Document:

Exhibit 10.1

 

Exhibit 10.1

Dated
31st
 August 2005

	 	 	 	 	 
	MMO EU LIMITED

	 	 	(1	)
	ROBERTSON GROUP LIMITED AND THE
	 	 	 	 
	EDINBURGH WOOLLEN MILL (GROUP) LIMITED

	 	 	(2	)
	 
	 	 	 	 
	NYMAGIC, INC.

	 	 	(3	)
	 
	 	 	 	 
	And
	 	 	 	 
	 
	 	 	 	 
	MMO UK LIMITED

	 	 	(4	)

 

SALE AND PURCHASE AGREEMENT

RELATING TO SHARES IN MMO UK

LIMITED

 

 

 

Contents

	 	 	 	 	 
	Clause	 	Page	 
	1 Interpretation 
	 	 	3	 
	 
	 	 	 	 
	2 Agreement to sell the Shares 
	 	 	6	 
	 
	 	 	 	 
	3 Consideration for the Shares 
	 	 	6	 
	 
	 	 	 	 
	4 Liability 
	 	 	6	 
	 
	 	 	 	 
	5 Completion 
	 	 	6	 
	 
	 	 	 	 
	6 Escrow Account 
	 	 	7	 
	 
	 	 	 	 
	7 Warranties 
	 	 	7	 
	 
	 	 	 	 
	8 Guarantee by NYMAGIC 
	 	 	9	 
	 
	 	 	 	 
	9 Conduct of Claims 
	 	 	10	 
	 
	 	 	 	 
	10 Undertakings 
	 	 	11	 
	 
	 	 	 	 
	11 Withholdings and Gross-up 
	 	 	12	 
	 
	 	 	 	 
	12 Miscellaneous 
	 	 	13	 
	 
	 	 	 	 
	Schedule 1 Warranties given by the Purchasers 
	 	 	15	 
	 
	 	 	 	 
	Schedule 2 Warranties 
	 	 	16	 
	 
	 	 	 	 
	Schedule 3 Relevant Proportions 
	 	 	21	 

 

 

THIS AGREEMENT is made on 31 August 2005 BETWEEN

	(1)	 	MMO EU LIMITED whose registered office at 51
Eastcheap, London EC3M 1JP (the “Seller”);
	 
	(2)	 	ROBERTSON GROUP LIMITED whose registered office is at 10 Perimeter Road, Pinefield
Industrial Estate, Elgin IV30 6AF; and THE EDINBURGH WOOLLEN MILL (GROUP) LIMITED
whose registered office is at Site A, Kingsmoor Park South Industrial Estate, Queens Drive,
Carlisle CA6 4SB (together the “Purchasers”);
	 
	(3)	 	NYMAGIC, INC a company incorporated under the laws of New York whose registered office is
at 919 Third Avenue, 10th Floor, New York, NY, United States 10022 (“NYMAGIC”);
and
	 
	(4)	 	MMO UK LIMITED whose registered office is at 51
Eastcheap, London EC3M 1JP (the
“Company”).

WHEREAS

	(A)	 	The Company is a limited liability company incorporated under the laws of England and Wales.
	 
	(B)	 	The Seller has agreed to sell all of the Shares that it owns to the Purchasers for the
consideration and upon the terms set out in this Agreement.

IT IS
AGREED:

	1	 	Interpretation
	 
	1.1	 	In this Agreement, including its Schedules, unless the context otherwise requires,
the following expressions shall have the following meanings:
	 
	 	 	“Accounts” means the audited report and financial statements of the Company for the
financial period ended on the Accounts Date;
	 
	 	 	“Accounts Date” means 31 December 2004;
	 
	 	 	“Business Day” means a day (other than a Saturday or Sunday or public holiday) on which
banks are open for business in London other than solely for the purposes of trading and
settlement in euro;
	 
	 	 	“Companies Act” means the Companies Act 1985 as amended;
	 
	 	 	“Completion” means the completion of the sale and purchase of the Shares in accordance with
clause 5;
	 
	 	 	“Completion Date” means the date of signing of this Agreement;

 

 

	 	 	“Debt” means the amount of money owed by the Company to NYMAGIC as set out in the Debt Repayment
Agreement;
	 
	 	 	“Debt Repayment Agreement” means an agreement of even date herewith between the Company and
NYMAGIC;
	 
	 	 	“Debt Repayment Side Letter” means a side letter of even date herewith between the Company, the
Seller, NYMAGIC and the Purchasers;
	 
	 	 	“Disclosure Letter” means the disclosure letter from the Seller to the Purchasers issued prior to
the signing of this Agreement together with all documents fairly disclosed and referred to and
incorporated therein and attached thereto;
	 
	 	 	“Encumbrance” means any claim, charge, mortgage, pledge, claim, right, interest, preference,
security, lien, option, equity, power of sale or hypothecation or any agreement to enter into any
of them or any other encumbrance or security interest of any kind;
	 
	 	 	“Funds at Lloyd’s” and “FAL” each have the meaning given to the term “funds at Lloyd’s” in the
Membership Byelaw (No 17 of 1993);
	 
	 	 	“holding company” means a holding company (as defined by section 736 and 736A of the Companies
Act) or a parent undertaking (as defined by section 258 of the Companies Act);
	 
	 	 	“ICTA” means the Income and Corporation Taxes Act 1988;
	 
	 	 	“Insolvency Proceedings” means dissolution, liquidation, administration, administrative
receivership, receivership, voluntary arrangement, scheme of arrangement with creditors, any
analogous or similar procedure in any jurisdiction, any form of procedure related to insolvency or
dissolution in any jurisdiction or the presentation of a petition or taking of any other step with
a view to any such procedure;
	 
	 	 	“Lloyd’s” means the Society incorporated by the Lloyd’s Act of 1871 by the name of Lloyd’s;
	 
	 	 	“Lloyd’s-MMO Agreement” means the deed of even date herewith between the Seller, NYMAGIC, the
Company and Lloyd’s in relation to the allocation of proceeds received by the Company in return for
the surrender of its losses by way of group relief to the Purchasers or companies within their
respective groups;
	 
	 	 	“Management Accounts” means the management accounts of the Company as at 31 July 2005 in the agreed
form (a copy of which is attached to the Disclosure Letter);
	 
	 	 	“MMO Group” means NYMAGIC and its subsidiaries;
	 
	 	 	“Parties” means the parties to this Agreement unless explicitly stated to be otherwise;

 

 

	 	 	“Purchase Price” means £2;
	 
	 	 	“Relevant Proportion” means in respect of each Purchaser the proportion set out next to its
name in Schedule 3;
	 
	 	 	“Relief has the meaning set out in the Taxation Deed;
	 
	 	 	“Shares” means the 2 issued ordinary shares of £1.00 each, being the entire issued share
capital of the Company;
	 
	 	 	“subsidiary” means a subsidiary (as defined by section 738 and 736A of the Companies Act)
or a subsidiary undertaking (as defined by section 258 of the Companies Act);
	 
	 	 	“Taxation” and “Tax” means

	 	(a)	 	all forms of tax, levy, duty, charge, impost, withholding or other amount
whenever
created or imposed and whether of the United Kingdom, Bermuda, the United States of
America or elsewhere, payable to or imposed by any Taxation Authority; and
	 
	 	(b)	 	all charges, interest, penalties and fines incidental or relating to any
Taxation falling
within (a) above or which arise as a result of the failure to pay any Taxation on
the due
date or to comply with any obligation relating to Taxation;

	 	 	“Taxation Authority” means the HM Revenue & Customs, or any other revenue, customs, fiscal,
governmental, statutory, state, provincial, local governmental or municipal authority, body
or person, whether of the United Kingdom, the United States of America or elsewhere;
	 
	 	 	“Taxation Deed” means the deed of even date herewith between NYMAGIC, the Seller, the
Company and the Purchasers in relation to the Company’s Tax affairs;
	 
	 	 	“Transaction Documents” means this Agreement, the Debt Repayment Agreement, the Debt
Repayment Side Letter, the Disclosure Letter, the Taxation Deed, the Lloyd’s-MMO Agreement
and any other agreement entered into pursuant to or in connection with this Agreement; and
	 
	 	 	“Warranties” means the warranties set out in Schedule 2.
	 
	1.2	 	References to this Agreement shall include any recitals and Schedules to it and any reference
to a clause or Schedule is a reference to a clause of or Schedule to this Agreement, unless
otherwise provided.
	 
	1.3	 	Any reference to any statute or statutory instrument shall include reference to any statutory
extensions, modification, amendment, consolidation or re-enactment of, and any subordinate
legislation made under, such statute provided that any such extension,
modification,

 

 

	 	 	amendment, consolidation or re-enactment or subordinate legislation does not impose on any
party any greater obligation than the obligation thereunder at the date hereof.
	 
	1.4	 	A person shall be deemed to be connected with another if that person is connected with such
other within the meaning of Section 839 of ICTA.
	 
	1.5	 	The terms “holding company” and “subsidiary” and “wholly-owned subsidiary” shall have
the same meanings in this Agreement as their respective definitions in the Companies Act
1985.
	 
	1.6	 	Headings are for convenience only and do not affect the interpretation of this Agreement.
	 
	1.7	 	The Interpretation Act 1978 shall apply to this Agreement in the same way as it applies to an
enactment.
	 
	1.8	 	References to the “Agreed Form” are to documents agreed by the Parties and initialled by or
on behalf of the Parties at or immediately before the signing of the Agreement.
	 
	2	 	Agreement to sell the Shares
	 
	 	 	Upon the terms and subject to the conditions of this Agreement, the Seller shall sell
with full title guarantee and each Purchaser shall purchase its Relevant Proportion of
the Shares free from all Encumbrances together with all rights and advantages now and
hereafter attaching thereto including, without limitation, the right to receive all
dividends, distributions or any return of capital declared, paid or made by the Company
in respect of the Shares after the date of this Agreement.
	 
	3	 	Consideration for the Shares
	 
	 	 	In consideration of the purchase of its Relevant Proportion of the Shares, each
Purchaser shall pay in cash on Completion its Relevant Proportion of the Purchase Price
to the Seller.
	 
	4	 	Liability
	 
	 	 	All obligations and liabilities of each of the Purchasers under this Agreement are
made or given on a several basis only as to their Relevant Proportions.
	 
	5	 	Completion
	 
	5.1	 	Completion of the sale and purchase of each Purchaser’s Relevant Proportion of the
Shares shall take place immediately after signing of this Agreement at the offices of Norton
Rose when:
	 
	5.1.1	 	NYMAGIC and the Seller shall enter into the Debt Repayment Side Letter confirming the
treatment of the remaining liabilities owed by the Company to NYMAGIC;

 

 

	5.1.2	 	the Taxation Deed shall be duly executed and delivered by NYMAGIC, the Purchasers, the
Seller and the Company;
	 
	5.1.3	 	the Seller shall deliver or procure to be delivered to each Purchaser, in respect of its Relevant
Proportion of the Shares, a duly executed transfer of that Relevant Proportion of the Shares in
favour of each such Purchaser respectively accompanied by a share certificate (or an express
indemnity in a form satisfactory to the Purchasers in the case of any certificate found to be
missing); and
	 
	5.1.4	 	each Purchaser shall pay their Relevant Proportion of the Purchase Price to the Seller.
	 
	6	 	Escrow Account
	 
	6.1	 	The Purchasers shall pay the Tax Loss Payments (as defined in the Taxation Deed) into the
Escrow Account (as defined in the Taxation Deed) in accordance with the Taxation Deed.
	 
	6.2	 	The Parties agree that they will instruct Norton Rose as holder of the Escrow Account in
accordance with the terms of the Taxation Deed and will procure that their instructions are
executed by Norton Rose as soon as is reasonably practicable.
	 
	6.3	 	The Parties agree that any funds in the Escrow Account from time to time are the property of
the Purchasers until the conditions for release of the funds pursuant to the terms of the Taxation
Deed are satisfied.
	 
	7	 	Warranties
	 
	7.1	 	Each of the Purchasers severally warrants to the Seller as at the date of this Agreement in the
terms set out in Schedule 1 to this Agreement.
	 
