Exhibit 99.1
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made and
entered into as of October 26, 2004 by and between TOWER GROUP, INC., a Delaware
corporation (the "Company") and FRIEDMAN, BILLINGS, RAMSEY GROUP, INC., a
Maryland limited partnership (the "Investor").
RECITALS
WHEREAS, the Company desires to issue and sell to the Investor, and
the Investor desires to purchase from the Company, 500,000 shares of common
stock, par value $0.01 per share, of the Company (the "Common Stock"), pursuant
to a Stock Purchase Agreement dated as of October 20, 2004 between the Company
and the Investor (the "Purchase Agreement").
WHEREAS, it is a condition precedent to the obligation of the Investor
to close the transactions contemplated by the Purchase Agreement that the
Company execute and deliver to the Investor this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
1. Definitions. (a) As used in this Agreement, the following terms
shall have the meanings set forth below:
(i) "Affiliate" of any specified Person means any other Person who
directly, or indirectly through one or more intermediaries, is in control
of, is controlled by, or is under common control with, such specified
Person. For purposes of this definition, control of a Person means the
power, directly or indirectly, to direct or cause the direction of the
management and policies of such Person whether by contract, securities
ownership or otherwise; and the terms "controlling" and "controlled" have
the respective meanings correlative to the foregoing.
(ii) "Agreement" means this Registration Rights Agreement, as the same
may be amended, supplemented or modified from time to time in accordance
with the terms hereof.
(iii) "Commission" means the Securities and Exchange Commission.
(iv) "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.
(v) "Investors" 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 and the Purchase Agreement.
(vi) "Person" means any individual, partnership, corporation, limited
liability company, joint stock company, association, trust, unincorporated
organization, or a government agency or political subdivision thereof.
(vii) "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 under the Securities Act) included in
the Registration Statement, as amended or supplemented by any prospectus
supplement with respect to the terms of the offering of any portion of the
Registrable Securities covered by the 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.
(viii) "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.
(ix) "Registrable Securities" means the shares of Common Stock
purchased pursuant to the Purchase Agreement; provided, however, a share of
Common Stock shall cease to be a Registrable Security for purposes of this
Agreement when it no longer is a Restricted Security.
(x) "Registration Expenses" means any and all expenses incident to
performance of or compliance with this Agreement, including without
limitation: (i) all Commission, and NASD registration and filing fees, (ii)
all fees and expenses incurred in connection with compliance with federal
or state securities or blue sky laws (including reasonable fees and
disbursements of counsel in connection with blue sky qualification of any
of the Registrable Shares and the preparation of a Blue Sky Memorandum and
compliance with the rules of the NASD), (iii) all expenses of printing,
delivering and distributing any Registration Statement, any Prospectus, any
amendments or supplements thereto, any certificates and other documents
relating to the performance of and compliance with this Agreement, (iv) all
fees and expenses incurred in connection with the listing of any of the
Registrable Securities on any securities exchange or the Nasdaq National
Market pursuant to Section 2 hereof, (v) the fees and disbursements of
counsel for the Company and of the independent public accountants
(including, without limitation, the expenses of any special audit and "cold
comfort" letters required by or incident to such performance) of the
Company and (vi) any fees and disbursements customarily paid by issuers or
sellers 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 underwriting
discounts or commissions, brokers' commissions and transfer taxes, if any,
relating to the sale or
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disposition of Registrable Securities by an Investor and any legal or other
costs of the Investor, including the fees and expenses of any counsel to
the Investor.
(xi) "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.
(xii) "Restricted Security" means any share of Common Stock 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 in compliance with the resale provisions of Rule 144 under the
Securities Act (or any successor provision thereto) or is transferable
pursuant to paragraph (k) of Rule 144 under the Securities Act (or any
successor provision thereto), or (iii) otherwise has been transferred and a
new share of Common Stock not subject to transfer restrictions under the
Securities Act has been delivered by or on behalf of the Company.
(xiii) "Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations of the Commission thereunder, or any similar
successor statute.
(b) All capitalized terms used and not defined herein have the
respective meaning assigned to them in the Purchase Agreement.
2. Registration. (a) Filing and Effectiveness of Registration
Statement.
