selling
stockholder will attempt to sell shares in block transactions to market makers
or other purchasers at a price per share that may be below the then-current
market price. We cannot make assurances that all or any of the shares of common
stock will be issued to, or sold by, the selling stockholder.

 

In addition, any shares that qualify for sale pursuant to Rule 144
promulgated under the Securities Act of 1933, as amended (the “Securities Act”),
may be sold under Rule 144 rather than pursuant to this prospectus.

 

The selling stockholder and any broker-dealers or agents that are involved
in selling the shares may be deemed to be “underwriters” within the meaning of
the Securities Act in connection with such sales. In such event, any commissions
received by such broker-dealers or agents and any profit on the resale of the
shares purchased by them may be deemed to be underwriting commissions or
discounts under the Securities Act.

 

In certain states, the applicable state securities laws will require a holder
of shares desiring to sell its shares to sell its shares only through registered
or licensed brokers or

 

2

 

dealers. In addition, in certain states the shares
may not be sold unless they have been registered or qualified for sale in the
applicable state or an exemption from the registration or qualification requirement
is available and is complied with.

 

We are required to pay all fees and expenses incident to the registration
of the shares. We have agreed to indemnify the selling stockholders against
certain losses, claims, damages and liabilities, including liabilities under
the Securities Act.

 

In addition, we will make copies of this prospectus available to the selling
stockholders for the purpose of satisfying the prospectus delivery requirements
of the Securities Act. The selling stockholders may indemnify any broker-dealer
that participates in transactions involving the sale of the shares against
certain liabilities, including liabilities arising under the Securities Act.

 

At the time a particular offer of shares is made, if required, a prospectus
supplement will be distributed that will set forth the number of shares being
offered and the terms of the offering, including the name of any underwriter,
dealer or agent, the purchase price paid by any underwriter, any discount,
commission and other item constituting compensation, any discount, commission
or concession allowed or reallowed or paid to any dealer, and the proposed
selling price to the public.

 

3Exhibit
4.1

 

COMMON
SHARES

 

	
  NUMBER

  	
  SHARES

  

 

Incorporated under the
laws of the Republic of the Marshall Islands

AEGEAN
MARINE PETROLEUM NETWORK INC.

 

100,000,000 Common
Shares — Par Value U.S. $0.01 each

25,000,000
Preferred Shares — Par Value U.S. $0.01 each

 

	
  This Certifies that

  	
   

  	
  is the owner of

  
	
   

  

 

fully paid and
non-assessable Common Shares, par value U.S. $0.01 each, of

AEGEAN
MARINE PETROLEUM NETWORK INC.

 

transferable on the books of the Corporation by the holder hereof in
person or by duly authorized Attorney upon surrender of this Certificate
properly endorsed.

 

The Corporation will furnish to any shareholder upon request and
without charge a full statement of the designation, relative rights,
preferences and limitations of each class and/or series thereof authorized to
be issued by the Corporation.

 

IN WITNESS WHEREOF, the Corporation has caused this
Certificate to be signed by its duly authorized officers and its Corporate Seal
to be hereunder affixed this

  

	
   

  	
   

  	
   

  	
   

  
	
  SECRETARY/TREASURER

  	
   

  	
   

  	
  VICE PRESIDENT/PRESIDENT

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