	7.2	 	The Seller and NYMAGIC jointly and severally warrant to each of the Purchasers as at the
date
of this Agreement in the terms set out in Part A of Schedule 2 to this Agreement and the Seller
warrants to each of the Purchasers as at the date of this Agreement in the terms set out in Part
B of Schedule 2 to this Agreement.
	 
	7.3	 	The Seller accepts that the Purchasers are entering into this Agreement in reliance upon each
of the Warranties.
	 
	7.4	 	Each of the Warranties shall be construed as a separate warranty and (save as expressly
provided to the contrary) shall not be limited or restricted by reference to or inference
from the
terms of any other Warranty or any other term of this Agreement.
	 
	7.5	 	Should any sum become payable in respect of a breach of Warranty in relation to the sale
of the
Shares it shall be payable by the Seller to the Purchasers according to their respective
Relevant
Proportion.

 

 

	7.6	 	The Purchasers shall not be entitled to recover any amount pursuant to this Agreement
in
respect of any claim to the extent that the Purchasers or the Company have already recovered
an amount in respect of such a claim under any of the Warranties or to the extent that recovery
has already been made under this Agreement or any of the other Transaction Documents in
respect of the same subject matter.
	 
	7.7	 	In relation to each Purchaser’s duty to mitigate any loss, such Purchaser shall not be in breach
of such duty to the extent that any step or action was taken or omitted to be taken or course of
conduct pursued or omitted to be pursued in compliance with any order, direction or mandatory
request of Lloyd’s or the Financial Services Authority (or, in either case, any replacement or
successor regulatory body).
	 
	7.8	 	If the Seller pays an amount in discharge of any claim under this Agreement and the
Purchasers or the Company subsequently recover (whether by payment, discount, credit, relief
or otherwise) from a third party a sum which is referable to the subject matter of the claim, the
Purchasers shall pay or procure payment to the Seller to the extent that they have not already
accounted to the Seller for such sum under one of the other provisions of this Agreement and
such sum has not been taken into account in quantifying any claim made by the Purchasers
under this Agreement an amount equal to (i) the sum recovered from the third party less any
reasonable costs and expenses incurred in obtaining such recovery or any Taxation payable in
respect thereof (or would have been payable but for the availability of any Relief) or (ii) if less,
the amount previously paid by the Seller to the Purchasers.
	 
	7.9	 	The Seller shall have no liability under or in relation to this Agreement if and to the extent that
the fact, event or circumstance giving rise thereto has been fully and fairly disclosed in
the
Disclosure Letter.
	 
	7.10	 	The Seller shall have no liability under or in relation to this Agreement:
	 
	7.10.1	 	unless notice in writing specifying full particulars and the amount of any claim is received
by the
Seller within two years from the date of this Agreement, other than in respect of
Taxation, in
which case the relevant period shall be seven years;
	 
	7.10.2	 	if such liability would not have arisen but for an act or omission carried out after the
date hereof
by the Purchasers or by the Company;
	 
	7.10.3	 	to the extent that such liability arises or that the amount thereof is increased as a result of any
change after the date hereof in the accounting reference date or in any of the accounting
or
actuarial policies, bases or practices of the Company except where such an adjustment is
necessary to bring the accounting and/or actuarial practices into line with UK GAAP and
standard actuarial practice as at the date of this Agreement; and

 

 

	7.10.4	 	in respect of any liability which is contingent only, unless and until such
contingent liability becomes an actual liability and is due and payable.
	 
	7.11	 	The Warranties shall not in any respect be extinguished or affected by
Completion.
	 
	8	 	Guarantee by NYMAGIC
	 
	8.1	 	NYMAGIC unconditionally and irrevocably guarantees to the Purchasers the due and punctual
performance of all the obligations and liabilities of the Seller under or otherwise arising out of or
in connection with this Agreement and the Debt Repayment Side Letter (as any of such
obligations and liabilities may from time to time be varied, extended, increased or replaced).
	 
	8.2	 	If any obligation or liability of the Seller expressed to be the subject of the guarantee contained
in this clause 8 (the “Seller’s Guarantee”) is not or ceases to be valid or enforceable against
the Seller (in whole or in part) on any ground whatsoever (including, but not limited to, any
defect in or want of powers of the Seller or irregular exercise of such powers, or any lack of
authority on the part of any person purporting to act on behalf of the Seller, or any legal or other
limitation, disability or incapacity, or any change in the constitution of, or any amalgamation or
reconstruction of the Seller, or the Seller taking steps to enter into or entering into bankruptcy,
liquidation, administration or insolvency, or any other step being taken by any person with a
view to any of those things), NYMAGIC, shall nevertheless be liable to the Purchasers in
respect of that purported obligation or liability as if the same were fully valid and enforceable
and NYMAGIC were the principal obligor in respect thereof.
	 
	8.3	 	The liability of NYMAGIC under the Seller’s Guarantee shall not be discharged or affected in
any way by:
	 
	8.3.1	 	the Purchasers compounding or entering into any compromise, settlement or arrangement with
the Seller or any other person; or
	 
	8.3.2	 	any variation, extension, increase, renewal, determination, release or replacement of this
Agreement, whether or not made with the consent or knowledge of NYMAGIC; or
	 
	8.3.3	 	the Purchasers granting any time, indulgence, concession, relief, discharge or release to the
Seller or any other person or realising, giving up, agreeing to any variation, renewal or
replacement of, releasing, abstaining from or delaying in taking advantage of or otherwise
dealing with any securities from or other rights or remedies which it may have against the Seller
or any other person; or
	 
	8.3.4	 	any other matter or thing which, but for this provision, might exonerate or affect the
enforceability of the Seller’s Guarantee.

 

 

	8.4	 	The Purchasers shall not be obliged to take any steps to enforce any rights or remedy
against
the Seller or any other person before enforcing the Seller’s Guarantee.
	 
	8.5	 	The Seller’s Guarantee is in addition to any other security or right now or hereafter available to
the Purchasers and is a continuing security notwithstanding entering into liquidation,
administration or insolvency or steps being taken by any person with a view to any of those
things or other incapacity of the Seller or NYMAGIC or any change in the ownership of either of
them.
	 
	8.6	 	Until the full and final discharge of all obligations and liabilities (both actual and contingent)
which are the subject of the Seller’s Guarantee, NYMAGIC:
	 
	8.6.1	 	waives all of its rights of subrogation, reimbursement and indemnity against the Seller and all
rights of contribution against any other person and agrees not to demand or accept any security
from the Seller or any other person in respect of any such rights and not to prove in competition
with the Purchasers in the bankruptcy, liquidation or insolvency of the Seller; and
	 
	8.6.2	 	agrees that it will not claim or enforce payment (whether directly or by set-off, counterclaim or
otherwise) of any amount which may be or has become due to NYMAGIC by the Seller or any
other person liable to the Purchaser in respect of the obligations hereby guaranteed if
and so
long as the Seller is in default under this Agreement provided this shall not apply to any
right of
NYMAGIC to receive any payments under the Lloyd’s-MMO Agreement.
	 
	8.7	 	Any moneys received by the Purchasers under the Seller’s Guarantee may be placed to the
credit of a suspense account with a view to preserving its rights to prove for the whole of its
claims against the Seller or any other person.
	 
	8.8	 	If the Seller’s Guarantee is discharged or released in consequence of any performance by the
Seller of the guaranteed obligations which are set aside for any reason, the Seller’s
Guarantee
shall be automatically reinstated in respect of the relevant obligations.
	 
	9	 	Conduct of Claims
	 
	9.1	 	If anything comes to the notice of the Purchasers by reason or in consequence of which
the Seller may be liable to make payment to the Purchasers pursuant to this Agreement under
the Warranties or clause 6:
	 
	9.1.1	 	the Purchasers shall procure that notice of such claim is given to the Seller within a
period of 20
Business Days following any Purchaser becoming aware of such matter;
	 
	9.1.2	 	without prejudice to the validity of the claim or alleged claim in question, the Purchasers shall
give all such material information and assistance, subject to being given reasonable
notice and
being paid all reasonable costs and expenses and subject to any existing confidentiality

 

 

	 	 	obligations of the Purchasers, access to premises and personnel and the right to examine
and copy or photograph any assets, accounts, documents and records, as the Seller or its
accountants or professional advisers may reasonably request and shall keep the Seller
informed of any developments, or documents received, in relation to such claim or alleged
claim; and
	 
	9.1.3	 	where the claim in question is as a result of or in connection with a claim by or
liability to a third party, the Purchasers:

	 	(a)	 	shall not make (or, as appropriate, procure that the Company shall
not make) any
admission of liability, agreement or compromise with any person, body or authority
in
relation to any such third party claim without the prior consent of the Seller
(such
consent not to be unreasonably withheld or delayed);
	 
	 	(b)	 	at their own discretion and upon receipt of a written request from
the Seller, shall allow
(or, as appropriate, shall procure that the Company shall allow) the Seller to be
placed
in a position to take on or take over the conduct of all proceedings, appeals
and/or
negotiations of whatsoever nature arising in connection with the claim in
question,
subject to being fully indemnified on an after-Tax basis to its reasonable
satisfaction by
the Seller against all reasonable out-of-pocket costs and expenses which it
incurs; and
	 
	 	(c)	 	as a consequence of clause 9.1.3 shall, at their own discretion,
give, subject to being
given reasonable notice by or on behalf of the Seller and being paid all reasonable
costs and expenses, all such information and assistance, including access to premises
and personnel, and the right to examine and copy or photograph any assets, accounts,
documents and records, for the purpose of avoiding, disputing, denying, defending,
resisting, appealing, compromising or contesting any such claim or liability as the Seller
or its professional advisers reasonably request, subject to any existing confidentiality
obligations of the Purchasers. The Seller agrees to keep all such information
confidential and only to use it for such purpose.

	10	 	Undertakings
	 
	10.1	 	Each Purchaser undertakes to the Seller that (save as required by law or a requirement having
the force of law) following Completion it will not (and will procure that the Company will not)
exercise any power or control or take any other step or action so as to procure:
	 
	10.2	 	the entry of the Company into Insolvency Proceedings; or
	 
	10.3	 	any action which may cause the Company to cease to be tax resident in the United Kingdom.
	 
	10.4	 	NYMAGIC (for itself and on behalf of the MMO Group) and the Seller jointly and severally
undertake and warrant to each of the Purchasers that, as at the date of this Agreement
the

 

 

	 	 	Company did not have any indebtedness outstanding to any party except as described in
the Debt Repayment Agreement and the Debt Repayment Side Letter and that other than in
respect of the business underwritten by the Company at Lloyd’s pursuant to its
participation on Syndicates 1265 and 2010 for the years of account 1998 to 2000 and 2001
respectively (which for the avoidance of doubt includes the Company’s liabilities to the
New Lloyd’s Central Fund) there are no liabilities actual or potential to any third
party or otherwise other than as disclosed in the Disclosure Letter.
	 
	11	 	Withholdings and Gross-up
	 
	11.1	 	All sums payable under this Agreement by the Seller shall be paid free and clear of all
deductions or Withholdings whatsoever, save only as may be required by law.
	 
	11.2	 	If, at any time, any applicable law, regulation or regulatory requirement requires the Seller to
make any deduction or withholding from any sums payable under this Agreement, the amount
so due shall be increased to the extent necessary to ensure that, after the making of such
deduction or withholding, the recipient of that payment receives, on the due date for such
payment, a net sum equal to the sum which it would have received had no such deduction or
withholding been required to be made.
	 
	11.3	 	If the Seller is required by law to make any deduction or withholding as referred to in clause
11.2, the Seller shall:
	 
	11.3.1	 	make such deduction or withholding; and
	 
	11.3.2	 	pay the full amount deducted or withheld to the relevant Taxation Authority in accordance with
applicable law, regulation or regulatory requirement.
	 
	11.4	 	If any amount paid or due to the Purchasers (in this clause 11.4, the “recipients”)
hereunder is
subject to Taxation, or would (but for the availability of any Relief) be subject to Taxation, in the
hands of the recipients, then the amount so paid or due (in this clause 11.4, “the net amount”)
shall be increased to an amount (in this clause 11.4, “the grossed-up payment”) which (after
subtraction of the amount of any Taxation which the grossed-up payment is subject to, or would,
but for the availability of any Relief, be subject to) shall equal the net amount, provided that if
any amount is initially paid on the basis that the amount due is not subject to Taxation in the
hands of the recipients or vice versa and it is subsequently determined that it is or that it is not,
such additional amounts shall be paid to or by the recipients as shall place the recipients in the
same after-tax position as they would have been in if the amount due had not been taxable in
the hands of the recipients.
	 
