PURCHASE/PLACEMENT AGREEMENT

 

March 27, 2006

 

FRIEDMAN, BILLINGS, RAMSEY & CO., INC.

1001 19th Street North

Arlington, Virginia 22209

 

Dear Sirs:

 

CastlePoint Holdings, Ltd., a Bermuda company limited by shares (the “ Company ”), proposes to issue and sell to you, Friedman, Billings, Ramsey & Co., Inc. (“ FBR ”), as initial purchaser, a number of common shares, par value $0.01 per share, of the Company (the “ Common Stock ”) equal to 23,500,000 shares less the number of Regulation D Shares sold in the Private Placement (each as defined herein) (the “ 144A/Regulation S Shares ”).

 

FBR will also act as the Company’s sole placement agent in connection with the Company’s offer and sale to certain “Accredited Investors” (as such term is defined in Regulation D (“ Regulation D ”) under the Securities Act of 1933, as amended (the “ Securities Act ”) of (a) that number of shares of Common Stock equal to the difference between 23,500,000 shares and the number of 144A/Regulation S Shares (the “ Regulation D Shares ” and, together with the 144A/Regulation S Shares, the “ Initial Shares ”), and (b) the Placed Option Shares (as defined herein), as set forth in the Final Memorandum (as defined herein) under the headings “Plan of Distribution”‘ and “Private Placement”. The offer and sale of the shares described in the first sentence of this paragraph (the “ Private Placement Shares ”) is referred to herein as the “ Private Placement ”.

 

In addition, the Company proposes to grant to you the option described in Section 1(c) hereof to purchase or place all or any part of 3,525,000 additional shares of Common Stock (the “ Option Shares ” and, together with the Initial Shares, the “ Shares ”) to cover additional allotments, if any.

 

The offer and sale of the Shares to you and to the Accredited Investors, respectively, will be made without registration of the Shares under the Securities Act of 1933, as amended (the “Securities Act”) and the rules and regulations thereunder (the “ Securities Act Regulations ”), in reliance upon the exemption from the registration requirements of the Securities Act provided by Section 4(2) thereof. You have advised the Company that you will make offers and sales (“ Exempt Resales ”) of the 144A/Regulation S Shares and the Purchased Option Shares (as defined herein) purchased by you hereunder (such shares referred to collectively herein as “ Resale Shares ”) in accordance with Section 3 hereof on the terms set forth in the Final Memorandum (as defined herein), as soon as you deem advisable after this Agreement has been executed and delivered.

 

In connection with the offer and sale of the Shares, the Company has prepared a preliminary offering memorandum, subject to completion, dated March, 2006, and amendments or supplements thereto (the “ Preliminary Memorandum ”), and a final offering memorandum, dated the date hereof and as it may be amended or supplemented from time to time (the “ Final

 

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Memorandum ”). Each of the Preliminary Memorandum and the Final Memorandum sets forth certain information concerning the Company and the Shares. The Company hereby confirms that it has authorized the use of the Preliminary Memorandum and the Final Memorandum in connection with (i) the offering and resale of the Resale Shares by FBR and by all dealers to whom Resale Shares may be sold and (ii) the Private Placement. Any references to the Preliminary Memorandum or the Final Memorandum shall be deemed to include all exhibits and annexes thereto.

 

It is understood and acknowledged that holders (including subsequent transferees) of the Shares will have the registration rights set forth in the registration rights agreement between the Company and FBR, which shall be in substantially the form attached hereto as Exhibit A and dated as of the Closing Time (as defined herein) (the “ Registration Rights Agreement ”), for so long as such securities constitute “Registrable Shares” (as defined in the Registration Rights Agreement).

 

Pursuant to, and subject to the terms of, the Registration Rights Agreement, the Company will agree to file with the Securities and Exchange Commission (the “ Commission ”), under the circumstances set forth therein, (i) a registration statement on Form S-1 under the Securities Act for the initial public offering of Common Stock that includes the resale by holders of the Registrable Shares and/or (ii) a shelf registration statement on Form S-1 or such other appropriate form pursuant to Rule 415 under the Securities Act relating to the resale by holders of the Registrable Shares, and to use its best efforts to cause any such registration statement to be declared effective.

