a5541084ex10_1.htm


    EXHIBIT
      10.1

    


    


    MANAGEMENT
      AGREEMENT

     

    between

     

    CastlePoint
      Insurance Company

     

    and

     

    Tower
      Risk Management Corp.

     

    


     

    This
      Agreement, entered into as of July
      1, 2007 (the “Agreement”) by and between CASTLEPOINT INSURANCE COMPANY, a
      property and casualty insurance company domiciled in New York (the “Company”),
      and TOWER RISK MANAGEMENT CORP., a New York corporation (“Manager”), each having
      offices located at 120 Broadway, New York, N.Y. 10271.

     

    PREAMBLE

     

    WHEREAS,
      Company desires to appoint
      Manager as its manager for performing underwriting and claims and other services
      with respect to certain business, which includes but is not limited to Brokerage
      Business and business that is not Specialty Program Business and Insurance
      Risk-Sharing Business or Traditional Program Business, as set forth in this
      Agreement; and

     

    WHEREAS,
      Manager desires to perform
      such responsibilities;

     

    NOW,
      THEREFORE, Company and Manager, in
      consideration of the mutual promises herein contained and for other good and
      valuable consideration, the receipt and sufficiency of which is hereby
      acknowledged, agree as follows:

     

    1.           Appointment.

     

    Company
      does hereby nominate,
      constitute, and appoint Manager as non-exclusive manager for: (i) the
      soliciting, underwriting, quoting, binding, issuing, and servicing of such
      of
      the Company's insurance policies as the Company determines for time-to-time
      on
      Exhibit A  (such insurance and any policies, contracts, binders,
      endorsements, certificates, agreements, or evidence of insurance, individually
      and collectively, will be referred to as "Policy" or "Policies" hereunder),
      which business includes, but is not limited to, Brokerage Business and business
      that is not Specialty Program Business and Insurance Risk Sharing Business
      or
      Traditional Program Business.

     

    2.           Authority.  Manager
      is authorized to:

     

    2.1           Issue,
      or direct Company to issue, Policies subject to: (i) the scope and limits
      granted in Exhibit A attached hereto; (ii) the terms and conditions (including
      exclusions) of forms
      of Policies prescribed by Company; (iii) applicable state insurance laws, rules,
      and regulations; (iv) the underwriting guidelines approved by Company; (v)
      Company's ultimate right to veto the solicitation, underwriting, quoting,
      binding, and issuing of any Policy by Manager; (vi) Company's ultimate right
      to
      cancel any Policy subject to applicable governmental regulatory requirements
      for
      cancellation and non-renewal; (vii) Company's ultimate right to veto the
      appointment by Manager of any agent, broker or producer, and the ultimate power
      of Company to cancel any such agency pursuant to Section 2.4; (viii) Company's
      right to approve all advertising with respect to the Policies in which Company's
      name is used.

     

    
      
         

      

      
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    2.2           Collect,
      account, receipt for, and remit premiums on Policies that Manager writes on
      behalf of Company in accordance with Section 2.1 and to retain its provisional
      management fee and policy billing fees, if any,  out of premiums so
      collected.  Manager agrees to pay all costs and expenses of collection
      from insureds where premiums to be received by Manager pursuant to this
      Agreement are not paid in full by the insured.  Manager agrees that
      all premiums, including return premiums received by Manager, are Company's
      property and will be paid over to the Company.

     

    2.3           Secure
      or obtain agents and producers to produce business.  Company
      appointments will follow upon Manager providing evidence that the agents and
      producers are lawfully licensed to transact the type of insurance they are
      expected to write, are not serving on Company's or Manager's board of directors
      and complete Company’s appointment process.  The agents and producers
      must meet the applicable compliance regulations for licensure.

     

    2.4           Terminate
      agents and producers.

     

    2.5           Investigate
      and settle claims as provided in Section 10 below and establish reserves for
      such claims.

     

    2.6           Purchase
      and maintain in effect treaty and facultative reinsurance to limit Company’s
      exposure on the Policies to the net amounts outlined in Exhibit
      A.  Company shall reimburse Manager for the Company’s proportionate
      share, but not greater than 15% of catastrophe reinsurance costs attributable
      to
      the business written by it.

     

    3.           Performance.

     

    3.1           Manager
      hereby accepts the foregoing appointment and agrees faithfully to perform the
      duties thereof in a professional manner as an agent of Company and to obey
      promptly such reasonable instructions as it may receive from time to time from
      Company in accordance with this Agreement.

     

    3.2           If
      Manager commits a material breach of this Agreement, Company may, as one remedy
      but not as an exclusive remedy, require its own employees or designated
      representatives to carry out Manager's duties hereunder.  Manager
      shall reimburse Company for Company's reasonable expenses, including salaries,
      incurred for having Company’s employees or representatives perform such duties
      or, at Company's option, Manager shall pay such employees or representatives
      directly.  Such reimbursement or direct payments shall be made by
      Manager within five (5) days after Manager's receipt of invoices of such
      expenses.

     

    
      
         

      

      
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    4.           Fees.