	11.5	 	If, at any time after any increased payment is made by the Seller as a consequence of the
application of clause 11.4, the Purchasers receive or are granted a credit against or
remission
from any Taxation payable by them which they would not otherwise have received or been

 

 

	 	 	granted, the Purchasers shall in their Relevant Proportions, to the extent that they can
do so without prejudicing the retention of the amount of such credit or remission,
reimburse the Seller with such amount as shall leave the Purchasers (after such
reimbursement) in no worse a position than they would have been in had the circumstances
giving rise to the increased payment not in fact arisen. Such reimbursement shall be made
not later than twenty Business Days after the Purchasers receive or are granted such
credit.
	 
	12	 	Miscellaneous
	 
	12.1	 	No variation of this Agreement shall be effective unless in writing and signed by or on
behalf of
each of the Parties to this Agreement.
	 
	12.2	 	Any time, date or period referred to in any provision of this Agreement may be extended by
agreement between all the relevant Parties.
	 
	12.3	 	Any notice or other communication required to be given or served under or in connection with
this Agreement shall be in writing and shall be sufficiently given or served if delivered or sent to
the Company Secretary at the Registered Office of the Party (and in the case of the Company
any notice should also be sent to the Purchasers).
	 
	12.4	 	Any such notice or other communication shall be delivered by hand or sent by courier, or
prepaid first class post or by facsimile. If sent by courier such notice or communication shall
conclusively be deemed to have been given or served at the time of despatch, in case of
service in the United Kingdom, or on the following Business Day in the case of international
service. If sent by post such notice or communication shall conclusively be deemed to have
been received two Business Days from the time of posting, in the case of inland mail in the
United Kingdom or three Business Days from the time of posting in the case of international
mail. If sent by facsimile, such notice or communication shall conclusively be deemed to have
been received at the time of sending provided that the sending of such facsimile is confirmed by
telephone by the sender and receipt of the facsimile is acknowledged by the recipient.
	 
	12.5	 	If any term or provision in this Agreement is held to be illegal or unenforceable, in whole or in
part, under any enactment or rule of law, such term or provision or part shall to that extent be
deemed not to form part of this Agreement but the enforceability of the remainder of this
Agreement shall not be affected.
	 
	12.6	 	The Parties shall and shall procure that their affiliates shall keep strictly confidential details of
the transaction contemplated by this Agreement or any ancillary matter and no announcement
concerning the same shall be made either before or after Completion by any party without
the
prior written approval of all the others except as may be required by statute or by any
securities
exchange or regulatory or governmental body to which any party is subject or submits
wherever
situated, including (without limitation) Lloyd’s, the UK Listing Authority, The London
Stock

 

 

	 	 	Exchange or The Panel on Takeovers and Mergers whether or not the requirement has the
force of law.
	 
	12.7	 	The Parties shall from time to time and at all times after
Completion execute all such deeds
and
documents and do all such things as another party may reasonably require for perfecting the
transactions intended to be effected under or pursuant to this Agreement and for vesting in
another party the full benefit of the Shares.
	 
	12.8	 	This Agreement may be executed in any number of counterparts each of which shall be
deemed an original, but all the counterparts shall together constitute one and the same
instrument.
	 
	12.9	 	This Agreement and the documents to be entered into pursuant to it, save as expressly referred
to therein, shall be governed by and construed in accordance with English law and the
Parties
irrevocably submit to the exclusive jurisdiction of the courts of England to settle any
disputes
which may arise out of or in connection with this Agreement and such documents. NYMAGIC
irrevocably appoints Clyde & Co of 51 Eastcheap, London EC3M 1JP (ref: AH 0515580) to
accept service of any proceedings issued by the courts of England.
	 
	12.10	 	The Parties to this agreement do not intend that any term of this Agreement should be
enforceable, by virtue of the Contracts (Rights of Third Parties) Act 1999, by any person who is
not a party to this Agreement.
	 
	12.11	 	This Agreement and the other Transaction Documents except the Lloyds-MMO Agreement are
personal to the Parties and accordingly no Party shall assign, transfer, charge or declare a trust
of the benefit of all or any of any other Party’s obligations nor any benefit arising under this
Agreement or any other such Transaction Document.
	 
	12.12	 	This Agreement and the other Transaction Documents contain the whole agreement between
the Parties relating to the subject matter of this Agreement at the date hereof to the exclusion of
any terms implied by law which may be excluded by contract. Each of the Purchasers, the
Seller and NYMAGIC acknowledge that they have not been induced to enter into this
Agreement by the other, and so far as is permitted by law and except in the case of fraud,
hereby waive any remedy in respect of, any warranties, representations and undertakings not
incorporated into this Agreement.
	 
	12.13	 	Each Party to this Agreement confirms it has received independent legal advice relating to all
the matters provided for in this Agreement and the Transaction Documents, including the
provisions of this clause, and agrees having considered the terms of this clause and the
Agreement as a whole, that the provisions of this clause are fair and reasonable.
	 
	 	 	IN WITNESS whereof the Agreement has been entered into the day and year first above
written.

 

 

Schedule 1

Warranties given by the Purchasers

	1	 	Authority and capacity of the Purchasers
	 
	1.1	 	Each of the Purchasers severally warrants that it has the legal right and full power and
authority to enter into and perform this Agreement and the Transaction Documents each of
which when executed will constitute a valid and binding obligation.
	 
	1.2	 	Each of the Purchasers severally warrants that the execution and delivery of, and the
performance of their respective obligations under this Agreement and the Transaction
Documents will not result in a breach of any provision of their respective memorandum or
articles of association.

 

 

Schedule 2

Warranties

	A 	 	Warranties given by the Seller and NYMAGIC
	 
	1	 	Authority and Capacity of the Seller and NYMAGIC
	 
	1.1	 	Each of the Seller and NYMAGIC has the legal right and full power and authority to enter
into
and perform this Agreement and any other Transaction Documents which when executed will
constitute a valid and binding obligation.
	 
	1.2	 	The execution and delivery of, and the performance by the Seller and NYMAGIC of their
obligations under this Agreement and Transaction Documents will not result in a breach of any
provision of any constitutional document of the Seller or NYMAGIC as the case may be.
	 
	1.3	 	NYMAGIC is the ultimate holding company of the MMO Group.
	 
	B	 	Warranties given by the Seller
	 
	1	 	Authority and Capacity of the Company
	 
	1.1	 	The execution and delivery of this Agreement will not:
	 
	1.1.1	 	result in a breach of any provision of any constitutional document of the Company; or
	 
	1.1.2	 	result in a breach of or give any third party a right to terminate or modify, or result in
the creation
of any Encumbrance under any agreement, licence or other instrument or result in a breach of
any order, judgement or decree of any court, governmental agency or regulatory body to which
the Company is a party or by which the Company or any of its assets is bound.
	 
	2	 	Insolvency
	 
	2.1	 	No order has been made, petition presented, resolution passed or meeting convened for the
winding up (or other process whereby the business is terminated and the assets of the
Company are distributed amongst the creditors and/or shareholders or other contributories) of
the Company, and there are no cases or proceedings under any applicable insolvency,
reorganisation, or similar laws in any jurisdiction concerning the Company and no events have
occurred which, under applicable laws, would justify any such cases or proceedings.
	 
	2.2	 	No proceedings have been commenced for the making of an administration order (or any other
order by which during the period it is in force, the affairs, business and assets of the
company
concerned are managed by a person appointed for the purpose by a court, governmental
agency or similar body) and, as far as the Seller is aware, no such petition has been
presented.

 

 

	 	 	No voluntary arrangement or scheme of arrangement has been proposed, entered into or
implemented in relation to the Company, its business or assets.
	 
	2.3	 	No receiver (including administrative receiver), liquidator, trustee, administrator,
custodian or
similar official has been appointed in any jurisdiction in respect of the whole or any part of the
business or assets of the Company and so far as the Seller is aware no step has been taken for
or with a view to the appointment of such a person.
	 
	2.4	 	No judgment against the Company is unsatisfied.
	 
	2.5	 	No statutory demand has been served on the Company.
	 
	3	 	Ownership of the Shares
	 
	 	 	The Seller is the sole beneficial owner of the Shares and is entitled to sell and transfer
to the Purchasers the full legal and beneficial ownership of the Shares with full title
guarantee on the terms of this Agreement.
	 
	4	 	Mortgages and other Encumbrances
	 
	 	 	There is no option, right to acquire, mortgage, charge, pledge, lien or other form of
security or encumbrance or equity on, over or affecting the share capital of the Company
and there is no agreement or commitment to give or create any and no claim has been
received by any person to be entitled to any such right or Encumbrance other than as are
required as part of the Company’s trading at Lloyd’s in the ordinary course of its business
as a corporate member at Lloyd’s.
	 
	5	 	Employees
	 
	 	 	The Company does not have, nor has it ever had, any employees.
	 
	6	 	Company structure etc.
	 
	6.1	 	The Shares of the Company comprise the whole of the share capital of the Company and as at
Completion all of them will be issued and fully paid up.
	 
	6.2	 	There is no agreement or commitment outstanding which calls for the allotment, issue or
transfer of, or accords to any person the right to call for the allotment, issue or transfer of, any
shares or debentures in or securities of the Company.
	 
	6.3	 	The Company is a wholly-owned subsidiary of the Seller.
	 
	6.4	 	Other than in respect of its interests in Lloyd’s Syndicates 1265 and 2010 and such
Syndicates’
interests in shares in bodies corporate by way of investment, the Company does not have any

 

 

	 	 	subsidiaries and has no participation or any other interest in the share capital of any
other body corporate.
	 
	7	 	Accuracy and adequacy of information
	 
	7.1	 	The statutory books (including all registers and minute books) of the Company have in all
material respects been kept in accordance with all applicable legal requirements and in all
material respects contain a record of the matters which are required by law to be dealt with in
those books and no notice or material allegation that any of them is incorrect or should be
rectified has been received.
	 
	7.2	 	All documents which are required by law to have been delivered by the Company to the
Registrar of Companies have been properly so delivered.
	 
	7.3	 	The written information set out in the Disclosure Letter is true and accurate in all material
respects.
	 
	8	 	Accounts
	 
	8.1	 	The Accounts:
	 
	8.1.1	 	were prepared in accordance with UK Accounting Standards applicable at the date to which
they were prepared and such standards were consistently applied; and
	 
	8.1.2	 	show a true and fair view of the state of affairs of the Company as at the Accounts Date and of
the Company’s profits and losses for the accounting reference period to which they relate.
	 
	8.2	 	For all material purposes the accounting records of the Company have been kept on a proper
and consistent basis, are up-to-date and contain those matters required by the Companies Acts
or other applicable legislation to be entered in them.
	 
	8.3	 	The Management Accounts have been prepared on a prudent basis using accounting policies
and principles which are consistent with the Accounts and are a complete and accurate
statement of the assets and liabilities of the Company in all material respects.
	 
	9	 	Events since the Accounts Date
	 
	 	 	Since the Accounts Date:
	 
	9.1	 	no resolution of the Company in general meeting has been passed; and
	 
	9.2	 	no change in the accounting reference period of the Company has been made.

 

 

	10	 	Contracts and Liabilities
	 
	10.1	 	Save for contracts entered into in the ordinary course of the Company’s business as a Lloyd’s
corporate member and the transfer of the run off of Syndicates 1265 and 2010 at Lloyd’s the
Company is not a party to any contract, agreement (including, without limitation, any
guarantee, indemnity or any bond or comfort letter), understanding or other arrangement.
	 
	10.2	 	The Company has no liabilities actual or contingent under any of its Funds at Lloyd’s
arrangements or otherwise other than in respect of the business underwritten by the Company at
Lloyd’s pursuant to its participation on Syndicates 1265 and 2010 for the years of account
1998 to 2000 and 2001 respectively.
	 
	10.3	 	The inter-company indebtedness of the Company to the MMO Group is detailed in the Disclosure
Letter.
	 
	11	 	Powers of attorney
	 
	 	 	Other than in respect of the business underwritten by the Company at Lloyd’s pursuant to its
participation on Syndicates 1265 and 2010 for the years of account 1998 to 2000 and 2001
respectively, the Company has not given any power of attorney or other authority (express,
implied or ostensible) which is still outstanding or effective to any person to enter into
any contract or commitment on its behalf.
	 