 

The Company and FBR agree as follows:

 

1.     Sale and Purchase .

 

(a)           144A/Regulation S Shares. Upon the basis of the warranties and representations and other terms and conditions herein set forth, the Company agrees to issue and sell to FBR and FBR agrees to purchase from the Company the 144A/Regulation S Shares at a purchase price of $9.30 per share (the “ 144A/Regulation S Purchase Price ”).

 

(b)           Regulation D Shares . The Company agrees to issue and sell the Regulation D Shares and, to the extent that FBR exercises the option described in Section 1(c), the Placed Option Shares, for which the Accredited Investors have subscribed pursuant to the terms and conditions set forth in the subscription agreements substantially in the forms attached to the Preliminary Memorandum as Appendix B, as applicable (each a “ Subscription Agreement ”). The Private Placement Shares will be sold by the Company pursuant to this Agreement at a price of $10.00 per share (the “ Regulation D Purchase Price ”). As compensation for the services to be provided by FBR in connection with the Private Placement, the Company shall pay to FBR at each of the Closing Time and any Secondary Closing Time (as defined herein), to the extent applicable, an amount equal to $0.70 per Private Placement Share sold at such time (the “ Placement Fee ”); provided, however, that no such Placement Fee shall be payable with respect to

 

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1,127,000 Private Placement Shares to be purchased by certain members of Company’s management and certain other individuals.

 

(c)           Option Shares. Upon the basis of the representations and warranties and subject to the other terms and conditions herein set forth, the Company hereby grants an option to FBR to (i) purchase from the Company, as initial purchaser, up to an aggregate of 3,525,000 Option Shares at the 144A/Regulation S Purchase Price per share (the “ Purchased Option Shares ”); and (ii) place, as exclusive placement agent for the Company, up to that number of Option Shares remaining, after subtracting any Purchased Option Shares with respect to which FBR has exercised its option pursuant to clause (i), at the Regulation D Purchase Price per share (the “ Placed Option Shares ”). The option granted hereby will expire thirty (30) days after the date hereof and may be exercised in whole or in part from time to time in one or more installments, including at the Closing Time, only for the purpose of covering additional allotments which may be made in connection with the offering and distribution of the Initial Shares upon written notice by FBR to the Company setting forth (i) the number of Option Shares as to which FBR is then exercising the option, (ii) the names and denominations to which the Option Shares are to be delivered in book-entry form through the facilities of The Depository Trust Company (“ DTC ”), (iii) the number of Option Shares that will be Purchased Option Shares and the number of Option Shares that will be Placed Option Shares, and (iv) the time and date of payment for and delivery of such Purchased Option Shares and/or Placed Option Shares in book-entry form. Any such time and date of delivery shall be determined by FBR, but shall not be later than five (5) full business days nor earlier than one (1) full business day after the exercise of said option, nor in any event prior to the Closing Time, unless otherwise agreed in writing by FBR and the Company.

 

2.     Payment and Delivery .

 

(a)           144A/Regulation S Shares. The closing of FBR’s purchase of the 144A/Regulation S Shares shall be held at the office of Lord, Bissell & Brook LLP, 111 South Wacker Drive, Chicago, Illinois (unless another place shall be agreed upon by FBR and the Company). At the closing, subject to the satisfaction or waiver of the closing conditions set forth herein, FBR shall pay to the Company the aggregate purchase price for the 144A/Regulation S Shares by wire transfer of immediately available funds to an account previously designated by the Company in writing against delivery by the Company of the 144A/Regulation S Shares to FBR for FBR’s account through the facilities of DTC in such denominations and registered in such names as FBR shall specify. Such payment and delivery shall be made at 10:00 a.m., New York City time, on the fifth (sixth, if pricing occurs after 4:30 p.m. New York City time) business day after the date hereof (unless another time, not later than ten (10) business days after such date, shall be agreed to by FBR and the Company). The time at which such payment and delivery are actually made is hereinafter called the “ Closing Time ”.

