Document:

exv4w33

 

EXHIBIT 4.33

2 September, 2002

Converium AG

MDU Investments Limited

	 
	

	PUT OPTION AGREEMENT

relating to preference shares in MDU

Investments Limited
	

 

 

CONTENTS

	 	 	 	 	 	 
	CLAUSE	 	PAGE
	 	 	 	 	 	 
	1.   INTERPRETATION
	 	 	1	 
	2.   PUT OPTION
	 	 	3	 
	3.   EXERCISE OF OPTION
	 	 	3	 
	4.   OPTION PRICE
	 	 	4	 
	5.
  COMPLETION
	 	 	4	 
	6.   TRIGGER EVENT
	 	 	4	 
	7.   WARRANTIES
	 	 	6	 
	8.   NEGATIVE UNDERTAKINGS
	 	 	7	 
	9.   RISK PAYMENT
	 	 	11	 
	10. TERMINATION
	 	 	11	 
	11. NON-ASSIGNMENT
	 	 	12	 
	12. AMENDMENTS
	 	 	12	 
	13. NOTICES
	 	 	12	 
	14. COUNTERPARTS
	 	 	13	 
	15. NO RIGHTS UNDER CONTRACTS (RIGHTS OF THIRD PARTIES) ACT 1999
	 	 	13	 
	16. GOVERNING LAW
	 	 	13	 
	SCHEDULE 1 DISCLOSURE AGAINST THE WARRANTIES IN
CLAUSE 7
	 	 	15	 
	 	Professor Spurrett
	 	 	15	 
	 	Dr Barry
	 	 	15	 
	SCHEDULE 2 PREFERENCE SHARE RIGHTS
	 	 	17	 
	 	Dividends
	 	 	17	 
	 	Capital
	 	 	17	 
	 	Class consents
	 	 	17	 
	 	Redemption
	 	 	18	 
	 	Restrictions
	 	 	19	 
	 	General
	 	 	19	 

 

 

THIS PUT OPTION AGREEMENT is made on 2 September 2002

BETWEEN:

	(1)	 	MDU Investments Limited, whose registered office is at 230 Blackfriars
Road, London SE1 8PJ, England (MDUI);
	 
	(2)	 	Converium AG, whose registered office is at General Guisan-Quai 26, 8022
Zurich, Switzerland (Converium) and
	 
	(3)	 	The Medical Defence Union Limited, whose registered office is at 230
Blackfriars Road, London SE1 8PJ, England.

WHEREAS:

(A)     MDUI is a private limited company with an authorised share capital of one
hundred pounds (£100) comprising one hundred (100) shares of one pound (£1)
each.

(B)     Converium has agreed to grant MDUI an option to require Converium (or a
person nominated by Converium) to subscribe for up to twenty million Preference
Shares to be created by MDUI at their nominal value of one pound (£1) each on
the terms of this Agreement.

IT IS AGREED as follows:

	1.	 	INTERPRETATION

Definitions

1.1     In this Agreement, the following expressions shall have the following
meanings:

Balance Sheet has the meaning given to it in clause 6;

Bank Account has the meaning given to it in clause 6;

Borrowings has the meaning given to it in clause 8;

Business Day means a day (other than a Saturday or Sunday) on which banks
generally are open in London and Zurich for a full range of business;

Completion means completion of an issue of Option Shares in accordance
with clause 5;

Conditions Precedent means the conditions set out in clause 6.4;

Deutsche Cash and Money Markets Fund means the fund of that name (or any
replacement name from time to time) managed by Deutsche Bank;

Page 1

 

Group means, in relation to MDUI or any other company, that company and
its Subsidiaries for the time being;

Low Risk Rate means the five year average rate of interest of sterling
denominated UK Government securities with an original maturity of five years;

MDUIL means MDU Insurance Limited;

Option Notice means a
notice given in accordance with clause 3;

Option Period means the period beginning on the date of this Agreement and
ending on 1 January 2009;

Option Price has the meaning given to it in clause 4;