     

     Manager
      shall receive a
      management fee quarterly for the foregoing services (“Management Fees”) during
      each calendar year of this agreement (or part thereof) equal to (A) the
      management fee percentage for such year (as set forth below) (the “Management
      Fee Percentage”) times (B) the amount of Subject  Written Premium on
      Policies managed by Manager for Company, net of return premiums. “Subject
      Written Premium” shall mean direct written premium net of specific, aggregate
      and property catastrophe excess of loss reinsurance costs. It is expressly
      agreed that the Management Fee Percentage payable to the manager shall be
      reduced by any expenses attributable to boards, bureaus and taxes that are
      required to be paid by Company. The provisional Management Fee Percentage shall
      be 34%.

    


    Such
      Management Fee Percentage shall be
      subject to adjustment until all losses for a given year have been settled (or
      deemed settled as set forth below).  Within sixty (60) days following
      the end of each year, Company shall calculate the Net Loss Ratio for each year
      that remains open and shall forward copies of such calculations to Manager.
      The
      Management Fee Percentage shall be increased nine-tenths of a percentage point
      for every percentage point by which the Net Loss Ratio is below 61% up to a
      maximum Management Fee Percentage of 36%, and decreased nine-tenths of a
      percentage point for every percentage point by which the Net Loss Ratio exceeds
      61%, subject to a minimum Management Fee Percentage of 31% as
      follows:

     

    
      	
              Net
                Loss Ratio

            	 	
              Management
                Fee Percentage

            	 
	
              64.33%
                or higher

            	 	
              31.0

            	 
	
              64

            	 	
              31.3

            	 
	
              63

            	 	
              32.2

            	 
	
              62

            	 	
              33.1

            	 
	
              61

            	 	
              34.0

            	 
	
              60

            	 	
              349

            	 
	
              59

            	 	
              35.8

            	 
	
              58.78
                or lower

            	 	
              36.0

            	 
	 	 	 	 


    

    


    The
      parties will settle amounts due within ten (10) days thereafter.  The
      Net Loss Ratio for each year shall be deemed to be finalized six (6) years
      following the close of such year or at any time before six (6) years by mutual
      agreement of the parties.

     

    For
      the purposes of this paragraph 4,
      "Net Loss Ratio" shall mean, for any period of time, the ratio of Net Losses
      incurred during such period to Net Premium Earned for such period, where “Net
      Losses” means, for any period of time, any and all amounts that the Company is
      required to pay to or on behalf of insureds for insurance claims made under
      its
      Policies including loss adjustment expenses, after the application of any
      applicable reinsurance.

     

    5.           Territory.

     

    Manager's
      authority to solicit, quote,
      underwrite, bind, issue, or service Policies extends only to insureds or
      prospective insureds located in the states specified in Exhibit A attached
      hereto, subject to: (i) the applicable licensing authority of Company, (ii)
      Company having made and received approval of all necessary regulatory filings
      and (iii) Manager obtaining licenses if required for activities conducted by
      Manager pursuant to this Agreement.

     

    
      
         

      

      
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    6.           Representations
      and Warranties of Manager.  On the
      effective date hereof, during the term of this Agreement, and for any period
      described in Section 14.5, Manager hereby represents and warrants to Company
      as
      follows:

     

    6.1           Laws
      and Licenses.  Manager has complied and will comply with all
      applicable laws, rules, and regulations.  Manager shall provide
      current copies of Manager's licenses, which will be maintained in Company's
      records.  Company will appoint Manager in all applicable
      states.  Manager will obtain and maintain at its own expense all
      licenses required for it to perform this Agreement.

     

    6.2           No
      Breach.  This Agreement is a valid and binding obligation of
      Manager.  The execution and delivery of this Agreement and the
      consummation of the transactions contemplated herein will not breach or conflict
      with Manager's by-laws or certificate of incorporation, nor with any agreement,
      covenant, or understanding (oral or written) to which Manager is bound, and
      will
      not adversely affect the application for issuance or the validity of any license
      of Manager.

     

    6.3           Status.  Manager
      is a duly organized and validly existing corporation in the State of New
      York.

     

    6.4           Authorization.  The
      execution, delivery, and performance of this Agreement by Manager have been
      duly
      and properly authorized by it.

     

    7.           Representations
      and Warranties of Company.  On the
      effective date hereof, during the term of this Agreement, and for any period
      described in Section 14.5, each Company hereby represents and warrants to
      Manager as follows:

     

    7.1           Laws
      and Licenses.  Company has complied and will comply with all
      applicable laws, rules and regulations and shall, whenever necessary, obtain
      and
      maintain at its own expense all licenses required for it to perform this
      Agreement.

     

    7.2           No
      Breach.  This Agreement is a valid and binding obligation of
      Company.  The execution and delivery of this Agreement and the
      consummation of the transactions contemplated herein will not breach or conflict
      with Company's by-laws or articles of incorporation, nor with any agreement,
      covenant, or understanding (oral or written) to which Company is bound, and
      will
      not adversely affect the application for issuance or the validity of any license
      of Company.

     

    7.3           Status.                        Company
      is a duly organized and validly existing corporation in the State of New
      York.