 

(b)           Regulation D Shares . At the Closing Time, subject to the satisfaction of the closing conditions set forth herein, FBR shall pay to the Company the aggregate applicable purchase price for the Regulation D Shares received by FBR prior to the Closing Time (net of any Placement Fee, if the Placement Fee is withheld as provided in the immediately following

 

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paragraph) against the Company’s delivery of the Regulation D Shares to FBR, as placement agent in respect of such shares, in book-entry form through the facilities of DTC for each such Accredited Investor’s account. At FBR’s option, it may delay the placement of up to 3% of Regulation D Shares (the “ Extended Regulation D Shares ”) for an additional five (5) business days after the Closing Time (the “ Extended Regulation D Closing Date ”) at which time FBR shall cause the escrow agent appointed to hold the subscription funds submitted by purchasers in the Private Placement, to the extent it has available funds transferred to it by Accredited Investors, to pay the Company the aggregate applicable purchase price for the Extended Regulation D Shares placed by FBR (net of any Placement Fee, if the Placement Fee is withheld as provided herein) against the Company’s delivery of the Extended Regulation D Shares to the purchasers thereof, in book-entry form through the facilities of DTC. Extended Regulation D Shares may only be placed with Accredited Investors who have committed to purchase Regulation D Shares before the Closing Time. The time at which payment and delivery on an Extended Regulation D Closing Date is actually made is hereinafter sometimes called the “ Extended Closing Time .”

 

At each of the Closing Time or any Extended Closing Time, unless FBR has withheld such amount from the applicable purchase price paid by FBR to the Company with respect to the Regulation D Shares placed by FBR on such date, the Company shall pay to FBR, by wire transfer of immediately available funds to an account or accounts designated by FBR, any Placement Fee amount, determined pursuant to Section 1(b) hereof, payable with respect to the Regulation D Shares for which the Company shall have received the purchase price.

 

(c)           Option Shares . The closing of FBR’s purchase or placement of the Option Shares shall occur from time to time at the office of Lord, Bissell & Brook LLP, 111 South Wacker Drive, Chicago, Illinois (unless another place shall be agreed upon by FBR and the Company). On the applicable Secondary Closing Time (as defined herein), subject to the satisfaction or waiver of the closing conditions set forth herein, FBR shall pay to the Company the aggregate applicable purchase price for the Option Shares then purchased or placed by FBR (net of any Placement Fee with respect to any Placed Option Shares) by wire transfer of immediately available funds against the Company’s delivery of the Option Shares. Such payment and delivery shall be made at 10:00 a.m., New York City time, on each Secondary Closing Time. The Option Shares shall be delivered in either book-entry form through the facilities of DTC or certificated form as set forth in Section 1(d), in such names and in such denominations as FBR shall specify. The time at which payment by FBR for and delivery by the Company of any Option Shares are actually made is referred to herein as a “ Secondary Closing Time ”.

 

(d)           Company Directed Shares . It is understood that approximately 1,312,500 shares of the Initial Shares (“ Company Directed Shares ”) initially will be reserved by the Company for offer and sale to employees and persons having business relationships with the Company who are “accredited investors” (“ Company Directed Share Participants ”). Under no circumstances will FBR be liable to the Company or to any Company Directed Share Participant for any action taken or omitted to be taken in good faith in connection the offer or sale of such Company Directed Shares. To the extent that any Company

 

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Directed Shares are not affirmatively reconfirmed for purchase by any Company Directed Share Participant on or immediately after the date of this Agreement, such Company Directed Shares may be offered by FBR as part of the 144A/Regulation S Shares as contemplated herein.

 

3.     Offering of the Shares; Restrictions on Transfer .

 

