EXHIBIT 10.49


 


SERVICE AND EXPENSE SHARING AGREEMENT


 


This (“Agreement”) is entered into as of January 1, 2007 by and between
Tower Insurance Company of New York (“TICNY”), a property and casualty
insurance 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, TICNY and CPM
entered into a Service and Expense Sharing 
Agreement dated April 4, 2006, but now find it advisable to amend and
restate such agreement; and


 


WHEREAS, CPM has acquired a property/casualty company named CastlePoint
Insurance Company (“CPIC”) and plans to acquire one or more additional property
and casualty insurance companies (not yet identified): and


 


WHEREAS, TICNY plans to underwrite Brokerage Business, on behalf of
itself and CPIC; and


 


WHEREAS, CPM plans to manage Specialty Program Business and Insurance
Risk Sharing Business and Traditional Program Business on behalf of TICNY
pursuant to a Program Management Agreement between CPM and TICNY; and


 


WHEREAS, CPIC plans to underwrite Specialty Program Business and
Insurance Risk Sharing Business and Traditional Program Business on behalf of
itself and underwrite Specialty Program Business and Insurance Risk Sharing
Business and Traditional Program Business (on behalf of and through TICNY); and


 


WHEREAS, TICNY and CPM are desirous of entering into an agreement
whereby CPM provides services to TICNY at its request (other than services
provided in its respective role as the manager of the Traditional Program
Business and Specialty Program Business and Insurance Risk Sharing Business)
and to provide a method for charging those expenses relating to services as
well as sharing any profits and losses from rendering services to third parties;


 


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


 


ARTICLE 1 – PERFORMANCE OF SERVICES 


 


1.01                           In addition to the services that CPM
or CPIC may provide to TICNY in managing the Specialty Program Business and
Insurance Risk Sharing Business and Traditional Program Business, CPM shall, if
requested, provide various insurance companies services to TICNY on the terms
and conditions set forth herein. The services provided shall be:


 


•      Underwriting and marketing services


•      State filing and regulatory compliance services


•      Loss prevention and premium audit services


 

















 


The
services provided to TICNY shall be based upon the written criteria, standards
and guidelines of TICNY, which shall have the ultimate and final authority over
decisions and policies.


 


ARTICLE 2 – COMPENSATION 


 


2.01                           The services provided to
TICNY shall be at cost, which shall be apportioned on a fair and equitable
basis utilizing estimates based on time, number of employees, company assets,
or any other mutually agreeable method providing for a fair and reasonable
allocation, provided such method is in conformity with generally accepted
accounting principles and within the requirements of section 1505 of the New York
Insurance Laws and the New York State Insurance Department Regulation 30.


 


2.02                           Expenses for the services rendered by CPM to TICNY shall be allocated
and reported in accordance with NY Department’s Regulation 30 and any other
applicable regulation.


 


2.03                           Settlement of Accounts


 


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


 


(b)         Within
thirty (30) days of the end of each calendar quarter, CPM shall submit to TICNY
a detailed written statement of the amount owed for services and the use of the
facilities for that calendar quarter with a true-up of the monthly estimates
and TICNY shall pay to CPM within fifteen (15) days following receipt of such
written statement the amount set forth in the statement.


 


ARTICLE 3 – TERM, SUSPENSION AND TERMINATION


 


3.01         Original
Term


 


The term of this Agreement will begin on the date of this Agreement and
will continue for a period of four (4) years, after which this Agreement will
terminate unless the parties agree to extend the term of this Agreement. This
Agreement may be terminated at any time by mutual consent of both parties, by
either party upon sixty (60) days written notice to the other party, or upon the
placement of TICNY or CPM into rehabilitation or liquidation by regulatory
authorities or upon the declaration of bankruptcy of either company.


 


3.02         Agreement


 


Services and facilities shall be provided to TICNY by CPM only to the
extent that such arrangements do not impede either company’s business or
operations.


 


TICNY 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 Agreement.


 


This Agreement may not be assigned, terminated or amended by either
party without the prior written consent of the New York Superintendent and any
other regulatory body required to provide such consent.


 


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3.03                           Rights Regarding 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)                      CPM shall promptly cease performing
any services called for 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, CPM shall continue to perform such services under this
Agreement in settlement of accounts or winding up of affairs between TICNY and
CPM if so requested by TICNY. Expenses for the services rendered by CPM shall
be allocated in accordance with NY Department’s Regulation 30 and any other
applicable regulation;


 


ARTICLE 4 – MAINTENANCE, CONTROL AND OWNERSHIP OF RECORDS


 


4.01         Maintenance
of Records


 


TICNY
and CPM will 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


 


All books, records, and files established and
maintained by TICNY or CPM by reason of its performance under this Agreement
which, absent this Agreement, would have been held by TICNY or CPM respectively
shall (i) be deemed the joint property of each party, (ii) be 


 


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maintained in accordance with all other applicable law
and regulation and (iii) be subject to examination at all times by CPM or TICNY
and persons authorized by it or any governmental agency having jurisdiction
over CPM or TICNY.


 


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         CPM’s
General Duties


 


CPM is responsible to perform the duties assumed under this Agreement
in accordance with the standards it would apply for the performance of such
duties for itself.


 


5.02         Management
of TICNY


 


The business and affairs of TICNY, notwithstanding any other provision
of this agreement to the contrary, shall be managed by its board of directors,
and, to the extent delegated by the board of directors, by its appropriately
designated officers. The board of directors and officers of CPM shall not have
any management prerogatives with respect to the business affairs and operations
of TICNY.


 


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:
  Chief Financial Officer

  
	
   

  	
   

  	
   

  
	
  TICNY:

  	
   

  	
  Tower Insurance Company of New York

  
	
   

  	
   

  	
  120 Broadway, 31st Floor

  
	
   

  	
   

  	
  New York, NY 10271

  
	
   

  	
   

  	
  Attn:
  Chief Financial Officer

  



 


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, but such consent shall not be unreasonably withheld.


 


This paragraph may not be implemented without the prior approval of the State of New York,
Superintendent of Insurance.


 


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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


 


CPM
and TICNY 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 performing,
or in failing to perform, services hereunder.


 


6.10         Arbitration


 


Any
dispute or difference between CPM and TICNY 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 


 


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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 current
President of the National Association of Independent Insurers shall appoint the
third arbitrator from the two remaining nominees. All the arbitrators shall be
chosen from those submitted by the parties.


 


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. The arbitration shall
occur in the State of New York and the arbitrators shall apply the laws of the
State of New York.


 


6.11         Remittance reports are to be
furnished quarterly and settlement within 15 days of the receipt of such
reports. The report shall provide in reasonable detail the type and nature of
expenses.


 


6.12         This Agreement is entered into as of
the date hereof by the parties hereto, but implementation is subject in any
case to the satisfaction of applicable insurance regulatory requirements of New
York, including any conditions such a regulator may impose on the terms of this
Agreement subsequent to the date hereof.


 


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


 


	
   

  	
  Tower
  Insurance Company of New York

  
	
   

  	
   

  
	
   

  	
  By: 

  	
   /s/ Francis M. Colalucci

  	
   

  
	
   

  	
   

  	
   Francis M. Colalucci

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  CastlePoint Management Corp.

  
	
   

  	
   

  
	
   

  	
  By:

  	
      /s/ Joel S. Weiner

  	
   

  
	
   

  	
   

  	
   Joel S. Weiner

  



 


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