     

    7.4           Authorization.  The
      execution, delivery, and performance of this Agreement by Company have been
      duly
      and properly authorized by it.

     

    
      
         

      

      
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    8.           Duties
      and Responsibilities. Subject to Company's
      supervision and instructions, Manager agrees to perform the following duties
      and
      services in addition to those otherwise enumerated in this Agreement with
      regards to Policies it manages hereunder:

     

    8.1           Solicit,
      underwrite, quote, bind, issue, secure proper countersignature when required
      by
      applicable laws, and service Policies on behalf of Company.

     

    8.2           Cancel
      Policies issued or underwritten by Manager in accordance with the terms of
      the
      Policies and applicable state regulations.

     

    8.3           Issue
      Policies only on forms approved by Company and filed with and approved by
      regulatory authorities wherever such filing and approval is
      required.

     

    8.4           Underwrite
      and issue Policies in accordance with the premium rates and underwriting
      criteria and guidelines as approved by Company.

     

    8.5           Investigate
      and settle claims as provided in Section 10 below and establish reserves for
      such claims.

     

    8.6           Maintain
      at Manager's expense data processing systems and equipment, an office or offices
      and a staff of employees sufficient in number and qualifications to perform
      the
      duties set forth in this Agreement.

     

    8.7           Pay
      to Company any fines imposed by regulatory authorities, taxation authorities,
      and their agents for data collection and advisory organizations, due to late
      filing or poor quality of data provided by Manager.

     

    8.8           Pay
      to Company any fines imposed by regulatory authorities upon Company due to
      the
      use of unapproved forms or rates by Manager or due to other market conduct
      violations caused by Manager's willful misconduct.

     

    8.9           Maintain
      separately for Company and each other insurer with which Manager does business,
      complete and current records and accounts, including underwriting files, which
      Manager shall retain in accordance with Section 12 and any applicable
      laws.

     

    8.10           Refund
      within sixty (60) days of the end of each calendar month, return commissions
      on
      Policy cancellations or premium reduction, in each case at the same rate at
      which such commissions were originally retained.

     

    8.11           Collect,
      account and receipt for premiums on Policies that Manager writes on behalf
      of
      Company in accordance with Section 2.1, and return premiums to policyowners,
      as
      necessary.  Manager shall promptly remit premiums collected on
      Company’s behalf, less return premium, reinsurance costs and Management Fees, to
      Company.

     

    8.12           Hold
      all monies, including premiums, return premiums, and monies received by Manager,
      in a fiduciary capacity for Company. Except as otherwise authorized by this
      Agreement, Manager shall maintain such monies in a separate and segregated
      bank
      account in a bank that is a member of the Federal Reserve System and is insured
      by the Federal Deposit Insurance Corporation. This account shall not be used
      for
      any purpose other than payments to or on behalf of Company. Any investment
      income produced from this bank account is the property of Manager.

     

    
      
         

      

      
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    8.13           Comply
      with all regulatory requirements including, but not limited to, the
      cancellation, non-renewal, or conditional renewal of policies.

     

    8.14           Return
      upon demand after termination of this Agreement, all unused Policies, forms,
      and
      other property furnished to Manager by Company. Such items remain the property
      of Company. Manager shall fully cooperate with and assist Company in recovering
      such items from third parties, if any.

     

    8.15           Exercise
      Manager's authority through authorized employees of Manager or its
      affiliates.

     

    8.16           Exercise
      exclusive and independent control of Manager's time and conduct.

     

    9.           Limitations
      of Authority.

     

    Notwithstanding
      the foregoing, all
      underwriting services provided to Company by Manager shall be based upon the
      written criteria, standards and guidelines of Company which shall retain the
      final authority over underwriting decisions including, but not limited to,
      acceptance, rejection, cancellation and termination of risks.

     

    10.           Claims.

     

    10.1           Manager
      shall or shall arrange to investigate, negotiate, and settle all Policy claims
      or losses on behalf of Company; however, Manager shall obtain the prior approval
      of Company before handling and settling any Policy claim or loss which is in
      excess of One Hundred Thousand Dollars ($100,000) gross incurred
      loss.  Manager shall determine coverage for claims; however, Manager
      shall obtain the prior written approval of Company for the handling of
      litigation in which the Company is named as a defendant or claims in which
      Manager seeks declaratory relief on behalf of Company.  All claims or
      losses shall be reported in monthly statements pursuant to Section 11
      below.  In addition, Manager shall immediately notify Company in
      writing of any claim or loss as Company requests upon receiving notice or
      knowledge of: (i) any Policy claim or loss in excess of Two Hundred Fifty
      Thousand Dollars ($250,000) gross incurred loss; or (ii) any loss regardless
      of
      incurred dollar amount involving the following: fatalities; brain stem/brain
      damage injuries; spinal cord injuries; heart attacks; severe, non-accumulative
      hearing loss; severe, non-accumulative vision loss; amputation of major body
      part; paraplegia; quadriplegia; serious burns (i.e. second or third degree
      and/or burns over 50% of the body); non-union, compound, comminuted, serious
      fractures; injury to the spine or pervasive nerve damage; class action suits;
      allegations of criminal conduct by an insured or allegations of criminal conduct
      by an insured or allegations of criminal conduct on the insured’s premises; bad
      faith claims or suits; demands in excess of policy limits; actual or alleged
      violations of the Deceptive Trade Practices Act; actual or alleged violations
      of
      the applicable State Insurance Codes; actual or alleged violation of law by
      Manager; or litigation naming Company as a defendant.  In determining
      gross incurred loss, Manager shall consider the facts and circumstance of the
      claim or loss, Manager’s analysis of the insured’s liability for the claim or
      loss, Manager’s analysis of damages resulting from the claim or loss and
      Manager’s analysis of the applicability of coverage for the claim or
      loss.  These individually reported claims or losses should be updated
      semi-annually and more frequently upon the occurrence of any material change
      in
      any claim or loss or any information previously reported to
      Company.  Company shall be immediately notified if Manager is closing
      a file on a reported claim or loss and of the reason for this file
      closure.  Failure to promptly notify Company of claims under this
      Section 10.1 shall be considered a material breach of this Agreement and subject
      to all the remedies provided herewith.

