Exhibit 10.16
SERVICE AND EXPENSE SHARING AGREEMENT
This Service and Expense Sharing Agreement ("Agreement") is made this 28th day
of December, 1995, by and between Tower Insurance Company of New York ("Tower"),
and Tower Risk Management Corp. ("TRM").
RECITALS
WHEREAS, TRM has entered into agreements with various insurance
companies (the "Clients") to perform certain underwriting and claims
functions on behalf of those companies pursuant to the insurance laws
and regulations in the various jurisdictions where such insurance
companies are licensed;
WHEREAS, Tower is an insurance company licensed to underwrite certain
property and casualty insurance business in the State of New York;
WHEREAS, TRM and Tower would like to enter into an agreement as set
forth below to jointly share in the underwriting and claims expenses to
be expended by the respective parties by utilizing Tower's existing
facilities and staff;
NOW THEREFORE, in consideration of the mutual agreements described in
this Agreement, Tower and TRM agree as follows:
ARTICLE 1 - PERFORMANCE OF SERVICES
Tower and TRM agree that Tower will make its facilities and employees available
to TRM to perform services for its Clients as more fully described in this
Agreement. All the services provided to the Clients by Tower are to be based
upon the written criteria, standards and guidelines of each respective Client as
set forth in each Client's respective agreement with TRM.
Notwithstanding any other provision of this Agreement, it is understood that the
business affairs of each party shall be managed by its respective Board of
Directors, and, to the extent delegated by such Board, by its appropriately
designated officers.
ARTICLE 2 - DUTIES
2.01 Tower's Duties
In reference to the following duties, Tower will perform the following
functions in compliance with the written criteria, standards and
guidelines set forth by each Client in their respective agreements with
TRM:
A. Underwriting and marketing
B. Premium collection
C. State filing
D. Loss prevention
E. Claims
F. Legal defense
2.02 TRM's Duties
TRM will continue to perform all of the following functions:
A. Negotiate, secure and maintain agreements with TRM's Client
insurance companies.
B. Maintain of books and records and preparation of tax returns and
financial statements.
C. Handle all corporate, legal and regulatory matters other than state
filing.
TRM will perform all duties not itemized in Article 2.01. If Tower
performs duties on behalf of TRM's Clients other than those described
in paragraph 2.01, then TRM shall pay for such services in addition to
compensation set forth in Article 3 of this Agreement.
ARTICLE 3 - COMPENSATION
3.01 Fees
In consideration of the services rendered by Tower pursuant to this
Agreement, TRM will pay a fee to Tower in accordance with the following
formula:
A. Underwriting: The greater of 5% of gross premiums written by TRM, or
an amount equal to the following:
Total # of policies issued by TRM x Total Underwriting Cost
-----------------------------------------
Total # of policies issued by TRM & Tower
The Total Underwriting Cost is defined as all expenses which are
incurred by Tower to perform the duties itemized in paragraph 2.01 A
through D of this Agreement.
B. Claims:
Total billable hours charged to TRM Clients x Total Claims Cost
-------------------------------------------
Total Available Billable Hours
Total Claims Cost is defined as all expenses which are incurred by
Tower to perform the duties itemized in paragraph 2.01 E and F of
this Agreement. Available Billable Hours is defined as 2,000
multiplied by the number of employees performing the duties itemized
in paragraph 2.01 E and F of the agreement.
3.02 Time of Payment
The amount agreed upon as described in paragraph 3.01 will be payable
at the end of each calendar quarter.
ARTICLE 4 - TERM, SUSPENSION AND TERMINATION
4.01 Original Term
The term of this Agreement will begin on the date of this Agreement and
will continue through December 29, 1996 ("Original Term"). The term
will automatically be extended for successive five (5) year periods
thereafter, unless either party provides written notice 90 days prior
to the end of the original term or any extended term, as applicable,
that it does not wish to extend the term or this Agreement is
terminated pursuant to section 4.03.