	12	 	Bank accounts and borrowings
	 
	12.1	 	The Company does not have a bank account and the Company has not incurred or agreed to incur
any borrowing which it has not repaid or satisfied in full.
	 
	12.2	 	The Company does not have any loan capital outstanding and the Company has not lent or agreed
to lend any money which has not been repaid to it and has not given a guarantee in respect of
any loan of another person.
	 
	12.3	 	Save for contracts entered into in the ordinary course of the Company’s business as a Lloyd’s
corporate member, the annexes to the Disclosure Letter contain copies of all other contractual
documentation with respect to the arrangements for provision of capital by or on behalf of the
Company to Lloyd’s.
	 
	13	 	Litigation
	 
	 	 	Other than in the ordinary course of business as a Lloyd’s corporate member, the Company is
not engaged in any litigation or arbitration, administrative or criminal proceedings,
whether as plaintiff, defendant or otherwise, and no litigation or arbitration,
administrative or criminal proceedings by or against the Company is threatened or expected
and there is no fact or circumstance likely to give rise to any such litigation or
arbitration, administrative or criminal

 

 

	 	 	proceedings or to any proceedings against any director or employee (past or present) of the
Company in respect of any act or default for which the Company might be vicariously liable.
	 
	14	 	Delinquent and wrongful acts
	 
	14.1	 	The Company has not committed, nor is it liable, for any criminal, illegal or unlawful or
unauthorised act or breach of any obligation or duty whether imposed by or pursuant to
statute, contract or otherwise, and no claim that it has or is remains outstanding against the
Company.
	 
	14.2	 	No investigation or enquiry is being or has been conducted by any governmental or other body
in respect of the affairs of the Company.
	 
	15	 	Ownership of land
	 
	 	 	The Company has no interest in any freehold, leasehold or other immovable property in any
part of the world.
	 
	16	 	Intellectual Property
	 
	 	 	No rights in any intellectual property are vested in the Company (other than the right to
trade under its corporate name) and the Company is not a party to any confidentiality
agreement, or any agreement which restricts the free use or disclosure of any information.
	 
	17	 	Commercial
	 
	17.1	 	The Company has not conducted any business other than that of a corporate member at Lloyd’s.
	 
	17.2	 	The Company has not received notification that any investigation or enquiry is being or has
been conducted by any governmental or other body (including, for the avoidance of doubt,
Lloyd’s) in respect of its affairs and other than may arise as a result of this Agreement and
the Transaction Documents themselves and the Seller is not aware of any circumstances which
are likely to give rise to such investigation or enquiry and the Company has paid or procured
the payment of all cash calls as they fell due.
	 
	17.3	 	The Company has obtained all licences, permits and consents from any person, authority or
body reasonably required for the proper conduct of its business, all of which are valid and in
full force and effect and have been complied with in all material respects.
	 
	18	 	Funds at Lloyd’s
	 
	18.1	 	All documents relating to the Company’s participation at Lloyd’s are, in all material
respects, in Lloyd’s standard form and have not been amended in any material way.

 

 

Schedule 3

Relevant Proportions

	 	 	 
	  Purchaser

	 	Relevant Proportion (%)
	Robertson Group Limited
	 	50
	The Edinburgh Woollen Mill (Group)
Limited
	 	50

 

 

	 	 	 	 	 	 	 
	Signed by

	 	 	)	 	 	 
	duly authorised for and

	 	 	)	 	 	 
	on behalf of

	 	 	)	 	 	 
	MMO EU LIMITED

	 	 	)	 	 	/s/
THOMAS J. IACOPELLI
	 
	 	 	 	 	 	 
	Signed by

	 	 	)	 	 	 
	duly authorised for and

	 	 	)	 	 	 
	on behalf of

	 	 	)	 	 	 
	ROBERTSON GROUP LIMITED

	 	 	)	 	 	/s/
STEVE LYON
	 
	 	 	 	 	 	 
	Signed by

	 	 	)	 	 	 
	duly authorised for and

	 	 	)	 	 	 
	on behalf of

	 	 	)	 	 	 
	THE EDINBURGH WOOLLEN MILL

	 	 	)	 	 	 
	(GROUP) LIMITED

	 	 	)	 	 	/s/
DAVID HOUSTON
	 
	 	 	 	 	 	 
	Signed by

	 	 	)	 	 	 
	duly authorised for and

	 	 	)	 	 	 
	on behalf of

	 	 	)	 	 	 
	NYMAGIC, INC.

	 	 	)	 	 	/s/ GEORGE R. TRUMBULL
	 
	 	 	 	 	 	 
	Signed by

	 	 	)	 	 	 
	duly authorised for and

	 	 	)	 	 	 
	on behalf of

	 	 	)	 	 	 
	MMO UK LIMITED

	 	 	)	 	 	/s/
THOMAS J. IACOPELLIExhibit 10.2

 

Exhibit 10.2

Dated
31st
August 2005

	 	 	 	 	 
	MMO EU LIMITED

	 	 	(1	)
	 
	 	 	 	 
	NYMAGIC, INC.

	 	 	(2	)
	 
	 	 	 	 
	THE PURCHASERS

	 	 	(3	)
	 
	 	 	 	 
	and
	 	 	 	 
	 
	 	 	 	 
	MMO UK LIMITED

	 	 	(4	)

 

TAXATION DEED

 

 

 

THIS DEED is made on 31 August 2005 BETWEEN:

	(1)	 	MMO EU LIMITED (registered number 03314910) whose registered office is at 51 Eastcheap,
London EC3M 1JP (the “Seller”);
	 
	(2)	 	NYMAGIC, INC. a company incorporated under the laws of New York whose registered office is at
919 Third Avenue, 10th Floor, New York, NY 10022 (“the Guarantor”);
	 
	(3)	 	The persons whose names and registered offices are set out in Schedule 1 hereto (“the
Purchasers”); and
	 
	(4)	 	MMO UK LIMITED (registered number 03266637) whose registered office is at 51 Eastcheap,
London EC3M 1JP (“the Company”).

WHEREAS this Deed is entered into pursuant to an agreement of even date herewith between the
Purchasers, the Seller, the Guarantor and the Company for the sale and purchase of the issued share
capital of the Company (“the Share Sale Agreement”):

IT IS HEREBY AGREED as follows:

	1	 	Interpretation
	 
	1.1	 	Words and expressions defined in clause 1 of the Agreement shall (unless the context
otherwise requires) have the same meaning for the purposes of this Deed.
	 
	1.2	 	In this Deed:
	 
	 	 	“2005 Accounting Period” means the Accounting Period of the Company ending 31 December 2005;

	 
	 	 	
“Accounting Period” has the meaning ascribed to it in section 12 ICTA 1988;
	 
	 	 	“Accounting Requirements” in respect of any person, means any accounting requirements imposed by
law, statements of standard accounting practice, financial reporting standards and any other
accounting standards issued by any body from time to time charged with developing and/or applying
the generally accepted accounting principles applying to that person, and any other accounting
principle observance of which by that person is required in order to ensure its accounts, and
those of any other person with which its accounts are consolidated, comply with applicable law;
	 
	 	 	“Actual Taxation Liability” in relation to any person, means a liability of that person to make a
payment of Taxation or to make a payment in respect of Taxation where such liability is imposed by
law, whether or not such Taxation is also or alternatively chargeable against or attributable to
any other person;
	 
	 	 	“business day” means a day (other than a Saturday and Sunday) when banks are open for the
transaction of normal banking business in London;
	 
	 	 	“Corporation Tax Payments” means an installment payment as described in Regulation 5 of the
Corporation Tax (Instalment Payment) Regulations 1998;
	 
	 	 	“Default Rate” means 2 per cent above the base rate of Barclays Bank plc or, in the absence of
such base rate, the base rate of such other of the high street clearing banks as the Purchasers
shall select and of which the Purchasers’ Representative shall give notice to the Seller;
	 
	 	 	“Escrow Account” means the interest bearing deposit account at the Royal Bank of Scotland, 62-63
Threadneedle Street, PO Box 142, London, EC2R 8LA to be opened and held in the name of Norton Rose
in accordance with the terms of the Escrow Letter;
	 
	 	 	“Escrow Letter” means the letter addressed to Clyde & Co relating to the running of the Escrow
Account signed by the Seller, the Purchasers and the Guarantor;

 

 

	 	 	“Event” means any event, occurrence, transaction, act or omission (or any deemed event,
occurrence, transaction, act or omission) including, for the avoidance of doubt, the sale and
purchase of the Sale Shares pursuant to the Agreement;
	 
	 	 	“Group Relief Relief”  means any Relief which is eligible for relief from corporation tax pursuant
to the Group Relief Provisions;
	 
	 	 	“Group Relief Provisions”  means Chapter IV, Part X ICTA 1988

	 
	 	 	“ICTA
1988”  means the Income and Corporation Taxes Act 1988;
	 
	 	 	“Instalment Payment”  means any instalment payment as described in Regulation 5 of the Corporation
Tax (Instalment Payment) Regulations 1998
	 
	 	 	“Notice of Liability”  means any assessment, notice, demand or other document issued or action
taken by or on behalf of any Taxation Authority, or any self-assessment return or amended return,
from which it appears that the Company is subject to, is sought to be made subject to, or might
become subject to, any Taxation Liability;
	 
	 	 	“Post 2005 Accounting Period”  means any Accounting Period of the Company commencing on or after 1
January 2006;
	 
	 	 	“Purchasers’ Representative”  means such Purchaser as both the Purchasers shall from time to time,
by written notice to the Seller, appoint to act as the representative of the Purchasers for the
purposes of this Deed;
	 
	 	 	“Relevant Purchaser”  means such Purchaser or such member of such Purchaser’s group (as defined by
section 413 of ICTA 1988) which has utilised or sought to utilise Losses or Excess Losses pursuant
to the provisions of Schedule 5;
	 
	 	 	“Relevant Proportions”  means the percentage set out in Schedule 1;
	 
	 	 	“Relief”  means any loss, allowance, exemption, set-off, deduction, credit or other relief relating
to any Taxation or to the computation of income, profits or chargeable gains for the purposes of
any Taxation;
	 
	 	 	“Taxation”  means:

	 	(i)	 	all forms of tax, levy, duty, charge, impost, withholding or other amount whenever
created or imposed and whether of the United Kingdom or elsewhere, payable to or imposed
by any Taxation Authority; and
	 
	 	(ii)	 	all charges, interest, penalties and fines incidental or relating to any Taxation
falling within (i) above or which arise as a result of the failure to pay any Taxation
on the due date or to comply with any obligation relating to Taxation;

	 	 	“Taxation Authority”  means the HM Revenue and Customs, or any other revenue, customs, fiscal,
governmental, statutory, state, provincial, local governmental or municipal authority, body or
person, whether of the United Kingdom or elsewhere;
	 
	 	 	“Taxation Liability”  in relation to any person, means any Actual Taxation Liability of that person
or any other liability of, or amount incurred by, or charged against, that person, in each case
falling within any of clauses 2.1.1 to 2.1.4 (inclusive);
	 
	 	 	“TCGA 1992”  means the Taxation of Chargeable Gains Act 1992.
	 
	1.3	 	References in this Deed to any person being related to any other person for the
purposes of any Taxation shall include any case where, without limitation:

	1.3.1	 	either person has control (within the meaning of any of sections 416, 767B(4) and 840 ICTA
1988) of the other person;

 

 

	1.3.2	 	those persons are connected within the meaning of section 839 ICTA 1988) with each
other;
	 
	1.3.3	 	there is a connection (within the meaning of section 87 Finance Act 1996) between such
persons;
	 
	1.3.4	 	any other person has control (as defined in clause 1.3.1) of, or is connected (as defined in
clause 1.3.2) with those persons;
	 
	1.3.5	 	either person is the holding company of that other person or is a subsidiary of either that
other person or any other person of which the other person is also a subsidiary (“holding
company” and “subsidiary” having the meanings ascribed to them by Companies Act 1985);
	 
	1.3.6	 	either person is a direct or indirect participant in the management, control or capital of
that other person (for the purposes of Schedule 28AA ICTA 1988);
	 
	1.3.7	 	either person is such a person as is referred to in paragraph 2(1) of Schedule 28 Finance
Act 2000 where the other person is the taxpayer company as referred to in paragraph 1 of the
said Schedule 28;
	 
	1.3.8	 	those persons are associated for the purposes of section 42 Finance Act 1930; and/or
	 
	1.3.9	 	those persons are members of the same group for any tax purposes.