     

    
      
         

      

      
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    10.2           Whenever
      Manager shall deem it prudent to engage legal counsel or loss adjusters to
      protect Company's interest regarding claims or losses, such services shall
      be
      provided only by qualified attorneys-at-law and/or licensed loss adjusters
      selected by Manager, who have substantial experience in the handling of claims
      litigation of the type involved. Upon execution of this Agreement, Manager
      shall
      submit to Company for approval a list of the attorneys and loss adjusters it
      intends to use. Such list shall be considered approved unless Company objects
      to
      any of such firms or individuals within fourteen (14) days after receipt of
      such
      list. Any provision hereof to the contrary notwithstanding, it is agreed that,
      with respect to any claim or loss of any amount, Manager shall promptly furnish
      Company, or its designee, any additional claim or loss information requested
      by
      Company with respect to a claim or loss pertaining to any Policy covered by
      this
      Agreement, and it is further agreed with respect to any claim or loss of any
      amount as follows:

     

    
      	
              a.

            	
              Company
                may assign an attorney of its own choice to assume the defense of
                any
                claim or loss reported to Company and, in the event an attorney has
                already been employed by Manager, the service of such attorney which
                has
                already been employed by Manager shall be terminated by Manager forthwith
                and Manager shall waive any conflict of interest that may have been
                created by such attorney's employment by
                Manager.

            


    

     

    
      	
              b.

            	
              In
                the event that Company is named as a defendant in any lawsuit, Manager
                shall, as soon as it has notice or knowledge of such lawsuit, immediately
                give written notice thereof to Company accompanied by a copy of the
                complaint and any court papers related to such
                lawsuit.

            


    

     

    10.3           All
      claims services provided to Company by Manager shall be based upon the written
      criteria, standards and guidelines of Company which shall retain the final
      authority over claims decisions including, but not limited to, payment and
      non-payment of claims.

     

    10.4    The
      Company
      will establish a bank account to fund claim payments on its policies managed
      by
      Manager.  Manager shall be made an authorized signatory on, and shall
      pay claims out of such account.  Manager shall not be obligated to pay
      claims unless such account is sufficiently funded by the Company.

     

    
      	
              11.  

            	
               Accounting
                and Reporting Procedures.

            


    

     

    Manager
      shall:

     

      Within
      thirty (30) days after the end of each month, remit to Company all premiums
      collected on Policies issued under the terms of this Agreement, less the
      provisional management fee due to Manager in accordance with Exhibit A attached
      hereto.  Manager may not offset balances due to Company hereunder
      against balances due Manager under any other contract with Company;

     

    
      
         

      

      
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      On
      behalf of Company supply accounting, underwriting, and claim bordereaux with
      copies to Company, pursuant to these terms and conditions;

     

      With
      regard to business placed by Manager with Company hereunder, furnish to Company,
      in electronic format, within thirty (30) days after the end of each quarter
      a
      report of  written, earned, and unearned premiums; losses and loss
      adjustment expenses paid and outstanding; loss and loss adjustment expenses
      incurred; commissions earned by Manager;

     

      Provide
      detail and summary reports, in an electronic or printed medium, as are required
      to meet all reporting requirements of state regulatory or taxation authorities,
      their managers for data collection, and advisory organizations including but
      not
      limited to:

     

    a.           Within
      thirty (30) days of the close of the calendar quarter:  direct
      premiums (written and earned); in force premiums; policy counts (written and
      in
      force); direct losses and loss adjustment expenses including subrogation (paid
      and reserved); number of claims open, closed with payment, and closed without
      payment; as prescribed by state regulatory authorities.

     

    b.           Within
      thirty (30) days of the close of the calendar quarter:  direct written
      premium, losses, and loss adjustment expense including subrogation (paid and
      reserved) transaction data as prescribed by advisory organizations providing
      loss cost and policy forms.

