Execution Copy
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement") is made and entered into
as of November 13, 2006, by and between TOWER GROUP, INC., a Delaware
corporation (the "Company"), and CASTLEPOINT REINSURANCE COMPANY, LTD, a Bermuda
corporation (the "Purchaser").
RECITALS
WHEREAS, the Company has authorized the sale and issuance of up to an
aggregate of 40,000 shares of its Series A Preferred Stock (the "Shares") to the
Purchaser; and
WHEREAS, the Purchaser desires to purchase the Shares and the Company
desires to issue and sell the Shares to the Purchaser on the terms and
conditions set forth herein;
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
promises, representations, warranties, and covenants hereinafter set forth and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
1. CERTAIN DEFINITIONS.
For all purposes of this Agreement, the following terms shall have the
respective meanings set forth in this Article 1 (such definitions to be equally
applicable to both the singular and plural forms of the terms herein defined):
"8-K Filing" has the meaning ascribed to such term in Section 6.3.
"2005 Annual Report" has the meaning ascribed to such term in Section
4.6(a).
"Action" means any legal, administrative, arbitration or other similar
suit, inquiry, notice of violation, investigation, proceeding, claim, or action.
"Affiliate" means any Person that, directly or indirectly through one or
more intermediaries, controls or is controlled by or is under common control
with a Person, as such terms are used in and construed under Rule 144 under the
Securities Act.
"Agreement" has the meaning ascribed to such term in the Recitals.
"Applicable Law" means any federal, state, local or foreign statute, law,
ordinance, rule, regulation, order, writ, injunction, judgment, decree,
directive, principle of common law or interpretation of any of the foregoing by
a Governmental Authority applicable to a Person or any such Person's
subsidiaries, properties, assets, officers, directors, employees or agents.
"Bylaws" has the meaning ascribed to such term in Section 4.4.
"Certificate of Designations" has the meaning ascribed to such term in
Section 2.1.
"Certificate of Incorporation" has the meaning ascribed to such term in
Section 2.1.
"Closing" has the meaning ascribed to such term in Section 3.1.
"Closing Date" has the meaning ascribed to such term in Section 3.1.
"Common Stock" has the meaning ascribed to such term in Section 2.1.
"Contracts" shall mean all written agreements, contracts, commitments and
undertakings, indentures, notes, bonds, loans, instruments, treaties, leases,
mortgages and other binding arrangements.
"Conversion Shares" has the meaning ascribed to such term in Section 2.1.
"Disclosure Schedule" has the meaning ascribed to such term in the preamble
to Article 4.
"Domiciliary Regulators" means the Governmental Authorities responsible for
regulating insurance companies in the Insurance Companies' respective states of
domicile.
"DTC" has the meaning ascribed to such term in Section 7.1.
"DTC Transfer Conditions" has the meaning ascribed to such term in Section
7.1.
"Encumbrance" means any lien, pledge, security interest, easement or
encumbrance of any kind or nature whatsoever, and any agreement to give or grant
or permit any of the foregoing; provided that this definition of "Encumbrance"
shall not include: (i) liens for current Taxes and assessments not yet due and
payable, including, without limitation, liens for non-delinquent ad valorem
Taxes, non-delinquent statutory liens arising other than by reason of any
default on the part of the Company or the Subsidiaries and liens for Taxes being
contested by the Company in good faith, (ii) such liens, minor imperfections of
title or easements on real property, leasehold estates or personal property as
do not in any material respect detract from the value thereof and do not in any
material respect interfere with the present use of the property subject thereto,
(iii) materialmen's, mechanics', workmen's, repairmen's, employees', carriers',
warehousemen's and other like liens arising in the ordinary course of business
or relating to any construction, rebuilding or repair of any property leased, so
long as the obligations to which such liens relate are not delinquent and also
so long as any such lien does not materially impair the value of such leased
property, (iv) any such lien, pledge, security interest, easement or encumbrance
arising solely as a result of any action taken by Purchaser or any of its
Affiliates and (v) any limitation or restriction imposed upon the transfer of
the Securities by any registration provision of the Securities Act of 1933, as
amended, or any applicable state securities law regulating the disposition of
the Securities.
"Exchange Act" has the meaning ascribed to such term in Section 4.6.
"GAAP" has the meaning ascribed to such term in Section 4.6.
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"Global Select Market" has the meaning ascribed to such term in Section
4.13.
"Governmental Authority" means any nation or government, any state or other
political subdivision thereof, any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government
or any self-regulatory agency, commissioner or authority.
"Indemnities" has the meaning ascribed to such term in Section 9.11.
"Indemnified Liabilities" has the meaning ascribed to such term in Section
9.11.
"Insurance Company" means any Subsidiary that is engaged in the business of
issuing insurance policies.
"Insurance Contract" means any insurance policy, annuity contract, or
guaranteed investment contract entered into with a customer whether directly or
by reinsurance.
"Investigation" means any governmental or regulatory investigation.
"Lock-Up Period" has the meaning ascribed to such term in Section 7.5.
"Material Adverse Effect" has the meaning ascribed to such term in Section
4.1.
"Non-Domiciliary Regulators" means the Governmental Authorities responsible
for regulating insurance companies outside of the Insurance Companies'
respective states of domicile.
"Permits" means all licenses, permits, orders, consents, approvals,
registrations, authorizations, qualifications and filings with and under all
Applicable Laws and Governmental Authorities and all industry or other
non-governmental self-regulatory organizations.
"Person" means any individual, corporation, company, partnership (limited
or general), joint venture, limited liability company, association, trust, a
government, any department or agency thereof or any other entity.
"Press Release" has the meaning ascribed to such term in Section 6.3.
"Purchaser" has the meaning ascribed to such term in the Recitals.
"Registration Rights Agreement" has the meaning ascribed to such term in
Section 3.2.
"Regulation D" has the meaning ascribed to such term in the Recitals.
"Required Minimum" means, as of any date, 125% of the maximum aggregate
number of shares of Common Stock then issuable in the future pursuant to the
Transaction Documents, including any Conversion Shares issuable upon the
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exchange of all Shares, ignoring any exchange, conversion or exercise limits set
forth therein, determined on the basis of the Exchange Rate (as defined in the
Certificate of Designation), in each case as in effect on the Trading Day
immediately prior to the date of determination.
"Rule 144" means Rule 144 promulgated by the SEC pursuant to the Securities
Act, as such Rule may be amended from time to time, or any similar rule or
regulation hereafter adopted by the SEC having substantially the same effect as
such Rule.
"SEC" has the meaning ascribed to such term in Section 4.3(b).
"SEC Reports" has the meaning ascribed to such term in Section 4.6.
"Securities Act" has the meaning ascribed to such term in Section 4.6.
"Security" and "Securities" have the meaning ascribed to such terms in
Section 2.1.
"Select SEC Reports" has the meaning ascribed to such term in Section 4.6.
"Shares" has the meaning ascribed to such term in the Recitals.
"Subsidiaries" has the meaning ascribed to such term in Section 4.1.
"Tax" means (i) all federal, state, local and foreign taxes, charges, fees,
imposts, levies and other assessments, including, without limitation, all
income, gross receipts, capital, sales, use, ad valorem, value added, transfer,
franchise, profits, inventory, capital stock, license, payroll, employment,
social security, unemployment, excise, severance, stamp, occupation, property
and estimated taxes, all taxes which are required to be withheld, customs
duties, fees, assessments and charges of any kind whatsoever, (ii) all interest,
penalties, fines, additions to tax and additional amounts imposed by any Taxing
Authority in connection with any item described in clause (i), and (iii) any
transferee liability in respect of any items described in clauses (i) or (ii)
payable by reason of contract, assumption, transferee liability, operation of
law, Treasury Regulation Section 1.1502-6(a) (or any predecessor or successor
thereof of any analogous or similar provision under law) or otherwise.
"Taxing Authority" means the Internal Revenue Service or any other
Governmental Authority responsible for the administration of any Tax.
"Trading Day" means a day on which the Common Stock is traded on the Global
Select Market.
"Transaction Documents" has the meaning ascribed to such term in Section
3.2.
2. AGREEMENT TO SELL AND PURCHASE.
2.1 Authorization of Shares. The Company has authorized (a) the sale
and issuance to Purchaser of the Shares and (b) the issuance of such shares of
its common stock, par value $0.01 per share (the "Common Stock") to be issued
upon conversion of the Shares (the "Conversion Shares"). The Shares and the
Conversion Shares are collectively
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referenced herein as the "Securities" and each of them may individually be
referred to herein as a "Security." The Securities have the rights, preferences,
privileges and restrictions set forth in the Amended and Restated Certificate of
Incorporation of the Company (the "Certificate of Incorporation") and the
Certificate of Designations of the Series A Preferred Stock attached hereto as
Exhibit A (the "Certificate of Designations").
2.2 Sale and Purchase. Subject to the terms and conditions hereof, at
the Closing (as hereinafter defined), the Company hereby agrees to issue and
sell to the Purchaser, and the Purchaser agrees to purchase from the Company,
the Shares. The purchase price to be paid by the Purchaser to the Company for
the Shares to be sold and purchased hereunder shall be $40,000,000.
3. CLOSING, DELIVERY AND PAYMENT.
3.1 Closing. Subject to the satisfaction (or waiver) of the conditions
set forth in Article 8 hereof, the closing of the sale and purchase of the
Shares (the "Closing") shall take place at 10:00 a.m., New York City time, on
December 4, 2006, at the offices of the Company, 000 Xxxxxxxx, Xxx Xxxx, Xxx
Xxxx 00000 or at such other time or place as the Company and the Purchaser shall
mutually agree (such date is hereinafter referred to as the "Closing Date").
3.2 Delivery. At the Closing, subject to the terms and conditions
hereof, (i) the Company will deliver to the Purchaser a certificate representing
the Shares, against payment by the Purchaser of the purchase price therefor by
check or wire transfer made payable to the order of the Company and (ii) the
Company and the Purchaser shall execute and deliver the Registration Rights
Agreement in the form attached hereto as Exhibit B (the "Registration Rights
Agreement"). This Agreement, the Registration Rights Agreement and the
Certificate of Designations are collectively referred to herein as the
"Transaction Documents."
3.3 Placement Fee. The Company shall pay to the Purchaser a placement
fee equal to $400,000. Such amount shall be deducted from the purchase price
payable pursuant to Section 2.2.
3.4 Fees and Expenses. Subject to Section 3.3 or as otherwise set
forth herein or the Registration Rights Agreement, the Company and the Purchaser
shall each be responsible for the fees and expenses incurred by it in connection
with this Agreement and the transactions contemplated hereby.
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
Except as set forth under the corresponding section of the disclosure
schedule delivered to the Purchaser concurrently herewith (the "Disclosure
Schedule"), the Company hereby represents and warrants as of the date hereof to
Purchaser as follows:
4.1 Organization, Good Standing and Qualification. The Company and
each of its direct and indirect subsidiaries (collectively, the "Subsidiaries")
is a corporation duly incorporated, validly existing and in good standing under
the laws of the jurisdiction in
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which it is incorporated, and has all requisite corporate power and authority to
own and operate its properties and assets, to carry on its business as presently
conducted The Company and each of its Subsidiaries is duly qualified to do
business and is in good standing as a foreign corporation in all jurisdictions
in which the nature of its activities and of its properties (both owned and
leased) makes such qualification necessary, except for those jurisdictions in
which failure to do so would not have or reasonably be expected to have a
Material Adverse Effect. For purposes of this Agreement, "Material Adverse
Effect" means any effect which, individually or in the aggregate with all other
effects, reasonably would be expected to be materially adverse to (i) the
legality, validity or enforceability any of the Transaction Documents or the
Securities, (ii) the ability of the Company to perform on a timely basis its
obligations under this Agreement or any of the other Transaction Documents or
(iii) the business, operations, assets, properties, prospects, reputation,
financial condition or results of operations of the Company and its
Subsidiaries, taken as a whole.
4.2 Authorization; Binding Obligations. (i) The Company has the
requisite corporate power and authority to execute and deliver this Agreement
and the other Transaction Documents, to issue and sell the Securities in
accordance with the terms thereof and to carry out the provisions of this
Agreement and the other Transaction Documents, and (ii) all corporate action on
the part of the Company, its officers, directors and stockholders necessary for
the authorization, execution and delivery of this Agreement and each of the
other Transaction Documents, the performance of all obligations of the Company
hereunder and thereunder and the authorization, sale, issuance and delivery of
the Shares pursuant hereto and the Conversion Shares pursuant to the Certificate
of Incorporation and the Certificate of Designations has been taken. Assuming
that this Agreement and the Registration Rights Agreement have been duly
authorized, executed and delivered by the Purchaser and constitute valid and
binding obligations of the Purchaser, this Agreement is, and the other
Transaction Documents will be at the Closing, valid and binding obligations of
the Company enforceable in accordance with their terms, except (a) as limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws of
general application affecting enforcement of creditors' rights, (b) general
principles of equity that restrict the availability of equitable remedies, and
(c) to the extent that the enforceability of the indemnification provisions in
the Registration Rights Agreement may be limited by Applicable Law.
4.3 Capitalization; Voting Rights.
(a) The authorized capital stock of the Company consists of 40 million
shares of Common Stock and two million shares of preferred stock, par value
$0.01 per share ("Preferred Stock"), of which 40,000 shares are (or upon filing
of the Certificate of Designation, will be) designated as Series A Preferred
Stock. As of November 1, 2006, 19,982,038 shares of Common Stock were issued and
outstanding and no shares of Preferred Stock were issued and outstanding.
(b) Except as provided in the Company's filings with the United States
Securities and Exchange Commission (the "SEC"), and except for the Securities,
there are no outstanding options, warrants, scrip, rights (including conversion,
anti-dilution or preemptive rights and rights of first refusal or similar
rights), or contracts, commitments, understandings or agreements of any kind by
which the Company or any of its Subsidiaries is or
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may become bound to issue any of its securities, nor are any such issuances,
contracts, commitments, understandings or arrangements contemplated.
(c) All issued and outstanding shares of capital stock of the Company
(i) have been duly authorized and validly issued and are fully paid and
nonassessable, and (ii) were issued in compliance with all applicable state and
federal laws concerning the issuance of securities.
(d) The Company does not have any shareholder rights plan, "poison
pill" or other anti-takeover plans or similar arrangements.
(e) Except as set forth in the Company's filings with the SEC, there
are no proxy, stockholder agreements, voting agreements or other similar
agreements with respect to the Company's capital stock to which the Company is a
party or, to the knowledge of the Company, between or among any of the Company's
stockholders.
(f) The Company or one of its Subsidiaries has the unrestricted right
to vote, and (subject to limitations imposed by Applicable Law) to receive
dividends and distributions on, all shares of capital stock of its Subsidiaries
as owned by the Company or any such Subsidiary.