	1.4	 	The provisions of clauses 12.1 (alterations), 12.3 (notices), 12.5 (continuing
effect), 12.8 (counterparts), 12.9 (applicable law) and 12.11 (successors and assigns) of
the Agreement shall apply as if the same were set out here in full, and as if references
therein to “the Agreement” were references to this Deed.
	 
	1.5	 	References to clauses and Schedules are (unless the context otherwise requires) references to
clauses of, and Schedules to, this Deed. References in any Schedule to paragraphs are
(unless the context otherwise requires) references to paragraphs of that Schedule.
	 
	1.6	 	All obligations and liabilities of each of the Purchasers or Relevant Purchasers under this
Deed are made or given on a several basis only.
	 
	2	 	Covenant by the Seller
	 
	2.1	 	Subject to clause 3 the Seller hereby covenants with the Purchasers to pay to the
Purchasers their Relevant Proportions of an amount or amounts equal to each of the following:
	 
	2.1.1	 	subject to clauses 2.1.3 and 2.1.4, any Actual Taxation Liability of the Company arising as
a result of, in respect of, or by reference to:

	 	(a)	 	any Event occurring, or deemed for the purposes of any Taxation to occur, on or before
Completion which shall include any underwriting entered into on or prior to Completion; or
	 
	 	(b)	 	any income, profits or chargeable gains (not falling within (a) above) earned, accrued or
received, or deemed for the purposes of any Taxation to be earned, accrued or received, on or
before, or in respect of any period ending on or before, Completion; or
	 
	 	(c)	 	the Company’s run-off of any underwriting activity (to the extent not falling within (a)
above) entered into on or prior to Completion.

	2.1.2	 	any liability of the Company to pay or repay any other person (other than any Taxation
Authority) any amount under any agreement or other arrangement entered into before Completion
relating to:

	 	(a)	 	the surrender or allocation among any companies of any Relief;
	 
	 	(b)	 	any election by one or more companies to treat a disposal or a gain to have been
made by one of those companies; or
	 
	 	(c)	 	value added tax (or the equivalent in any other jurisdiction);

 

 

	2.1.3	 	any Actual Taxation Liability of the Company (not falling within clause 2.1.1) which
is the liability to Taxation of any other person and for which the Company is liable by
reason of having been, at any time before Completion, related to or ceasing as a result of
the disposal of the Shares (or any arrangements leading to such disposal) to be related to:

	 	(a)	 	that other person for the purposes of any Taxation;
	 
	 	(b)	 	any person which is or has been at any time on or before Completion related to
that other person for the purposes of any Taxation; or
	 
	 	(c)	 	any other person which is or has been at any time on or before Completion related
to a person falling within above (b) for the purposes of any Taxation; and

	2.1.4	 	any reasonable costs and expenses properly incurred by the Purchasers or the Company in
connection with any such liability or amount as is referred to in any of clauses 2.1.1 to
2.1.3 inclusive for which the Seller is liable, or with any successful action taken by the
Purchasers to recover any amounts due from the Seller hereunder.
	 
	3	 	Limitations
	 
	3.1	 	The Seller shall not be liable to make any payment under clause 2.1 in respect of any
Taxation Liability of any person to the extent that:

	3.1.1	 	   such Taxation Liability would not have arisen but for a change in the Accounting
Requirements applying to, or in any way affecting, that person, introduced or having effect
after Completion, other than a change which is required in order to comply with the Accounting
Requirements applying to that person in each case as in force or having effect at Completion;
or

	 
	3.1.2	 	   such Taxation Liability would not have arisen but for any act, omission or transaction done,
made or carried out by any one or more of the Purchasers, or any company connected with any of
the Purchasers and the Company or any of their respective directors, employees or agents after
Completion, where such act, omission or transaction was not done,
made or carried out:

	 	(i)	 	as required by law as it is in force at the date of the Agreement;
	 
	 	(ii)	 	pursuant to a legally binding commitment of the Company created on or
before Completion; or
	 
	 	(iii)	 	in the ordinary course of business of the Company as carried on immediately prior
to Completion;

	 	 	   provided that the presentation of any document for stamping where it is required in order to
register or enforce such document or where its production is required by any Taxation
Authority shall be treated as being required by law;

	 
	3.1.3	 	   such Taxation Liability arises or is increased as a result of any increase in the rates of
Taxation announced after Completion;

	 
	3.1.4	 	   such Taxation Liability would not have arisen or would have been reduced or eliminated but
for a failure on the part of the Company to make any claim, election, surrender or disclaimer
or give any notice or consent or do anything after Completion the making, giving or doing of
which was taken into account in preparing the Accounts and details of which were provided to
the Purchasers in writing prior to Completion;

	 
	3.1.5	 	   such Taxation Liability would not have arisen but for a cessation of, or change in the
nature or conduct of, any trade carried on by the Company, being a cessation or change
occurring after Completion;

	 
	3.1.6	 	   such
Taxation Liability has been discharged on or before Completion;

 

 

	3.1.7	 	such Taxation Liability is reduced or eliminated by any Relief under the Group Relief
Provisions being made available to the Company at no cost to the Company, and without any
payment being made in respect thereof by the Purchasers under Schedule 4;
	 
	3.1.8	 	such Taxation Liability would not have arisen but for any failure or delay by the
Purchasers or the Company in paying over to any Taxation Authority any payment previously made
by the Seller in respect of a Tax Liability; or
	 
	3.1.9	 	such Taxation Liability arises as a consequence of a breach by the Purchasers of any of
their obligations under this Deed.

	3.2	 	No claim shall be brought by the Purchasers under clause 2 of this Deed against the Seller
unless notice in writing specifying such particulars, as are available at the relevant time,
and (where practicable) the anticipated amount of such claim is given to the Seller not later
than seven years after the date of this Deed.
	 
	4	 	Rebate
	 
	4.1	 	Clause 4.2 shall apply where the Seller has paid any amount due to the Purchasers under
clause 2 in respect of any Taxation Liability (in this clause 4, the “Relevant Payment”) and
any one or more of the Purchasers and the Company (in this clause 4, the “Relevant Recipient”)
receives (whether by way of actual receipt, credit, set-off or otherwise) from any other
person a payment in respect of such Taxation Liability (in this clause 4, the “Relevant
Receipt”).
	 
	4.2	 	The Purchasers agree with the Seller that, where this clause 4.2 applies, they shall in their
Relevant Proportions repay, or cause to be repaid, to the Seller a sum equal to the lesser of:

	4.2.1	 	the amount of the Relevant Receipt after deduction therefrom of the aggregate of:

	 	(a)	 	the reasonable costs incurred by the Purchasers or the Relevant Recipient in
obtaining it (to the extent that such costs have not been reimbursed pursuant to the
indemnity given in clause 4.3); and
	 
	 	(b)	 	any Actual Taxation Liability of the Relevant Recipient in respect of the
Relevant Receipt; and

	4.2.2	 	the amount of the Relevant Payment (except so much of the Relevant Payment as represents an
amount payable by virtue of clause 6 (withholdings and gross-up)).

	4.3	 	If the Purchasers shall become aware of their actual or potential entitlement or the actual
or potential entitlement of the Company to any Relevant Receipt, the Purchasers shall give or
cause to be given written notice thereof in accordance with clause 1.4 to the Seller as soon
as reasonably practicable after becoming so aware. If so requested by the Seller, and subject
to the Purchasers and/or the Company being indemnified to the reasonable satisfaction of the
Purchasers against all costs and expenses which may be thereby incurred, the Purchasers shall
severally take or cause to be taken such action as is in their control (including collectively
procuring that the Company may take such action but without any Purchaser being obliged to
take any action which it is not able to do) as the Seller shall reasonably request to secure
receipt of the payment in question.
	 
	5	 	Conduct of Claims
	 
	5.1	 	If any one or more of the Purchasers and the Company shall become aware of any Notice of
Liability which might give rise to a claim under this Deed, the Purchasers’ Representative
shall, by way of covenant but not as a condition precedent to the liability of the Seller
hereunder, give or cause to be given written notice thereof to the Seller as soon as
reasonably practicable (and, in any event, in the case of a Notice of Liability which requires
an appeal to be made against it or other action to be taken within a specified period of time,
within ten business days of becoming aware in reasonable detail thereof).
	 
	5.2	 	As regards any such Notice of Liability, the Purchasers shall take or cause to be taken such
action as the Seller may, by written notice given to the Purchasers’ Representative,
reasonably request to cause that Notice of Liability to be withdrawn or to dispute, resist,
appeal against, compromise or defend that Notice of Liability and any determination in respect
thereof, or to apply to postpone (so far as legally

 

 

	 	 	possible) the payment of any Taxation pending the determination of any appeal, but subject to
the Purchasers and the Company being indemnified to the reasonable satisfaction of the
Purchasers against all losses (including any additional Taxation Liability of that person),
interest, damages, expenses thereby suffered or incurred by the Purchasers or the Company and
provided that:

	5.2.1	 	any request made by the Seller pursuant to this clause 5.2 shall be made within a reasonable
time of receipt by the Seller of any notice given to the Seller in accordance with clause 5.1
(and, in any event, in the case of a Notice of Liability which requires an appeal to be made
or other action to be taken within a specified period of time, (and provided that the
Purchasers’ Representative has complied with its obligations under clause 5.1) not later than
five business days prior to the expiry of such specified period);
	 
	5.2.2	 	where the Seller does not make any such request within the period referred to in clause
5.2.1, the Purchasers and the Company shall (without prejudice to the rights of the Purchasers
under this Deed in respect of the Notice of Liability) be free to take such action as they
consider reasonable in the circumstances to settle the relevant liability to which the Notice
of Liability relates; and
	 
	5.2.3	 	the Purchasers and the Company shall not be obliged to comply with any request of the Seller
which involves contesting any assessment of Taxation before any court or any other appellate
body (including any tribunal or court) unless they have been advised in writing, at the
expense of the Seller, by either tax counsel of at least five years’ call or, if considered to
be appropriate by both the Seller and the Purchasers’ Representative, a leading firm of
accountants or lawyers, instructed by agreement between the Purchasers’ Representative and the
Seller or, failing such agreement, in accordance with the procedure set out in clause 5.3,
that an appeal against such assessment is a reasonable course of action to be taken;
	 
	5.2.4	 	save where the Seller provides reasonably satisfactory indemnities therefor, neither the
Purchasers nor the Company shall be obliged to take any action which is likely to increase
their liability to taxation for any Accounting Period ending after Completion;
	 
	5.2.5	 	the rights of the Seller under this clause 5.2 shall cease if either;

	 	(a)	 	in the opinion of the Purchasers’ Representative acting reasonably, the
Guarantor would not at the relevant time have the realisable resources to meet the
Actual Taxation Liability, the subject of the Notice of Liability and any losses
referred to in clause 5.2 unless security satisfactory to the Purchasers is given to
the Purchasers in respect thereof, or
	 
	 	(b)	 	if legal proceedings are commenced with a view to the Guarantor’s winding-up,
dissolution or administration, or for the appointment of a receiver, administrator,
trustee or similar officer in respect of it or of any of its assets (otherwise than for
the purpose of its voluntary reconstruction or amalgamation).

	5.3	 	If the Seller and the Purchasers’ Representative shall not have agreed upon tax counsel or,
if relevant a leading firm of accountants or lawyers within 14 days, such matter shall
thereupon be referred to such leading counsel, firm of accountants or firm of lawyers as the
President for the time being of the Law Society of England and Wales shall (at the request of
either the Purchasers’ Representative or the Seller) nominate.
	 
	6	 	Withholdings and Gross-up
	 
	6.1	 	All sums payable under this Deed by the Seller shall be paid free and clear of all deductions
or Withholdings whatsoever, save only as may be required by law.
	 
