EX-10.59



 





EXHIBIT 10.59




SERVICE AGREEMENT



This (“Agreement”) is entered into as of May 1, 2007 by and between Tower Risk Management
Corp.(“TRM”), a company domiciled in New York with offices located at 120 Broadway, New York, N.Y.
10271 and CastlePoint Management Corp. (“CPM”), a Delaware corporation with offices located at 120
Broadway, New York, N.Y. 10271.




RECITALS




     WHEREAS, TRM plans to underwrite and manage certain business on behalf of CastlePoint
Insurance Company (“CPIC”) pursuant to a Management Agreement between TRM and CPIC;



     WHEREAS, CPM plans to underwrite and manage certain business on behalf of Tower Group, Inc.’s
insurance subsidiaries; and



     WHEREAS, TRM and CPM are desirous of entering into an agreement whereby TRM and CPM provide
services to each other at each other’s request as well as sharing any profits and losses from
rendering services to third parties; and



     NOW THEREFORE, in consideration of the mutual agreements described in this Agreement, TRM and
CPM agree as follows:



ARTICLE 1 – PERFORMANCE OF SERVICES 




	 	 	 
	1.01

	 	TRM and CPM agree to provide to each other, at each other’s request, various insurance
companies services (as may be set forth in the attached schedules) at terms and conditions set
forth herein.






ARTICLE 2 – COMPENSATION 




	 	 	 
	2.01

	 	Any compensation paid by CPM to TRM and by TRM to CPM for services rendered hereunder shall
be as agreed by the parties on a case by case basis. CPM and TRM agree that such compensation
or fees shall be competitive with prevailing local market rates.
	 
	 	 
	2.02

	 	With respect to claims services, to the extent such services are provided by either company
to the other, each agrees to pay for the allocated loss adjustment expenses incurred by the
servicing company in adjusting and defending claims on the hourly billing rate to be
established by the companies. TRM and CPM agree to utilize the same billing rate or method of
payment established to allocate or assign unallocated expenses to adjust and defend claims.
	 
	 	 
	2.03

	 	Settlement of Accounts
	 
	 	 
	 

	 	Each company shall submit to the other within thirty (30) days of the end of each calendar
quarter a detailed written estimate of the amount owed for services and the use of
facilities pursuant to this Agreement in that calendar month, and each company shall pay to
the other within fifteen (15) days following receipt of such estimate the amount set forth
in the estimate.






 









 






	 	 	 
	2.04

	 	Profit Sharing 

	 

	 	Where CPM and TRM both participated in providing services to third
parties, CPM and TRM agree to share any profits and losses realized
in proportion to their respective participation.






ARTICLE 3 – TERM, INDEPENDENCE AND TERMINATION




	 	 	 
	3.01

	 	Term
	 
	 	 
	 

	 	The term of this Agreement will begin on the date of this Agreement and will continue until
terminated by one of parties.
	 
	 	 
	3.02

	 	Independence
	 
	 	 
	 

	 	Services and facilities shall be provided to CPM by TRM at the request of CPM and to TRM by
CPM at the request of TRM, but the requested party shall provide such services and
facilities only to the extent that such arrangements do not impede either company’s business
or operations.
	 
	 	 
	 

	 	TRM and CPM shall act hereunder so as to assure the separateness of their respective
operating identities. Books and records shall be maintained separately for each party for
services provided by this Service Agreement.
	 
	 	 
	3.03

	 	Termination







	 	(a)	 	This Agreement may be terminated at any time by the mutual agreement of the
parties, or by either party for any of the following reasons:






	 	(1)	 	Immediately by either party in the event of bankruptcy, insolvency,
liquidation or assignment for the benefit of creditors by the other party;
	 
	 	(2)	 	Upon sixty (60) days written notice by either party in the event of
any material change in the ownership or control of the other party;
	 
	 	(3)	 	Immediately by either party in the event any law or regulation of a
federal, state or local government has rendered this Agreement illegal, but only
insofar as that law or regulation applies to this Agreement;
	 
	 	(4)	 	Immediately by either party in the event of fraud, abandonment,
gross or willful misconduct, insolvency, or lack of legal capacity to act on the
part of either party;
	 
	 	(5)	 	Upon sixty (60) days written notice by either party in the
event of default in any material term of this Agreement, unless the default is
cured prior to the end of the end of the sixty (60) day period.