(g) The rights, preferences, privileges and restrictions of the
Securities are as stated in the Certificate of Incorporation and the Certificate
of Designations. The Securities are duly authorized and when issued in
compliance with the provisions of this Agreement, the Certificate of
Designations and the Certificate of Incorporation, (i) the Securities will be
validly issued, fully paid and non-assessable, and will be free of any liens,
taxes, claims or other Encumbrances and (ii) will not be subject to preemptive
rights, rights of first refusal or other similar rights of stockholders of the
Company or any other person provided, however, that the Shares and the
Conversion Shares may be subject to restrictions on transfer under the
Registration Rights Agreement, state and/or federal securities laws as set forth
herein or as otherwise required by such laws at the time a transfer is proposed.
As of the Closing Date, the Company shall have reserved from its duly authorized
capital stock a number of shares of Common Stock for issuance of the Conversion
Shares at least equal to the Required Minimum on the date hereof.
4.4 Compliance with Other Instruments; Absence of Conflicts. Neither
the Company nor any of its Subsidiaries is in violation or default of, and the
execution, delivery, and performance of and compliance with this Agreement and
the other Transaction Documents by the Company, and, assuming the accuracy of
the warranties and representations of the Purchaser herein, the issuance and
sale of the Shares pursuant hereto and of the Conversion Shares pursuant to the
Certificate of Incorporation and the Certificate of Designations, will not, with
or without the passage of time or giving of notice, result in any violation of,
or be in conflict with or constitute a default under, (i) any term of the
Certificate of Incorporation or the Company's bylaws as in effect on the date
hereof (the "Bylaws") or the Subsidiaries' organizational documents, (ii) any
provision of any Contract to which the Company or any of its Subsidiaries is
party or by which it or any of them or any of its or their respective properties
is bound or affected, or (iii) any Applicable Law to which the Company or any of
its Subsidiaries is subject
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(including United States federal and state securities laws, rules and
regulations and rules and regulations of any self-regulatory organizations to
which either the Company or its securities are subject) or by which any property
or asset of the Company or any of its Subsidiaries is bound or affected, other
than, in the case of clauses (ii) and (iii), any such violation, default,
conflict that would not, individually or in the aggregate, have a Material
Adverse Effect. The execution, delivery, and performance by the Company of and
compliance by the Company with this Agreement and the other Transaction
Documents, and the issuance and sale of the Shares pursuant hereto and of the
Conversion Shares pursuant to the Certificate of Incorporation and the
Certificate of Designations, will not, with or without the passage of time or
giving of notice, result in the creation of any Encumbrance or charge upon any
of the properties or assets of the Company or any of its Subsidiaries or the
suspension, revocation, impairment, forfeiture or nonrenewal of any Permit
applicable to the Company or any of its Subsidiaries or any of its or their
assets or properties, other than any such Encumbrances, charges, suspensions,
revocations, impairments, forfeitures or nonrenewals that would not,
individually or in the aggregate, have a Material Adverse Effect.
4.5 Consents. No governmental orders, permissions, consents, approvals
or authorizations are required to be obtained by the Company and no
registrations or declarations are required to be filed by the Company in
connection with the execution and delivery of this Agreement or the issuance of
the Shares or the Conversion Shares, except such as have been duly and validly
obtained or filed, or with respect to any filings that must be made after the
Closing, as will be filed in a timely manner.
4.6 SEC Reports; Financial Statements. The Company has filed in a
timely manner (within applicable extension periods) all documents that the
Company was required to file with the SEC under the Securities Act of 1933, as
amended (the "Securities Act") and the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), preceding the date of this Agreement (all of the
foregoing filed prior to the date hereof and all exhibits included therein and
financial statements and schedules thereto and documents incorporated by
reference therein, the "SEC Reports"). The SEC Reports complied in all material
respects with the applicable requirements of the Exchange Act or the Securities
Act, as the case may be, and the rules and regulations of the SEC as of their
respective filing dates, and the information contained therein as of the date
thereof did not contain an untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. Except as disclosed on Section 4.6 of the Disclosure Schedule,
none of the statements made in any such SEC Reports is, or has been, required to
be amended or updated under Applicable Law (except for such statements as have
been amended or updated in subsequent filings made prior to the date hereof). As
of their respective dates, the financial statements of the Company included in
the SEC Reports complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC
applicable with respect thereto. Such financial statements have been prepared in
accordance with U.S. generally accepted accounting principles ("GAAP"),
consistently applied, during the periods involved (except as may be otherwise
indicated in such financial statements or the notes thereto or, in the case of
unaudited interim statements, to the extent they may not include footnotes or
may be condensed or summary statements) and fairly present in all material
respects the consolidated financial position of the
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Company and its consolidated Subsidiaries as of the dates thereof and the
consolidated results of their operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal year-end audit
adjustments). Except as set forth in the most recent financial statements of the
Company included in the Select SEC Reports, the Company has no liabilities,
contingent or otherwise, other than (i) liabilities incurred in the ordinary
course of business subsequent to the date of such financial statements and (ii)
liabilities incurred in the ordinary course of business and not required under
GAAP to be reflected in such financial statements, which liabilities and
obligations referred to in clauses (i) and (ii), individually or in the
aggregate, are not material to the financial condition or operating results of
the Company. For purposes of this Agreement, "Select SEC Reports" means the
Company's (A) Proxy Statement for its 2006 Annual Meeting, (B) Annual Report on
Form 10-K/A for the fiscal year ended December 31, 2005 (the "2005 Annual
Report"), (C) Quarterly Reports on Form 10-Q for the fiscal quarters ended March
31, 2006, June 30, 2006, September 30, 2006 and (D) Current Reports on Form 8-K
filed since September 30, 2006.
4.7 Absence of Certain Changes; No Material Adverse Effect. Except as
set forth in the Select SEC Reports, since December 31, 2005, there has been no
event or occurrence which has had or would reasonably be expected to have a
Material Adverse Effect. The Company has not taken any steps, and does not
currently expect to take any steps, to seek protection pursuant to any
bankruptcy or receivership law, nor does the Company or any of its Subsidiaries
have any knowledge or reason to believe that its creditors intend to initiate
involuntary bankruptcy proceedings with respect to the Company or any of its
Subsidiaries.
4.8 Filings. Except as set forth in the Select SEC Reports or in
Section 4.8 of the Disclosure Schedule, since January 1, 2004, (i) the Company
and the Subsidiaries have filed all material reports, statements, documents,
registrations, filings and submissions required to be filed with any
Governmental Authority, and all such reports, statements, documents,
registrations, filing and submissions complied in all material respects with
Applicable Law in effect when filed, and (ii) no material deficiencies have been
asserted in writing by, nor have any material comments been received from, nor
any material penalties imposed by, any such Governmental Authorities with
respect to such reports, statements, documents, registrations, filings or
submissions.
4.9 Permits. The Company and its Subsidiaries have all Permits in each
of the jurisdictions in which the Company and the Subsidiaries conduct or
operate their respective businesses as now being conducted, and all such Permits
are in full force and effect, with such exceptions which singularly and in the
aggregate have not and would not reasonably be expected to have a Material
Adverse Effect, and the Company believes it or its Subsidiaries can obtain,
without undue burden or expense, any similar authority for the conduct of their
respective businesses as planned to be conducted. The Company and the
Subsidiaries are, and at all times since January 1, 2004 have been, in
compliance in all material respects with the terms of the Permits. No event has
occurred or circumstance exists that (with or without the giving of notice or
lapse of time or both) (1) constitutes or would reasonably be expected to result
in, directly or indirectly, a violation of, or a failure to comply with any
Permit, or (2) has resulted or would reasonably be expected to result, directly
or indirectly, in the revocation, withdrawal, suspension, cancellation, or
termination of, or any modification to, any Permit, except for such violations
or failures to comply or revocations, withdrawals, suspensions, cancellations,
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terminations or modifications that would not reasonably be expected to have a
Material Adverse Effect. The consummation of the transactions contemplated by
this Agreement and the other Transaction Documents will not result in any
revocation, cancellation, suspension or nonrenewal of any such material Permit.
4.10 Litigation.
(a) Except as disclosed in the Select SEC Reports and other than
Actions arising in the ordinary course of business from or related to the
obligations of the Company under any Insurance Contract or similar contract
written, assumed or reinsured by the Company, there are no pending or, to the
knowledge of the Company, threatened Actions against and to the knowledge of the
Company, no pending or threatened Investigations of, the Company, any Subsidiary
or any of their properties or assets challenging the validity or propriety of,
or that have the effect of preventing, delaying, making illegal or otherwise
interfering with any of the transactions contemplated by this Agreement or the
other Transaction Documents.
(b) As of the date of this Agreement, there are no pending Actions or,
to the knowledge of the Company, threatened material Actions against, and to the
knowledge of the Company, no pending or threatened Investigations of, any
current or former officer or director of any of the Company or the Subsidiaries
in his or her capacity as an officer or director of any of the Company or the
Subsidiaries.
4.11 Registration Rights. Except as required pursuant to the
Registration Rights Agreement and except as disclosed in the SEC Reports, the
Company is presently not under any obligation, and has not granted any rights,
to register under the Securities Act, any of the Company's presently outstanding
securities or any of its securities that may hereafter be issued.
4.12 Broker's Fees. No agent, broker, investment banker, person or
firm acting on behalf of or under the authority of the Company is or will be
entitled to any fee or commission from the Purchaser directly or indirectly in
connection with the transactions contemplated herein.
4.13 Listing and Maintenance Requirements. The Common Stock is
registered pursuant to Section 12(b) of the Exchange Act, and the Company has
taken no action designed to, or which to its knowledge is likely to have the
effect of, terminating the registration of the Common Stock under the Exchange
Act nor has the Company received any notification that the Commission is
contemplating terminating such registration. The Common Stock is currently
listed for trading on the Nasdaq Global Select Market (the "Global Select
Market"). The Company has not received notice from the Global Select Market on
which the Common Stock is or has been listed or quoted to the effect that the
Company is not in compliance with the listing or maintenance requirements of the
Global Select Market. The Company is, and has no reason to believe that it will
not continue to be, in compliance with all such listing and maintenance
requirements. Prior to the conversion of the Shares, the Company shall secure
the listing of the Conversion Shares on the Global Select Market and on each
other national securities exchange, automated quotation system or
over-the-counter market upon which the shares of Common Stock are then listed
(subject to official notice of issuance). The issuance and
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delivery of the Shares pursuant hereto and the Conversion Shares pursuant to the
Certificate of Incorporation and the Certificate of Designations will not
constitute a change of control under the rules of the Global Select Market.
4.14 Anti-Takeover Provisions. The Company and its board of directors
have taken all necessary action, if any, in order to render inapplicable any
control share acquisition, business combination, poison pill (including any
distribution under a rights agreement) or other similar anti-takeover provision
under its Certificate of Incorporation or the laws of the state of its
incorporation (including ss.203 of the Delaware General Corporation Law) which
is or could become applicable to Purchaser as a result of the transactions
contemplated by this Agreement, including, without limitation, the Company's
issuance of the Securities and Purchaser's ownership of the Securities.
4.15 Private Placement. Assuming the accuracy of the Purchaser's
representations and warranties set forth in Section 5.3, no registration under
the Securities Act or any state securities laws is required for the offer and
sale of the Securities by the Company to Purchaser as contemplated hereby. The
issuance and sale of the Securities hereunder does not contravene the rules and
regulations of the Global Select Market or any state securities laws.
4.16 No General Solicitation or Integrated Offering. Neither the
Company nor any distributor participating on the Company's behalf in the
transactions contemplated hereby (if any) nor any Person acting for the Company,
or any such distributor, has conducted any "general solicitation" (as such term
is defined in Regulation D) or general advertising with respect to any of the
Securities being offered hereby. Neither the Company nor any of its Affiliates,
nor any person acting on its or their behalf, has directly or indirectly made
any offers or sales of any security or solicited any offers to buy any security
under circumstances that would require registration of the Securities being
offered hereby under the Securities Act or cause this offering of Securities to
be integrated with any prior offering of securities of the Company for purposes
of the Securities Act, which result of such integration would require
registration under the Securities Act, or that would be integrated with the
offer or sale of the Securities for the purpose of the rules and regulations of
the Global Select Market or any applicable stockholder approval provisions.
5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.
The Purchaser hereby represents and warrants to the Company as follows
(provided that such representations and warranties do not lessen or obviate the
representations and warranties of the Company set forth in this Agreement):
5.1 Organization and Good Standing. The Purchaser is duly organized,
validly existing and in good standing under the laws of the Islands of Bermuda.
The Purchaser has all requisite corporate power and authority to own and operate
its properties and assets, to carry on its business as presently conducted, to
execute and deliver this Agreement and the Registration Rights Agreement and to
carry out the provisions of this Agreement and the Registration Rights
Agreement.
11
5.2 Requisite Power and Authority. All corporate action on the part of
the Purchaser, its officers, directors and stockholders necessary for the
authorization, execution and delivery of this Agreement and the Registration
Rights Agreement and the performance of all obligations of the Purchaser
hereunder and thereunder has been taken. Assuming that this Agreement and the
Registration Rights Agreement have been duly authorized, executed and delivered
by the Company and constitute valid and binding obligations of the Company, this
Agreement is, and the Registration Rights Agreement will be at the Closing,
valid and binding obligations of the Purchaser enforceable in accordance with
their terms, except (a) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application affecting
enforcement of creditors' rights, (b) general principles of equity that restrict
the availability of equitable remedies, and (c) to the extent that the
enforceability of the indemnification provisions in the Registration Rights
Agreement may be limited by applicable laws.
5.3 Investment Representations. The Purchaser understands that neither
the Shares nor the Conversion Shares have been registered under the Securities
Act or under any state or non-U.S. securities law. The Purchaser also
understands that the Shares are being offered and sold pursuant to an exemption
from registration contained in the Securities Act based in part upon the
Purchaser's representations contained in this Agreement. The Purchaser hereby
represents and warrants as follows:
(a) The Purchaser Bears Economic Risk. The Purchaser is knowledgeable,
sophisticated and experienced in making, and is qualified to make decisions with
respect to investments in shares presenting an investment decision like that
involved in the purchase of the Shares capable of evaluating the merits and
risks of its investment in the Company and has the capacity to protect its own
interests. The Purchaser understands that it must bear the economic risk of this
investment indefinitely unless the Shares (or the Conversion Shares) are
transferred in a transaction that is registered pursuant to the Securities Act
or exempt from registration. The Purchaser understands that the Company has no
present intention of registering the Shares or the Conversion Shares except as
provided in the Registration Rights Agreement. The Purchaser also understands
that there is no assurance that any exemption from registration under the
Securities Act will be available for any proposed transfer of the Shares or the
Conversion Shares and that, even if available, such exemption may not allow the
Purchaser to transfer all or any portion of the Shares or the Conversion Shares
under the circumstances, in the amounts or at the times the Purchaser might
propose.
(b) Acquisition for Own Account. The Purchaser is acquiring the Shares
and the Conversion Shares for the Purchaser's own account for investment only,
and not with a view towards their distribution.
(c) Accredited Investor. The Purchaser represents that it is an
institutional "accredited investor" within the meaning of Regulation D under the
Securities Act.