Option Shares means twenty million (20,000,000) Preference Shares;

parties means Converium and MDUI (and party shall be construed
accordingly);

Permitted Borrowings has the meaning given to it in clause 8;

Preference Dividend means the dividend (which may be at different rates
for different series of Preference Shares) attaching to the Preference Shares;

Preference Shares means the cumulative redeemable preference shares of one
pound (£1) each to be created in the capital of MDUI which shall have the
rights set out in Schedule 2 to this Agreement and which may be issued in more
than one series;

Put Option has the meaning given to it in clause 2;

Risk Payment has the meaning given to it in clause 9;

Security Interest has the meaning given to it in clause 8;

Shareholders’ Agreement means the shareholders agreement relating to MDU
Services Limited dated 10 December 2001 between Converium, The Medical Defence
Union Limited, MDUIL and MDU Services Limited as amended by a deed of amendment
dated the date of this Agreement;

Subscription Monies has the meaning given to it in clause 9;

Subsidiary means, in relation to an undertaking (the holding undertaking),
any other undertaking in which the holding undertaking (or persons acting on
its or their behalf) for the time being directly or indirectly holds or
controls either:

	(a)	 	a majority of the voting rights exercisable at general meetings of the
members of that undertaking on all, or substantially all, matters; or

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	(b)	 	the right to appoint or remove directors having a majority of the voting
rights exercisable at meetings of the board of directors of that
undertaking on all, or substantially all, matters,

and any undertaking which is a Subsidiary of another undertaking shall
also be a Subsidiary of any further undertaking of which that other is a
Subsidiary; and Subsidiaries shall be construed accordingly; and

Trigger Event shall have the meaning given to it in clause 6.1.

1.2     In this Agreement, unless the context otherwise requires:

	(a)	 	references to persons shall include individuals, bodies corporate
(wherever incorporated), unincorporated associations and partnerships;
	 
	(b)	 	the headings are inserted for convenience only and shall not affect the
construction of the Agreement;
	 
	(c)	 	references to one gender shall include all genders;
	 
	(d)	 	any reference to an enactment is a reference to it as from time to time
amended, consolidated or re-enacted (with or without modification) and
includes all instruments or orders made under such enactment; and
	 
	(e)	 	references to documents in the agreed form are to such documents as
agreed between the parties and initialled on behalf of each party.

1.3     The Schedules comprise schedules to this Agreement and form part of this
Agreement.

	2.	 	PUT OPTION

In consideration of the payment of £1, receipt of which is hereby acknowledged,
Converium hereby grants to MDUI an option (the Put Option) to require Converium
to subscribe for up to an aggregate of twenty million (20,000,000) Preference
Shares on the terms of this Agreement. Converium may, at its absolute
discretion, procure that a Subsidiary of Converium subscribes for the relevant
Preference Shares in satisfaction of Converium’s obligations pursuant to this
clause 2. The Put Option may be exercised in whole on one occasion or by
several tranches of one million (1,000,000) Preference Share multiples.

	3.	 	EXERCISE OF OPTION

3.1     The Put Option may be exercised by notice or notices in writing by MDUI
given at any time during the Option Period when the Conditions Precedent have
been satisfied and
the Trigger Event applies but only to the extent necessary (rounded up to the
nearest one million (1,000,000) Preference Shares) to ensure that the Trigger
Event no longer applies.

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3.2     The Put Option may only be exercised in respect of multiples of one million
(1,000,000) of the Option Shares.

	4.	 	OPTION PRICE

The price payable for the Option Shares under the Put Option (the Option Price)
shall be one pound (£1) per Preference Share

	5.	 	COMPLETION

5.1     Subject to the Conditions Precedent having been satisfied, completion of
the subscription of the relevant Option Shares shall take place at MDUI’s
registered office on the fifth Business Day following the receipt by Converium
of an Option Notice.