     

    c.           Thirty
      (30) days prior to the prescribed deadline:  the reports of direct
      premiums (written and earned), losses, and loss adjustment expenses including
      salvage and subrogation (paid and reserved) as required by state regulatory
      data
      collection agents, including but not limited to financial calls, unit
      statistical data, summary statistical data, and detailed claim information
      for
      National Council on Compensation Insurance (NCCI), Insurance Services Office
      (ISO), and National Association of Independent Insurers (NAII), and various
      state-specific reporting requirements as necessary.

     

      By
      the first business day of February of each year, Manager shall provide Company
      with any information Company may require in order to complete its statutory
      financial statements for the prior year. Company shall notify Manager of the
      material information required by December 31 of the prior year.

     

    12.           Books
      and Records.

     

    Manager
      shall keep such books and
      records as may be (i) reasonably requested by Company; or (ii) required by
      law,
      rulings, or orders of the insurance departments of the states having
      jurisdiction over: (a) Manager or Manager's business or (b) any
      Policies.  Manager shall make such books and records available for
      examination, audit, and copying by the insurance departments of such states
      and
      by Company, or by their authorized representatives.  Company shall
      have the right to examine and review at any reasonable time all books, records,
      files, and papers, including, but not by way of limitation, claim files and
      underwriting files

     

    
      
         

      

      
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    maintained
      and kept by Manager which relate to this Agreement and the
      Policies.  Manager shall institute and maintain retention and disposal
      systems for claim files and underwriting files in accordance with procedures
      and
      requirements as prescribed by law. All books and records of Manager shall be
      maintained at the principal

    place
      of business of Manager and shall be complete, accurate, and up-to-date, and
      shall reflect all monies paid or received by Agent and all transactions of
      Manager pursuant to this Agreement. Anything to the contrary notwithstanding,
      all of the books, records, files, and papers maintained and kept by Manager
      relating to underwriting and claims matters involving this Agreement or the
      Policies, shall be and remain the sole and exclusive property of Company except
      that upon termination of this Agreement, all right, title, and interest in
      and
      to all Policy renewals or expirations and all records with respect to renewals
      and expirations shall automatically and irrevocably transfer to and vest in
      Manager provided Manager has accounted for and has made payments of all amounts
      due Company and continues to do so.

     

    13.           Indemnification.

     

    13.1           Manager
      shall indemnify and hold harmless Company from and against all losses, damages,
      costs, expenses, claims, fines, penalties, or liabilities of any description
      suffered by Company with respect to Manager on any Policies issued or
      underwritten by Manager, including, without limitation, any attorney's fees,
      in
      connection with or arising out of: (i) any violations by Manager of laws, rules,
      or regulations to which it is subject; (ii) any material breach of any warranty
      or representation of Manager made in this Agreement or any other material breach
      of this Agreement by Manager; or (iii) any willful misconduct, gross negligence,
      or misrepresentation, of Manager or of it officers, directors, employees,
      agents, sub-producers, or independent contractors.

     

    13.2           Company
      shall indemnify and hold harmless Manager from and against all losses, damages,
      costs, expenses, claims, fines, penalties, or liabilities of any description
      suffered by Manager with respect to Company on any Policies issued or
      underwritten by Company, including, without limitation, any attorney's fees,
      in
      connection with or arising out of: (i) any violations by Company of laws, rules,
      or regulations to which it is subject; (ii) any breach of any warranty or
      representation of Company made in this Agreement or any other breach of this
      Agreement by Company; or (iii) any alleged or actual misconduct, negligence,
      misrepresentation, or other acts or failures to act of Company or of it
      officers, directors, employees, agents, sub-producers, or independent
      contractors.

     

    14.           Termination
      of Agreement.

     

    14.1  This
      Agreement shall continue until terminated in accordance with Sections 14.2
      through 14.6 below.

     

    14.2  This
      Agreement may be terminated immediately by either party upon giving written
      notice to the other party via electronic, certified or registered mail in the
      event of:

     

    a.           The
      misappropriation by either party of any funds or property belonging to the
      other
      party;

     

    b.           The
      fraud, gross negligence, or willful misconduct of the other party;

     

    
      
         

      

      
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    c.           The
      license or certificate of authority of the other party in their state of
      domicile is canceled, non-renewed or suspended by any public
      authority;

     

    d.           An
      assignment by the other party for the benefit of creditors; the dissolution
      or
      liquidation of the other party; the appointment of a conservator, receiver,
      or
      liquidator for a substantial part of the other party’s property; the institution
      of bankruptcy, insolvency, or similar proceedings by or against the other
      party;

     

    e.           Material
      breach by the other party of any provision of this Agreement;

     

    f.           If
      any law or regulation of the federal, state, or local government of any
      jurisdiction in which the other party is doing business shall render illegal
      or
      invalid any transaction contemplated by this Agreement, or any term of this
      Agreement, this Agreement may be terminated insofar as it applies to such
      jurisdiction by either party giving notice to the other party to such effect
      or
      by either party giving notice to the other party to such effect;

     

    g.           Change
      in ownership of ten percent (10%) or more of the outstanding voting stock of
      the
      other party, sale or transfer of the other party’s assets, merger of the
      other  party, or change or resignation of any principal officer or
      director of the other party;

     

    h.           The
      licenses required of the other party for it to perform under this Agreement
      expire, are terminated, or are not valid pursuant to the law of the State in
      which the other party is transacting business on behalf of either
      party.

