Document:

EXHIBIT 4.4

 

REGISTRATION
RIGHTS AGREEMENT

 

THIS REGISTRATION RIGHTS AGREEMENT (this “Agreement”) is made
and entered into as of April 4, 2006 by and between TOWER GROUP, INC.,
a Delaware corporation (the “Investor”),
and CASTLEPOINT HOLDINGS, LTD., a Bermuda company (the “Company”).

 

RECITALS

 

WHEREAS, the Investor purchased from the Company 2,555,000
common shares, par value $0.01 per share, of the Company (the “Common Shares”),
pursuant to a Subscription Agreement between the Company and the Investor (the “Subscription Agreement”);

 

WHEREAS, the Company issued to the Investor a warrant
to purchase 1,127,000 Common Shares (the “Investor Warrant”); and

 

WHEREAS, in consideration of the Investor’s entry into
the Subscription 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 April 4, 2006, or such other time or such other date as the Company
and the Investor may agree.

 

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(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 Warrant”
means the warrant granted by the Company to the Investor dated March 28,
2006.

 

(viii)                        “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.

 

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

 

(x)                                   “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.

 

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

 

(xii)                             “Registrable Securities” means (i) the Common
Shares purchased pursuant to the Subscription Agreement, (ii) the Common
Shares issuable upon exercise of the Investor Warrant, and (iii) 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 Shares; provided,
however, that a Common Share shall cease to

 

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be a Registrable Security for purposes of this Agreement when it no
longer is a Restricted Security.

 

(xiii)                          “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 or The Nasdaq Stock Market 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.

 

(xiv)                         “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.

 

(xv)                            “Restricted Security”
means any Common 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 Common
Share not subject to transfer restrictions under the Securities Act has been
delivered by or on behalf of the Company.

 

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

 

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(xvii)                      “Shelf S-1 Resale Registration
Statement” means a shelf registration statement on Form S-1 to be
filed by the Company within 90 days after the Closing Date, as described in the
Offering Memorandum of the Company dated March 27, 2006.

 

(xviii)                   “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 Shelf S-1 Resale Registration Statement has been withdrawn or
has ceased to be effective, or if the Shelf S-1 Resale Registration Statement
has not been filed within 150 days after the Closing Date, then 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 or 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
Common Shares to be sold by them to the underwriters on the same terms as apply
to the Common Shares to be sold by the Investor. If the managing underwriter
thereof advises the Company and the Investor that, in its view, the number of Common
Shares that the Company and the Investor and other selling security holders (if
any) intend to include in such registration exceeds the largest number of
Common Shares 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

 

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number of Common Shares 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.

 

(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 Shares or any other Common
Shares of the Company 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.

 

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(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 Common Shares 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 Common Shares
which does not exceed the Maximum Offering Size, in the following order of
priorities:  (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 the Investor.

 

(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
Shares.

 

(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, 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 direct the Investor to suspend sales of the Registrable
Securities pursuant to a Registration Statement 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 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

 

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would materially 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 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 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, represents 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 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 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 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 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)

 

7

 

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);

 

(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);

 

8

 

(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 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

 

9

 

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 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

 

10

 

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 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

 

11

 

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 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 Common
Shares, 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 Common Shares 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.

 

12

 

(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
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

 

13

 

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) 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 assigned
or transferred only with the prior written

 

14

 

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

 

If to the Company,
to:

 

CastlePoint Holdings, Ltd.

Clarendon House

2 Church Street

Hamilton HM 11  Bermuda

Attention:  The Secretary

Fax:  (441) 292-4720

 

15

 

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

 

Baker & McKenzie LLP

1114 Avenue of the Americas

New York, New York 10036

Attention:  Roslyn Tom, Esq.

Fax:  (212) 310-1771

 

If to the
Investor, to:

 

Tower Group, Inc.

120 Broadway, 14th Floor

New York, New York 10271

Attention:  Michael H. Lee

Fax:  (212) 271-5492

 

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

 

Lebouf,
Lamb, Greene & MacRae LLP

125 West 55th Street

New York, New York 10019

Attention: Matthew M. Ricciardi, Esq.