5.2     The following events shall take place at Completion:

	(a)	 	Converium shall cause the Option Price to be paid by banker’s draft made
payable to MDUI or electronic funds transfer to the Bank Account or such
other bank account in the UK in the name of MDUI as MDUI shall notify to
Converium in the Option Notice;
	 
	(b)	 	MDUI shall deliver to Converium a copy of valid board and shareholders
resolutions of MDUI (in each case certified by the company secretary of
MDUI as being true and complete copies) approving the creation of the
Preference Shares that are to be subscribed by Converium as required by
clause 6.4 and making any necessary changes to the memorandum and articles
of association of MDUI;
	 
	(c)	 	MDUI shall deliver to Converium a copy of a valid board resolution of
MDUI resolving to issue the relevant Option Shares to Converium and valid
resolutions of the shareholders of MDUI granting authority pursuant to
section 80 of the Companies Act 1985 and Article 2(a) of MDUI’s articles
of association for such issue and disapplying the statutory pre-emption
rights pursuant to section 95 of the Companies Act 1985 in relation to
such issue (in each case certified by the company secretary of MDUI as
being true and complete copies);
	 
	(d)	 	MDUI shall deliver to Converium the share certificates relating to the
relevant Option Shares; and
	 
	(e)	 	MDUI shall procure that Converium is entered in the register of members
of MDUI as the holder of the relevant Option Shares.
	 
	6.	 	TRIGGER EVENT

6.1     Subject to Clause 6.2 the Trigger Event is the reduction of the
consolidated net assets of The Medical Defence Union Limited and its
Subsidiaries to below twenty million pounds sterling (£20,000,000).

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6.2     The Trigger Event shall only apply if MDUI provides to Converium, with the
Option Notice, a consolidated balance sheet (a Balance Sheet) (prepared in
accordance with the accounting practices and principles used to prepare the
audited consolidated accounts for The Medical Defence Union Limited’s Group for
the previous accounting period of The Medical Defence Union Limited for which
such accounts have been produced) showing that the condition in clause 6.1 has
been satisfied and the Balance Sheet has been certified by the finance director
of The Medical Defence Union Limited on behalf of The Medical Defence Union
Limited (and without personal liability) as giving an accurate view of the
consolidated net assets of The Medical Defence Union Limited and its
Subsidiaries based on such accounting principles and practices.

6.3     MDUI shall procure that a copy of the audited annual consolidated accounts
of The Medical Defence Union Limited and its Subsidiaries (including a
confirmation from the auditors of The Medical Defence Union Limited that in
their opinion the financial statements comprising the audited annual
consolidated accounts of The Medical Defence Union Limited and its Subsidiaries
give a true and fair view of the state of The Medical Defence Union Limited and
its Subsidiaries’ affairs as at the date of such financial statements) for each
year during which one or more Balance Sheet is issued is provided to Converium
within fourteen (14) days of the completion of such accounts.

6.4     The Conditions Precedent are:

	(a)	 	MDUI validly increasing its share capital by the creation of such number
of Preference Shares as are to be subscribed by Converium pursuant to the
Option Notice. The Preference Shares shall have the rights set out in
Schedule 2 and shall be subject to no other obligations of any kind other
than those applying to shareholders of MDUI in general as set out in the
articles of association of MDUI in the agreed form. The rate of interest
to be inserted in paragraph A.1 of Schedule 2 shall be the rate of
interest equal to aggregate of (i) the Low Risk Rate on the date when the
relevant Option Notice is served and (ii) 300 basis points. All
Preference Shares, regardless of their interest rate, shall rank pari
passu;
	 
	(b)	 	the valid transfer of the shares in MDUIL currently registered in the
name of The Medical Defence Union Limited to MDUI on the terms set out in
the draft share sale agreement in the agreed form and the valid transfer
of the share in MDU Insurance Limited currently registered in the name of
Dental Defence Union Limited to The Medical Defence Union Limited such
that following such transfers MDUI and The Medical Defence Union Limited
will together hold the entire issued share capital of MDU Insurance
Limited;
	 
	(c)	 	MDUI opening a bank account in the name of MDUI with a UK resident bank
(the Bank Account); and
	 
	(d)	 	MDU Insurance Limited entering into a negative covenant agreement in the
agreed form.