(i) Upon the receipt by the Company at any time after the 180 day
anniversary of the effective date of the registration statement on Form S-1
relating to the Company's initial public offering (the "IPO") of the
written request of a holder or holders representing an aggregate of 25% or
more of Registrable Securities, 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
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
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) the second anniversary of the date hereof 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
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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 earlier of (A) the second
anniversary of the date hereof and (B) 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. Only one demand for a
registration of Registrable Securities may be made pursuant to this Section
2(a).
(ii) Notwithstanding anything to the contrary herein, if the filing or
maintenance of any Registration Statement would require the Company to make
a disclosure that would, in the reasonable judgment of the Company's Board
of Directors, have a material adverse effect on the business, operations,
properties, prospects or financial condition of the Company or on pending
or imminent transactions, the Company shall have the right, upon written
notice to the Investor, to delay the filing of any Registration Statement
or of any amendment thereto for a period not to exceed 45 days, or to
suspend its obligation to maintain the effectiveness of any Registration
Statement and to suspend the use of any Prospectus or Prospectus supplement
in connection with any Registration Statement for an aggregate of 45
calendar days in any period of twelve consecutive months (each, a "Blackout
Period"). The Investor agrees that upon receipt of any such notice from the
Company, it shall immediately cease all efforts to dispose of Registrable
Securities pursuant to such Registration Statement until such time as the
Company shall notify it of the end of such restrictions or, if earlier, the
expiration of the Blackout Period.
(iii) If a registration pursuant to this Section 2(a) involves an
underwritten Public 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 largest number of shares
of Common Stock that can be sold without having an adverse effect on such
Public Offering, including with respect to the price at which such shares
can be sold (the "Maximum Offering Size"), the Company will include in such
registration only that number of shares of Common Stock which does not
exceed the Maximum Offering Size, in the following order of priorities: (1)
first, all Registrable Securities of the Investor and (2) second, the
securities proposed to be registered by the Company and by other holders of
securities entitled to participate in the registration, drawn from them
pro-rata based on the number of shares each has requested to be included in
such registration.
(b) Piggyback Registration Rights. (i) At any time after the 180th day
anniversary of the IPO, if the Company proposes to register any of its Common
Stock or any other shares of Common Stock of the Company under the Securities
Act (other than a registration on Form S-8 or S-4 or any successor or similar
forms), whether or not for sale for its own account, it will each 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
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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 post office date
stamp on the notice from the Company (which request shall specify the number of
Registrable Securities intended to be disposed of by such Investor), 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 Investors must sell their Registrable Securities to the underwriters (who
shall be selected by the Company) 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 Investors must sell their
Registrable Securities in accordance with the plan of distribution set forth on
Exhibit A and (C) if, at any time after giving written notice of its intention
to register any Registrable Securities pursuant to this Section 2(b) and prior
to the effective date of the Registration Statement filed in connection with
such registration, the Company shall determine for any reason not to register
such Registrable Securities, the Company shall give written notice to the
Investor and, thereupon, shall be relieved of its obligation to register any
Registrable Securities in connection with such registration.
(ii) If a registration pursuant to this Section 2(b) involves an
underwritten Public 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: (1) first, all securities the Company
proposes to sell for its own account, (2) second, up to the full number of
securities proposed to be registered for the account of the holders of
securities entitled to inclusion of their securities in the Registration
Statement by reason of demand registration rights and (3) third, the
securities requested to be registered by other holders of securities
entitled to participate in the registration (including Registrable
Securities of the Investor), drawn from them pro-rata based on the number
of shares each has requested to be included in such registration and the
Investor.
(iii) If as a result of the proration provisions of this Section 2(b),
the Investor is not entitled to include all such Registrable Securities in
such registration, such Investor may elect to withdraw its request to
include any Registrable Securities in such registration.
(iv) If the Investor decides not to include all of its Registrable
Securities in any Registration Statement thereafter filed by the Company,
the Investor shall nevertheless continue to have the right 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.
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(v) Notwithstanding the foregoing, the Company shall have no
obligations under this Section 2(b) hereof at any time that such
Registrable Securities are the subject of an effective registration
statement.
3. Obligations of the Company. In connection with the registration of
the Registrable Securities, the Company shall use commercially reasonable
efforts to:
(a) 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 (i) shall be available for the sale of the Registrable
Securities by the Investor, (ii) 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 (iii) shall comply in all
respects with the requirements of Regulation S-T under the Securities Act, and
use commercially reasonable efforts to cause such Registration Statement to
become effective and remain effective in accordance with Section 2 of this
Agreement.