	6.2	 	If, at any time, any applicable law, regulation or regulatory requirement requires the Seller
to make any deduction or withholding from any sums payable to the Purchasers under this Deed,
the amount so due shall be increased to the extent necessary to ensure that, after the making
of such deduction or withholding, the Purchasers receive, on the due date for such payment, a
net sum equal to the sum which they
would have received had no such deduction or withholding been required to be made.
	 
	6.3	 	If the Seller is required by law to make any deduction or withholding as referred to in
clause 6.2, the Seller shall:

 

 

	6.3.1	 	make such deduction or withholding; and
	 
	6.3.2	 	pay the full amount deducted or withheld to the relevant Taxation Authority in accordance
with applicable law, regulation or regulatory requirement.

	6.4	 	If any amount paid or due to the Purchasers hereunder gives rise to any Actual Taxation
Liability, or would (but for the availability of any Relief) give rise to an Actual Taxation
Liability, in the hands of the Purchasers, then the amount so paid or due (in this clause 6.4,
“the net amount”) shall be increased to an amount (in this clause 6.4, “the grossed-up
payment”) which (after subtraction of the amount of any Actual Taxation Liability which
arises, or would, but for the availability of any Relief, arise in the hands of the Purchasers
with respect to the grossed-up payment) shall equal the net amount, provided that if any
amount is initially paid on the basis that the amount due is not taxable in the hands of the
Purchasers or vice versa and it is subsequently determined that it is or that it is not, such
additional amounts shall be paid to or by the Purchasers as shall place the Purchasers in the
same after-tax position as they would have been in if the amount due had not been taxable in
the hands of the Purchasers.
	 
	6.5	 	If, at any time after any increased payment is made by the Seller as a consequence of the
application of clause 6.2, the Purchasers receive or are granted a credit against or remission
from any Taxation payable by them which they would not otherwise have received or been
granted, the Purchasers shall in their Relevant Proportions, to the extent that they can do so
without prejudicing the retention of the amount of such credit or remission, reimburse the
Seller with such amount as shall leave the Purchasers (after such reimbursement) in no worse a
position than they would have been in had the circumstances giving rise to the increased
payment not in fact arisen. Such reimbursement shall be made not later than ten business days
after the Purchasers receive or are granted such credit.
	 
	7	 	Payment
	 
	7.1	 	Where any amount is required to be paid by any person to the Purchasers under clause 2 in
respect of any Actual Taxation Liability, that person shall pay such amount in cleared,
immediately available funds on or before the date before the last date on which the Taxation
in question is due for payment to the relevant Taxation Authority without incurring any
penalty, fine or interest, or, if later, seven business days following the date on which the
Purchasers, in accordance with clause 5, notify that person of its liability to make payment
and the amount of that payment.
	 
	7.2	 	Where any amount is required to be paid by any person to the Purchasers under clause 2 (other
than in respect of any Actual Taxation Liability) that person shall pay such amount in
cleared, immediately available funds on or before the later of:

	 	(a)	 	in the case of a Taxation Liability falling within clause 2.1.2, the day before the
date upon which the payment or repayment is due to be made by the Company; and
	 
	 	(b)	 	in the case of a Taxation Liability falling within clause 2.1.4, the day before the
date upon which the costs or expenses are due to be paid by the Company; and

	 	 	seven business days after the date on which the Purchasers, in accordance with clause 5
(conduct of claims), notifies that person of its liability to make a payment and the amount of
that payment.
	 
	7.3	 	Sums not paid on the dates specified in clauses 7.1, 7.2 and/or Schedule 4 shall bear
interest (which shall accrue from day to day after, as well as before, judgement) at the
Default Rate for the period from the date following that specified date up to and including
the day of actual payment of such sums (or the next business day if the day of actual payment
is not a business day) compounded quarterly, provided that interest shall not be payable under
this clause 7.4 in respect of any period or part thereof to the extent that the amount of the
Taxation Liability in question takes account of interest for the same period or part thereof.
	 
	8	 	Taxation Compliance
	 
	 	 	Schedule 3 shall have effect.

 

 

	9	 	Group Relief Arrangements
	 
	 	 	Schedule 4 shall have effect.
	 
	10	 	Guarantee
	 
	10.1	 	Schedule 2 shall have effect.
	 
	11	 	Confidentiality
	 
	11.1	 	Each party undertakes to the others that it shall:

	11.1.1	 	treat all information provided under this Deed as confidential;
	 
	11.1.2	 	not disclose such information to any person other than its auditors and/or lawyers unless
the relevant party has given its prior consent in writing to such disclosure, such consent not
to be unreasonably withheld or delayed; and
	 
	11.1.3	 	use its best endeavours to procure that those other persons who are referred to in clause
11.1.2 above shall not disclose the same to any other person;

	11.2	 	Nothing in the undertaking contained in clause 11.1 shall restrict the disclosure of
information to the extent that:

	11.2.1	 	the same is required by law;
	 
	11.2.2	 	the information has come into the public domain without any breach of that undertaking; or
	 
	11.2.3	 	the relevant party has given its prior consent to such disclosure in writing.

	12	 	Counter-Indemnity
	 
	12.1	 	Each Purchaser hereby covenants with the Seller to pay to the Seller an amount equal to its
Relevant Proportion of any Taxation Liability for which the Seller or any other person
falling within section 767A(2) or 767AA(4) of the ICTA becomes liable by virtue of the
operation of sections 767A, 767AA and 767B of the ICTA in circumstances where the taxpayer
company (as referred to in section 767A(1)) and/or the transferred company (as referred to in
section 767AA(1)) is the Company.
	 
	12.2	 	The covenant contained in clause 12.1 shall not apply to any Taxation Liability to the extent
that the Purchasers could claim payment in respect thereof under this Deed or would have been
able to do so but for any financial limits contained in the Share Sale Agreement; and
	 
	12.3	 	Clauses 5, 6 and 7 of this Deed (Conduct of Claims, Withholdings and Gross-up and Payment)
shall apply to the covenants contained in this clause 12 as they apply to the covenants
contained in clause 2, replacing references to the Seller by the Purchasers (and vice versa)
and making any other necessary modifications.
	 
	13	 	Change of Control
	 
	13.1	 	In the event that any party (other than a person with whom either of the Purchasers would
form a group for group relief purposes) acquires any interest in the issued share capital of
the Company from the Purchasers other than where the person acquiring such interest
enters into contractual documentation with the Parties hereto (other than the Purchasers) in
substantially the same form as this Deed to ensure that the Seller is not materially
financially disadvantaged by such acquisition, the Purchasers from whom such party acquires
such interest shall indemnify the Seller for any material financial disadvantage to it arising
as a result of such acquisition.
	 
	13.2	 	Clause 13.1 shall cease to apply to any acquisition taking place after the later of:

	 	(a)	 	31 December 2007; and

 

 

	 	(b)	 	the date on which both no funds stand to the credit of the Escrow Account and the
Purchasers conclude (acting reasonably) that no further funds are likely to be paid
into the Escrow Account.

	13.3	 	In the event that an acquisition is ignored under clause 13.1 by virtue of the acquirer
having been part of the same group, and such person subsequently leaves the group owning an
interest in the Company, clause 13.1 shall apply on the occasion of such departure from the
group.
	 
	14	 	Liquidation of the Seller
	 
	14.1	 	The parties acknowledge that the Seller may be put into liquidation after Completion and in
the event of any such liquidation or proposed liquidation, the parties agree that references
to the Seller shall be replaced by references to the Guarantor, and if necessary, they shall
execute such documentation to ensure that obligations (and the rights) of the Seller will be
transferred to the Guarantor by way of novation or otherwise, with the intent that the
Purchasers should have direct contractual recourse by way of primary obligation against the
Guarantor (and vice versa), and that subject thereto, the Purchasers should have no further
recourse against the Seller.
	 
	 	 	IN WITNESS whereof this Deed has been entered into the day and year first above written

 

 

Schedule 1

The Purchasers

	 	 	 	 	 	 	 
	Name	 	Registered Office	 	Relevant Proportion (%)
	Robertson Group Limited

	 	10 Perimeter Road, Elgin IV30
6AE	 	 	50	 
	The Edinburgh Woollen
Mill
 (Group) Limited

	 	Site A Kingmoor Park South
Industrial Estate

Queens Drive

Carlisle
 CA6 4SB
	 	 	50	 

 

 

Schedule 2

Guarantee

	1	 	Guarantee by the Guarantor
	 
	1.1	 	In consideration of the Purchasers entering into this Deed, the Guarantor unconditionally
and irrevocably guarantees to the Purchasers the due and punctual performance of all the
obligations and liabilities of the Seller under or otherwise arising out of or in connection
with this Deed and the Share Sale Agreement (as any of such obligations and liabilities may
from time to time be varied, extended, increased or replaced) and undertakes to keep the
Purchasers, in their Relative Proportions, fully indemnified against all liabilities, losses,
proceedings, claims, damages, costs and expenses of whatever nature which the Purchasers may
suffer or incur as a result of any failure or delay by the Seller in the performance of any
of such obligations and liabilities.
	 
	1.2	 	If any obligation or liability of the Seller expressed to be the subject of the guarantee
contained in this Schedule 2 (the “Seller’s Guarantee”) is not or ceases to be valid or
enforceable against the Seller (in whole or in part) on any ground whatsoever (including, but
not limited to, any defect in or want of powers of the Seller or irregular exercise of such
powers, or any lack of authority on the part of any person purporting to act on behalf of the
Seller, or any legal or other limitation, disability or incapacity, or any change in the
constitution of, or any amalgamation or reconstruction of the Seller, or the Seller taking
steps to enter into or entering into bankruptcy, liquidation, administration or insolvency,
or any other step being taken by any person with a view to any of those things), the
Guarantor shall nevertheless be liable to the Purchasers in respect of that purported
obligation or liability as if the same were fully valid and enforceable and the Guarantor
were the principal debtor in respect thereof.
	 
	1.3	 	The liability of the Guarantor under the Seller’s Guarantee shall not be discharged or
affected in any way by:

	1.3.1	 	the Purchasers compounding or entering into any compromise, settlement or arrangement with
the Seller, or any other person; or
	 
	1.3.2	 	any variation, extension, increase, renewal, determination, release or replacement of this
Deed, whether or not made with the consent or knowledge of the Guarantor; or
	 
	1.3.3	 	the Purchasers granting any time, indulgence, concession, relief, discharge or release to
the Seller, any co-guarantor or any other person or realising, giving up, agreeing to any
variation, renewal or replacement of, releasing, abstaining from or delaying in taking
advantage of or otherwise dealing with any securities from or other rights or remedies which
it may have against the Seller, any co- guarantor or any other person; or
	 
	1.3.4	 	any other matter or thing which, but for this provision, might exonerate or affect the
liability of the Guarantor.

	1.4	 	The Purchasers shall not be obliged to take any steps to enforce any rights or remedy
against the Seller or any other person before enforcing the Seller’s Guarantee.
	 
	1.5	 	The Seller’s Guarantee is in addition to any other security or right now or hereafter
available to the Purchasers and is a continuing security notwithstanding entering into
liquidation, administration or insolvency or steps being taken by any person with a view to
any of those things or other incapacity of the Seller or the Guarantor or any change in the
ownership of either of them.
	 
	1.6	 	Until the full and final discharge of all obligations and liabilities (both actual and
contingent) which are the subject of the Seller’s Guarantee, the Guarantor:

	1.6.1	 	waives all of its rights of subrogation, reimbursement and indemnity against the Seller and
all rights
of contribution against any other person and agrees not to demand or accept any
security from the Seller or any other person in respect of any such rights and not to
prove in competition with the Purchasers in the bankruptcy, liquidation or insolvency
of the Seller or any such other person; and

 

 

	1.6.2	 	agrees that it will not claim or enforce payment (whether directly or by set-off,
counterclaim or
otherwise) of any amount which may be or has become due to the Guarantor by the Seller,
any other person or any other person liable to the Purchasers in respect of the
obligations hereby guaranteed if and so long as the Seller is in default under this
Deed provided this shall not apply to any right of the Guarantor to receive any
payments under the Lloyd’s — MMO Agreement.

	1.7	 	Any moneys received by the Purchasers under the Seller’s Guarantee may be placed to the
credit of a suspense account with a view to preserving its rights to prove for the whole of
its claims against the Seller or any other person.
	 