(a)           FBR represents and warrants to and agrees with the Company that (i) it has not solicited and will not solicit any offer to buy, and has not and will not make any offer to sell, the Shares by means of any form of general solicitation or general advertising (within the meaning of Regulation D, and, with respect to Resale Shares sold in reliance on Regulation S under the Securities Act (“ Regulation S ”), by means of any directed selling efforts (within the meaning of Regulation S) in the United States; (ii) it is an Accredited Investor; (iii) (A) it will not offer or sell the Shares as part of its distribution at any time and otherwise prior to the expiration of the one year distribution compliance period (as defined under Regulation S), in the United States or to or for the account or benefit of a U.S. person (as defined under Regulations S) except as permitted to qualified institutional buyers pursuant to Rule 144A, pursuant to an available exemption from the registration requirements of the Securities Act, or pursuant to the registration requirements of the Securities Act and otherwise, in each case, in compliance with applicable law,(B) it will not engage in hedging transactions with regard to any Shares prior to the expiration of the one year distribution compliance period unless in compliance with the Securities Act and (C) at or prior to confirmation of a sale of such Shares, to a distributor, dealer or person receiving a selling concession, fee or other remuneration that purchases such Shares from it during the one year distribution compliance period, it will have sent a confirmation or notice to such purchaser stating that the purchaser is subject to the same restrictions on offers and sales that apply to the distributor; (iv) it has solicited and will solicit offers to buy the Private Placement Shares only from, and has offered and will offer only to, persons it reasonably believes are Accredited Investors and who provide to it a fully completed and executed purchaser’s letter substantially in the form of Appendix II or IV to the Preliminary Memorandum; and (v) it has solicited and will solicit offers to buy the Resale Shares only from, and has offered and will offer, sell and deliver the Resale Shares only to, (A) persons who it reasonably believes to be “qualified institutional buyers” (as defined in Rule 144A under the Securities Act) (“ QIBs ”) or, if any such person is buying for one or more institutional accounts for which such person is acting as fiduciary or agent, only when such person has represented to it that each such account is a qualified institutional buyer to whom notice has been given that such sale or delivery is being made in reliance on Rule 144A, and, in each case, in transactions under Rule 144A and who provide to it a fully completed and executed purchaser’s letter substantially in the form of Appendix I to the Preliminary Memorandum, and (B) persons (each a “ Regulation S Purchaser ”) to whom, and under which circumstances, it reasonably believes offers and sales of Resale Shares may be made without registration under the Securities Act in reliance on Regulation S thereunder, and who provide to it a fully completed and executed purchaser’s letter substantially in the form of Appendix III to the Preliminary Memorandum or Final Memorandum (such persons specified in clauses (v)(A) and (v)(B) being referred to herein as the “ Eligible Purchasers ”).

 

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(b)           The Company represents and warrants to and agrees with FBR that it (together with its affiliates) has not solicited and will not solicit any offer to buy, and it (together with its affiliates) has not offered and will not offer to sell, the Shares by means of any form of general solicitation or general advertising (within the meaning of Regulation D), and it has solicited and will solicit offers to buy the Private Placement Shares only from, and has offered and will offer, sell or deliver the Shares only to, persons it reasonably believes are Accredited Investors. The Company also represents and warrants and agrees that it will sell the Private Placement Shares only to persons that have provided to the Company a fully completed and executed Subscription Agreement in the form of Appendix II or IV, as applicable, to the Preliminary Memorandum.

 

(c)           The Company represents and warrants to and agrees with FBR that, assuming the accuracy of FBR’s representations and warranties and FBR’s compliance with its obligations set forth in this Section 3, (i) none of the Company or any of its affiliates or any person acting on behalf of it or its affiliates has engaged in, nor will it engage in, any directed selling efforts (as that term is defined in Regulation S) with respect to the Shares; and (ii) the Company or any of its affiliates, and any person acting on behalf of it or its affiliates (in each case, other than FBR as to which no representation is made) have complied, and will comply, with the offering restrictions requirement of Regulation S.

 

(d)           FBR represents and warrants that it has not offered and will not offer any Private Placement Shares, and it has not offered or sold, and will not offer or sell, any Resale Shares in a jurisdiction outside of the United States except in material compliance with all applicable laws, regulations and rules of those countries.

 

(e)           Each of FBR and the Company severally represents and warrants to the others that no action is being taken by it or is contemplated that would permit an offering or sale of the Shares or possession or distribution of the Preliminary Memorandum or the Final Memorandum or any other offering material relating to the Shares in any jurisdiction where, or in any other circumstances in which, action for those purposes is required (other than in jurisdictions where such action has been duly taken by counsel for FBR).

 

(f)            FBR and the Company agree that FBR may arrange (i) for the private offer and sale of a portion of the Resale Shares to a limited number of Eligible Purchasers (which may include affiliates of FBR), and (ii) for the private offer and sale of the Private Placement Shares by the Company to Accredited Investors (which may include affiliates of FBR), in each case under restrictions and other circumstances designed to preclude a distribution of the Shares that would require registration of the Shares under the Securities Act, including those restrictions and procedures set forth in this Section 3 of this Agreement.