(b) Prepare and file with the Commission such amendments and
post-effective amendments to each Registration Statement as may be necessary
under applicable law to keep such Registration Statement effective for the
applicable period; and cause each Prospectus to be supplemented by any required
prospectus supplement, and as so supplemented to be filed pursuant to Rule 424
(or any similar provision then in force) under the Securities Act and comply
with the provisions of the Securities Act, the Exchange Act and the rules and
regulations thereunder applicable to it with respect to the disposition of all
securities covered by each Registration Statement during the applicable period
in accordance with the intended method or methods of distribution by the
Investor thereof (including sales by any broker-dealer);
(c) 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 until such time as all of such Registrable Securities
have been disposed of in accordance with the intended methods of disposition by
the Investor as set forth in the Prospectus forming part of the Registration
Statement;
(d) (i) Prior to the filing with the Commission of any Registration
Statement (including any amendments thereto) and the distribution or delivery of
any Prospectus (including any supplements thereto), provide draft copies thereof
(including a copy of the accountant's consent letter to be included in the
filing) to the Investor and reflect in such documents all such comments relating
to the Investor and the plan of the distribution of the Registrable Securities
as the Investor reasonably may propose; and
(ii) Furnish to the Investor (A) promptly after the same is prepared
and publicly distributed, filed with the Commission, or received by the
Company, one copy of the Registration Statement, each Prospectus, and each
amendment or supplement thereto, and (B) such number of copies of the
Prospectus and all amendments and supplements
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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;
(e) (i) Register or qualify the Registrable Securities covered by a
Registration Statement under such securities or "blue sky" laws of all
jurisdictions requiring blue sky registration or qualification,
(ii) Prepare and file in such jurisdictions such amendments (including
post-effective amendments) and supplements to such registrations and
qualifications as may be necessary to maintain the effectiveness thereof at
all times during the Registration Period,
(iii) Take all such other lawful actions as may be necessary to
maintain such registrations and qualifications in effect at all times
during the Registration Period, and
(iv) Take all such other lawful actions reasonably necessary or
advisable to qualify the Registrable Securities for sale in such
jurisdictions;
provided, however, that the Company shall not be required in connection with any
of its obligations under this Section 3(e) to (A) qualify to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
Section 3(e), (B) subject itself to general taxation in any such jurisdiction or
(C) file a general consent to service of process in any such jurisdiction;
(f) 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, 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;
(g) 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;
(h) 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;
(i) 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;
(j) Cooperate with the Investor to facilitate the timely preparation
and delivery of certificates for the Registrable Securities to be offered
pursuant to a Registration
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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;
(k) 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.
4. Obligations of the Investor. In connection with the registration of
the Registrable Securities, the Investor shall have the following obligations:
(a) It shall be a condition precedent to the obligations of the
Company to complete the registration pursuant to this Agreement with respect to
the Registrable Securities that such Investor shall furnish to the Company such
information regarding itself, the Registrable Securities held by it and the
intended method of disposition of the Registrable Securities held by it as shall
be reasonably required to effect the registration of such Registrable Securities
and shall execute such documents in connection with such registration as the
Company may reasonably request. At least ten business days prior to the first
anticipated filing date of a Registration Statement, the Company shall notify
the Investor and its counsel, whether in-house or otherwise ("Counsel") of the
information the Company requires from the Investor (the "Requested
Information"). If at least 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 at least two business days prior to the
anticipated filing date the Company still has not received the Requested
Information from the Investor or its Counsel, then the Company may file the
Registration Statement without including Registrable Securities of the Investor.
However, promptly upon receipt of the Requested Information, and at the
Investor's expense, the Company shall file such amendment(s) to the Registration
Statement as may be necessary to include therein the Registrable Securities.
(b) The Investor agrees to cooperate with the Company in connection
with the preparation and filing of such Registration Statement hereunder, unless
the Investor has notified the Company in writing of its election to exclude all
of its Registrable Securities from such Registration Statement.
(c) 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.
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(d) 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(f) or
3(g), 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(f) 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 in the
Investor's possession of the Prospectus covering such Registrable Securities
current at the time of receipt of such notice.