	1.8	 	If the Seller’s Guarantee is discharged or released in consequence of any performance by
the Seller of the guaranteed obligations which is set aside for any reason, the Seller’s
Guarantee shall be automatically reinstated in respect of the relevant obligations.

 

 

Schedule 3

Taxation Compliance

(clause 8)

	1	 	Accounting Periods for the periods up to and including 31 December 2005
	 
	1.1	 	The Seller shall prepare the corporation tax return (and any relevant supporting material)
relating to the tax affairs of the Company for all Accounting Periods up to and including the
2005 Accounting Period (in this Schedule, “the Relevant Periods”).
	 
	1.2	 	The Seller covenants with the Purchasers that it shall use its reasonable endeavours to
provide to the Purchasers (or their duly authorised agent or representative) the corporation
tax return for the accounting period ended on 31st December 2004 by 14th October 2005 and the
Purchasers shall use their reasonable endeavours to file such return by 31st October 2005.
The documentation which has been prepared in accordance with paragraph 1.1 above for the 2005
Accounting Period shall be provided by the Seller to the Purchasers not less than 20 business
days before the date of intended submission.
	 
	1.3	 	The Purchasers shall deal with the submission of all documentation (including the tax
computation) and shall deal with all matters (including correspondence) relating to the tax
affairs of the Company for the Relevant Periods with a view to agreeing the same with the
relevant Taxation Authority.
	 
	1.4	 	The Seller covenants with the Purchasers that it shall provide to the Purchasers (or their
duly authorised agent or representative) within five business days of the receipt thereof, a
copy of any material communication from the relevant Taxation Authority received after
Completion by the Seller or its duly authorised agent or representative (and not also
received by the Company, the Purchasers or any company in the group of companies of which the
Purchasers are members or any then current director, employee or agent or professional
adviser of any of them) relating to any Relevant Period of the Company.
	 
	1.5	 	The Purchasers covenant with the Seller that they shall:

	1.5.1	 	provide to the Seller (or its duly authorised agent or representative):

	 	(a)	 	not less than 14 business days before the date of intended submission,
a copy of any material communication, including responses to the relevant Taxation
Authority enquiries relating to any Relevant Period of the Company which it is
proposed be submitted after Completion to the relevant Taxation Authority, together
with details of the date on which the same is intended to be submitted; and
	 
	 	(b)	 	without prejudice to paragraph 1.5.1 (a), within five business days
after the despatch of such communication, a copy of any communication sent to the
relevant Taxation Authority after Completion relating to any Relevant Period of the
Company; and
	 
	 	(c)	 	in the event that the Purchasers make any material amendments to the
tax computation (prepared in accordance with paragraph 1.1 above), not less than 14
business days before the date of intended submission a copy of the amended tax
computation (including any supporting materials); and

	1.5.2	 	consider and amend in accordance with any reasonable comment made by or on behalf of the
Seller in relation to any communication referred to in paragraph 1.5.1 (a) before submission
to the relevant Taxation Authority, provided that the Purchasers shall not be obliged so to
amend unless the Seller has communicated such comments in writing to the Purchasers not less
than seven business days before the date on which the relevant communication is intended by
the Purchasers to be delivered to the relevant Taxation Authority as advised by the
Purchasers.

 

 

	1.6	 	The Purchasers shall procure that, in respect of any Relevant Period, the Company shall
in relation to Taxation:

	1.6.1	 	sign and submit any Taxation return and computations,
	 
	1.6.2	 	make any claims, disclaimers, notices or elections, and
	 
	1.6.3	 	give any consents, as may be reasonably required by the Seller in relation to such Relevant
Period, provided that:

	 	(a)	 	the Seller has complied with its obligations specified in paragraph 1.1; and
	 
	 	(b)	 	the Company shall not be obliged to take any action or do any thing which:

	 	(i)	 	the Purchasers reasonably consider is not full, true
and accurate in all material respects; and/or
	 
	 	(ii)	 	would give rise either to a liability to Taxation for
the Company or a loss of any Relief by the Company; and
	 
	 	(iii)	 	is inconsistent with any Taxation laws or generally
accepted accounting policies or the approach previously taken by the Company
in its relevant corporation tax return or self-assessment;

	 	(c)	 	the Company shall not be required to take any step which would reduce
the amount of Relief to be surrendered to the Purchasers below £5,874,272 for the
2005 Accounting Period, other than where required to offset any Actual Taxation
Liability in respect of which the Seller could be liable under this Deed.

	1.7	 	The Company shall be entitled, subject to any change of law or interpretation of law taking
effect or announced after the date of this Agreement to file its return on the basis that it
makes an election under section 107(4) Finance Act 2000 based on technical provisions before
deduction of reinsurance.
	 
	2	 	Accounting Periods after the 2005 Accounting Period
	 
	2.1	 	The Purchasers shall prepare all documentation and deal with all matters (including
correspondence) relating to the tax affairs of the Company for the Accounting Periods after
the 2005 Accounting Period with a view to agreeing the same with the relevant Taxation
Authority.
	 
	2.2	 	The Purchasers shall procure that the Company shall not without the written consent of the
Seller make any election or take any other action (other than as required by law at the date
of the Agreement, pursuant to any legally binding commitment created before Completion or as
required by any generally accepted accounting standard or as contemplated by Schedule 4)
whether under the provisions of section 107(4) Finance Act 2000 or otherwise which would
reduce the Company’s losses for the 2005 Accounting Period below the amount specified in
paragraph 4 of Schedule 4. If any such election is entered into without the prior written
consent of the Seller, such election shall be deemed to be void.
	 
	3	 	Information
	 
	3.1	 	If the Company so requests, the Seller shall provide such assistance (or use its
reasonable endeavours to procure the provision of such assistance) as is reasonable to
assist the Company at any time after Completion in locating documents, records of facts,
valuations or information relating to any Accounting Period of the Company commencing prior
to Completion. Furthermore, the Purchasers agree to provide (or procure the provision
of) similar assistance to the Seller (or any assignee of the Seller of any asset or business
of the Seller) in so far as the Company may have relevant records or facts pertaining to the
business.
	 
	3.2	 	If the Company so requests post-Completion or the Company or the Purchasers are required
to calculate the amount of any payment pursuant to Schedule 4, the Seller shall provide to
the Company or the Purchasers (or their duly authorised agent or representative) suitable
access to any information held by the Seller relevant to the tax affairs of the Company.

 

 

	3.3	 	The Purchasers shall, and shall procure that the Company shall provide to the Seller (a)
(as soon as reasonably practicable after receipt thereof) copies of any communication from
Lloyd’s concerning (i) the quantum of any Losses (as defined in Schedule 4) and (ii) any
calls on the central fund; and (b) (as soon as reasonably practicable after finalisation)
copies of the Company’s accounts for any accounting period ended after Completion.
	 
	3.4	 	For the avoidance of doubt, nothing in this Schedule 3 shall, in any way, limit or exclude
the liability of the Seller under this Deed (without prejudice to the operation of clause
3.1.9) or the Purchasers’ rights under clause 5.
	 
	4	 	Costs
	 
	4.1	 	In this paragraph, the Tax Negotiation costs shall be the costs incurred by the Company in
relation to its corporation tax return for the 2005 Accounting Period following submission of
that return, including the negotiation and agreement of that tax return and the agreement of
the surrender of any group relief in respect of that return, but shall not include any costs
for which the Seller is otherwise liable under this Deed.
	 
	4.2	 	To the extent not discharged on or before Completion, the costs of dealing with any
outstanding matter relating to the affairs of the Company for any period before the 2005
Accounting Period shall be borne by the Seller to the extent that such costs are reasonably
and properly incurred.
	 
	4.3	 	The costs of dealing with any matter relating to the 2005 Accounting period shall be borne as
follows:-

	 	(i)	 	in relation to any cost which is not a Tax Negotiation cost, such costs shall
be borne as to the first £20,000 by the Purchasers; where costs exceeds such amount,
such excess, shall be borne by the Seller to the extent that such costs are reasonably
and properly incurred;
	 
	 	(ii)	 	in relation to the Tax Negotiation cost, the Seller shall bear the first
£10,000 of such costs to the extent that they are reasonably and properly incurred.
Where the Tax Negotiations costs exceed such amount the Seller shall bear such excess,
subject to its prior agreement to such additional costs, such agreement not to be
unreasonably withheld and delayed.

	4.4	 	The parties shall consult in good faith prior to the date on which any costs as are referred
to in paragraph 4.2 and 4.3 are incurred and if, following such consultation, they are agreed,
they shall be deemed to be reasonably and properly incurred.

 

 

Schedule 4

Group
Relief Arrangements

(clause 9)

	 
	1	 	 
	 
	1.1	 	This Schedule records the terms agreed between the Seller, the Company and the Purchasers
on which group relief will be claimed and surrendered and payments will therefor be made. The
Seller, the Company and the Purchasers hereby undertake to ensure or procure:

	 	(a)	 	that there is made all such claims and given all such consents in
accordance with the Group Relief Provisions to give effect to their respective
rights and obligations under this Schedule;
	 
	 	(b)	 	that there is supplied to each other such information as is relevant to
calculate the quantum of any payment to or from the Company under this Schedule; and
	 
	 	(c)	 	that without the consent of the other parties to this Deed (not to be
unreasonably withheld or delayed), no party shall take any step to close off prior
to 31 December 2005 the accounting period which started on 1 January 2005, and in
the event that it is so closed off, references to the 2005 Accounting Period shall
be modified accordingly.

	1.2	 	If the Guarantor so requests, by giving at least 30 days’ written notice, each of the
Purchasers shall supply to the Guarantor on or by the date specified in such notice such
information as the Guarantor may reasonably request to enable the Guarantor to determine the
status and timing of any payment made or likely to be made hereunder. The Purchasers shall be
under no obligation to supply such information more than twice in any twelve month period.
	 
	2	 	For the avoidance of doubt, any reference to specific statutory provisions in this Schedule
shall be deemed to include references to those provisions as subsequently amended and, should
the Group Relief Provisions be replaced by another regime by which the losses of the Company
may be used by any member of any Purchaser’s Group, the parties hereby agree that this
schedule shall be read mutatis mutandis to give effect to their intentions as stated below.
	 
	3	 	Subject to the provisions of this Schedule, the consideration each Purchaser agrees to pay
or procure there is paid to the Company shall be 8.5p for each and every £1 of losses or
other amounts eligible for relief from corporation tax which is capable of being surrendered
by the Company pursuant to section 402 ICTA 1988 (the
“
Losses”) in the 2005 Accounting Period
(the “
Tax Loss Payment”), provided that the Losses shall for the purposes of this Schedule
(including paragraph 14.3) be deemed to be capable of surrender, if and to the extent that
they would be so capable but for an insufficiency of profits on the part of the Purchasers or
their group or they would be so capable, but for the Company no longer being owned by a
consortium of which the Purchasers or members of their groups are the sole equity-holders (as
to 50 per cent each of the ordinary shares of the Company) as a result of any voluntary act
or omission done or failed to be done by the Company or the Purchasers after Completion
(other than pursuant to: (i) any arrangement made on or before Completion (including under
any indebtedness owing to Lloyd’s or the Central Fund); or (ii) as required by law or any
regulatory authority, including but not limited to Lloyd’s or (iii) as requested by the
Seller pursuant to this Deed), such voluntary act or omission being a Purchaser De-Grouping
Event.
	 
	4	 	Subject to the provisions of this Schedule, neither Purchaser shall (save for the
provisions of paragraph 6 below) be obliged to pay for any Losses to the extent that, in
relation to the 2005 Accounting Period, such losses exceed that Purchaser’s Relevant
Proportion of 5,874,272.
	 
	5	 	Save as set out in paragraph 6 below, neither Purchaser shall be obliged to pay for any
Losses which are made available to the Purchasers or any member of their groups in relation
to a Post 2005 Accounting Period.
	 
	6	 	To the extent that any Losses exceed the amounts set out in paragraph 4 above, these are
hereafter referred to as “Excess Losses” and each an “Excess Loss”. No Purchaser shall be
obliged to pay for

 

 

	 	 	any Excess Loss, unless and then only to the extent that it or any member of its group
actually utilises any such Excess Loss to reduce its Corporation Tax Payments. Each
Purchaser shall use its reasonable endeavours to use such Excess Losses. Each Purchaser
shall pay:

	 	(a)	 	for such Excess Losses in the 2005 Accounting Period the amount shall be
8.5p for each and every £1 of Excess Losses so used; and
	 
	 	(b)	 	for such Excess Losses in subsequent Accounting Periods the amount shall
be 13.5p for each and every £1 of Excess Losses so used.