(d) Company Information. The Purchaser has received and read the SEC
Reports and has had an opportunity to discuss the Company's business, management
and financial affairs with directors, officers and management of the Company and
has had the opportunity to review the Company's operations and facilities. The
Purchaser has
12
also had the opportunity to ask questions of and receive answers from, the
Company and its management regarding the terms and conditions of this
investment. The Purchaser has, in connection with the decisions to purchase the
Shares, relied only upon the SEC Reports and the representations and warranties
of the Company set forth in the Transaction Documents.
(e) No Action Outside the United States. The Purchaser acknowledges
that the Company has taken no action or will take any action in any jurisdiction
outside the United States to permit an offering of the Shares or the Conversion
Shares, or possession or distribution of offering materials in connection with
the issuance of the Shares or the Conversion Shares, in any jurisdiction outside
the United States where legal action by the Company for that purpose is
required. The Purchaser will comply with all applicable laws and regulations in
each jurisdiction outside the United States in which it purchases, offers, sells
or delivers Shares or Conversion Shares or has in its possession or distributes
any offering material, in each case at its own expense.
5.4 Transfer Restrictions. The Purchaser acknowledges and agrees that
the Shares and, if issued, the Conversion Shares are subject to restrictions on
transfer as set forth herein and in the Registration Rights Agreement.
5.5 Covering Short Positions. The Purchaser will not use the Shares or
the Conversion Shares to cover any short position in the Common Stock if doing
so would be in violation of applicable securities laws.
5.6 No Legal, Tax or Investment Advice. The Purchaser understands that
nothing in the SEC Reports, this Agreement, the Registration Rights Agreement or
any other materials presented to the Purchaser in connection with the purchase
and sale of the Shares constitutes legal, tax or investment advice. The
Purchaser has consulted such legal, tax and investment advisors as it, in its
sole discretion, has deemed necessary or appropriate in connection with its
purchase of the Shares.
5.7 Ownership of Company Stock. None of the Purchaser or the
Purchaser's subsidiaries beneficially owns (as such term is defined for purposes
of Section 13(d) of the Exchange Act) any shares of the Common Stock of the
Company or any other class or series of the Company's capital stock.
5.8 Broker's Fees. Except for the fee of the Purchaser's financial
advisor referred to in Section 3.3, no agent, broker, investment banker, person
or firm acting on behalf of or under the authority of the Purchaser is or will
be entitled to any fee or commission from the Company directly or indirectly in
connection with the transactions contemplated herein.
6. COVENANTS
6.1 Best Efforts. The parties shall use their respective best efforts
timely to satisfy each of the conditions described in Sections 8.1 and 8.2 of
this Agreement.
13
6.2 Form D. The Company shall file with the SEC a Form D with respect
to the Securities as required under Regulation D and provide a copy thereof to
Purchaser promptly after such filing.
6.3 Press Release; Form 8-K; Publicity. The Company shall issue on or
before the next business day following the date hereof a press release (the
"Press Release") announcing the entry into the transactions contemplated hereby
and shall within two days following the date hereof file a Current Report on
Form 8-K with the SEC concerning this Agreement and the transactions
contemplated hereby (the "8-K Filing"). The Company and the Purchaser shall
consult with each other in issuing any other press releases with respect to the
transactions contemplated hereby, and neither the Company nor the Purchaser
shall issue any such press release or otherwise make any such public statement
without the prior consent of the Company, with respect to any press release of
the Purchaser, or without the prior consent of the Purchaser, with respect to
any press release of the Company, which consent shall not unreasonably be
withheld, except if such disclosure is required by law, in which case the
disclosing party shall promptly provide the other party with prior notice of
such public statement or communication.
6.4 Reservation of Shares. The Company shall, if applicable: (i) in
the time and manner required by the Global Select Market, but in any event prior
to the conversion of the Shares into Common Stock, prepare and file with the
Global Select Market an additional shares listing application covering a number
of shares of Common Stock at least equal to the Required Minimum on the date of
such application, (ii) take all steps necessary to cause such shares of Common
Stock to be approved for listing on the Global Select Market as soon as possible
thereafter, (iii) provide to the Purchaser evidence of such listing, and (iv)
from and after the conversion of the Shares into Common Stock, maintain the
listing of such Common Stock on the Global Select Market.
6.5 No Integrated Offerings. The Company shall not make any offers or
sales of any security (other than the Securities) under circumstances that would
require registration of the Securities being offered or sold hereunder under the
Securities Act or cause this offering of the Securities to be integrated with
any other offering of securities by the Company for purposes of any stockholder
approval provision applicable to the Company or its securities.
6.6 Legal Compliance. The Company shall conduct its business and the
business of its Subsidiaries in compliance with all Applicable Laws, except
where the failure to do so would not have a Material Adverse Effect.
6.7 Information. So long as Purchaser (or any of its Affiliates)
beneficially owns any of the Securities, the Company shall furnish to Purchaser
the information the Company must deliver to any holder or to any prospective
transferee of Securities in order to permit the sale or other transfer of such
Securities pursuant to Rule 144A of the SEC or any similar rule then in effect.
The Company shall keep at its principal executive office a true copy of this
Agreement (as at the time in effect), and cause the same to be available for
inspection at such office during normal business hours by any holder of
Securities or any prospective transferee of Securities designated by a holder
thereof.
14
6.8 Pledge of Securities. The Company acknowledges and agrees that the
Securities may be pledged by Purchaser in connection with a bona fide margin
agreement or other loan or financing arrangement that is secured by the
Securities. The pledge of Securities shall not be deemed to be a transfer, sale
or assignment of the Securities hereunder, and if Purchaser effects a pledge of
Securities, it shall not be required to provide the Company with any notice
thereof or otherwise make any delivery to the Company pursuant to this Agreement
or any other Transaction Document. The Company shall execute and deliver such
documentation as a pledgee of the Securities may reasonably request in
connection with a pledge of the Securities to such pledgee by Purchaser.
6.9 Investment Company Act. The Company shall conduct its business in
a manner so that it will not be required to register as an investment company
under the Investment Company Act.
7. SECURITIES TRANSFER MATTERS.
7.1 Conversion and Exercise. Upon conversion of the Shares by any
person, (i) if the DTC Transfer Conditions (as defined below) are satisfied, the
Company shall cause its transfer agent to electronically transmit all Conversion
Shares by crediting the account of such person or its nominee with the
Depository Trust Company ("DTC") through its Deposit Withdrawal Agent Commission
system; or (ii) if the DTC Transfer Conditions are not satisfied, the Company
shall issue and deliver, or instruct its transfer agent to issue and deliver,
certificates (subject to the legend and other applicable provisions hereof and
the Certificate of Designation), registered in the name of such person its
nominee, physical certificates representing the Conversion Shares. Even if the
DTC Transfer Conditions are satisfied, any person effecting a conversion of
Shares may instruct the Company to deliver to such person or its nominee
physical certificates representing the Conversion Shares, in lieu of delivering
such shares by way of DTC Transfer. For purposes of this Agreement, "DTC
Transfer Conditions" means that (A) the Company's transfer agent is
participating in the DTC Fast Automated Securities Transfer program and (B) the
certificates for the Conversion Shares required to be delivered do not bear a
legend and the person effecting such conversion or exercise is not then required
to return such certificate for the placement of a legend thereon.
7.2 Transfer or Resale. Purchaser understands that (i) except as
provided in the Registration Rights Agreement, the sale or resale of the
Securities have not been and are not being registered under the Securities Act
or any state securities laws, and the Securities may not be transferred unless
(A) the transfer is made pursuant to and as set forth in an effective
registration statement under the Securities Act covering the Securities; or (B)
Purchaser shall have delivered to the Company an opinion of counsel reasonably
satisfactory to the Company (which opinion shall be in form, substance and scope
customary for opinions of counsel in comparable transactions) to the effect that
the Securities to be sold or transferred may be sold or transferred pursuant to
an exemption from such registration; or (C) sold or transferred to an affiliate
of Purchaser that agrees to be bound by this Article 7; and (ii) neither the
Company nor any other person is under any obligation to register such Securities
under the Securities Act or any state securities laws (other than pursuant to
the terms of the Registration Rights Agreement). Notwithstanding the foregoing
or anything else contained herein to the contrary,
15
the Securities may be pledged as collateral in connection with a bona fide
margin account or other lending arrangement, provided such pledge is consistent
with Applicable Laws.
7.3 Legends. Purchaser understands that the Shares and, until such
time as the Conversion Shares have been registered under the Securities Act
(including registration pursuant to Rule 416 thereunder) as contemplated by the
Registration Rights Agreement or otherwise may be sold by such Purchaser under
Rule 144, the Certificates for the Conversion Shares may bear a restrictive
legend in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR IN ANY OTHER
JURISDICTION. THE SECURITIES REPRESENTED HEREBY MAY NOT BE OFFERED,
SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER APPLICABLE SECURITIES LAWS UNLESS
OFFERED, SOLD OR TRANSFERRED PURSUANT TO AN AVAILABLE EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THOSE LAWS.
The Company shall, immediately prior to a registration statement covering
the Securities (including, without limitation, the Registration Statement
contemplated by the Registration Rights Agreement) being declared effective,
deliver to its transfer agent an opinion letter of counsel, opining that at any
time such registration statement is effective, the transfer agent may issue, in
connection with the issuance of the Conversion Shares, certificates representing
such Conversion Shares without the restrictive legend above, provided such
Conversion Shares are to be sold pursuant to the prospectus contained in such
registration statement. Upon receipt of such opinion, the Company shall cause
the transfer agent to confirm, for the benefit of the holders, that no further
opinion of counsel is required at the time of transfer in order to issue such
shares without such restrictive legend.
The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of any Security upon which it is
stamped, if, unless otherwise required by state securities laws, (i) the sale of
such Security is registered under the Securities Act (including registration
pursuant to Rule 416 thereunder) or (ii) such holder provides the Company with
an opinion of counsel, in form, substance and scope customary for opinions of
counsel in comparable transactions, to the effect that a public sale or transfer
of such Security may be made without registration under the Securities Act. If
the holder of any Security is an affiliate of the Company, the legend on any
such Security shall not be so removed. In the event the above legend is removed
from any Security and thereafter the effectiveness of a registration statement
covering such Security is suspended or the Company determines that a supplement
or amendment thereto is required by applicable securities laws, then upon
reasonable advance written notice to Purchaser the Company may require that the
above legend be placed on any such Security that cannot then be sold pursuant to
an effective registration statement or under Rule 144 and Purchaser shall
cooperate in the replacement of such legend. Such legend shall thereafter be
removed when such Security may again be sold pursuant to an effective
registration statement or under Rule 144.
16
7.4 Transfer Agent Instruction. Upon compliance by Purchaser with the
provisions of this Article 7 with respect to the transfer of any Securities, the
Company shall permit the transfer of such Securities and, in the case of the
transfer of Conversion Shares, promptly instruct its transfer agent to issue one
or more certificates (or effect a DTC Transfer) in such name and in such
denominations as specified by Purchaser. The Company shall not give any
instructions to its transfer agent with respect to the Securities, other than
any permissible or required instructions provided in this Article 7, and the
Securities shall otherwise be freely transferable on the books and records of
the Company as and to the extent provided in this Agreement.
7.5 Lock-Up Period. During the period from the date hereof until 180
days from such date (the "Lock-Up Period"), the Purchaser will not (a) directly
or indirectly, offer, sell, agree to offer or sell, solicit offers to purchase,
grant any call option or purchase any put option with respect to, pledge, borrow
or otherwise dispose of any Registrable Security, as defined in the Registration
Rights Agreement, (b) establish or increase any "put equivalent position" or
liquidate or decrease any "call equivalent position" with respect to any
Registrable Security (in each case within the meaning of Section 16 of the
Exchange Act and the rules and regulations promulgated thereunder), or (c)
otherwise enter into any swap, derivative or other transaction or arrangement
that transfers to another, in whole or in part, any of the economic consequence
of ownership of a Registrable Security, whether or not such transaction is to be
settled by delivery of Registrable Securities, other securities, cash or other
consideration.
8. CONDITIONS TO CLOSING.
8.1 Conditions to the Purchaser's Obligations to Purchase the Shares.
The Purchaser's obligations to purchase the Shares at the Closing are subject to
the satisfaction or waiver on or prior to the Closing Date of the following
conditions:
(a) Representations and Warranties True; Performance of Obligations.
The representations and warranties made by the Company in Article 4 shall be
true and correct in all material respects as of the Closing Date, with the same
force and effect as if they had been made on and as of said date, and the
Company shall have performed, satisfied and complied with all obligations,
covenants and conditions herein required to be performed, satisfied or complied
with by it on or prior to the Closing.
(b) Legal Investment. On the Closing Date, the sale and issuance of
the Shares and the proposed issuance of the Conversion Shares shall be legally
permitted by all laws and regulations to which the Purchaser and the Company are
subject.
(c) Consents, Permits, Waivers and Approvals. The Company and the
Purchaser shall have obtained any and all consents, permits, waivers and
approvals necessary or appropriate for consummation of the transactions
contemplated by this Agreement and the other Transaction Documents and such
consents, permits, waivers and approvals shall be in full force and effect.
(d) Compliance Certificate. The Company shall have delivered to the
Purchaser a Compliance Certificate, executed by the Senior Vice President and
17
CFO of the Company, dated the Closing Date to the effect that the conditions
specified in subsections (a) and (c) (as it pertains to the Company) of this
Section 8.1 have been satisfied.
(e) Listing. The Common Stock shall be authorized for quotation and
listed on the Global Select Market and trading in the Common Stock (or on the
Global Select Market generally) shall not have been suspended by the SEC or the
Global Select Market.
(f) Certificate of Designations. The Certificate of Designations,
substantially in the form attached hereto as Exhibit A, shall have been approved
and adopted by the Company.
(g) Registration Rights Agreement. The Registration Rights Agreement,
substantially in the form attached hereto as Exhibit B, shall have been executed
and delivered by the Company.
8.2 Conditions to Obligations of the Company to Issue and Sell the
Shares. The Company's obligation to issue and sell the Shares to the Purchaser
at the Closing is subject to the satisfaction or waiver of the following
conditions:
(a) Representations and Warranties True. The representations and
warranties in Article 5 made by the Purchaser shall be true and correct in all
material respects as of the Closing Date, with the same force and effect as if
they had been made on and as of said date, and the Purchaser shall have
performed all obligations and conditions herein required to be performed or
observed by it on or prior to the Closing.
(b) Consents, Permits, Waivers and Approvals. The Company and the
Purchaser shall have obtained any and all consents, permits, waivers and
approvals necessary or appropriate for consummation of the transactions
contemplated by this Agreement and the other Transaction Documents and such
consents, permits, waivers and approvals shall be in full force and effect.
(c) Compliance Certificate. The Purchaser shall have delivered to the
Company a Compliance Certificate, executed by an executive officer of the
Purchaser, dated the Closing Date to the effect that the conditions specified in
subsections (a) and (b) (as it pertains to the Purchaser) of this Section 8.2
have been satisfied.