5. Expenses of Registration. All Registration Expenses shall be paid
by the Company. The Investor shall pay the underwriting discount attributable to
such Investor's Registrable Securities, any transfer taxes payable with respect
thereto, and all fees and expenses, including fees and expenses of such
Investor's counsel, incurred by the Investor.
6. Indemnification and Contribution. (a) The Company shall indemnify
and hold harmless the Investor and each of its officers and limited and general
partners and each person who controls the Investor within the meaning of Section
15 of the Securities Act or Section 20 of the Exchange Act (each such person
being sometimes hereinafter referred to as an "Indemnified Person") from and
against any losses, claims, damages or liabilities, joint or several, to which
such Indemnified Person may become subject under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an untrue statement or alleged
untrue statement of a material fact contained in any Registration Statement or
Prospectus or an omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein (in
light of the circumstance in which they were made, in the case of the
Prospectus) not misleading, and the Company hereby agrees to reimburse such
Indemnified Person for all reasonable legal and other expenses incurred by them
in connection with investigating or defending any such action or claim as and
when such expenses are incurred; provided, however, that the Company shall not
be liable to any such Indemnified Person in any such case to the extent that any
such loss, claim, damage or liability arises out of or is based upon (i) an
untrue statement or alleged untrue statement made in, or an omission or alleged
omission from, such Registration Statement or Prospectus in reliance upon and in
conformity with written information furnished to the Company by the Investor or
such Indemnified Person expressly for use therein or (ii) in the case of the
occurrence of an event of the type specified in Section 3(f), the use by the
Indemnified Person of an outdated or defective Prospectus after the Company has
provided to such Indemnified Person written notice that such Prospectus is
outdated or defective.
(b) Indemnification by the Investor. The Investor shall (i) indemnify
and hold harmless the Company, its directors (including any person who, with his
or her consent, is named in the Registration Statement as a director nominee of
the Company), its officers, each person, if any, who controls the Company within
the meaning of either Section 15 of the Securities Act or Section 20 of the
Exchange Act, against any losses, claims, damages or liabilities to which the
Company or such other persons may become subject, under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an untrue statement or alleged
untrue statement of a material fact contained in such Registration Statement or
Prospectus or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
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the statements therein (in light of the circumstances under which they were
made, in the case of the Prospectus), not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Company by the Investor
expressly for use therein.
(c) Notice of Claims, etc. Promptly after receipt by a party seeking
indemnification pursuant to this Section 6 (an "Indemnified Party") of written
notice of any investigation, claim, proceeding or other action in respect of
which indemnification is being sought (each, a "Claim"), the Indemnified Party
promptly shall notify in writing the party against whom indemnification pursuant
to this Section 6 is being sought (the "Indemnifying Party") of the commencement
thereof; but the omission to so notify the Indemnifying Party shall not relieve
it from any liability that it otherwise may have to the Indemnified Party,
except to the extent that the Indemnifying Party is materially prejudiced by
reason of such failure. The Indemnifying Party shall be entitled to assume the
defense of any Claim with counsel reasonably acceptable to the Indemnified
Party. Notwithstanding the assumption of the defense of a Claim by the
Indemnifying Party, the Indemnified Party shall have the right to employ
separate legal counsel and to participate in the defense of such Claim in any
such case, but the fees and expenses of such counsel shall be at the expense of
such Indemnified Party unless (i) the Indemnifying Party shall not have employed
counsel to have charge of the defense of such action within a reasonable time
after notice of the institution of such action is given by the Indemnified
Party, (ii) such Indemnified Party shall have reasonably concluded (based on the
advice of counsel) that there may be defenses available to it which are
different from or additional to those available to the Indemnifying Party (in
which case the Indemnifying Party shall not have the right to direct the defense
of such action on behalf of the Indemnified Party) or (iii) the employment of
such counsel shall have been authorized in writing by the Indemnifying Party in
connection with the defense of such action, in any of which events the counsel
employed by such Indemnified Party shall be reasonably acceptable to the
Indemnifying Party, and the fees and expenses of such counsel shall be borne by
the Indemnifying Party, and paid as incurred (it being understood, however, that
the Indemnifying Party shall not be liable for the expenses of more than one
separate firm of attorneys for the Indemnified Party in any one action or series
of related actions in the same jurisdiction (other than local counsel in any
such jurisdiction) representing the Indemnified Parties who are parties to such
action). If the Indemnified Party employs separate legal counsel in
circumstances other than as described in clauses (i), (ii) or (iii) above, the
fees, costs and expenses of such legal counsel shall be borne exclusively by the
Indemnified Party. The Indemnified Party shall not, without the prior written
consent of the Indemnifying Party (which consent shall not unreasonably be
withheld), settle or compromise any Claim or consent to the entry of any
judgment that does not include an unconditional release of the Indemnifying
Party from all liabilities with respect to such Claim or judgment.