     

    14.3           This
      Agreement may be terminated at any time by the Company if the Reinsurance
      covering the business under this agreement is cancelled, terminated or
      expired.

     

    14.4           This
      Agreement may be terminated at any time by mutual written agreement, or upon
      sixty (60) days prior written notice by either Company or Manager.

     

    14.5           If
      at any time either party sends notice of termination to the other party as
      provided in Section 14.2 above or the Agreement is otherwise terminated as
      provided herein, the Manager shall not solicit, underwrite, quote, bind, or
      issue any Policies or renew any existing Policies for which the inception date
      or renewal date falls after the effective date of termination of this Agreement,
      nor shall Manager cancel and rewrite any existing Policies.

     

    14.6           Unless
      otherwise indicated by this Agreement or either party otherwise notifies the
      other party in writing, Manager's duties and responsibilities under this
      Agreement shall survive termination of this Agreement until such time as all
      Policies issued, underwritten, or serviced by Manager pursuant to this Agreement
      have expired and all known losses under such Policies have been paid or settled,
      have run off or otherwise have been disposed of in the judgment of Company,
      all
      incurred but not reported loss reserves have been reduced to zero, and any
      amounts owed to Company by others has been paid. The only compensation Manager
      shall receive for its performance of its duties hereunder (both during and
      after
      the term of this Agreement) is set forth in Section 4.

     

    
      
         

      

      
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    14.7                      Upon
      termination of the Agreement, Manager shall, unless notified in writing to
      the
      contrary by Company:

     

    a.           Continue
      to represent Company for the purpose of servicing Policies placed by Manager
      with Company which are in force on, or renewed at Company's election, or as
      required by law, after the date of termination of this Agreement, and Manager
      shall continue to receive its normal compensation for such
      services.

     

    b.           Issue
      and countersign appropriate endorsements on Policies in force, provided that
      without prior written approval of Company, such endorsement shall not increase
      nor extend Company's liability nor extend the term of any Policy.

     

    c.           Collect
      and receipt for premiums and retain commissions out of premiums collected as
      full compensation.

     

    14.8           Any
      notice issued pursuant to this Section shall be effective on the day after
      it is
      received by Manager.

     

    15.           Suspension
      of Manager's Authority.

     

    15.1  In
      lieu of terminating this Agreement, Company may give written notice to Manager
      that Company is immediately suspending Manager's authority in its entirety
      or in
      any particular state to bind new or renewal business, change any existing Policy
      and/or settle any claim during the pendency of any of the following
      events:

     

    a.           Manager
      is delinquent in payment of any monies due Company;

     

    b.           Any
      dispute exists between Manager and Company regarding the existence of any of
      the
      events listed in Section 14.2;

     

    15.2  Such
      suspension shall remain in effect until such delinquency is cured or dispute
      is
      resolved and Manager receives written notification from Company to that effect.
      If such delinquency is not cured within fifteen (15) days from the date of
      receipt of written notification by Manager of such delinquency, Company may
      exercise its right to terminate this Agreement under Section 14.2.

     

    15.3   Unless
      otherwise notified in writing to the contrary by Company, Manager's obligation
      under this Agreement shall continue during the suspension of Manager's authority
      under this Agreement.

     

    15.4   Any
      notice of suspension issued pursuant to this Section shall be effective
      immediately.

     

    16.           Ownership
      of Expirations.

     

    The
      use and control of expirations of
      the Policies will remain the property of Manager; and Company will not, without
      consent of Manager, (a) refer or communicate to any other agent or broker,
      Company’s records of insureds, expiration dates and other material information
      relating to specific risks except for loss or claims information specifically
      requested by the insured or the insured’s authorized representative nor (b) use
      such material information relating to specific risks for purposes of
      solicitation.

     

    
      
         

      

      
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    17.           Mediation;
      Arbitration and Injunctive Relief.

     

    17.1           If
      any dispute arises between Company and Manager with reference to the
      interpretation, performance, or breach of this Agreement (whether the dispute
      arises before or after termination of this Agreement) such dispute, if not
      resolved by the parties, must be submitted to non-binding
      mediation.  If such dispute is not resolved by non-binding mediation
      within sixty (60) days it will then be submitted for decision to a panel of
      three arbitrators.  Notice requesting arbitration will be in writing
      and sent certified or registered mail, return receipt requested.

     

    17.2           One
      arbitrator shall be chosen by each party and the two arbitrators shall, before
      instituting the hearing, choose an impartial third arbitrator who shall preside
      at the hearing.  If either party fails for any reason to appoint its
      arbitrator within thirty (30) days after being requested to do so by the other
      party, the latter, after ten (10) days notice by certified or registered mail
      of
      its intention to do so, may appoint the second arbitrator.  If the two
      arbitrators are unable to agree upon the third arbitrator within thirty (30)
      days of their appointment, the third arbitrator shall be selected from a list
      of
      six individuals (three named by each arbitrator) by a judge of the United States
      District Court having jurisdiction over the geographical area in which the
      arbitration is to take place, or if that court declines to act, the state court
      having general jurisdiction in such area.