9. MISCELLANEOUS.
9.1 Governing Law. This Agreement shall be governed by and construed
under the laws of the State of Delaware. The parties agree that any action
brought by either party under or in relation to this Agreement, including
without limitation to interpret or enforce any provision of this Agreement,
shall be brought in, and each party agrees to and does hereby submit to the
jurisdiction and venue of, any state or federal court located in the County of
New Castle, State of Delaware. The Company irrevocably waives the defense of an
inconvenient forum to the maintenance of such suit or proceeding in such forum.
The Company
18
further agrees that service of process upon the Company mailed by first class
mail shall be deemed in every respect effective service of process upon the
Company in any such suit or proceeding. Nothing herein shall affect the right of
Purchaser to serve process in any other manner permitted by law. The Company
agrees that a final non-appealable judgment in any such suit or proceeding shall
be conclusive and may be enforced in other jurisdictions by suit on such
judgment or in any other lawful manner.
9.2 Successors and Assigns. The Purchaser may assign its right to
purchase the Shares to any one or more direct or indirect majority-owned
subsidiaries; provided that no such assignment shall relieve the Purchaser of
its obligations hereunder to the extent that the assignee fails to fulfill the
same. Upon any such permitted assignment, the references in this Agreement to
the Purchaser shall also apply to any such assignee unless the context otherwise
requires. Except as otherwise expressly provided herein, the provisions hereof
shall inure to the benefit of and be binding upon the parties hereto and their
respective successors, assigns, heirs, executors and administrators; provided,
however, that prior to the receipt by the Company of adequate written notice of
the transfer of any Shares specifying the full name and address of the
transferee, the Company may deem and treat the person listed as the holder of
such Shares in its records as the absolute owner and holder of such Shares for
all purposes.
9.3 Entire Agreement. This Agreement, the Disclosure Schedule and the
other Transaction Documents and the other documents delivered pursuant hereto or
thereto constitute the full and entire understanding and agreement between the
parties with regard to the subjects hereof.
9.4 Severability. In the event one or more of the provisions of this
Agreement should, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provisions of this Agreement, and this Agreement
shall be construed as if such invalid, illegal or unenforceable provision had
never been contained herein.
9.5 Amendment and Waiver. This Agreement may be amended or modified,
and the rights and obligations of the Company and the Purchaser may be waived,
only upon the written consent of the Company and the holders of at least a
majority of the Shares purchased or agreed to be purchased pursuant to this
Agreement.
9.6 Notices. All notices or other communications required or permitted
hereunder shall be in writing and shall be deemed effectively given: (i) upon
personal delivery to the party to be notified, (ii) upon receipt, if sent by
facsimile during normal business hours of the recipient or, if not sent by
facsimile during normal business hours of the recipient, then on the next
business day; (iii) three days after having been sent, if sent by registered or
certified mail, return receipt requested, postage prepaid; or (iv) one day after
deposit with a nationally recognized overnight courier, if sent by such a
courier, specifying next day delivery, with written verification of receipt.
Notices to the Company shall be addressed to:
Tower Group, Inc.
000 Xxxxxxxx, 00xx Xxxxx
00
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxxxxxxxx, Esq.
Fax Number: (000) 000-0000
with a copy to:
LeBoeuf, Lamb, Xxxxxx & XxxXxx LLP
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx Xxxxxxxxx, Esq.
Fax Number: (000) 000-0000
Notices to the Purchaser shall be addressed to:
CastlePoint Reinsurance Company, Ltd.
Victoria House
00 Xxxxxxxx Xxxxx
Xxxxxxxx XX 00 Xxxxxxx
Xxxxxxxxx: Xxxx Xxxxxx
Fax Number: (000) 000-0000
with a copy to:
CastlePoint Holdings, Ltd.
000 Xxxxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxx X. Xxxxx
Fax Number: (000) 000-0000
9.7 Titles and Subtitles. The titles of the sections and subsections
of the Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
9.8 Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
9.9 Survival. The representations and warranties of the Company and
the agreements and covenants set forth in Sections 4, 6, 7 and 9 hereof shall
survive until the one year anniversary of the Closing notwithstanding any due
diligence investigation conducted by or on behalf of Purchaser. Moreover, none
of the representations and warranties made by the Company herein shall act as a
waiver of any rights or remedies Purchaser may have under applicable U.S.
federal or state securities laws.
9.10 Further Assurances. Each party shall do and perform, or cause to
be done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably
20
request in order to carry out the intent and accomplish the purposes of this
Agreement and the consummation of the transactions contemplated hereby.
9.11 Indemnification. In consideration of Purchaser's execution and
delivery of this Agreement and the other Transaction Documents and purchase of
the Securities hereunder, and in addition to all of the Company's other
obligations under this Agreement and the other Transaction Documents, from and
after the Closing, the Company shall defend, protect, indemnify and hold
harmless Purchaser and all of its officers, directors and employees and any of
the foregoing persons' agents or other representatives (including, without
limitation, those retained in connection with the transactions contemplated by
this Agreement, collectively, the "Indemnitees") from and against any and all
actions, causes of action, suits, claims, losses, costs, penalties, fees,
liabilities and damages, and expenses in connection therewith (irrespective of
whether any such Indemnitee is a party to the action for which indemnification
hereunder is sought), and including reasonable attorneys' fees and disbursements
(the "Indemnified Liabilities"), incurred by any Indemnitee as a result of, or
arising out of, or relating to (i) any misrepresentation or breach of any
representation or warranty made by the Company in this Agreement, any other
Transaction Document or any other certificate, instrument or document delivered
by the Company at the Closing or (ii) any breach of any covenant, agreement or
obligation of the Company contained in this Agreement, any other Transaction
Document or any other certificate, instrument or document delivered by the
Company at the Closing. To the extent that the foregoing undertaking by the
Company may be unenforceable for any reason, the Company shall make the maximum
contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under Applicable Law. Except as otherwise set
forth herein, the procedures with respect to the rights and obligations under
this Section 9.11 shall be the same as those set forth in Section 6 of the
Registration Rights Agreement.
9.12 Payment Set Aside. To the extent that the Company makes a payment
or payments to Purchaser, or the Purchaser makes a payment or payments to the
Company, hereunder or pursuant to any of the other Transaction Documents or
Purchaser or the Company enforces or exercises its respective rights hereunder
or thereunder, and such payment or payments or the proceeds of such enforcement
or exercise or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside, recovered from, disgorged by or are
required to be refunded, repaid or otherwise restored to the Company or
Purchaser, as applicable, a trustee, receiver or any other person under any
Applicable Law (including, without limitation, any bankruptcy law, state or
federal law, common law or equitable cause of action), then to the extent of any
such restoration the obligation or part thereof originally intended to be
satisfied shall be revived and continued in full force and effect as if such
payment had not been made or such enforcement or setoff had not occurred.
9.13 Joint Participation in Drafting. Each party to this Agreement has
participated in the negotiation and drafting of this Agreement and the other
Transaction Documents. As such, the language used herein and therein shall be
deemed to be the language chosen by the parties hereto to express their mutual
intent, and no rule of strict construction will be applied against any party to
this Agreement.
9.14 Remedies. No provision of this Agreement or any other Transaction
Document providing for any remedy to Purchaser shall limit any other remedy
21
which would otherwise be available to Purchaser at law, in equity or otherwise.
Nothing in this Agreement or any other Transaction Document shall limit any
rights Purchaser may have under any applicable federal or state securities laws
with respect to the investment contemplated hereby.
9.15 Knowledge. As used in this Agreement, the term "knowledge" of any
person or entity shall mean and include (i) actual knowledge and (ii) that
knowledge which a reasonably prudent business person could have obtained in the
management of his or her business affairs after making due inquiry and
exercising due diligence which a prudent business person should have made or
exercised, as applicable, with respect thereto.
9.16 Arms-Length Transaction. Each of the Parties acknowledges and
agrees that they are acting on their own behalf and in the capacity of an
arm's-length purchaser or seller, as applicable. Each Party further acknowledges
and agrees that it has independently evaluated the merits of the transactions
contemplated by this Agreement and the other Transaction Documents, that it has
independently determined to enter into the transactions contemplated hereby and
thereby, that it is not relying on any advice from or evaluation by any other
person (other than its representatives), and that it is not acting in concert
with any other person in making its purchase of securities hereunder or in
monitoring its investment in the Company.
9.17 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument. Facsimile signatures shall be as effective as
original signatures.
22
IN WITNESS WHEREOF, the parties hereto have executed the Stock Purchase
Agreement as of the date set forth in the first paragraph hereof.
TOWER GROUP, INC.
By:________________________________________
Name:
Title:
CASTLEPOINT REINSURANCE COMPANY, LTD.
By:________________________________________
Name:
Title:
Exhibit A
CERTIFICATE OF DESIGNATIONS
OF
SERIES A PREFERRED STOCK
OF
TOWER GROUP, INC.
------------------------------------
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
------------------------------------
Tower Group, Inc., a Delaware corporation (the "Company"), in accordance
with the provisions of Sections 103 and 151 of the General Corporation Law of
the State of Delaware (the "DGCL") thereof, does hereby make this Certificate of
Designations and DOES HEREBY CERTIFY:
That the board of directors of the Company (the "Board") has the authority,
pursuant to the Amended and Restated Certificate of Incorporation of the Company
(the "Certificate of Incorporation") and the DGCL, to adopt resolutions
providing for the designations, preferences and relative, participating,
optional and other special rights, and qualifications, limitations or
restrictions of one or more series of preferred stock, par value $0.01 per
share, of the Company (the "Preferred Stock").
That pursuant to resolutions of the Board of Directors adopted on o, 2006,
the creation of the Series A Preferred Stock, $0.01 par value per share (the
"Series A Preferred Stock"), was authorized and the designations, preferences
and relative, participating, optional and other special rights and
qualifications, limitations and restrictions of such Series A Preferred Stock,
in addition to those set forth in the Certificate of Incorporation and Amended
and Restated By-Laws (the "By-Laws") of the Company, were fixed as follows:
1. Designation.
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The designation of the Series A Preferred Stock shall be "Series A
Preferred Stock," and the number of shares constituting the Series A Preferred
Stock shall be 40,000. The Series A Preferred Stock shall have a liquidation
preference of $1,000 per share. The Company may from time to time, without
notice to or the consent of holders of the Series A Preferred Stock, issue
additional preferred stock. No such issuance shall affect the due authorization
of any issued and outstanding shares of the Series A Preferred Stock.
2. Definitions.
-----------
"Board" shall mean the Board of Directors of the Company or any duly
authorized committee of the Board of Directors.
"Business Day" shall mean a day that is a Monday, Tuesday, Wednesday,
Thursday or Friday and is not a day on which banking institutions in New York
City generally are authorized or obligated by law or executive order to close.
"Certificate of Designations" shall mean this Certificate of Designations
relating to the Series A Preferred Stock, as amended from time to time.
"Change in Control" shall have the meaning assigned to such term in Section
6(a).
"Common Stock" shall mean the common stock, par value $0.01 per share, of
the Company.
"Conversion" shall have the meaning set forth in Section 5(a) hereof.
"Conversion Date" shall have the meaning set forth in Section 5(a) hereof.
"Dividend Payment Date" shall have the meaning assigned to such term in
Section 3(a)(i).
"Dividend Period" shall have the meaning assigned to such term in Section
3(c).
"Dividend Rate" shall mean 8.66% per annum.
"Dividend Record Date" shall have the meaning assigned to such term in
Section 3(b).
"Issue Date" shall mean the initial date of delivery of the Series A
Preferred Stock.
"Junior Stock" shall mean the Common Stock and any other class or series of
shares of the Company that ranks junior to the Series A Preferred Stock either
as to the payment of dividends or as to the distribution of assets upon any
liquidation, dissolution or winding up of the Company.
"Liquidation Preference" shall have the meaning assigned to such term in
Section 8(b).
"Nonpayment" shall have the meaning assigned to such term in Section 10(b).
"Optional Conversion Shares" shall have the meaning assigned to such term
in Section 5(a).
"Parity Stock" shall mean any class or series of preferred shares of the
Company that ranks equally with the Series A Preferred Stock in the payment of
dividends and in the distribution of assets on any liquidation, dissolution or
winding up of the Company.
"Person" shall mean any individual, corporation, partnership, joint
venture, trust, limited liability company or corporation, unincorporated
organization or government or any agency or political subdivision thereof.
"Preferred Stock Director" shall have the meaning assigned to such term in
Section 10(b).
"solvent" shall have the meaning assigned to such term in Section 3(a).
"Value of Consideration" shall have the meaning assigned to such term in
Section 6(a).
"Voting Preferred Stock" shall mean any other class or series of preferred
stock of the Company ranking equally with the Series A Preferred Stock either as
to dividends or the distribution of assets upon liquidation, dissolution or
winding up and upon which voting rights similar to those granted to the holders
of the Series A Preferred Stock have been conferred and are exercisable.
3. Dividends.
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(a) Dividend Payment Dates. The holders of the Series A Preferred Stock
shall be entitled to receive cash dividends when, as and if declared by the
Board or a duly authorized committee of the Board, out of assets legally
available for that purpose and to the extent the Company is able to pay its
debts as they fall due ("solvent") after giving effect thereto, at the
applicable Dividend Rate set forth below in this Section 3. Dividends on the
Series A Preferred Stock shall be payable on a non-cumulative basis, quarterly
in arrears on the 27th day of March, June, September and December of each year,
the Mandatory Conversion Date and, if applicable, the date of consummation of
any Change in Control (each, a "Dividend Payment Date"), subject to Section
3(e).
(b) Dividend Record Date. Each such dividend shall be paid to the holders
of record of the Series A Preferred Stock as they appear on the share register
of the Company on the applicable record date (each, a "Dividend Record Date"),
which shall be a record date fixed by the Board that is not more than 60 nor
less than 10 days prior to such Dividend Payment Date. The Dividend Record Date
shall apply regardless of whether any particular Dividend Record Date is a
Business Day.
(c) Dividend Period. Each dividend period (a "Dividend Period") shall
commence on and include a Dividend Payment Date and shall run to but excluding
the next Dividend Payment Date, except that the initial Dividend Period will
commence on and include the Issue Date, and will run to and exclude the first
Dividend Payment Date thereafter.
(d) Day Count Convention. The amount of dividends payable per share of
Series A Preferred Stock on each Dividend Payment Date will be calculated using
the per annum Dividend Rate and on the basis of a 360-day year consisting of
twelve 30-day months.
(e) Business Day Convention. If any Dividend Payment Date is not a Business
Day, then dividends will be payable on the first Business Day following such
Dividend Payment Date
unless such day is in the next calendar month, in which case dividends shall be
payable on the first Business Day preceding such Dividend Payment Date and
dividends, in each case, shall accrue to the actual payment date.