	 	(b)	 	In the event of termination of this Agreement:






	 	(1)	 	TRM and CPM shall promptly cease performing any services being
provided under this agreement;
	 
	 
	 	(2)	 	Neither party shall have any claim against the other for loss of
prospective profits or fees or damage to business arising there from;
	 
	 
	 	(3)	 	Notwithstanding the termination of this Agreement, TRM and CPM
shall continue to perform such services under this Agreement in settlement of
accounts




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	 	 	 	or winding up of affairs between TRM and CPM if so requested by either party.
	 
	 	(4)	 	Notwithstanding the termination of this Agreement, TRM or CPM shall
continue to provide the claims and legal defense under this Agreement with
respect to all claims reported to either prior to the effective date of any
termination in accordance with the terms of this Agreement. In consideration for
performing its services as set forth herein, CPM and TRM will continue to
compensate each other in the manner set forth in Article 2 of this Agreement. In
the event either company assumes the handling of their own claims after
termination, each party agrees to cooperate with and instruct its respective
employees to cooperate in such transition.





ARTICLE 4 – MAINTENANCE CONTROL AND OWNERSHIP OF RECORDS




	 	 	 
	4.01
 

	 	Maintenance of Records
	 
	 	 
	 

	 	TRM and CPM will each maintain all appropriate records, files, ledgers and reports so as to
accurately reflect at all times the financial transactions with one another.
	 
	 	 
	4.02

	 	Ownership of Records







	 	(a)	 	All books, records, and files established and maintained by TRM or CPM by
reason of its performance under this Agreement which, absent this Agreement, would have
been held by TRM or CPM respectively shall (i) be deemed the joint property of each
party, (ii) be maintained in accordance with all other applicable law and regulation
and (iii) be subject to examination at all times by CPM or TRM and persons authorized
by it or any governmental agency having jurisdiction over CPM or TRM, if any.
	 
	 	(b)	 	Except s set forth in (a) above, each party is the owner of all records related
to its company regardless of in whose possession those records may be at any time.





ARTICLE 5 – GENERAL REQUIREMENTS




	 	 	 
	5.01

	 	TRM’s and CPM’s General Duties
	 

	 	TRM and CPM are responsible to perform the duties assumed under this Agreement in accordance
with standard procedures for the performance of such duties, which exist in the insurance
industry in the United States.






ARTICLE 6 – MISCELLANEOUS 




	 	 	 
	6.01

	 	Notices
	 

	 	All notice requirements and other communications indicated shall be deemed given when
personally delivered or on the third succeeding business day after being mailed by
registered or certified mail, return receipt requested, to the appropriate party at its
address below or at such other address as shall be specified by notice given hereunder.
	 
	 	 






	 	 	 	 	 
	 

	 	CPM:
	 	CastlePoint Management Corp.
	 

	 	 	 	120 Broadway, 30th Floor
	 

	 	 	 	New York, NY 10271
	 

	 	 	 	Attn: General Counsel






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	 	TRM:
	 	Tower Risk Management Corp.
	 

	 	 	 	120 Broadway, 31st Floor
	 

	 	 	 	New York, NY 10271
	 

	 	 	 	Attn: General Counsel






	 	 	 
	6.02

	 	Binding Effect and Assignment
	 
	 	 
	 

	 	This Agreement shall be binding upon and inure to the benefit of the parties hereto and
their respective heirs, representatives, successors and assigns. This Agreement may not be
assigned without mutual consent of the parties.
	 
	 	 
	6.03

	 	Amendment
	 
	 	 
	 

	 	This Agreement may not be amended, altered or modified except in writing signed by the party
against whom enforcement or any waiver, change, discharge, alternation or modification is
sought.
	 