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4.02 Suspension
TRM may suspend Tower's underwriting authority during the pendency of
any dispute regarding the cause for termination.
4.03 Rights Regarding Termination
A. This Agreement may be terminated at any time by the mutual agreement
of the parties for the following reasons:
(1) Immediately upon written notice by TRM in the event any of its
agreements with its Client is terminated;
(2) Immediately by both parties in the event of bankruptcy,
insolvency, liquidation or assignment for the benefit of
creditors by either party;
(3) Upon 60 days written notice by either party in the event of any
material change in the ownership or control of the other party.
(4) 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;
(5) 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.
(6) Upon 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) Tower shall promptly cease all solicitation and underwriting
activities provided for hereunder.
(2) Upon termination of this Agreement, neither party shall have
any claim against the other for loss of prospective profits or
fees or damage to business arising therefrom.
(3) Notwithstanding the termination of this Agreement, Tower shall
continue to perform the services described in Article 2.01 A
through D of this Agreement in settlement of accounts or
winding up of affairs between Tower and TRM if so requested by
TRM. In connection therewith, Tower shall perform these duties
without compensation until all the policies that are in force
at the date of the termination have been either terminated or
expired, whichever event occurs later. Thereafter, Tower agrees
to perform the aforementioned services for a fee to be agreed
upon between the parties if requested by TRM.
(4) Notwithstanding the termination of this Agreement, Tower shall
continue provide the claims and legal defense duties set forth
it paragraph 2.01 E and F of this Agreement with respect to all
claims reported to it 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,
TRM will continue to compensate Tower in the manner set forth
in Article 3 of this Agreement. In the event TRM takes over
handling of any or all outstanding claims after termination,
Tower agrees to cooperate with and instruct its employees to
cooperate with TRM in connection with TRM's handling of such
claims.
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ARTICLE 5 - MAINTENANCE, CONTROL AND OWNERSHIP OF RECORDS
5.01 Maintenance of Records
Tower will maintain all appropriate records, files, ledgers and reports
so as to accurately reflect at all times the financial transactions of
each Client in accordance with the written criteria, standards and
guidelines set forth in each Client's respective agreement with TRM.
5.02 Ownership of Records
Notwithstanding the terms of section 5.01, above, the use and control
of expirations, including those on a direct billed business, the
records thereof, and Tower's work product, shall be the sole property
of TRM. Ownership of all records of any kind relating to each Client,
including claim files, and disposition of same upon liquidation of a
Client shall be determined in accordance with the terms and conditions
of each Client's respective agreement with TRM.
ARTICLE 6 - GENERAL REQUIREMENTS OF TOWER
6.01 Tower's General Duties
Tower is 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.
6.02 Dealing with Third Parties
Tower shall be authorized to use TRM's letterhead and may act for, make
commitments on behalf of, and represent TRM and its Clients to any
third party, in the ordinary course of business and in fulfillment of
its obligations under this Agreement.
ARTICLE 7 - MISCELLANEOUS
7.01 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.
TRM: Tower Risk Management Corp.
000 Xxxxxxx Xxxxxx - 4th Fl.
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxx X. Xxx
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TOWER: Tower Insurance Company of New York
000 Xxxxxxx Xxxxxx - 4th Fl.
Xxx Xxxx, XX 00000
Attn: Xxxxxxx X. Xxx
7.02 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.
7.03 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.
7.04 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.
7.05 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.
7.06 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.
7.07 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.
7.08 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.
7.09 Indemnification
TRM and Tower 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.
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7.10 Arbitration
Any dispute or difference between TRM and Tower 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 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 7.10.
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.
Tower Insurance Company of New York
BY: /s/ Xxxxxxx X. Xxx
----------------------
Xxxxxxx X. Xxx, Pres.
Tower Risk Management Corp.
BY: /s/ Xxxxxxx X. Xxx
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Xxxxxxx X. Xxx, Pres.
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