(f) Junior Stock. So long as any shares of Series A Preferred Stock remain
outstanding for any Dividend Period, unless the full dividends for the current
Dividend Period on all outstanding Series A Preferred Stock and Parity Stock
have been declared and paid (or declared and a sum sufficient for the payment
thereof has been set aside): (i) no dividend whatsoever shall be paid or
declared during such Dividend Period on the Common Stock or other Junior Stock
(other than a dividend payable solely in Common Stock or other Junior Stock);
and (ii) no Common Stock or other Junior Stock shall be purchased, redeemed or
otherwise acquired for consideration by the Company, directly or indirectly
(other than as a result of a reclassification of such Junior Stock for or into
other Junior Stock, or the exchange or conversion of one share of Junior Stock
for or into another share of Junior Stock) during such Dividend Period.
(g) Pro Rata Adjustments. When dividends are not paid in full (or duly
provided for) on any Dividend Payment Date (or, in the case of Parity Stock
having dividend payment dates different from the Dividend Payment Dates, on a
dividend payment date falling within a Dividend Period) upon the Series A
Preferred Stock and any Parity Stock, all dividends declared upon the Series A
Preferred Stock and all such Parity Stock payable on such Dividend Payment Date
(or, in the case of Parity Stock having dividend payment dates different from
the Dividend Payment Dates, on a dividend payment date falling within the
Dividend Period related to such Dividend Payment Date) shall be declared pro
rata so that the respective amounts of such dividends shall bear the same ratio
to each other as all accrued but unpaid dividends per share of Series A
Preferred Stock and all Parity Stock payable on such Dividend Payment Date (or,
in the case of Parity Stock having dividend payment dates different from the
Dividend Payment Dates, on a dividend payment date falling within the related
Dividend Period) bear to each other.
(h) Additional Series A Preferred Stock. In the event that additional
shares of the Series A Preferred Stock are issued after the original issue date,
dividends on such shares may accrue from the original issue date or any other
date specified by the Company at the time such additional shares are issued.
These dividends will accrue, with respect to each Dividend Period, in the manner
set forth in Sections 3(a)(i) and 3(b).
(i) Non-Cumulative Dividends. Dividends on Series A Preferred Stock shall
be non-cumulative. To the extent that any dividends payable on the Series A
Preferred Stock on any Dividend Payment Date are not declared and paid, in full
or otherwise, on such Dividend Payment Date, then such unpaid dividends shall
not cumulate and shall cease to accrue and be payable and the Company shall have
no obligation to pay dividends accrued for the applicable Dividend Period
subsequent to such Dividend Payment Date or to pay interest with respect to such
dividends, whether or not dividends are declared on Series A Preferred Stock for
any subsequent Dividend Period.
4. Redemption.
----------
(a) The Company, at its option, may redeem, in whole at any time or in part
from time to time, the Series A Preferred Stock at the time outstanding, upon
notice given as provided in Section 4(c) below, at a redemption price equal to
$1,000 per share of Series A Preferred Stock, together with an amount equal to
any dividends that have been declared but not paid prior to the redemption date
(but with no amount in respect of any dividends that have not been declared
prior to such date). The redemption price for the Series A Preferred Stock shall
be payable on the redemption date to the holder of such shares against surrender
of the certificate(s) evidencing such shares to the Company or its agent. If the
redemption date occurs subsequent to the Dividend Record Date for a Dividend
Period, any declared but unpaid dividends payable on such redemption date shall
not be paid to the holder entitled to receive the redemption price on the
redemption date, but rather shall be paid to the holder of record of the
redeemed shares on such Dividend Record Date relating to the Dividend Payment
Date as provided in Section 3.
(b) Notice of redemption shall be given to the holders of record of the
Series A Preferred Stock in accordance with Section 13(a) hereof. Such mailing
shall be not less than 30 days and not more than 60 days before the date fixed
for redemption. Notwithstanding the above, in the case of redemption concurrent
with a Conversion in which the holders have elected not to convert the Optional
Election Shares, such notice shall be given not later than the date of the
underwriting agreement with respect to the underwritten public offering giving
rise to such Conversion. Any notice delivered as provided in Section 13(a) shall
be conclusively presumed to have been duly given, whether or not the holder
receives such notice, but failure to duly give such notice, or any defect in
such notice or in the mailing thereof, to any holder of Series A Preferred Stock
designated for redemption shall not affect the validity of the proceedings for
the redemption of any other Series A Preferred Stock. Each such notice given to
a holder shall state: (i) the redemption date; (ii) the number of shares of
Series A Preferred Stock to be redeemed and, if less than all the shares of the
Series A Preferred Stock held by such holder are to be redeemed, the number of
such shares of Series A Preferred Stock to be redeemed from such holder; (iii)
the redemption price; and (iv) the place or places where holders may surrender
certificates evidencing the shares of Series A Preferred Stock for payment of
the redemption price.
(c) If notice of redemption has been duly given and if on or before the
redemption date specified in the notice all funds necessary for the redemption
have been set aside by the Company for the benefit of the holders of the Series
A Preferred Stock called for the redemption, then on and after the redemption
date dividends shall cease to accrue on such shares of Series A Preferred Stock
so called for redemption, all such shares of Series A Preferred Stock so called
for redemption shall no longer be deemed outstanding and all rights with respect
to such shares of Series A Preferred Stock shall forthwith on such redemption
date cease and terminate, except only the right of the holders thereof to
receive the amount payable on such redemption, without interest.
(d) In case of any redemption of only part of the Series A Preferred Stock
at the time outstanding, the shares to be redeemed shall be selected either pro
rata or in such other manner as the Board may determine to be fair and
equitable. Subject to the provisions hereof, the Board shall have full power and
authority to prescribe the terms and conditions
upon which the Series A Preferred Stock shall be redeemed from time to time. In
case fewer than all the shares of Series A Preferred Stock represented by any
certificate are redeemed, a new certificate shall be issued representing the
unredeemed shares without cost to the holder thereof.
5. Conversion in Connection with a Public Offering.
-----------------------------------------------
(a) On the closing date of the Company's first underwritten public offering
of its common stock after October 31, 2006 (other than offers made to employees,
officers or directors of the Company registered on a Form S-8 or offers made to
agents of the Company pursuant to shares registered on a Form S-3 filed with the
United States Securities and Exchange Commission (the "SEC")) (the "Conversion
Date"), 30,000 shares of Series A Preferred Stock will automatically convert
(the "Conversion") into a number of shares of Common Stock per share of Series A
Preferred Stock equal to the liquidation preference amount of a share of Series
A Preferred Stock divided by the offering price of the Common Stock in such
offering or private placement (the "Conversion Price"). The remaining 10,000
shares of Series A Preferred Stock (the "Optional Conversion Shares") shall be
convertible on the Conversion Date at the election of the holders of the shares
of the Series A Preferred Stock. Such Optional Conversion Shares shall be
converted into a number of shares of Common Stock per Optional Conversion Share
based on the Conversion Price as defined above. Notice of such election shall be
delivered to the Company in accordance with the provisions of Section 14(a) not
later than the date on which the preliminary prospectus pertaining to the
underwritten public offering is filed with the SEC.
(b) The holders of the Series A Preferred Stock to be converted on the
Conversion Date shall have the right to receive, in addition to the number of
shares of Common Stock specified in Section 5(a), an amount in cash equal to any
dividends that have been declared but not paid prior to the Conversion Date (but
with no amount in respect of any dividends that have not been declared prior to
such date), such amount to be paid at the time of the Conversion, to the extent
that the Company has sufficient lawful funds to pay such amount at such time. If
the Conversion Date occurs subsequent to the Dividend Record Date for a Dividend
Period, any declared but unpaid dividends payable on the Conversion Date shall
not be paid to the holder entitled to receive the redemption price on the
Mandatory Conversion Date, but rather shall be paid to the holder of record of
the redeemed shares on such Dividend Record Date relating to the Dividend
Payment Date as provided in Section 3.
(c) To the extent that the Company does not have sufficient lawful funds to
pay in cash the amount equal to all of such dividends that have been declared
but not paid prior to the Conversion Date, the holders of Series A Preferred
Stock to be converted on the Conversion Date shall be entitled to receive, upon
conversion of such Series A Preferred Stock on the Conversion Date, an
additional number of shares of Common Stock per share of Series A Preferred
Stock equal to the amount of such dividends that have been declared but not paid
prior to the Conversion Date in cash divided by the Conversion Price. Any
resulting fractional shares of Common Stock shall be settled in cash as provided
below, subject to the availability of sufficient lawful funds to make such
settlement.
(d) From and after the Conversion Date, all shares of Series A Preferred
Stock that have been converted on such Conversion Date shall no longer be deemed
outstanding and all rights with respect to such shares of Series A Preferred
Stock shall forthwith cease and terminate, except only the right of the holders
thereof to receive the Common Stock and any cash due and owing on conversion of
the Series A Preferred Stock, without interest.
(e) No fractional shares of Common Stock will be issued to holders of
Series A Preferred Stock as a result of any Conversion of shares of Series A
Preferred Stock pursuant to this Section 5. In lieu of any fractional share of
Common Stock otherwise issuable in respect of any Conversion pursuant to this
Section 5, the Company shall pay an amount in cash (computed to the nearest
cent) equal to the same fraction of the Conversion Price.
(f) Notwithstanding this Section 5, if the Conversion shall result in the
issuance of shares of common stock of the Company that would require the vote of
the stockholders of the outstanding shares of common stock pursuant to the
listing rules of the Nasdaq Global Select Market, the number of shares of Series
A Preferred Stock to be initially converted into Common Stock shall be limited
to a number that would not require such a vote and the remaining shares of
Series A Preferred Stock shall not be converted until the required stockholder
vote is obtained.
(g) The issuance of certificates for shares of Common Stock on Conversion
of the Series A Preferred Stock pursuant to this Section 5 shall be made without
charge to the holder of the Series A Preferred Stock for any documentary stamp
or similar taxes that may be payable in respect of the issue or delivery of such
certificate, provided that the Company shall not be required to pay any tax that
may be payable in respect of any transfer involved in the issuance and delivery
of any such certificate upon conversion in a name other than that of the holder
of such shares of Series A Preferred Stock so converted and the Company shall
not be required to issue or deliver such certificates unless or until the person
or persons requesting the issuance thereof shall have paid to the Company the
amount of such tax or shall have established to the satisfaction of the Company
that such tax has been paid.
6. Conversion Upon Change in Control.
---------------------------------
(a) Immediately prior to the consummation of any Change in Control (as
defined below) that is consummated at a time when CastlePoint Reinsurance
Company, Ltd. or one of its subsidiaries holds any shares of Series A Preferred
Stock, each share of Series A Preferred Stock held by CastlePoint Reinsurance
Company, Ltd. or one of its subsidiaries shall be converted into a number of
shares of Common Stock equal to the liquidation preference amount of a share of
Series A Preferred Stock, determined in accordance with Section 8(a), divided by
the Value of the Consideration (as defined below) per share of Common Stock in
such Change in Control. A "Change in Control" means (i) any merger or
consolidation of the Company with and into another company, other than a merger
or consolidation in which (x) the Company is the surviving entity and (y) the
holders of the Company's Common Stock immediately prior to the consummation of
such merger or consolidation own more than 50% of the voting equity interests of
the surviving entity immediately after the consummation of such merger or
consolidation; (ii) any transaction by which any person or group of persons
(within the meaning of Rule 13d-5 under the Securities Exchange Act of 1934, as
amended, or any successor or replacement rule) acquires beneficial ownership (as
defined in Rule 13d-3 under the Securities Exchange Act of
1934, as amended, or any successor or replacement rule) of securities of the
Company representing more than 50% of the voting power of the Company holder of
at the time of such Change in Control. The "Value of Consideration" means the
value of any consideration paid per share of Common Stock or value of the
consideration into which a share of Common Stock is converted in a Change in
Control transaction or, if such Change in Control Value does not involve a
merger or consolidation of the Company or the acquisition of shares of Common
Stock, the equivalent value placed upon a share of Common Stock in such
transaction; provided, that (i) in the case of any publicly traded securities
payable per share of Common Stock or into which a share of Common Stock shall be
converted, the value of such securities shall be the last price at which such
securities are traded on a public market immediately prior to the closing of the
Change in Control and (ii) in the case of any securities that are not publicly
traded or any other property payable per share of Common Stock or into which a
share of Common Stock shall be converted, the value of such securities shall be
fixed in good faith by the Board.
(b) The holders of the Series A Preferred Stock to be converted in
connection with a Change in Control shall have the right to receive, in addition
to the number of shares of Common Stock specified in Section 6(a), an amount in
cash equal to any dividends that have been declared but not paid prior to the
consummation of such Change in Control (but with no amount in respect of any
dividends that have not been declared prior to such date), such amount to be
paid at the time of the consummation of such Change in Control, to the extent
that the Company has sufficient lawful funds to pay such amount at such time. If
the consummation of such Change in Control occurs subsequent to the Dividend
Record Date for a Dividend Period, any declared but unpaid dividends payable
upon the consummation of such Change in Control shall not be paid to the holder
entitled to receive the redemption price on the date of the consummation of such
Change in Control, but rather shall be paid to the holder of record of the
redeemed shares on such Dividend Record Date relating to the Dividend Payment
Date as provided in Section 3.
(c) To the extent that the Company does not have sufficient lawful funds to
pay in cash the amount equal to all of such dividends that have been declared
but not paid prior to the consummation of a Change in Control, the holders of
Series A Preferred Stock to be converted in connection with a Change in Control
shall be entitled to receive, upon conversion of such Series A Preferred Stock
upon the consummation of such Change in Control, an additional number of shares
of Common Stock per share of Series A Preferred Stock equal to the amount of
such dividends that have been declared but not paid prior to the consummation of
such Change in Control in cash divided by the Value of Consideration. Any
resulting fractional shares of Common Stock shall be settled in cash as provided
below, subject to the availability of sufficient lawful funds to make such
settlement.
(d) From and after the consummation of a Change in Control, all shares of
Series A Preferred Stock that have been converted in connection with such Change
in Control shall no longer be deemed outstanding and all rights with respect to
such shares of Series A Preferred Stock shall forthwith cease and terminate,
except only the right of the holders thereof to receive the Common Stock and any
cash due and owing on conversion of the Series A Preferred Stock, without
interest.
(e) No fractional shares of Common Stock will be issued to holders of
Series A Preferred Stock as a result of any Conversion of shares of Series A
Preferred Stock pursuant to this
Section 6. In lieu of any fractional share of Common Stock otherwise issuable in
respect of any conversion pursuant to this Section 6, the Company shall pay an
amount in cash (computed to the nearest cent) equal to the same fraction of the
Value of Conversion.
(f) The issuance of certificates for shares of Common Stock on conversion
of the Series A Preferred Stock pursuant to this Section 6 shall be made without
charge to the holder of the Series A Preferred Stock for any documentary stamp
or similar taxes that may be payable in respect of the issue or delivery of such
certificate, provided that the Company shall not be required to pay any tax that
may be payable in respect of any transfer involved in the issuance and delivery
of any such certificate upon conversion in a name other than that of the holder
of such shares of Series A Preferred Stock so converted and the Company shall
not be required to issue or deliver such certificates unless or until the person
or persons requesting the issuance thereof shall have paid to the Company the
amount of such tax or shall have established to the satisfaction of the Company
that such tax has been paid.