Page 5

 

	7.	 	WARRANTIES

7.1     MDUI warrants to Converium that as at the date of this Agreement and as at
any date when an Option Notice is served by MDUI:

	(a)	 	MDUI has been duly incorporated and is validly existing under relevant
law with full power and authority to execute and perform its obligations
under this Agreement;
	 
	(b)	 	the execution, delivery and performance of this Agreement by MDUI has
been duly authorised by MDUI and this Agreement constitutes a legal, valid
and binding obligation of MDUI enforceable in accordance with its terms;
	 
	(c)	 	all corporate and other approvals, consents and authorisations required
by the MDUI for the issue of the Option Shares will have been obtained and
will be unconditional and in full force and effect when such shares are
issued;
	 
	(d)	 	the Option Shares will have been duly authorised when such shares are
issued and, when such shares are issued and delivered in accordance with
the terms of this Agreement they will be validly issued in accordance with
the law and regulations of England, fully paid and free from all liens,
charges, encumbrances and other third party rights, and the existing
shareholders of MDUI will have validly waived their pre-emption rights (if
any) with respect to the Option Shares and no other person has any
pre-emptive or other rights with respect to the Option Shares and there
are no legal restrictions on the issue of the Option Shares under the laws
of England or the constitutional documents of MDUI;
	 
	(e)	 	upon issue of any Option Shares to Converium or its nominated Subsidiary,
Converium or that Subsidiary will become the sole legal and beneficial
owner of such Option Shares;
	 
	(f)	 	the execution and delivery of this Agreement, the performance of its
terms and the creation and issue of the Option Shares will not infringe
any provision of applicable law or regulation, is not contrary to the
provisions of the constitutional documents of MDUI and will not result in
any breach of the terms of, or constitute a default under, any instrument,
agreement or order to which MDUI is a party or by which it or its property
is bound;

7.2     MDUI warrants to Converium that so far as MDUI or any of Mr Maurice
Gallivan, Dr Michael Saunders or Dr Christine Tomkins are aware and save as
disclosed in Schedule 1 to this Agreement, as at the date of this Agreement no
member of The Medical Defence Union Limited’s Group (save for MDU Services
Limited) is:

	(a)	 	in material breach of the terms of, or in material default under, any
instrument, agreement or order to which it is a party or by which it or
its property is bound; or

Page 6

 

	(b)	 	a party to any litigation or arbitration proceedings relating to claims
or amounts which are likely to have a material adverse effect on the
condition (financial or other), prospects, results of operations or
general affairs of The Medical Defence Union Limited’s Group taken as a
whole or would materially and adversely affect the ability of the MDUI to
perform its obligations under this Agreement.

7.3     For the purpose of clause 7.2(a) a breach or default will not be considered
material unless such breach or default results in a claim (or series of
connected claims) against or a cost to The Medical Defence Union Limited’s
Group of one million pounds (£1,000,000) or more and claims or amounts referred
to in 7.2(b) will not have a material adverse effect unless such claim or
amount exceeds one million pounds (£1,000,000) or results in a cost to The
Medical Defence Union Limited’s Group of one million pounds (£1,000,000) or
more.

7.4     MDUI will not be liable in respect of any claim for breach of warranty
unless MDUI receives notification of the claim on or before the date which
falls one year after the later of: (a) the date on which twenty million
(20,000,000) Preference Shares have been acquired by Converium or a Subsidiary
nominated by it pursuant to this Agreement; and (b) 1 January 2009.

7.5     The total aggregate liability of MDUI in respect of any claim or claims for
breach of warranty pursuant to this clause 7 will be limited to an amount equal
to the aggregate of the nominal value of the Preference Shares held by
Converium or any of its Subsidiaries at the time such claim is notified to MDUI
together with all amounts outstanding pursuant to the terms of the Preference
Shares at that time.

7.6     MDUI agrees to notify Converium to the extent it or any of Mr Maurice
Gallivan, Dr Michael Saunders or Dr Christine Tomkins, becomes aware that there
has been or is likely to be a breach of the warranties set out in this clause
7.