 

(g)           FBR and the Company agree that the Shares may be resold or otherwise transferred by the holders thereof only if the offer and sale of such Shares are registered under the Securities Act or if an exemption from registration is available. FBR hereby establishes and agrees that it has observed and will observe the following procedures in

 

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connection with offers, sales and subsequent resales or other transfers of any Shares placed by FBR:

 

(i)            Sales only to Eligible Purchasers . Initial offers and sales of the Resale Shares will be made only in Exempt Resales by FBR to investors that FBR reasonably believes to be Eligible Purchasers and who have delivered to the Company and FBR a fully completed and executed purchaser’s letter substantially in the form of Appendix I or III, as applicable, to the Preliminary Memorandum or Final Memorandum.

 

(ii)           No general solicitation . The Shares will be offered only by approaching prospective purchasers on an individual basis with whom FBR has an existing relationship. No general solicitation or general advertising within the meaning of Regulation D will be used in connection with the offering of the Shares.

 

(iii)          Restrictions on transfer . The Final Memorandum shall state that the offer and sale of the Shares have not been and will not be registered (other than pursuant to the Registration Rights Agreement) under the Securities Act, and that no resale or other transfer of any Shares or any interest therein prior to the date that is two years (or such shorter period as is prescribed by Rule 144(k) under the Securities Act as then in effect) after the later of the original issuance of such Shares and the last date on which the Company or any “affiliate” (as defined in Rule 144 under the Securities Act) of the Company was the owner of such Shares may be made by a purchaser of such Shares except as follows:

 

(A)          to the Company or any subsidiary thereof,

 

(B)           pursuant to a registration statement that has been declared effective under the Securities Act,

 

(C)           for so long as the Shares are eligible for resale pursuant to Rule 144A under the Securities Act, in a transaction complying with the requirements of Rule 144A to a person who such purchaser reasonably believes is a QIB that purchases for its own account or for the account of a QIB and to whom notice is given that the offer, resale, pledge or transfer is being made in reliance on Rule 144A,

 

(D)          pursuant to offers and sales to non-U.S. persons that occur outside the United States within the meaning of Regulation S, with the consent of the Company,

 

(E)           to an Accredited Investor that is acquiring the Shares for his, her or its own account or an investment adviser who is acquiring the Shares for the account of an Accredited Investor for investment purposes and not with a view to, or for offer or sale in connection with, any distribution thereof, or

 

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(F)           pursuant to any other available exemption from the registration requirements of the Securities Act,

 

in each case in accordance with any applicable federal securities laws and the securities laws of any state of the United States or other jurisdiction.

 

(h)           FBR and the Company agree that each initial resale of Resale Shares by FBR (and each purchase of Resale Shares from the Company by FBR) in accordance with this Section 3 shall be deemed to have been made on the basis of and in reliance on the representations, warranties, covenants and agreements (including, without limitation, agreements with respect to indemnification and contribution) of the Company herein contained.

 

4.     Representations and Warranties of the Company.

 

The Company hereby represents and warrants to FBR that, as of the date of this Agreement:

 

(a)           the Preliminary Memorandum did not, as of its date or as of 7:00 p.m. Eastern Time on March 27, 2006, and will not, as of the Closing Time, contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading; and the Final Memorandum will not, as of its date, at Closing Time and each Secondary Closing Time (if any), contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however , that this representation and warranty shall not apply to any statement in or omission from the Preliminary Memorandum or Final Memorandum made in reliance upon and in conformity with information furnished to the Company in writing by FBR expressly for use therein (that information being limited to that described in the last sentence of Section 8(b) hereof);

 

(b)           the Company is a company limited by shares duly organized and validly existing and in good standing under the laws of Bermuda, with requisite corporate power and authority to own, lease or operate its properties and to conduct its business as described in the Final Memorandum and to execute and deliver this Agreement and the Registration Rights Agreement, and to consummate the transactions contemplated hereby (including the issuance, sale and delivery of the Shares) and thereby;

 

(c)           each of CastlePoint Reinsurance Company, Ltd. (“ CastlePoint Re ”) and CastlePoint Management Corp. (“ CastlePoint Management ”) (each, a “ Subsidiary ” and, collectively, the “ Subsidiaries ”) is a company or a corporation, as the case may be, duly organized and validly existing and in good standing under the laws of its jurisdiction of incorporation , with requisite corporate power and authority to own, lease or operate its properties and to conduct its business as described in the Final Memorandum and to execute and deliver this Agreement, and to consummate the transactions contemplated hereby;