(d) Contribution. If the indemnification provided for in this Section
6 is unavailable to or insufficient to hold harmless an Indemnified Party in
respect of any losses, claims, damages or liabilities (or actions in respect
thereof), then each Indemnifying Party shall contribute to the amount paid or
payable by such Indemnified Party as a result of such losses, claims, damages or
liabilities (or actions in respect thereof) (i) in such proportion as is
appropriate to reflect the relative benefits received by the Indemnifying
Parties and the Indemnified Parties from the offering of the shares of Common
Stock or (ii) if (but only if) the
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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
Parties and the Indemnified Parties in connection with the statements or
omissions which resulted in such losses, claims, damages or liabilities (or
actions in respect thereof), as well as any other relevant equitable
considerations. The relative fault of such Indemnifying Party and Indemnified
Party shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact relates to information supplied by such
Indemnifying Party or by such Indemnified Party, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The parties hereto agree that it would not be just
and equitable if contribution pursuant to this Section 6(d) were determined by
pro rata allocation or by any other method of allocation which does not take
account of the equitable considerations referred to in this Section 6(d). The
amount paid or payable by an Indemnified Party as a result of the losses,
claims, damages or liabilities (or actions in respect thereof) referred to above
shall be deemed to include any legal or other fees or expenses reasonably
incurred by such Indemnified Party in connection with investigating or defending
any such action or claim. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
(e) Notwithstanding any other provision of this Section 6, in no event
shall the Investor be required to undertake liability to any person under this
Section 6 for any amounts in excess of the dollar amount of the gross proceeds
to be received by the Investor from the sale of its Registrable Securities
pursuant to any Registration Statement under which such Registrable Securities
are to be registered under the Securities Act.
(f) The obligations of the Company under this Section 6 shall be in
addition to any liability that the Company may otherwise have to any Indemnified
Person and the obligations of any Indemnified Person under this Section 6 shall
be in addition to any liability that such Indemnified Person may otherwise have
to the Company. The remedies provided in this Section 6 are not exclusive and
shall not limit any rights or remedies that may otherwise be available to an
indemnified party at law or in equity.
7. Assignment. The rights to have the Company register Registrable
Securities pursuant to this Agreement may be assigned or transferred only with
the prior written consent of the Company, and any such assignment or transfer
without such consent shall be void and of no effect. Notwithstanding the
foregoing, such consent of the Company shall not be required with respect to any
assignment or transfer of Registrable Securities to an Affiliate of Investor. 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
11
before the time the Company received the written notice contemplated by clause
(b) of this sentence the transferee or assignee agrees in writing with the
Company to be bound by all of the provisions contained herein, and (e) the
Company is furnished with an opinion of counsel, which counsel and opinion shall
be reasonably satisfactory to the Company, to the effect that the permitted
assignment would be in compliance with the Securities Act and any applicable
state or other securities laws.
8. Amendment and Waiver. Any provision of this Agreement may be
amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Company and the Investor. Any amendment or waiver
effected in accordance with this Section 9 shall be binding upon the Investor
and the Company.
9. Miscellaneous. (a) If the Company (i) fails to file any
Registration Statement pursuant to Section 2(a) within the agreed time frame,
(ii) fails to cause any Registration Statement pursuant to Section 2(a) to
become effective within the agreed time frame, (iii) fails to keep any
Registration Statement pursuant to Section 2(a) current and effective for the
agreed period of time, or (iv) fails to provide the agreed piggy-back rights
pursuant to Section 2(b), then the Investor will be entitled as a remedy for any
and all concurrent breaches of this Agreement related to one or more concurrent
such failures (provided that multiple penalties shall not accrue for multiple
defaults that overlap) to liquidated and agreed upon damages payable on each
Registrable Share for each day of any such delay or failure, as the case may be.