	8.	 	NEGATIVE UNDERTAKINGS

8.1     MDUI undertakes with Converium that, from the date of this Agreement until
the earlier of (i) the date on which the Preference Shares have been redeemed
in full and all amounts due pursuant to the terms of the Preference Shares paid
in full and; (ii) 1 January 2009 if no Preference Shares or Option Notice are
then outstanding, without the written consent of Converium, it will not:

	(a)	 	and will procure that no member of The Medical Defence Union Limited’s
Group save for MDUIL will:

	 	(i)	 	create or permit to subsist any Security Interest
on the whole or any part of its present or future property,
assets or revenues;
	 
	 	(ii)	 	sell or otherwise dispose of any of its assets on
terms whereby such property or asset is or may be leased to or
re-acquired or acquired by it or any other member of The
Medical Defence Union Limited’s Group;

Page 7

 

	 	(iii)	 	sell or otherwise dispose of any of its
receivables on recourse terms,

	 	 	except for Permitted Security Interests and actions taken by MDU Services
Limited and approved by a board resolution of that company in accordance
with the Shareholders’ Agreement;

	(b)	 	and will procure that no member of The Medical Defence Union Limited’s
Group save for MDUIL will, either in a single transaction or in a series
of transactions whether related or not and whether voluntarily or
involuntarily, sell, transfer, lease or otherwise dispose of all or any a
substantial part of their property or assets or any shares in MDUIL except
that the following disposals shall not be taken into account:

	 	(i)	 	disposals made with the prior consent of Converium
including pursuant to clause 6.4(b);
	 
	 	(ii)	 	disposals of property or assets made in the
ordinary course of business of the disposing entity;
	 
	 	(iii)	 	disposals of property or assets in exchange for
other property or assets comparable as to type and value;

	 	 	except for actions taken by MDU Services Limited and approved by a board
resolution of that company in accordance with the Shareholders Agreement;

	(c)	 	and will procure that no member of The Medical Defence Union Limited’s
Group save for MDUIL will incur or have outstanding any Borrowings other
than (i) Borrowings incurred solely for the purpose of redeeming or
purchasing the Preference Shares; or (ii) Permitted Borrowings; or (iii)
Borrowings by MDU Services Limited that are approved by a board resolution
of that company in accordance with the Shareholders Agreement;
	 
	(d)	 	and will procure that no member of The Medical Defence Union Limited’s
Group save for MDUIL will acquire any business (which for the avoidance of
doubt does not include the shares in a dormant Subsidiary of The Medical
Defence Union Limited held by The Medical Defence Union Limited or one of
its Subsidiaries) other than an acquisition by MDU Services Limited with
the agreement of the board of that company in accordance with the
Shareholders Agreement;
	 
	(e)	 	enter into any amalgamation, merger or reconstruction;
	 
	(f)	 	and will procure that no member of The Medical Defence Union Limited’s
Group save for MDUIL will incur any expenditure save in the ordinary
course of business (save for expenditure by MDU Services Limited with the
agreement of the board of that company in accordance with the Shareholders
Agreement);

Page 8

 

	(g)	 	and will procure that no member of The Medical Defence Union Limited’s
Group save for MDUIL will incur any Capital Expenditure in excess of an
aggregate amount of £150,000 per annum (save for expenditure by MDU
Services Limited with the agreement of the board of that company in
accordance with the Shareholders’ Agreement);
	 
	(h)	 	and will procure that no other member of The Medical Defence Union
Limited’s Group save for MDUIL will invest in any undertaking (as defined
in the Companies Act 1985) or other entity save for: (i) an investment in
an undertaking or entity that only carries out or will only carry out the
business of providing professional indemnity cover on a discretionary
basis, providing advice and assistance with medico-legal problems and
claims related advice and assistance and risk management that The Medical
Defence Union Limited’s Group and MDU Services Limited currently carries
out; and (ii) provided that the undertaking or entity in which such
investment is made becomes a Subsidiary of The Medical Defence Union
Limited as a result of such investment.