 

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(d)           all issued and outstanding shares of each Subsidiary have been duly authorized and validly issued, are fully paid and nonassessable, and have not been issued in violation of or subject to any preemptive right, co-sale right, registration right, right of first refusal or other similar right of shareholders arising by operation of law, under the articles of incorporation or by-laws of such Subsidiary, under any agreement to which such Subsidiary is a party or otherwise, and are owned by the Company free and clear of any pledge, security interests, liens, encumbrances, claims or equitable interests. The Company does not, and as of any Closing Date will not, own or control, directly or indirectly, any corporation, association or other entity other than the Subsidiaries and CastlePoint Bermuda Holdings, Ltd.;

 

(e)           the Company had, at the date indicated, the duly authorized capitalization set forth in the Final Memorandum under the caption “Capitalization”, and at the Closing Time, will have the pro forma authorized capitalization set forth in the Final Memorandum under the caption “Capitalization” after giving effect to the adjustments set forth thereunder; all of the issued and outstanding shares of capital stock of the Company have been duly and validly authorized and issued and are fully paid and non-assessable, and have not been issued in violation of or subject to any pre-emptive right or other similar right of shareholders arising by operation of law, under the certificate of incorporation, memorandum of association or bye-laws of the Company, under any agreement to which the Company is a party or otherwise; except as disclosed in or contemplated by the Final Memorandum, there are no outstanding (i) securities or obligations of the Company or any Subsidiary convertible into or exchangeable for any capital stock of the Company, (ii) warrants, rights or options to subscribe for or purchase from the Company any such capital stock or any such convertible or exchangeable securities or obligations or (iii) obligations of the Company to issue or sell any shares of capital stock, any such convertible or exchangeable securities or obligation, or any such warrants, rights or options;

 

(f)            the Shares have been duly authorized for issuance, sale and delivery pursuant to this Agreement and, when issued and delivered by the Company against payment therefor in accordance with the terms of this Agreement, will be duly and validly issued and fully paid and nonassessable, free and clear of any pledge, lien, encumbrance, security interest or other claim, and the issuance, sale and delivery of the Shares by the Company are not subject to any preemptive right, co-sale right, registration right, right of first refusal or other similar right of shareholders arising by operation of law, under the certificate of incorporation, memorandum of association or bye-laws of the Company, under any agreement to which the Company is a party or otherwise, other than as provided for in the Registration Rights Agreement and in that certain Registration Rights Agreement between the Company and Tower Group, Inc. (the “ Tower Registration Rights Agreement ”); and the Shares satisfy the requirements set forth in Rule 144A(d)(3) under the Securities Act;

 

(g)           CastlePoint Management shall use its best reasonable efforts to procure any licenses, approvals and authorizations necessary to conduct its business as described in the Preliminary Memorandum; each of the Company, and subject to the capitalization of CastlePoint Re as provided for in the Preliminary Memorandum, CastlePoint Re, is duly qualified or licensed by, and is in good standing in, each jurisdiction in which it

 

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conducts its business, or in which it owns or leases property or maintains an office and in which such qualification or licensing is necessary and in which the failure, individually or in the aggregate, to be so qualified or licensed could reasonably be expected to have a material adverse effect on the business, condition (financial or otherwise), results of operations or prospects of the Company and the Subsidiaries taken as a whole (a “ Material Adverse Effect ”);

 

(h)           Each of the Company and the Subsidiaries has good and valid title to substantially all other real and personal property reflected as assets owned by them in the Final Memorandum, in each case free and clear of all liens, security interests, pledges, charges, encumbrances, mortgages and defects, except such as are disclosed in the Final Memorandum or as could not reasonably be expected to have a Material Adverse Effect; any real property or personal property held under lease by the Company or any of the Subsidiaries is held under a lease that is valid, existing and enforceable by the Company or such Subsidiary, with such exceptions as are disclosed in the Final Memorandum or as could not reasonably be expected to have a Material Adverse Effect, and the Company has not received any notice of any material claim of any sort that has been asserted by anyone adverse to the rights of the Company under any such lease;

 