7. Conversion Upon Regulatory Change.
---------------------------------
If both (a) and (b) below occur:
(a) after the date of the issuance of the Series A Preferred Stock, the
criteria used by A.M. Best Company, Inc. for determining whether and to what
extent a security qualifies as permanent equity capital shall change such that
the Series A Preferred Stock no longer qualifies for treatment as favorable as
the treatment afforded to the Series A Preferred Stock on its date of issuance,
and
(b) the Company affirmatively elects to qualify the Series A Preferred
Stock for treatment as permanent equity capital by A.M. Best Company, Inc.
without any sublimit or other quantitative restriction on the inclusion of the
Series A Preferred Stock in permanent equity capital (other than any limitation
the Company elects to accept and any limitation requiring that common equity or
a specified form of common equity constitute the dominant form of permanent
equity capital) under such criteria,
then, upon such affirmative election, the Series A Preferred Stock shall be
convertible at the Company's option into a new series of preferred stock having
terms and provisions substantially identical to those of the Series A Preferred
Stock, except that such new series may have such additional or modified rights,
preferences, privileges and voting powers, and limitations and restrictions
thereof, as are necessary in the judgment of the Board (after consultation with
legal counsel of recognized standing) to comply with the Required Equity Capital
Provisions (as defined below), provided that the Company will not cause any such
conversion unless the Board determines that the rights, preferences, privileges
and voting powers, and the qualifications, limitations and restrictions thereof,
of such new series of preferred stock, taken as a whole, are not materially less
favorable to the holders thereof than the rights, preferences, privileges and
voting powers, and the qualifications, limitations and restrictions thereof, of
the Series A Preferred Stock, taken as a whole.
As used above, the term "Required Equity Capital Provisions" means such
terms and provisions as are, in the judgment of the Company (after consultation
with legal counsel of
recognized standing), required for preferred stock to qualify for equity capital
treatment by A.M. Best Company, Inc. that is as favorable as the treatment
afforded to the Series A Preferred Stock on its date of issuance, without any
sublimit or other quantitative restriction on the inclusion of such preferred
stock in permanent equity capital (other than any limitation the Company elects
to accept and any limitation requiring that common equity or a specified form of
common equity constitute the dominant form of permanent equity capital) pursuant
to the applicable criteria used by A.M. Best Company, Inc.
8. Liquidation Rights.
------------------
(a) Upon the voluntary or involuntary dissolution, liquidation or winding
up of the Company, the holders of the Series A Preferred Stock shall be entitled
to receive and to be paid out of the assets of the Company available for
distribution to its stockholders, before any payment or distribution shall be
made on the Common Stock or on any other Junior Stock the liquidation preference
of $1,000 per share of Series A Preferred Stock, plus any declared and unpaid
dividends for the then-current Dividend Period, without accumulation of any
undeclared dividends.
(b) If in any distribution described in Section 5(a) above the assets of
the Company or proceeds thereof are not sufficient to pay the Liquidation
Preferences (as defined below) in full to all holders of the Series A Preferred
Stock and all holders of any Parity Stock, the amounts paid to the holders of
the Series A Preferred Stock and to the holders of all such other Parity Stock
shall be paid pro rata in accordance with the respective aggregate Liquidation
Preferences of the holders of the Series A Preferred Stock and the holders of
all such other Parity Stock. In any such distribution, the "Liquidation
Preference" of any holder of Series A Preferred Stock or Parity Stock shall mean
the amount otherwise payable to such holder in such distribution, including any
declared but unpaid dividends (and, in the case of any holder of shares other
than Series A Preferred Stock and on which dividends accrue on a cumulative
basis, an amount equal to any unpaid, accrued cumulative dividends, whether or
not declared, as applicable).
(c) If the Liquidation Preference has been paid in full to all holders of
the Series A Preferred Stock, the holders of other shares of the Company shall
be entitled to receive all remaining assets of the Company according to their
respective rights and preferences and the holders of the Series A Preferred
Stock as such shall have no right or claim to any of the remaining assets of the
Company.
(d) Neither the sale, lease, exchange, transfer or conveyance of all or
substantially all of the assets of the Company for cash, securities or other
property, nor the merger or consolidation of the Company into or with any other
corporation or the merger or consolidation of any other corporation into or with
the Company, shall be deemed to be a dissolution, liquidation or winding up,
voluntary or involuntary, for the purposes of this Section 8.
9. Ranking.
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The Series A Preferred Stock shall rank, with respect to the payment of
dividends and distributions prior to or upon the liquidation, dissolution or
winding up of the Company:
(i) senior to all Common Stock outstanding and other Junior
Stock, and each other series of Junior Stock that the Company may
later issue;
(ii) equally with Parity Stock and each other series of
Parity Stock that the Company may later issue; and
(iii) junior to any series of senior shares that the Company
may later issue, subject to compliance with Section 11(b).
10. Voting and Certain Other Rights.
-------------------------------
(a) Except as set forth herein or required by applicable law, holders of
Series A Preferred Stock shall have no voting rights.
(b) Whenever dividends on any Series A Preferred Stock shall have not been
declared and paid for the equivalent of six or more dividend payments, whether
or not for consecutive Dividend Periods (a "Nonpayment"), the holders of such
Series A Preferred Stock, voting together as a single class with holders of any
and all other series of Voting Preferred Stock then outstanding, will be
entitled to vote for the election of a total of one additional member to the
Board (the "Preferred Stock Director"), provided that the election of any such
director shall not cause the Company to violate the corporate governance
requirement of the Nasdaq Global Select Market (or any other exchange on which
the securities of the Company may be listed) that listed companies must have a
majority of independent directors. The Preferred Stock Director shall be elected
by simple majority at a special meeting called at the request of the holders of
record of at least 20% of the shares of Series A Preferred Stock or of any other
series of Voting Preferred Stock then outstanding (unless such request for a
special meeting is received less than 90 days before the date fixed for the next
annual meeting or special meeting of the stockholders of the Company, in which
event such election shall be held only at such next annual or special meeting of
stockholders), and at each subsequent annual meeting of stockholders of the
Company. For this purpose, the Board shall reserve one vacant place on the Board
of the Company to accommodate such election and pass such resolutions as are
necessary to give effect to such election.
(c) If the holders of the Series A Preferred Stock become entitled to elect
a director to the Board, the Company shall promptly give notice to all holders
and take all action necessary, including calling a meeting or circulating a
consent to permit the nomination and election of such director. Applicable
provisions of the Company's Certificate of Incorporation shall be applicable to
the holders of Series A Preferred Stock and any other Voting Preferred Stock as
a class, provided that any written consents approved by the holders of record of
a majority of the Series A Preferred Stock and any other Voting Preferred Stock
outstanding shall be effective and shall bind all holders of Series A Preferred
Stock. If and when dividends for at least four Dividend Periods, whether or not
consecutive, following a Nonpayment have been paid in full
(or declared and a sum sufficient for such payment has been set aside), then the
right of the holders of the Series A Preferred Stock to elect the Preferred
Stock Director shall cease (but subject to revesting of such voting rights in
the event of any future Nonpayment pursuant to this Section 10) and the number
of Dividend Periods in which dividends have not been declared and paid shall be
reset to zero and, if and when any rights of holders of the Series A Preferred
Stock to elect the Preferred Stock Director shall have ceased, the terms of
office of the Preferred Stock Director shall terminate forthwith and the number
of directors constituting the Board shall automatically be reduced by one.
(d) The Preferred Stock Director may be removed at any time without cause
by the holders of record of a majority of the outstanding Series A Preferred
Stock and any other shares of Voting Preferred Stock, when they have the voting
rights described above (voting together as a single class). So long as a
Nonpayment shall continue, any vacancy in the office of the Preferred Stock
Director (other than prior to the initial election of a Preferred Stock Director
after a Nonpayment) may be filled by a vote of the holders of record of a
majority of the shares of Series A Preferred Stock outstanding and any other
Voting Preferred Stock then outstanding (voting together as a single class),
when they have the voting rights described above. The Preferred Stock Director
shall be entitled to one vote on any matter.
(e) Holders of the Series A Preferred Stock shall be entitled to vote on
matters as described in Section 11.
11. Modification.
------------
(a) With the Consent of Holders. Except as provided below in this Section
11(a), this Certificate of Designations may be amended, modified or
supplemented, and noncompliance in any particular instance with any provision of
this Certificate of Designations or the Series A Preferred Stock may be waived,
in each case with the written consent or affirmative vote of the holders of at
least two-thirds of the shares of Series A Preferred Stock at the time
outstanding, including any modification occurring in connection with any merger
or consolidation of the Company or otherwise.
Subject to Sections 6 and 7, without the written consent or the affirmative
vote or consent of the holders of at least two-thirds of the outstanding shares
of Series A Preferred Stock, given in person or by proxy, either in writing or
at a meeting, an amendment or waiver under this Section 11(a) may not:
amend, alter or repeal the provisions of the Company's
Certificate of Incorporation, By-Laws or this Certificate of
Designations so as to materially and adversely affect the special
rights, preferences, privileges and voting powers of the Series A
Preferred Stock, taken as a whole; or
consummate a binding share exchange or reclassification
involving the Series A Preferred Stock or a merger or consolidation of
the Company with another entity, unless in each case the Series A
Preferred Stock (x) remains outstanding or (y) in the case of any such
merger or consolidation with respect to which the Company is not the
surviving or
resulting entity, is converted into or exchanged for preference
securities of the surviving or resulting entity or its ultimate parent
having such rights, preferences, privileges and voting powers, taken
as a whole, as are not materially less favorable to the holders
thereof than the rights, preferences, privileges and voting powers of
the Series A Preferred Stock, taken as a whole;
provided, however, that for all purposes of this Section 11(a), any increase in
the amount of the authorized or issued Series A Preferred Stock, or the creation
and issuance, or an increase in the authorized or issued amount, of any other
series of preferred stock ranking equally with and/or junior to the Series A
Preferred Stock with respect to the payment of dividends (whether such dividends
are cumulative or non-cumulative) and/or the distribution of assets upon
liquidation, dissolution or winding up of the Company will not be deemed to
adversely affect the special rights, preferences, privileges or voting powers of
the Series A Preferred Stock.
(b) Changes after Provision for Redemption. No vote or consent of the
holders of the Series A Preferred Stock shall be required pursuant to Sections
10(b) and 11(a) above if, at or prior to the time when any such vote or consent
would otherwise be required pursuant to such Section, all outstanding Series A
Preferred Stock shall have been redeemed, or called for redemption upon proper
notice and sufficient funds shall have been set aside by the Company for the
benefit of holders of such Series A Preferred Stock called for redemption, in
each case pursuant to Section 4 above.
12. Currency of Payments.
--------------------
Any cash payments with respect to the Series A Preferred Stock shall be
paid in United States dollars in immediately available funds.
13. No Preemptive Rights.
--------------------
No holder of Series A Preferred Stock shall have any preemptive right as to
any additional issue of shares of capital stock of the Company, or to any
security convertible, exercisable or exchangeable into such shares.
14. Miscellaneous.
-------------
(a) Notices. Any and all notices or other communications or deliveries to
be provided by the holders hereunder shall be in writing and delivered
personally, by facsimile, sent by a nationally recognized overnight courier
service, addressed to the Company, at 000 Xxxxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx
Xxxx 00000, facsimile number (000) 000-0000, Attn: General Counsel, or such
other address or facsimile number as the Company may specify for such purposes
by notice to the holders delivered in accordance with this Section. Any and all
notices or other communications or deliveries to be provided by the Company
hereunder shall be in writing and delivered personally, by facsimile, sent by a
nationally recognized overnight courier service addressed to each holder of
record of the Series A Preferred Stock at the facsimile telephone number or
address of such holder of record at their respective last addresses or facsimile
telephone number appearing on the share register of the Company, or if no such
facsimile telephone number or address appears, at the principal place of
business of the holder.
Any notice or other communication or deliveries
hereunder shall be deemed given and effective on the earliest of (i) the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified in this Section prior to 5:30 p.m. (New
York City time), (ii) the date after the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile telephone number
specified in this Section later than 5:30 p.m. (New York City time) on any date
and earlier than 11:59 p.m. (New York City time) on such date, (iii) the second
Business Day following the date of mailing, if sent by nationally recognized
overnight courier service, or (iv) upon actual receipt by the party to whom such
notice is required to be given.
(b) Lost or Mutilated Preferred Stock Certificate. If a holder's Series A
Preferred Stock certificate shall be mutilated, lost, stolen or destroyed, the
Company shall execute and deliver, in exchange and substitution for and upon
cancellation of a mutilated certificate, or in lieu of or in substitution for a
lost, stolen or destroyed certificate, a new certificate for the shares of
Series A Preferred Stock so mutilated, lost, stolen or destroyed but only upon
receipt of evidence of such loss, theft or destruction of such certificate, and
of the ownership hereof, and indemnity, if requested, all reasonably
satisfactory to the Company.
(c) Waiver. Any waiver by the Company or the holder of a breach of any
provision of this Certificate of Designations shall not operate as or be
construed to be a waiver of any other breach of such provision or of any breach
of any other provision of this Certificate of Designations. The failure of the
Company or the holder to insist upon strict adherence to any term of this
Certificate of Designations on one or more occasions shall not be considered a
waiver or deprive that party of the right thereafter to insist upon strict
adherence to that term or any other term of this Certificate of Designations.
Any waiver must be in writing.
(d) Status of Converted or Redeemed Preferred Stock. In case any shares of
Series A Preferred Stock shall be converted, redeemed or reacquired by the
Company, such shares shall resume the status of authorized but unissued shares
of preferred stock and shall no longer be designated as Series A Preferred
Stock.
(e) Other Rights. Except as provided in Sections 5, 6 and 7, the Series A
Preferred Stock will not be convertible into, or exchangeable for, any other
class or series of securities of the Company, and holders of the Series A
Preferred Stock will have no subscription rights to acquire additional shares of
the Company. Holders of the Series A Preferred Stock shall have no right to
require the redemption or repurchase of the Series A Preferred Stock.
[Signature appears on subsequent page.]
IN WITNESS WHEREOF, I have affixed my signature hereto this ?th day of
[November], 2006.
TOWER GROUP, INC.
By:__________________________
Corporate Secretary
Execution Copy
Exhibit B
REGISTRATION RIGHTS AGREEMENT
-----------------------------
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made and
entered into as of o, 2006 by and between CASTLEPOINT REINSURANCE COMPANY, LTD.,
a Bermuda company (the "Investor"), and TOWER GROUP, INC., a Delaware
corporation (the "Company").