Borrowings means and includes as at any date:

	(a)	 	all moneys borrowed (with or without security);
	 
	(b)	 	the nominal amount of the issued share capital (other than equity share
capital as defined by Section 744 of the Companies Act 1985) of any member
of The Medical Defence Union Limited’s Group, which is not beneficially
owned by another member of The Medical Defence Union Limited’s Group;
	 
	(c)	 	receivables sold, assigned or discounted;
	 
	(d)	 	the acquisition cost of any asset to the extent payable before or after
the time of acquisition and possession by the party liable therefor where
the advance or deferred payment is arranged primarily as a method of
raising finance or financing the acquisition of that asset;
	 
	(e)	 	any obligation under any lease which is required to be capitalised under
generally accepted accounting principles;
	 
	(f)	 	the net exposure (meaning the amount payable by the party liable
thereunder on termination or closing out of such arrangements determined
on a mark to market basis) of currency swap or interest swap, cap or
collar transactions;
	 
	(g)	 	the principal amount raised by acceptances or under any acceptance credit
opened on its behalf by a bank or accepting house;
	 
	(h)	 	the principal amount (including any fixed or minimum premium payable on
final redemption or repayment) of any debentures (as defined by Section
744 of the Companies Act 1985);

Page 9

 

	(i)	 	any other transaction having the commercial effect of a borrowing
(whether including money, commodities or other property); and
	 
	(j)	 	any guarantee, indemnity or similar assurance against the Borrowings of
any person.

Capital Expenditure means any expenditure incurred (or committed to be
incurred) which falls to be treated as capital expenditure in accordance with
generally accepted accounting principles.

Permitted Borrowings means:

	(a)	 	Borrowings pursuant to any bank facility granted to any member of The
Medical Defence Union Limited’s Group prior to the date of this Agreement
and advised in writing to Converium prior to the date of this Agreement;
	 
	(b)	 	any lease or hire or retention of title agreements or arrangements in
respect of any office equipment in the ordinary course of business;
	 
	(c)	 	any borrowings from any other member of The Medical Defence Union
Limited’s Group; and
	 
	(d)	 	subject to the limitations in clause 8.1(f), any lease of property
occupied by any member of The Medical Defence Union Limited’s Group.

Permitted Security Interest means:

	(a)	 	a lien or right of set-off arising in the normal course of business or by
operation of law securing obligations not more than thirty days overdue;
	 
	(b)	 	any conditional sale or title retention arising under or pursuant to any
contract for the purchase of goods in the normal course of business
securing obligations not more than thirty days overdue;
	 
	(c)	 	any Security Interest created or permitted to subsist with the prior
written consent of Converium;
	 
	(d)	 	any other Security Interests so long as the amount secured by all such
Security Interests is not in excess of £250,000.

Security Interest means any mortgage, charge, pledge, lien, right of
set-off, assignment by way of security, retention of title or any other
security interest whatsoever or any other agreement or arrangement having the
effect of conferring security, howsoever created or arising.

8.2     MDUI undertakes that, save for the changes to its articles of association
required by clause 6.4, it will not change its articles of association or issue
any shares which rank in
priority to or pari passu with (in either case as to dividends, on a winding-up
or otherwise) the Preference Shares without Converium’s prior written approval.

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8.3     MDU undertakes that (save as envisaged under this Agreement) it shall not
take any action that, so far as it is aware, will cause a liability to
corporation tax to arise to MDUI as a result of the operation of section 179 of
the Taxation of Chargeable Gains Act 1992.

	9.	 	RISK PAYMENT

9.1     Any amounts (the Subscription Monies) paid by Converium or any Subsidiary
of Converium for Preference Shares pursuant to this Agreement shall be invested
in sterling denominated UK government securities or in units of the Deutsche
Cash and Money Markets Fund save to the extent required by any member of The
Medical Defence Union Limited’s Group for the purposes of its business.

9.2     If any Subscription Monies are not invested in sterling denominated UK
government securities or the Deutsche Cash and Money Markets Fund, The Medical
Defence Union Limited shall pay to Converium an amount equal to one and one
half per cent per annum of the amount of the Subscription Monies not so
invested (the Risk Payment).