     

    17.3           All
      arbitrators shall be active or retired disinterested officials of insurance
      or
      reinsurance companies not under the control or management of either party to
      this Agreement and will not have personal or financial interests in the result
      of the arbitration.

     

    17.4           Within
      thirty (30) days after notice of appointment of all arbitrators, the panel
      shall
      meet and determine timely periods for briefs, discovery procedures, and
      schedules for hearings.

     

    17.5           The
      panel shall be relieved of all judicial formality and shall not be bound by
      the
      strict rules of procedure and evidence.  Arbitration shall take place
      in New York, New York.  Insofar as the arbitration panel looks to
      substantive law, it shall consider the law of the State of New
      York.  The decision of any two arbitrators when rendered in writing
      shall be final and binding.  The panel is empowered to grant interim
      relief as it may deem appropriate.

     

    17.6           The
      panel shall interpret this Agreement as an honorable engagement rather than
      merely a legal obligation and shall make its decision considering the custom
      and
      practice of the applicable insurance and reinsurance businesses within sixty
      (60) days following the termination of the hearing unless the parties consent
      to
      an extension.  Judgment upon the award may be entered in any court
      having jurisdiction thereof.

     

    17.7           Punitive
      damages will not be awarded.  The arbitrators may, however, at their
      discretion award such other costs and expenses as they deem appropriate,
      including but not limited to attorneys' fees, the cost of arbitration, and
      arbitrators’ fees, to the extent permitted by law.

     

    
      
         

      

      
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    17.8           It
      is understood and agreed that in the event of any breach or threatened breach,
      Company may apply to a court of competent jurisdiction for, and shall be
      entitled to, injunctive relief from such court, without the requirement of
      posting a bond or proof of damages, designed to cure existing breaches and
      to
      prevent a future occurrence or threatened future occurrence of like breaches
      on
      the part of Manager.  It is further understood and agreed that the
      remedies and recourses herein provided shall be in addition to, and not in
      lieu
      of, any other remedy or recourse which is available to Company either at law
      or
      in equity in the absence of this paragraph including without limitation the
      right to damages.

     

    18.           Miscellaneous.

     

    18.1  This
      Agreement may be revised by mutual agreement of Manager and Company and such
      revision shall be evidenced by a written agreement duly executed by authorized
      representatives of Manager and Company, which specifies the effective date
      thereof. Any amendment to which section 1505 of the New York Insurance Laws
      is
      applicable shall be resubmitted to the Superintendent of Insurance in accordance
      with the provisions of that section.

     

    18.2  Manager
      shall not have authority to represent Company on any exclusive basis with
      respect to any policy form, line, or class or subclass of business, unless
      otherwise authorized in writing by Company.

     

    18.3  Manager
      shall not commit Company to any expenses or obligations not specifically
      provided for herein without the prior written permission of
      Company.  Company shall reimburse Manager for expenses and costs
      incurred by Manager which are not in the ordinary course of business and which
      Company has specifically approved.

     

    18.4  Company
      shall have the right to oversee and supervise the operation of this Agreement,
      including but not limited to the right at all reasonable times to have access
      to
      and to copy at Company's expense Manager's books and records as they relate
      to
      this Agreement, which rights shall survive the termination or expiration of
      this
      Agreement. The director or commissioner of insurance of any state where Manager
      issues Policies on behalf of Company shall have at all reasonable times the
      right of access to all books, records, and bank account of Manager in a form
      usable by such official.

     

    18.5  During
      the term of this Agreement, Manager shall obtain and maintain in full force
      and
      effect, at its expense, fidelity insurance with a minimum policy limit of
      $1,000,000, errors and omissions insurance with a minimum policy limit of
      $2,000,000, directors and officers insurance with a minimum policy limit of
      $2,000,000, and general liability insurance with a minimum policy limit of
      $1,000,000 and on such terms as are reasonably acceptable to
      Company.  Manager shall furnish Company with copies of the
      certificates of insurance for such insurance, and shall not cancel or amend
      any
      such insurance without Company's prior written consent.

     

    18.6  Manager
      shall provide to Company, copies of its quarterly financial reports and annual
      audited financial reports.

     

    
      
         

      

      
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    18.7  If
      Manager fails in any respect to fulfill its duties and responsibilities under
      this Agreement, then the expense incurred by Company in order to fulfill
      Manager's duties and responsibilities under this Agreement will be fully
      reimbursed by Manager.

     

    18.8  This
      Agreement may not be directly or indirectly assigned by either party in whole
      or
      in part, nor may Manager appoint a sub managing general Manager.

     

    18.9  Any
      provision of this Agreement which conflicts with applicable law or regulation
      will be amended to the minimum extent necessary to effectuate compliance with
      such law or regulation.