(i)            the Company owns or possesses such licenses or other rights to use all patents, trademarks, service marks, trade names, copyrights, software and design licenses, trade secrets, manufacturing processes, other intangible property rights and know-how (collectively “ Intangibles ”), as are necessary to entitle the Company and the Subsidiaries, taken as a whole, to conduct the Company’s business described in the Final Memorandum, and neither the Company nor any of the Subsidiaries has received written notice of any infringement of or conflict with (and, upon due inquiry, the Company knows of no such infringement of or conflict with) asserted rights of others with respect to any Intangibles which could reasonably be expected to have a Material Adverse Effect;

 

(j)            neither the Company nor any of the Subsidiaries has violated, or received notice of any violation with respect to, any law, rule, regulation, order decree or judgment applicable to it and its business, including those relating to transactions with affiliates, environmental, safety or similar laws, federal or state laws relating to discrimination in the hiring, promotion or pay of employees, federal or state wages and hours law, the Employee Retirement Income Security Act or the rules and regulations promulgated thereunder, except for those violations that would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect;

 

(k)           neither the Company nor any Subsidiary nor any officer, director, agent or employee purporting to act on behalf of the Company or any Subsidiary, has at any time, directly or indirectly, (i) made any contributions to any candidate for political office, or failed to disclose fully any such contributions, in violation of law, (ii) made any payment to any state, federal or foreign governmental officer or official, or other person charged with similar public or quasi-public duties, other than payments required or allowed by applicable law (including the Foreign Corrupt Practices Act of 1977, as amended), (iii) engaged in any transactions, maintained any bank account or used any corporate funds except for transactions, bank accounts and funds which have been and are reflected in the

 

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normally maintained books and records of the Company and the Subsidiaries, (iv) violated any provision of the Foreign Corrupt Practices Act of 1977, as amended, or (v) made any other unlawful payment;

 

(l)            except as otherwise disclosed in the Final Memorandum, there are no outstanding loans or advances or guarantees of indebtedness by the Company to or for the benefit of any of the officers, directors, affiliates or representatives of the Company or any of the members of the families of any of them; any outstanding loans or advances or guarantees of indebtedness by the Company or to or for the benefit of any such persons will be repaid, satisfied or terminated, as the case may be, within 60 days after the Closing Time;

 

(m)          except with respect to FBR, neither the Company nor any Subsidiary has incurred any liability for any finder’s fees or similar payments in connection with the transactions contemplated hereby;

 

(n)           neither the Company nor any of the Subsidiaries is in breach of, or in default under (nor has any event occurred which with notice, lapse of time, or both would constitute a breach of, or default under), its respective certificate of incorporation, memorandum of association, bye-laws, or other organizational documents (collectively, the “ Charter Documents ”) or in the performance or observance of any obligation, agreement, covenant or condition contained in any contract, license, indenture, mortgage, deed of trust, bank loan or credit agreement or other agreement or instrument to which the Company or such Subsidiary is a party or by which either of them or their respective properties may be bound or affected, except for such breaches or defaults which would not have a Material Adverse Effect;

 

(o)           the execution, delivery and performance by the Company of this Agreement, and the execution, delivery and performance by the Company and its Subsidiaries, as applicable, of the Registration Rights Agreement; the Tower Registration Rights Agreement; the Warrant dated as of March 28, 2006, issued by the Company in favor of Tower Group, Inc. (the “ Warrant ”); the Master Agreement to be entered into among the Company, CastlePoint Management, Tower Group, Inc., Tower Insurance Company of New York (“ TICNY ”) and Tower National Insurance Company (“ TNIC ”) (the “ Master Agreement ”); the Program Management Agreement to be entered into among CastlePoint Management, TICNY and TNIC (the “ Program Management Agreement ”); the Service and Expense Sharing Agreement to be entered into among the Company, CastlePoint Management, Tower Group, Inc., TICNY and TNIC (the “ Service and Expense Sharing Agreement ”); the Brokerage Business Quota Share Reinsurance Agreement to be entered into among CastlePoint Re, TICNY and TNIC (the “ Brokerage Business Reinsurance Agreement ”); the Traditional Program Business Quota Share Reinsurance Agreement to be entered into among CastlePoint Re, TICNY and TNIC (the “ Traditional Program Business Reinsurance Agreement ”); the Specialty Program Business and Insurance Risk Sharing Business Quota Share Reinsurance Agreement, to be entered into among CastlePoint Re, TICNY and TNIC (the “ Specialty Program Business