Such liquidated damages shall be payable quarterly in arrears, within ten (10)
days of the end of each fiscal quarter and shall accrue daily at a rate of (i)
10% of the initial purchase price per share of Registrable Securities as set
forth in the Purchase Agreement per annum during the first 90 days of the delay
or failure and (ii) the rate will escalate by an additional 5% of the initial
purchase price per share of Registrable Securities per annum for each successive
three month period after the first 90 days of the delay or failure.
(b) 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.
(c) 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.
120 Broadway, 14th Floor
New York, New York 10271
Attention: Michael H. Lee
Fax: (212) 271-5492
12
With a copy to:
LeBoeuf, Lamb, Greene & MacRae, L.L.P.
125 West 55th Street
New York, New York 10019
Attention: John Schwolsky, Esq.
Matthew Ricciardi, Esq.
Fax: (212) 424-8500
If to the Investor, to:
FBR Weston, Limited Partnership
1001 19th Street North
Arlington, Virginia 22209
Attention: Eric Billings
Fax: (703) 312-9559
With a copy to:
Friedman, Billings, Ramsey & Co., Inc.
1001 Nineteenth Street North
Arlington, Virginia 22209
Attention: William J. Ginivan, Esq.
Fax: (703) 469-1140
The Company or the Investor may change the foregoing address by notice
given pursuant to this Section 9(d).
(d) 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.
(e) 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.
(f) 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.
13
(g) This Agreement and the Purchase Agreement constitute 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 and the Purchase Agreement
supersede all prior agreements and undertakings among the parties hereto with
respect to the subject matter hereof.
(h) 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.
(i) All pronouns and any variations thereof refer to the masculine,
feminine or neuter, singular or plural, as the context may require.
(j) The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning thereof.
(k) 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.
(l) This Agreement may be signed in any number of counterparts, each
of which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument. Signatures delivered by facsimile
shall be deemed to be original signatures.
[Signature Page Follows]
14
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
COMPANY:
TOWER GROUP, INC.,
a Delaware corporation
By: /s/ Michael H. Lee
------------------------
Michael H. Lee
Chairman of the Board, President and
Chief Executive Officer
INVESTOR:
FRIEDMAN, BILLINGS, RAMSEY GROUP, INC.,
a Virginia corporation
By: /s/ Edward M. Wheeler
------------------------
Name: Edward M. Wheeler
Title: Managing Director
15
Exhibit A
Plan of Distribution
The selling stockholders and any of their donees, transferees,
pledgees, assignees and successors-in-interest may sell, from time to time, any
or all of their shares of 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 National 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, 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. A selling stockholder, for example, will be subject
to applicable provisions of the Securities Exchange Act and the rules and
regulations under it, including, without limitation, Regulation M, which
provisions may restrict certain activities of the selling stockholder and limit
the timing of purchases and sales of any shares of common stock by the selling
stockholder. Furthermore, under Regulation M, persons engaged in a distribution
of securities are prohibited from simultaneously engaging in market making and
certain other activities with respect to such securities for a specified period
of time prior to the commencement of such distributions, subject to specified
exceptions or exemptions. The foregoing may affect the marketability of the
shares offered by this prospectus.
To the extent required, this prospectus may be amended or supplemented
from time to time to describe a specific plan of distribution. In connection
with distributions of the shares or otherwise, the selling stockholders may
enter into hedging transactions with broker-dealers or other financial
institutions. In connection with such transactions, broker-dealers or other
financial institutions may engage in short sales of our common stock in the
course of hedging the positions they assume with selling stockholders. The
selling stockholders may also sell our securities short and redeliver the shares
to close out such short positions. The selling stockholders may also enter into
option or other transactions with broker-dealers or other financial institutions
that require the delivery to such broker-dealer or other financial institution
of shares offered by this prospectus, which shares the broker-dealer or other
financial institution may resell pursuant to this prospectus, as supplemented or
amended to reflect such transaction.
The selling stockholder may also engage in short sales against
the box, puts and calls and other transactions in our securities or derivatives
of our securities and may sell or deliver shares in connection with these
trades. The selling stockholder may pledge its shares to their brokers under the
margin provisions of customer agreements. If a 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, 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.
We are required to pay all fees and expenses incident to the
registration of the shares, including our fees and disbursements of counsel, to
the selling stockholders. 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.