     

    18.10  Manager
      is an independent contractor, not an employee of Company, and nothing in this
      Agreement shall be construed to create an employer/employee relationship between
      Company and Manager.

     

    18.11  This
      Agreement shall be construed in accordance with the laws of the State of New
      York.

     

    18.12  Neither
      Company nor Manager shall disclose material details of this Agreement and the
      Policies without the prior consent of the other party.  However, this
      restriction will not apply to disclosures made by Company or Manager to its
      agents, producers, shareholders, policyholders, auditors, accountants,
      arbitrators, legal counsel, or other third parties as required in the ordinary
      course of business, nor to disclosures required by arbitration panels,
      governmental agencies, regulatory authorities, or courts of law.

     

    18.13  Failure
      of either party to enforce compliance with any term or condition of this
      Agreement shall not constitute a waiver of such term or condition.  No
      waiver of any breach or default hereunder shall be valid unless in writing
      and
      signed by the party giving such waiver, and no such waiver shall be deemed
      a
      waiver of any subsequent breach or default of the same or similar
      nature.

     

    18.14  Manager
      acknowledges and agrees that it will benefit from this Agreement and that a
      breach by it of the covenants contained herein would cause Company irreparable
      damages that could not adequately be compensated for only by monetary
      compensation.  Manager shall notify Company in writing via electronic,
      certified or registered mail, within five (5) days if there is a change in
      ownership of ten percent (10%) or more of the outstanding voting stock of
      Manager, sale or transfer of all Manager's assets, merger of Manager, or change
      of any principal officer or director of Manager including, but not limited
      to,
      resignation.

     

    18.15  Any
      notice or other communications required or permitted hereunder shall be
      sufficiently given if sent by electronic, certified or registered mail, postage
      prepaid, if to Company, addressed to Tower Risk Management Corp., 120 Broadway,
      31st Floor, New York, New York, 10271, Attention: Stephen Kibblehouse, General
      Counsel, and if to Company addressed to CastlePoint Insurance Company., 120
      Broadway, 30th Floor, New York, NY 10271, Attention: General Counsel or such
      other address as notified by either party to the other.

     

    18.16  Notwithstanding
      any other provisions of this Agreement, the business and affairs of Company
      shall be managed by its board of directors, and, to the extent delegated by
      the
      board, by its appropriately authorized officers. The board of directors and
      officers of Manager shall not have any management prerogatives with respect
      to
      the business affairs and operations of the Company.

     

    
      
         

      

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

     

    
      	 	
              TOWER
                RISK MANAGEMENT CORP.

            	 
	 	 	 
	 	
              /s/
                Francis M. Colalucci

            	 
	 	
              Name:
                Francis M. Colalucci

            	 
	 	
              Title:
                Senior Vice President &

              Chief
                Financial
                Officer

            	 


    

    


    


    
      	 	
              CASTLEPOINT
                INSURANCE COMPANY

            	 
	 	 	 
	 	
              /s/
                Joel S. Weiner

            	 
	 	
              Name:
                Joel S. Weiner

            	 
	 	
              Title:
                Senior Vice President &

              Chief
                Financial
                Officer

            	 


    

     

    
      
         

      

      
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    EXHIBIT
      A

     

    SCHEDULE
      OF AUTHORITY

     

    Manager
      is only authorized to accept or bind business, as defined in Section A below,
      subject to the amounts and stipulations indicated below.  Amounts in
      excess of the authorized limits or classifications must be referred to Company
      for review and approval prior to binding.

     

    A.           GROSS
      NET WRITTEN PREMIUM LIMIT.   A maximum of
      $100,000,000 unless Manager obtains the prior written consent of
      Company.  Gross Net Written Premium shall mean gross written premium
      of Company less returned premium for cancellations and reductions.

     

    B.           POLICY
      LIMITS, COVERAGE CLASSIFICATIONS AND MAXIMUM NET LINES (after treaty and
      facultative reinsurance).

     

    


     

    
      	
              Coverage

            	
              Limit

            	
              Maximum
                Net Lines

            
	
              Property

              (including
                Equipment Breakdown)

            	
              $50
                Million or TBA

            	
              $1
                Million per risk/per occurrence

            
	
              General
                Liability and Auto Liability

            	
              $1
                Million per Occurrence / $2 Million Aggregate

            	
              $1
                Million per occurrence

            
	
              Workers’
                Compensation

              Employer’s
                Liability

            	
              Statutory

              $1
                Million

            	
              $1
                Million per occurrence

            
	
              Excess
                and Umbrella Liability

            	
              $10
                Million

            	
              $250,000
                per occurrence

            


    

    


     

    The
      above coverages are provided on ISO forms and on certain independent manuscript
      forms to be agreed.

     

    Other
      classifications of insurance may be written on Company's insurance policies
      subject to Company’s prior approval.

     

    C.           TERRITORIAL
      LIMITATIONS.   Manager shall not issue any policy in
      any jurisdiction other than the authorized states defined as those states in
      which Company is licensed and has filed and approved rates and
      policies.  Company at its own discretion may limit or revoke Manager's
      authority as regards any particular state.

     

    
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