	 	 
	6.04

	 	Invalidity
	 
	 	 
	 

	 	The invalidity of any provision of this Agreement shall not affect the validity of the
remainder of any such provision or the remaining provisions of this Agreement.
	 
	 	 
	6.05

	 	Interpretation
	 
	 	 
	 

	 	The article, section and paragraph headings included in this Agreement have been used solely
for convenience and shall not be used in the interpretation of this Agreement. References to
articles, sections and paragraphs shall refer to such provisions in this Agreement unless
otherwise stated.
	 
	 	 
	6.06

	 	Waiver
	 
	 	 
	 

	 	The failure of either party at any time to require performance by the other party of any
provision of this Agreement shall not be deemed a continuing waiver of that provision or a
waiver of any other provision of this Agreement and shall in no way affect the full right to
require such performance from the other party at any time thereafter.
	 
	 	 
	6.07

	 	Severability
	 
	 	 
	 

	 	This Agreement and the transaction contemplated herein constitute one transaction and shall
not be divisible in any manner. A breach of any portion of this Agreement shall be deemed a
breach of the whole Agreement.
	 
	 	 
	6.08

	 	Counterparts
	 
	 	 
	 

	 	If photocopies or duplicates of the original of this Agreement are signed by both parties,
then each such originally signed document shall be deemed to be an original of this
Agreement.
	 
	 	 
	6.09

	 	Indemnification
	 
	 	 
	 

	 	Each of CPM and TRM shall hold harmless and defend and indemnify the other party against any
expenses, damages, liability, action, cost or other claims, including attorney fees arising
out of the other party’s material breach of any duty or obligation hereunder or any claims
made against a party relating to, or arising out of, the other party’s willful misconduct or
gross negligence in






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	 	performing, or in failing to perform, services hereunder.
	 
	 	 
	6.10

	 	Arbitration
	 
	 	 
	 

	 	Any dispute or difference between CPM and TRM relating to the interpretation or performance
of this Agreement, including its formation or validity, or any transaction under this
Agreement, whether arising before or after termination, shall be submitted to arbitration.
	 
	 	 
	 

	 	Upon written request of any party, each party shall choose an arbitrator and the two chosen
shall select a third arbitrator. If either party refuses or neglects to appoint an
arbitrator within 30 days after receipt of the written request for arbitration, the
requesting party may appoint a second arbitrator. If the two arbitrators fail to agree on
the selection of a third arbitrator within 30 days of their appointment, each of them shall
nominate three individuals, of whom the other shall decline two. The third arbitrator shall
be chosen by lots from the two remaining nominees.
	 
	 	 
	 

	 	The parties hereby waive all objections to the selection of the arbitrators, provided they
are selecting in conformity with this paragraph 6.10.
	 
	 	 
	 

	 	All arbitrators shall be active or retired officers of insurance or reinsurance companies,
or Lloyd’s of London underwriters, and disinterested in the outcome of the arbitration. Each
party shall submit its case to the arbitrators within 30 days of the appointment of the
third arbitrator.
	 
	 	 
	 

	 	The arbitrators shall have the power to determine all procedural rules for the holding of
the arbitration including but not limited to inspection of documents, examination of
witnesses and any other matter relating to the conduct of the arbitration. The arbitrators
shall interpret this Agreement as an honorable engagement and not as merely a legal
obligation; they are relieved of all judicial formalities and may abstain from following the
strict rules of law. The arbitrators may award interest and costs. Each party shall bear the
expense of its own arbitrator and shall share equally with the other party the expense of
the third arbitrator and of the arbitration.
	 
	 	 
	6.11

	 	Governing Law
	 
	 	 
	 

	 	This Agreement shall be interpreted according to the laws of the state of Delaware,
excluding its conflict of laws provisions.





[Signature page follows]




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




	 	 	 	 	 	 	 
	 	 	Tower Risk Management Corp.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Francis Colalucci	 	 
	 

	 	 	 	 

Francis Colalucci, SVP and CFO
	 	 
	 
	 	 	 	 	 	 
	 	 	CastlePoint Management Corp.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Joel Weiner	 	 
	 

	 	 	 	 

Joel Weiner, SVP and CFO
	 	 







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