9.3     The Risk Payment shall accrue on any Subscription Monies not invested in
sterling denominated UK government securities or the Deutsche Cash and Money
Markets Fund from (and including) the date when such Subscription Monies are
not invested in sterling denominated UK government securities or the Deutsche
Cash and Money Markets Fund until (but excluding) the date when the relevant
Subscription Monies are reinvested in sterling denominated UK government
securities or the Deutsche Cash and Money Markets Fund. The Risk Payment shall
compound on an annual basis and shall be payable when the Preference Dividend
in relation to the Preference Shares in respect of which the relevant
Subscription Monies were received is payable (or, if earlier, is paid).

9.4     In addition to any amount payable pursuant to clauses 9.1 to 9.3 MDU shall
pay to Converium at the time when the Preference Dividend in relation to any
Preference Shares is payable (or, if earlier, paid) an amount equal to the
difference between the amount of Preference Dividend payable and the amount
that would have been payable had paragraph A.2 of Schedule 2 (and therefore the
rights attaching to the Preference Shares) included the words “, shall compound
on an annual basis” after the words “daily basis” in the first line.

	10.	 	TERMINATION

This Agreement may be terminated with immediate effect:

	(a)	 	by written agreement between the parties; or
	 
	(b)	 	by written notice from Converium to MDUI if:

	 	(i)	 	there is any breach of the warranties set out in
clause 7;

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	 	(ii)	 	there is any breach of the negative covenants set
out in clause 8 which is not wholly remedied within 30 days;
	 
	 	(iii)	 	the Shortfall Reinsurance Contract between Zurich
Insurance Company and MDU Insurance Limited dated 1 May 2000 or
the Shareholders’ Agreement is terminated or is no longer
valid.

	11.	 	NON-ASSIGNMENT

11.1     Neither party may assign or transfer any of its rights or obligations
under this Agreement in whole or in part.

	12.	 	AMENDMENTS

12.1     This Agreement may be amended only by an instrument in writing signed by
duly authorised representatives of each party.

	13.	 	NOTICES

13.1     Any notice to be given by one party to the other under, or in connection
with, this Agreement shall be in writing and signed by or on behalf of the
party giving it. Any such notice may be served by delivering it by hand or
sending it by pre-paid recorded delivery, special delivery or registered post
to the address and for the attention of the relevant party set out in clause
13.2 (or as otherwise notified from time to time in accordance with the
provisions of this clause 13). Any notice so served by hand or post shall be
deemed to have been duly given:

	(a)	 	in the case of delivery by hand, when delivered;
	 
	(b)	 	in the case of prepaid recorded delivery, special delivery or registered
post, on the date of delivery

PROVIDED that in each case where delivery by hand occurs after 6 p.m. on a
Business Day or on a day which is not a Business Day, service shall be deemed
to occur at 9 a.m. on the next following Business Day. References to time in
this clause are to local time in the country of the addressee.

Address of notices

13.2     The addresses of the parties for the purpose of clause 13.1 are as follows:

	(a)	 	Converium

Address:

General Guisan-Quai 26

8022 Zurich

Switzerland

For the attention of: Chris Bell
	 
	(b)	 	MDUI

Address:

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	 	 	230 Blackfriars Road

London SE1 8PJ

United Kingdom

For the attention of: The Company Secretary

	 
	(c)	 	The Medical Defence Union Limited

Address:

230 Blackfriars Road

London SE1 8PJ

United Kingdom

For the attention of: The Company Secretary

Change of notice details

13.3     A party may notify the other party to this Agreement of a change to its
name, relevant addressee or address for the purposes of this clause 13,
provided that such notice shall only be effective on:

	(a)	 	the date specified on the notice as the date on which the change is to
take place; or
	 
	(b)	 	if no date is specified or the date specified is less than five Business
Days after the date on which notice is given, the date following five
Business Days after notice of any change has been given.
	 