RECITALS
--------
1. WHEREAS, the Investor and the Company have entered into a Stock
Purchase Agreement, dated November 14, 2006 (the "Purchase Agreement"), pursuant
to which the Investor has agreed to purchase from the Company, and the Company
has agreed to sell to the Investor, 40,000 shares of the Company's Series A
Preferred Stock, par value $0.01 per share (the "Preferred Stock");
2. WHEREAS, the Preferred Stock is convertible into shares (the
"Conversion Shares") of common stock, par value $0.01 per share, of the Company
(the "Common Stock"), as set forth in the Certificate of Designations of the
Preferred Stock (the "Certificate of Designations"); and
3. WHEREAS, in consideration of the Investor's entry into the Purchase
Agreement, the Company has agreed to execute and deliver to the Investor this
Agreement;
AGREEMENT
---------
4. 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:
DEFINITIONS. (B) 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:
"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.
1
"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.
"Closing Date" means December 4, 2006, or such other time
or such other date as the Company and the Investor may agree.
"Commission" means the Securities and Exchange Commission.
"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.
"Free Writing Prospectus" means a free writing prospectus
(as such term is defined in Rule 405 under the Securities Act) relating
to Registrable Securities.
"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.
"Person" means any individual, partnership, corporation,
limited liability company, joint stock company, association, trust,
unincorporated organization, or a government agency or political
subdivision thereof.
"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.
"Public Offering" means an offer registered with the
Commission and the appropriate state securities commissions by the
Company of its Common Stock and made pursuant to the Securities Act.
"Registrable Securities" means (i) the Conversion Shares
and (ii) any shares or other securities issued in respect of such
Registrable Securities by reason of or in connection with any share
dividend, share distribution, share split, purchase in any rights
offering or in connection with any exchange for or replacement of such
Registrable Securities or any combination of shares, recapitalization,
amalgamation, merger or consolidation, any other equity securities
issued in respect of Registrable Securities pursuant to any other pro
rata distribution with respect to the Common Stock; provided,
2
however, that a Conversion Share shall cease to be a Registrable
Security for purposes of this Agreement when it no longer is a
Restricted Security.
"Registration Expenses" means any and all expenses incident
to the performance of or compliance with this Agreement, including,
without limitation: (i) all Commission, securities exchange, NASD
registration, listing, inclusion and filing fees, (ii) all fees and
expenses incurred in connection with compliance with international,
federal or state securities or blue sky laws (including, without
limitation, any registration, listing and filing fees and reasonable
fees and disbursements of counsel in connection with blue sky
qualification of any of the Registrable Securities and the preparation
of a blue sky memorandum and compliance with the rules of the NASD),
(iii) all expenses in preparing or assisting in preparing, word
processing, duplicating, printing, delivering and distributing any
Registration Statement, any Prospectus, any amendments or supplements
thereto, any underwriting agreements, securities sales agreements,
certificates and any other documents relating to the performance under
and compliance with this Agreement, (iv) all fees and expenses incurred
in connection with the listing or inclusion of any of the Registrable
Securities on any securities exchange pursuant to Section 3(h) of this
Agreement, (v) the fees and disbursements of counsel for the Company
and of the independent public accountants of the Company (including,
without limitation, the expenses of any special audit and "cold
comfort" letters required by or incident to such performance), and (vi)
any fees and disbursements customarily paid in issues and sales of
securities (including the fees and expenses of any experts retained by
the Company in connection with any Registration Statement); provided,
however, that Registration Expenses shall exclude brokers' or
underwriters' discounts and commissions, if any, relating to the sale
or disposition of Registrable Securities by the Investor.
"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.
"Restricted Security" means any Conversion Share except any
that (i) has been registered pursuant to an effective registration
statement under the Securities Act and sold in a manner contemplated by
the prospectus included in such registration statement, (ii) has been
transferred by the Investor in compliance with the resale provisions of
Rule 144 under the Securities Act (or any successor provision thereto)
or is transferable by the Investor pursuant to paragraph (k) of Rule
144 under the Securities Act (or any successor provision thereto), or
(iii) otherwise has been transferred by the Investor and a new
certificate representing a share of Common Stock not subject to
transfer restrictions under the Securities Act has been delivered by or
on behalf of the Company.
"Securities Act" means the Securities Act of 1933, as
amended, and the rules and regulations of the Commission thereunder, or
any similar successor statute.
3
"Underwritten Offering" means a sale of securities of the
Company to an underwriter or underwriters for reoffering to the public.
REGISTRATION. (C) DEMAND REGISTRATION RIGHTS.
At any time after the six-month anniversary of the date on
which the Investor purchases the Preferred Stock, upon the receipt by
the Company of the written request of the Investor, and in no event
later than 60 days after the receipt of such request (but subject to
any applicable Blackout Periods), the Company shall prepare and file
with the Commission (the "Filing Deadline") a Registration Statement
under the Securities Act on Form S-3 (or such other form as may be
available for use by the Company) relating to the offer and sale of the
Registrable Securities by the Investor and will promptly take all
actions that are necessary or advisable in connection with such
registration, including without limitation, providing written responses
to any comments made by the Commission regarding such registration
statement and filing any necessary pre-effective amendments and all
necessary exhibits thereto, and will use its commercially reasonable
efforts to cause such Registration Statement to be declared effective
by the Commission as soon as possible after the initial filing thereof.
The Company will, subject to any applicable Blackout Periods, use its
commercially reasonable efforts to keep such Registration Statement
effective for the period beginning on the date such Registration
Statement becomes effective (the "Effectiveness Date") and terminating
on the earlier of (x) two years from the Effectiveness Date and (y) the
date upon which all Registrable Securities then held by the Investor
either (i) may be resold without restriction of any kind and without
need for such Registration Statement to be effective or (ii) have been
disposed of pursuant to transactions contemplated by the Registration
Statement. The Company's obligation to file a Registration Statement
under this Section 2(a) shall terminate on the date upon which all
Registrable Securities then held by the Investor either (i) may be
resold without restriction of any kind and without need for a
Registration Statement to be effective or (ii) have been disposed of
pursuant to transactions contemplated by the Registration Statement.
If a registration pursuant to this Section 2(a) involves a
Public Offering that is an Underwritten Offering, the Company and each
other selling security holder participating in such Public Offering
shall agree to sell any shares of Common Stock to be sold by them to
the underwriters on the same terms as apply to the shares of Common
Stock to be sold by the Investor. If the managing underwriter thereof
advises the Company and the Investor that, in its view, the number of
shares of Common Stock that the Company and the Investor and other
selling security holders (if any) intend to include in such
registration exceeds the largest number of shares of Common Stock that
can be sold without having an adverse effect on such Public Offering,
including with respect to the price at which such shares can be sold
(the "Maximum Offering Size"), the Company will include in such
registration only that number of shares of Common Stock which does not
exceed the Maximum Offering Size, in the following order of priorities:
(1) first, all Registrable Securities of the Investor and (2) second,
the securities proposed to be registered by the Company and by other
holders of securities entitled to participate in
4
the registration, drawn from them pro-rata based on the number of
shares each has requested to be included in such registration.
The Company shall be required to register the Registrable
Securities not more than two (2) times pursuant to this Section 2(a).
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).
Piggyback Registration Rights. (i) If the Company proposes to
register any of its Common Stock under the Securities Act (other than a
registration on Form S-8 or S-4 or any successor or similar forms),
whether or not for sale for its own account, it will at such time, give
prompt written notice at least 20 calendar days prior to the
anticipated filing date of the registration statement relating to such
registration to the Investor, which notice shall set forth such
Investor's rights under this Section 2(b) and shall offer the Investor
the opportunity to include in such registration statement such number
of Registrable Securities as the Investor may request. Upon the written
request of the Investor made within 15 calendar days of the notice from
the Company (which request shall specify the number of Registrable
Securities such Investor seeks to register), the Company will use
commercially reasonable efforts to effect the registration under the
Securities Act of all Registrable Securities that the Company has been
so requested to register by the Investor, to the extent requisite to
permit the disposition of the Registrable Securities to be so
registered; provided, however, that (A) if such registration involves
an underwritten Public Offering, the Investor must sell its Registrable
Securities to the underwriters on the same terms and conditions as
apply to the Company or other selling security holders, (B) if such
registration does not involve an underwritten Public Offering, the
Investor must sell its Registrable Securities in accordance with the
plan of distribution set forth on Exhibit A and (C) if, at any time
after giving written notice of its intention to register any
Registrable Securities pursuant to this Section 2(b) and prior to the
effective date of the Registration Statement filed in connection with
such registration, the Company shall determine for any reason not to
register such Registrable Securities, the Company shall give written
notice to the Investor and, thereupon, shall be relieved of its
obligation to register any Registrable Securities in connection with
such registration.
5
If a registration pursuant to this Section 2(b) involves an
Underwritten Offering and the managing underwriter thereof advises the
Company that, in its view, the number of shares of Common Stock that
the Company and the Investor and other selling security holders (if
any) intend to include in such registration exceeds the Maximum
Offering Size, the Company will include in such registration only that
number of shares of Common Stock which does not exceed the Maximum
Offering Size, in the following order of priorities: (A) if such
registration of the Common Stock is initiated by the Company for its
own account, (1) first, all securities the Company proposes to sell for
its own account and (2) second, the securities requested to be
registered by other holders of securities entitled to participate in
the registration (including Registrable Securities of the Investor),
drawn from them pro-rata based on the number of shares each has
requested to be included in such registration; and (B) if such
registration of the Common Stock is initiated at the request of a
selling stockholder, (1) first, all securities of such selling
stockholder that the selling stockholder proposes to sell for its
account and (2) second, the securities to be registered by the Company
and those requested to be registered by other holders of securities
entitled to participate in the registration (including Registrable
Securities of the Investor), drawn from them pro-rata based on the
number of shares each has requested to be included in such
registration.
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.
If the Investor decides not to include all of its
Registrable Securities in any Registration Statement thereafter filed
by the Company but before the Registration Statement becomes effective,
the Investor shall nevertheless continue to have the right under this
Section 2(b) to include any Registrable Securities then held by it in
any subsequent Registration Statement as may be filed by the Company
with respect to offerings of its Common Stock.
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.
Blackout Period.
---------------
Subject to the provisions of this Section 2(c) and a good
faith determination by a majority of the independent members of the
Board of Directors of the Company that it is in the best interests of
the Company to suspend the use of the Registration Statement, prior to
the filing of a Registration Statement or following the effectiveness
of a Registration Statement (and the filings with any international,
federal or state securities commissions), the Company, by written
notice to managing underwriter (if any) and the Investor, may suspend
its obligation to file the Registration Statement with the Commission
or direct the Investor to suspend sales of the Registrable Securities
pursuant to a Registration Statement, as the case may be, for such
times as the Company
6
reasonably may determine is necessary and advisable (but in no event
for more than (x) an aggregate of ninety (90) days in any rolling
twelve (12)- month period commencing on the Closing Date or (y) more
than sixty (60) days in any rolling ninety (90)-day period), if any of
the following events shall occur: (1) the representative of the
underwriters of an Underwritten Offering of primary shares by the
Company has advised the Company that the sale of Registrable
Securities pursuant to the Registration Statement would have a
material adverse effect on the Company's primary offering; (2) the
majority of the independent members of the Board of Directors of the
Company shall have determined in good faith that (A) the offer or sale
of any Registrable Securities would materially impede, delay or
interfere with any proposed financing, offer or sale of securities,
acquisition, amalgamation, merger, tender offer, business combination,
corporate reorganization or other significant transaction involving
the Company or (B) after obtaining the advice of counsel, the sale of
Registrable Securities pursuant to the Registration Statement would
require disclosure of non-public material information not otherwise
required to be disclosed under applicable law, and (C) (x) the Company
has a bona fide business purpose for preserving the confidentiality of
the proposed transaction, (y) disclosure would have a material adverse
effect on the Company or the Company's ability to consummate the
proposed transaction, or (z) the proposed transaction renders the
Company unable to comply with Commission requirements, in each case
under circumstances that would make it impractical or inadvisable to
cause the Registration Statement (or such filings) to become effective
or to promptly amend or supplement the Registration Statement on a
post-effective basis, as applicable; or (3) the majority of the
independent members of the Board of Directors of the Company shall
have determined in good faith, after obtaining the advice of counsel,
that the Company is required by law, rule or regulation or that it is
in the best interests of the Company to supplement the Registration
Statement or file a post-effective amendment to the Registration
Statement in order to incorporate information into the Registration
Statement for the purpose of (A) including in the Registration
Statement any prospectus required under Section 10(a)(3) of the
Securities Act; (B) reflecting in the prospectus included in the
Registration Statement any facts or events arising after the effective
date of the Registration Statement (or of the most recent
post-effective amendment) that, individually or in the aggregate,
represent a fundamental change in the information set forth therein;
or (C) including in the prospectus included in the Registration
Statement any material information with respect to the plan of
distribution not disclosed in the Registration Statement or any
material change to such information. Any period in which the Company's
obligation to file the Registration Statement or the use of the
Registration Statement has been suspended in accordance with this
Section 2(c) is sometimes referred to herein as a "Blackout Period."
Upon the occurrence of any such suspension, the Company shall use its
commercially reasonable best efforts to file the Registration
Statement, to cause the Registration Statement to become effective or
to promptly amend or supplement the Registration Statement on a
post-effective basis or to take such action as is necessary to make
resumed use of the Registration Statement compatible with the
Company's best interests, as applicable, so as to permit the Investor
to resume sales of the Registrable Securities as soon as possible.
7
In the case of an event that causes the Company to suspend
the use of a Registration Statement (a "Suspension Event"), the Company
shall give written notice (a "Suspension Notice") to the managing
underwriter (if any) and the Investor to suspend sales of the
Registrable Securities and such notice shall state generally the basis
for the notice and that such suspension shall continue only for so long
as the Suspension Event or its effect is continuing (but in no event
longer than the periods specified in Section 2(c)(i)) and the Company
is using its commercially reasonable best efforts and taking all
reasonable steps to file the Registration Statement or to terminate
suspension of the use of the Registration Statement as promptly as
possible. The Investor shall not effect any sales of the Registrable
Securities pursuant to such Registration Statement (or such filings) at
any time after it has received a Suspension Notice from the Company and
prior to receipt of an End of Suspension Notice (as defined below). If
so directed by the Company, the Investor will deliver to the Company
(at the expense of the Company) all copies (other than permanent file
copies) then in the Investor's possession of the Prospectus covering
the Registrable Securities at the time of receipt of the Suspension
Notice. The Investor may recommence effecting sales of the Registrable
Securities pursuant to the Registration Statement (or such filings)
following further notice to such effect (an "End of Suspension Notice")
from the Company, which End of Suspension Notice shall be given by the
Company to the Investor and the managing underwriter in the manner
described above promptly following the conclusion of any Suspension
Event and its effect.
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.
OBLIGATIONS OF THE COMPANY. IN CONNECTION WITH THE REGISTRATION OF THE
REGISTRABLE SECURITIES, THE COMPANY SHALL USE COMMERCIALLY REASONABLE EFFORTS
TO:
(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.