Fax:  (212) 649-9483

 

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.

 

(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.

 

16

 

(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]

 

17

 

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

 

 

	
   

  	
  CASTLEPOINT
  HOLDINGS, LTD.

  
	
   

  	
  a Bermuda
  company

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Joel S.
  Weiner

  	
   

  
	
   

  	
  Name: Joel S.
  Weiner

  
	
   

  	
  Title: Chief
  Financial Officer and Senior

  
	
   

  	
  Vice President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  TOWER GROUP, INC.

  
	
   

  	
  a Delaware corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Michael H.
  Lee

  	
   

  
	
   

  	
  Name:  Michael H. Lee

  
	
   

  	
  Title:  Chairman of the Board, President and Chief
  Executive Officer

  

 

[SIGNATURE PAGE TO TOWER’S
REGISTRATION RIGHTS AGREEMENT]

 

 

Exhibit A

 

Plan of Distribution

 

The selling shareholder and any of its donees, transferees,
pledgees, assignees and successors-in-interest may sell, from time to
time, any or all of their common shares 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 shareholder 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 shareholder 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 common shares covered by this
prospectus may be limited in its ability to engage in market activities
with respect to such shares. The selling shareholder, 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 shareholder and
limit the timing of purchases and sales of any common shares by the selling
shareholder. 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 shareholders 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 shares in the course of hedging the positions they assume with
selling shareholders. The selling shareholders may also sell our
securities short and redeliver the shares to close out such short positions. The
selling shareholders 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 shareholder 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 shareholder may pledge its
shares to its brokers under the margin provisions of customer agreements. If the
selling shareholder defaults on a margin loan, the broker may offer and
sell, from time to time, the pledged shares.

 

The selling shareholder 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 shareholder may arrange
for other broker-dealers to participate in sales. Broker-dealers may receive
commissions, concessions or discounts from the selling shareholder (or, if any
broker-dealer acts as agent for the purchaser of shares, from the purchaser) in
amounts to be negotiated. The selling shareholder 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 shareholder 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
common shares will be issued to, or sold by, the selling shareholder.

 

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 shareholder 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 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
shareholders 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 shareholders for the purpose of satisfying the
prospectus delivery requirements of the Securities Act. The selling shareholders
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.EXHIBIT 10.1

 

EMPLOYMENT AGREEMENT

 

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

 

WITNESSETH THAT

 

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

 

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

 

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

 

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

 

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

 

1.                                       Term.

 

(a)                                  Term
of Employment.

 

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

 

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

 

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

 

 

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

 

2.                                       Position
and Duties.

 

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

 

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

 

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

 

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

 

2

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

3

 

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

 

4.                                       Termination
of Employment.

 

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

 

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

 

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

 

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

 

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

 

4

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

5.                                       Obligations
of the Company upon Termination.

 

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

 

5

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

6

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

7

 

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

 

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

 

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

 

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

 

8

 

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

 

6.                                       Certain
Tax Consequences.

 

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

 

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

 

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

 

9

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

10

 

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

 

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

 

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

 

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

 

(e)                                  Remedies;
Severability.

 

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

 

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

 

11

 

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

 

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

 

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

 

13.                                 Successors.

 

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

 

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

 

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

 

12

 

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

 

15.                                 Miscellaneous.

 

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

 

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

 

If to the Executive:

 

Michael H. Lee

65 East 90th Street

New York, New York 10128

 

If to the Company:

 

CastlePoint Holdings Ltd.

Clarendon House

2 Church Street

Hamilton HM 11, Bermuda

Attention:  The Secretary

Facsimile:  (441)-292-4720

 

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

 

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

 

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

 

13

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

14

 

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

 

	
   

  	
  CASTLEPOINT
  HOLDINGS, LTD.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Joel S.
  Weiner

  	
   

  
	
   

  	
  Name: Joel
  S. Weiner

  
	
   

  	
  Its: Senior
  Vice President and Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
    /s/
  Michael H. Lee

  	
   

  
	
   

  	
  Michael H.
  Lee

  

 

15

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