	7	 	The time for payment by the Relevant Purchaser of the Tax Loss Payment into the Escrow
Account shall be:

	 	(a)	 	in relation to the Losses, at each relevant tax payment date on which the
Relevant Purchaser has been able by virtue of having utilised the Losses to reduce
its liability to corporation tax by virtue of the Losses or would have been able to
(but for an insufficiency of profits or a Purchaser De-Grouping Event); and
	 
	 	(b)	 	in relation to the Excess Losses, at each relevant tax payment date on
which the Relevant Purchaser utilises such Excess Losses to reduce its liability to
corporation tax.

	 	 	with each date being a “Payment Date”, provided that if any such Payment Date falls on or
before Completion, the Payment Date shall be the first such Date falling after Completion.
	 
	8	 	At each Payment Date the amount to be paid by each Relevant Purchaser will be calculated
on the assumptions that the amount of the technical reserves which can be disclaimed under
Section 107(4) of the Finance Act 2000 in respect of the period of account ended 31 December
2004 are calculated by reference to the technical provisions (as defined in subsection (7)
of Section 107, after taking account of reinsurance recoverables) and that no tax relief is
available in respect of any amounts accruing by way of interest to the Central Fund. If such
assumptions are subsequently proven to be incorrect the amount of the Relevant Payment to be
increased pursuant to paragraph 9 shall be increased by reference to the interest (net of
tax) that would have been earned on such increase in the Relevant Payment had such increased
Relevant Payment been made initially.
	 
	9	 	Subject to this, if at the Payment Date it is not possible to quantify precisely the
Escrow Tax Loss Payment, the amount to be paid into the Escrow Account (the “Relevant
Payment”) will be agreed upon by the Guarantor and the Relevant Purchaser, each acting
reasonably (the “Accepted Amount”). If the Guarantor and the Relevant Purchaser cannot agree
on an Accepted Amount within 10 business days from the Payment Date, the matter shall
thereupon be referred to a leading firm of chartered accountants (who shall act as experts
and not arbitrators, and whose determination shall, in the absence of manifest error, be
final and binding) to be agreed with between the Relevant Purchaser and the Guarantor.
	 
	10	 	The amount of each Relevant Payment shall be adjusted by the Relevant Purchaser (and the
Relevant Purchaser shall notify the Guarantor accordingly) as necessary no later than five
business days following the occurrence of each of the following, each to be known as an
“Adjustment Date”):
	 
	10.1	 	the Relevant Purchaser adjusts that Instalment Payment;
	 
	10.2	 	the Company submits its Tax Return for the relevant Accounting Period;
	 
	10.3	 	the Relevant Purchaser submits its Tax Return for the relevant Accounting Period;
	 
	10.4	 	(if later) the Relevant Purchaser submits any claim for Group Relief in relation to the
relevant Accounting Period;
	 
	10.5	 	the date on which it becomes possible to precisely quantify the Tax Loss Payment (including,
for example, any final determination that the Losses are not capable of surrender by the
Company); and
	 
	10.6	 	it has been finally determined that the Relevant Purchaser has insufficient profits to
utilise the Losses or that a Purchaser De-Grouping Event has occurred.

 

 

	11	 	Within 10 business days of any Adjustment Date, if (a) the effect of the adjustment is to
increase the Relevant Payment, then the Relevant Purchaser shall pay a sum equal to such
increase (plus any interest which would have been earned (less tax) on the Escrow Account)
into the Escrow Account or (b) if the effect of the adjustment is to decrease the Relevant
Payment then an amount equal to such decrease (plus any interest thereon earned (less tax) on
the Escrow Account by the Relevant Purchaser) shall be re-paid to the Relevant Purchaser from
the Escrow Account.
	 
	12	 	In the event that the benefit of any Losses or Excess Losses available to the Company which
would otherwise be the subject of payments into the Escrow Account are realised in a way which
mirrors in economic terms the benefit of group relief but is not within the Group Relief
Provisions, the parties confirm that it is their intent that the provisions of this Schedule
are modified accordingly so as to leave the parties in the same position as they would have
been had such Losses or Excess Losses been utilised under the Group Relief Provisions.
	 
	13	 	Any amounts standing to the balance of the Escrow Account after the operation of paragraphs
10 and 14.3 (if relevant) (the “Escrow Cash”) to the Company shall be paid (together with an
amount equal to the interest earned on such sum calculated on a fair and equitable basis) to
the Company on the occurrence of any one of the following events in relation to the relevant
accounting period and the Relevant Purchaser in respect of which the Relevant Payment was
paid:

	 	(a)	 	if no notice of enquiry is received from a Taxation Authority for both the
Company’s and the Relevant Purchaser’s tax return within two years after the later of
(i) the end of the Relevant Purchaser’s accounting period and (ii) the end of the
Company’s accounting period, (or if later, (in relation to both the Relevant
Purchaser’s and the Company’s tax return) the dates specified in paragraph 24
Schedule 18 Finance Act 1998 for the giving of a notice of enquiry), then an
appropriate proportion (equal to the Relevant Proportion of that Purchaser) of the
Escrow Cash shall be immediately released; or
	 
	 	(b)	 	if no notice of a tax enquiry is received from a Taxation Authority in
respect of the Company’s corporation tax return but notice is received in respect of
a Relevant Purchaser’s corporation tax return then an appropriate proportion of the
Escrow Cash shall be released on the later of:

	 	(i)	 	the date on which written confirmation is received from a
Taxation Authority (which the Relevant Purchaser shall use its best efforts to
seek) that the Taxation Authority will not open an enquiry in respect of the
Company’s Group Relief Reliefs in relation to the relevant Relevant Purchaser
or if earlier, it is clear to the Relevant Purchaser acting reasonably that any
enquiry will not impact on the quantum of any payment made or to be made under
this Schedule;
	 
	 	(ii)	 	the date on which such enquiry which may have such an impact
into the Relevant Purchaser’s corporation tax return is closed by the Taxation
Authority; and
	 
	 	(iii)	 	the date on which a Taxation Authority will no longer be
able to open an enquiry into the corporation tax return of the Company under
paragraph 24 Schedule 18 Finance Act 1998; or

	 	(c)	 	if notice of a tax enquiry is received from a Taxation Authority in respect
of the Company’s tax return but not in respect of the Relevant Purchaser’s tax return
then an appropriate proportion of the Escrow Cash shall be released at the later of

	 	(i)	 	the date on which such enquiry into the Company’s tax
return is closed by the Taxation Authority; and
	 
	 	(ii)	 	the date on which a Taxation Authority will no longer be
able to open an enquiry into the tax return of the Relevant Purchaser under
paragraph 24 Schedule 18 Finance Act 1998; or

	 	(d)	 	if notice of a tax enquiry is received from a Taxation Authority in respect
of both the Company and a Relevant Purchaser’s returns, then the Escrow Cash shall be
released at the later of the dates indicated in sub paragraphs (b) and (c) above.

	14	 	Amounts standing to the credit of the Escrow Account shall be released from the Escrow
Account to

 

 

	 	 	the Purchasers to the extent that in relation to the relevant accounting period in which
the Relevant Payment was made;
	 
	14.1	 	the Company incurs an Actual Taxation Liability for which the Seller is liable under this
Deed, in which case the amount released to the Purchasers (in satisfaction of such liability
to the extent of such release (ignoring any accrued interest)) shall be the amount of such
Actual Taxation Liability (as reduced or extinguished by any available Relief arising on or
before Completion) together with an amount equal to the interest earned on such sum calculated
on a fair and equitable basis and the Relevant Purchaser shall have no further obligation to
make any payment in respect thereof;
	 
	14.2	 	any Relief which is used to reduce an Actual Taxation Liability for which the Seller is
liable has been the subject of a Tax Loss Payment into the Escrow Account above by any
Purchaser (an “Escrow Payment”), in which case the amount released to such Purchaser shall be
the amount of such Escrow Payment, plus any interest accrued in respect of such payment
calculated on a fair and equitable basis;
	 
	14.3	 	it is finally determined that any losses are not capable of surrender by the Company to the
Relevant Purchasers in which case the amount released shall be an amount equal to the amount
paid for such losses plus any interest accrued on such amount calculated on a fair and
equitable basis.
	 
	15	 	It is further agreed that if the benefit of the surrender of any Group Relief Reliefs to
the Purchasers or their groups is lost or reduced as a result of the coming into force after
Completion of, or any introduction or change after Completion in, any law, rule, regulation
(or their interpretation by any court of law or tribunal) then the amount of any future Tax
Loss Payments shall be reduced correspondingly and to the extent that any Tax Loss Payments
have already been paid into the Escrow Account, the sum of any Tax Loss Payments that
correspond to such Group Relief Reliefs that are so lost or reduced shall be returned to the
Relevant Purchasers (the “Return”) together with any related interest calculated on a fair
and equitable basis, and the Relevant Purchasers shall have no further obligation to make any
payment in respect thereof.
	 
	16	 	Any obligation of the Purchasers under this Schedule shall be several and limited to each
Purchaser’s Relevant Proportion.
	 
	17	 	The Purchasers, Seller and Guarantor each agree to undertake, or ensure there is undertaken:

	 	(a)	 	all necessary action as may be required to ensure the Escrow Account is
operated in accordance with the provisions of this Schedule; and
	 
	 	(b)	 	the execution of the Escrow Letter.

 

 

	 	 	 	 	 	 	 	 	 
	EXECUTED and DELIVERED

	 	 	)	 	 	 	 	 
	as a DEED by

	 	 	)	 	 	/s/ GEORGE R. TRUMBULL	 	 
	MMO EU LIMITED

	 	 	)	 	 	Director	 	 
	 

	 	 	)	 	 	 	 	 
	 

	 	 	)	 	 	/s/ GEORGE R. TRUMBULL	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	 	)	 	 	Director/Secretary	 	 
	 
	 	 	 	 	 	 	 	 
	EXECUTED and DELIVERED

	 	 	)	 	 	 	 	 
	as a DEED by

	 	 	)	 	 	/s/ GEORGE R. TRUMBULL	 	 
	 

	 	 	 	 	 	 	 	 
	NYMAGIC, INC.

	 	 	)	 	 	Director	 	 
	 

	 	 	)	 	 	 	 	 
	 

	 	 	)	 	 	/s/ PAUL J. HART	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	 	)	 	 	Director/Secretary	 	 
	 
	 	 	 	 	 	 	 	 
	EXECUTED and DELIVERED

	 	 	)	 	 	 	 	 
	as a DEED by

	 	 	)	 	 	/s/ GEORGE R. TRUMBULL	 	 
	 

	 	 	 	 	 	 	 	 
	MMO UK LIMITED

	 	 	)	 	 	Director	 	 
	 

	 	 	)	 	 	 	 	 
	 

	 	 	)	 	 	/s/ THOMAS J. IACOPELLI	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	 	)	 	 	Director/Secretary	 	 
	 
	 	 	 	 	 	 	 	 
	EXECUTED and DELIVERED

	 	 	)	 	 	 	 	 
	as a DEED by

	 	 	)	 	 	/s/ STEVE LYON	 	 
	 

	 	 	 	 	 	 	 	 
	ROBERTSON GROUP LIMITED

	 	 	)	 	 	Director	 	 
	 

	 	 	)	 	 	 	 	 
	 

	 	 	)	 	 	/s/ IRENE WILSON;	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	 	)	 	 	Director/Secretary	 	 
	 
	 	 	 	 	 	 	 	 
	EXECUTED and DELIVERED

	 	 	)	 	 	 	 	 
	as a DEED by

	 	 	)	 	 	/s/ DAVID HOUSTON	 	 
	 

	 	 	 	 	 	 	 	 
	THE EDINBURGH WOOLEN MILL

	 	 	)	 	 	Director	 	 
	(GROUP) LIMITED

	 	 	)	 	 	 	 	 
	 

	 	 	)	 	 	/s/ ALEC WHITAKER	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	 	)	 	 	Director/Secretary

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