Prepare and file with the Commission such amendments and
post-effective amendments to each Registration Statement as may be necessary
under applicable law to
8
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);
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);
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;
(ii) 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
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;
(iii) 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,
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,
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
9
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;
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 omission, and deliver a number of copies of
such supplement and amendment to the Investor as the Investor may reasonably
request;
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;
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;
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;
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;
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
10
participate in road shows and meeting with potential investors as the Investor
shall reasonably request.
OBLIGATIONS OF THE INVESTOR. IN CONNECTION WITH THE REGISTRATION OF
THE REGISTRABLE SECURITIES, THE INVESTOR SHALL HAVE THE FOLLOWING OBLIGATIONS:
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 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.
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.
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).
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.
11
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.
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.
INDEMNIFICATION AND CONTRIBUTION. (D) THE COMPANY AGREES TO INDEMNIFY
AND HOLD HARMLESS (I) THE INVESTOR, (II) EACH PERSON, IF ANY, WHO CONTROLS
(WITHIN THE MEANING OF SECTION 15 OF THE SECURITIES ACT OR SECTION 20(A) OF THE
EXCHANGE ACT), ANY SUCH PERSON DESCRIBED IN CLAUSE (I) (ANY OF THE PERSONS
REFERRED TO IN THIS CLAUSE (II) BEING HEREINAFTER REFERRED TO AS A "CONTROLLING
PERSON"), AND (III) THE RESPECTIVE OFFICERS, DIRECTORS, PARTNERS, EMPLOYEES,
REPRESENTATIVES AND AGENTS OF ANY SUCH PERSON OR ANY CONTROLLING PERSON (ANY
PERSON REFERRED TO IN CLAUSE (I), (II) OR (III) MAY HEREINAFTER BE REFERRED TO
AS A "PURCHASER INDEMNITEE"), TO THE FULLEST EXTENT LAWFUL, FROM AND AGAINST ANY
AND ALL LOSSES, CLAIMS, DAMAGES, JUDGMENTS, ACTIONS, OUT-OF-POCKET EXPENSES, AND
OTHER LIABILITIES (THE "LIABILITIES"), INCLUDING WITHOUT LIMITATION AND AS
INCURRED, REIMBURSEMENT OF ALL REASONABLE COSTS OF INVESTIGATING, PREPARING,
PURSUING OR DEFENDING ANY CLAIM OR ACTION, OR ANY INVESTIGATION OR PROCEEDING BY
ANY GOVERNMENTAL AGENCY OR BODY, COMMENCED OR THREATENED, INCLUDING THE
REASONABLE FEES AND EXPENSES OF COUNSEL TO ANY PURCHASER INDEMNITEE, JOINT OR
SEVERAL, DIRECTLY OR INDIRECTLY RELATED TO, BASED UPON, ARISING OUT OF OR IN
CONNECTION WITH ANY UNTRUE STATEMENT OR ALLEGED UNTRUE STATEMENT OF A MATERIAL
FACT CONTAINED IN ANY REGISTRATION STATEMENT OR PROSPECTUS (AS AMENDED OR
SUPPLEMENTED IF THE COMPANY SHALL HAVE FURNISHED TO SUCH PURCHASER INDEMNITEE
ANY AMENDMENTS OR SUPPLEMENTS THERETO), OR ANY PRELIMINARY PROSPECTUS OR ISSUER
FREE WRITING PROSPECTUS TAKEN AS A WHOLE WITH THE PRELIMINARY PROSPECTUS, OR ANY
OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT REQUIRED TO BE
STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN, IN LIGHT OF
12
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 SHARES OF COMMON STOCK, IF SUCH PRELIMINARY
PROSPECTUS (OR PRELIMINARY PROSPECTUS AS AMENDED OR SUPPLEMENTED) IS FURNISHED
OR MADE AVAILABLE TO THE INVESTOR PRIOR TO THE TIME OF SALE OF SUCH SHARES OF
COMMON STOCK TO SUCH PERSON AND THE UNTRUE STATEMENT CONTAINED IN OR OMISSION
FROM OR ALLEGED UNTRUE STATEMENT CONTAINED IN OR ALLEGED OMISSION FROM SUCH
PRELIMINARY PROSPECTUS WAS CORRECTED IN THE PRELIMINARY PROSPECTUS, AS AMENDED
OR SUPPLEMENTED. THE COMPANY SHALL NOTIFY THE INVESTOR PROMPTLY OF THE
INSTITUTION, THREAT OR ASSERTION OF ANY CLAIM, PROCEEDING (INCLUDING ANY
GOVERNMENTAL INVESTIGATION), OR LITIGATION OF WHICH IT SHALL HAVE BECOME AWARE
IN CONNECTION WITH THE MATTERS ADDRESSED BY THIS AGREEMENT WHICH INVOLVES THE
COMPANY OR A PURCHASER INDEMNITEE. THE INDEMNITY PROVIDED FOR HEREIN SHALL
REMAIN IN FULL FORCE AND EFFECT REGARDLESS OF ANY INVESTIGATION MADE BY OR ON
BEHALF OF ANY PURCHASER INDEMNITEE.
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
14
the net proceeds received by such Purchaser Indemnitee from sales of Registrable
Securities giving rise to such obligations.
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.
15
Contribution. If the indemnification provided for in paragraphs (a)
and (b) of this Section 6 is for any reason held to be unavailable to an
Indemnified Party in respect of any Liabilities referred to therein (other than
by reason of the exceptions provided therein) or is insufficient to hold
harmless a party indemnified thereunder, then each Indemnifying Party under such
paragraphs, in lieu of indemnifying such Indemnified Party thereunder, shall
contribute to the amount paid or payable by such Indemnified Party as a result
of such Liabilities (i) in such proportion as is appropriate to reflect the
relative benefits of the Indemnified Party on the one hand and the Indemnifying
Party(ies) on the other in connection with the statements or omissions that
resulted in such Liabilities, or (ii) if the allocation provided by clause (i)
above is not permitted by applicable law, in such proportion as is appropriate
to reflect not only the relative benefits referred to in clause (i) above but
also the relative fault of the Indemnifying Party(ies) 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.
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
16
Securities Act) shall be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentation.
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.
ASSIGNMENT. THE RIGHTS TO HAVE THE COMPANY REGISTER REGISTRABLE
SECURITIES PURSUANT TO THIS AGREEMENT MAY BE ASSIGNED OR TRANSFERRED ONLY WITH
THE PRIOR WRITTEN CONSENT OF THE COMPANY, AND ANY SUCH ASSIGNMENT OR TRANSFER
WITHOUT SUCH CONSENT SHALL BE VOID AND OF NO EFFECT. IN THE EVENT OF ANY SUCH
PERMITTED ASSIGNMENT OR TRANSFER BY THE INVESTOR TO ANY PERMITTED TRANSFEREE OF
ALL OR ANY PORTION OF SUCH REGISTRABLE SECURITIES, SUCH TRANSFER WILL BE ALLOWED
ONLY IF: (A) THE INVESTOR AGREES IN WRITING WITH THE TRANSFEREE OR ASSIGNEE TO
ASSIGN SUCH RIGHTS, AND A COPY OF SUCH AGREEMENT IS FURNISHED TO THE COMPANY
WITHIN A REASONABLE TIME AFTER SUCH ASSIGNMENT, (B) THE COMPANY IS, WITHIN A
REASONABLE TIME AFTER SUCH TRANSFER OR ASSIGNMENT, FURNISHED WITH WRITTEN NOTICE
OF (I) THE NAME AND ADDRESS OF SUCH TRANSFEREE OR ASSIGNEE AND (II) THE
REGISTRABLE SECURITIES WITH RESPECT TO WHICH SUCH REGISTRATION RIGHTS ARE BEING
TRANSFERRED OR ASSIGNED, (C) IMMEDIATELY FOLLOWING SUCH TRANSFER OR ASSIGNMENT,
THE REGISTRABLE SECURITIES SO TRANSFERRED OR ASSIGNED TO THE TRANSFEREE OR
ASSIGNEE CONSTITUTE RESTRICTED SECURITIES, (D) AT OR BEFORE THE TIME THE COMPANY
RECEIVED THE WRITTEN NOTICE CONTEMPLATED BY CLAUSE (B) OF THIS SENTENCE THE
TRANSFEREE OR ASSIGNEE AGREES IN WRITING WITH THE COMPANY TO BE BOUND BY ALL OF
THE PROVISIONS CONTAINED HEREIN, AND (E) THE COMPANY IS FURNISHED WITH AN
OPINION OF COUNSEL, WHICH COUNSEL AND OPINION SHALL BE REASONABLY SATISFACTORY
TO THE COMPANY, TO THE EFFECT THAT THE PERMITTED ASSIGNMENT WOULD BE IN
COMPLIANCE WITH THE SECURITIES ACT AND ANY APPLICABLE STATE OR OTHER SECURITIES
LAWS.
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.
16
9. Miscellaneous.
-------------
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.
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:
Tower Group, Inc.
000 Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxxxxxxxx, Esq.
Fax: (000) 000-0000
With a copy (which shall not constitute notice) to:
LeBoeuf, Lamb, Xxxxxx & XxxXxx LLP
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxxxxxx, Esq.
Fax: (000) 000-0000
If to the Investor, to:
CastlePoint Reinsurance Company, Ltd.
Victoria House
00 Xxxxxxxx Xxxxx
Xxxxxxxx XX 00 Xxxxxxx
Xxxxxxxxx: Xxxx Xxxxxx
Fax Number: (000) 000-0000
With a copy (which shall not constitute notice) to:
CastlePoint Holdings, Ltd.
000 Xxxxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxx X. Xxxxx
Fax Number: (000) 000-0000
17
The Company or the Investor may change the foregoing address by notice
given pursuant to this Section 9(b).
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.
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.
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.
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.
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.
All pronouns and any variations thereof refer to the masculine,
feminine or neuter, singular or plural, as the context may require.
The headings in this Agreement are for convenience of reference only
and shall not limit or otherwise affect the meaning thereof.
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.
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.
18
[Signature Page Follows]
19
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
TOWER GROUP, INC.
a Delaware corporation
By: _____________________________
Name:
Title:
CASTLEPOINT REINSURANCE COMPANY, LTD.
a Bermuda company
By: ___________________________
Name:
Title:
20
Exhibit A
---------
Plan of Distribution
--------------------
The selling stockholder and any of its donees, transferees, pledgees,
assignees and successors-in-interest may sell, from time to time, any or all of
their common stock on any stock exchange, market or trading facility on which
the shares are traded or in private transactions. These sales may be at fixed or
negotiated prices. The selling stockholder may use any one or more of the
following methods when selling shares:
o ordinary brokerage transactions and transactions in which
the broker-dealer solicits purchasers;
o 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;
o purchases by a broker-dealer as principal and resale by the
broker-dealer for its account;
o over-the-counter distribution in accordance with the rules
of the Nasdaq Stock Market;
o privately negotiated transactions;
o short sales;
o broker-dealers may agree with the selling stockholder to
sell a specified number of such shares at a stipulated price
per share;
o a combination of any such methods of sale; and
o any other method permitted pursuant to applicable law.
Under applicable rules and regulations under the Securities Exchange
Act of 1934, as amended (the "Securities Exchange Act"), any person engaged in a
distribution of the shares of common stock covered by this prospectus may be
limited in its ability to engage in market activities with respect to such
shares. The selling stockholder, for example, will be subject to applicable
provisions of the Securities Exchange Act and the rules and regulations under
it, including, without limitation, Regulation M, which provisions may restrict
certain activities of the selling stockholder and limit the timing of purchases
and sales of any shares of common stock by the selling stockholder. Furthermore,
under Regulation M, persons engaged in a distribution of securities are
prohibited from simultaneously engaging in market making and certain other
activities with respect to such securities for a specified period of time prior
to the commencement of such distributions, subject to specified exceptions or
exemptions. The foregoing may affect the marketability of the shares offered by
this prospectus.
1
To the extent required, this prospectus may be amended or supplemented
from time to time to describe a specific plan of distribution. In connection
with distributions of the shares or otherwise, the selling stockholders may
enter into hedging transactions with broker-dealers or other financial
institutions. In connection with such transactions, broker-dealers or other
financial institutions may engage in short sales of our common stock in the
course of hedging the positions they assume with selling stockholders. The
selling stockholders may also sell our securities short and redeliver the shares
to close out such short positions. The selling stockholders may also enter into
option or other transactions with broker-dealers or other financial institutions
that require the delivery to such broker-dealer or other financial institution
of shares offered by this prospectus, which shares the broker-dealer or other
financial institution may resell pursuant to this prospectus, as supplemented or
amended to reflect such transaction.
The selling stockholder may also engage in short sales against the
box, puts and calls and other transactions in our securities or derivatives of
our securities and may sell or deliver shares in connection with these trades.
The selling stockholder may pledge its shares to its brokers under the margin
provisions of customer agreements. If the selling stockholder defaults on a
margin loan, the broker may offer and sell, from time to time, the pledged
shares.
The selling stockholder may sell shares directly to market makers
acting as principals and/or broker-dealers acting as agents for itself or its
customers. Broker-dealers engaged by the selling stockholder may arrange for
other broker-dealers to participate in sales. Broker-dealers may receive
commissions, concessions or discounts from the selling stockholder (or, if any
broker-dealer acts as agent for the purchaser of shares, from the purchaser) in
amounts to be negotiated. The selling stockholder does not expect these
commissions and discounts to exceed what is customary in the types of
transactions involved. Market makers and block purchasers that purchase the
shares will do so for their own account and at their own risk. It is possible
that a selling stockholder will attempt to sell shares in block transactions to
market makers or other purchasers at a price per share that may be below the
then-current market price. We cannot make assurances that all or any of the
shares of common stock will be issued to, or sold by, the selling stockholder.
In addition, any shares that qualify for sale pursuant to Rule 144
promulgated under the Securities Act of 1933, as amended (the "Securities Act"),
may be sold under Rule 144 rather than pursuant to this prospectus.
The selling stockholder and any broker-dealers or agents that are
involved in selling the shares may be deemed to be "underwriters" within the
meaning of the Securities Act in connection with such sales. In such event, any
commissions received by such broker-dealers or agents and any profit on the
resale of the shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act.
In certain states, the applicable state securities laws will require a
holder of shares desiring to sell its shares to sell its shares only through
registered or licensed brokers or 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.
2
We are required to pay all fees and expenses incident to the
registration of the shares. We have agreed to indemnify the selling stockholders
against certain losses, claims, damages and liabilities, including liabilities
under the Securities Act.
In addition, we will make copies of this prospectus available to the
selling stockholders for the purpose of satisfying the prospectus delivery
requirements of the Securities Act. The selling stockholders may indemnify any
broker-dealer that participates in transactions involving the sale of the shares
against certain liabilities, including liabilities arising under the Securities
Act.
At the time a particular offer of shares is made, if required, a
prospectus supplement will be distributed that will set forth the number of
shares being offered and the terms of the offering, including the name of any
underwriter, dealer or agent, the purchase price paid by any underwriter, any
discount, commission and other item constituting compensation, any discount,
commission or concession allowed or reallowed or paid to any dealer, and the
proposed selling price to the public.
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