	14.	 	COUNTERPARTS

14.1     This Agreement may be executed in any number of counterparts and by the
parties to it on separate counterparts, each of which shall be an original, but
all of which together shall constitute one and the same instrument.

	15.	 	NO RIGHTS UNDER CONTRACTS (RIGHTS OF THIRD PARTIES) ACT 1999

15.1     A person who is not a party to this Agreement shall have no right under
the Contracts (Rights of Third Parties) Act 1999 to enforce any of its terms.

	16.	 	GOVERNING LAW

16.1     This agreement shall be governed by and construed in accordance with
English law and the parties shall submit to the exclusive jurisdiction of the
English courts.

AS WITNESS this agreement has been signed by the duly authorised
representatives of the parties the day and year first before written.

	 	 	 	 	 	 	 	 	 	 	 
	 	 	SIGNED by CHRISTOPHER BELL
	 	)	 	/s/  	CHRISTOPHER BELL	 	/s/  	ANDREW DEIGHTON
	 	 	for and on behalf of
	 	)	 	 	 	 	 	 
	 	 	
CONVERIUM AG
	 	)	 	 	 	 	 	ANDREW DEIGHTON

Page 13

 

	 	 	 	 	 	 
	 	 	
SIGNED by ILLEGIBLE
	 	)	 
	 	 	
for and on behalf of
	 	)	 
	 	 	
MDU Investments Limited
	 	)	 
	 	 	 	 	 	 
	 	 	
SIGNED by ILLEGIBLE
	 	)	 
	 	 	
for and on behalf of The
	 	)	 
	 	 	
Medical Defence Union Limited
	 	)	 

Page 14

 

SCHEDULE 1

DISCLOSURE AGAINST THE WARRANTIES IN CLAUSE 7

Professor Spurrett

This is an action brought by the next friend of a minor (the plaintiff), in New
South Wales, who, it is alleged, suffered brain damage at birth as a
consequence of Professor Spurrett’s negligence. The estate of Professor
Spurrett, the MDU’s member, now deceased, has retained lawyers in Sydney who
have submitted a plea of plene administravit which, if successful, would mean
that the liability the MDU would choose to accept would be limited to the value
of the estate, about AUS$160,000.

The plaintiff has brought proceedings against the Wentworth Area Health
Authority whose insurers, the GIO, have sought to issue and serve proceedings
against and on the MDU in London. The GIO is seeking to establish that the MDU
is estopped from denying an indemnity to the estate of Professor Spurrett. It
has never explained, including at a recent hearing, the legal basis for this
(not least how the GIO, rather than the member, could rely on an estoppel).

As a secondary matter the GIO seeks to rely on s6 of the Law Reform
(Miscellaneous Provisions) Act in support of its claim to a statutory charge
and its entitlement to enforce that charge, in respect of what this Act refers
to as “insurance moneys” which are payable in respect of any liability. There
are a number of grounds of opposition to this point, including the fact that
the MDU is not an insurer, and that accordingly this Act has no application
here.

These proceedings are currently the subject of an application by the MDU that
they be struck out on the basis that there is no claim recognisable in law that
the Health Authority can bring against the MDU and that, in any event, there
are procedural obstacles to service of such a claim outside the jurisdiction.

That application was heard on 31 July 2002 and judgement has been reserved.
Even if successful, the claim against Professor Spurrett’s estate continues and
the MDU’s discretionary liability is the value of the claim should the plea of
plene administravit fail.

The value of the plaintiff’s claim is between AUS$6m and AUS$8m.

Dr Barry

Dr Barry is seeking a declaration that he is entitled to be indemnified by the
MDU in respect of any judgment, order for payment of damages and/or costs in a
number of actions against him and that he is entitled to be indemnified for
defence costs in respect of such actions. The actions are 44 civil claims where
patients are claiming damages arising from allegations of inappropriate conduct
by Dr Barry.

Page 15

 

The underlying issues are the subject of criminal proceedings and the MDU’s
view is that these claims are not as a result of his clinical practice. The
MDU is not assisting Dr Barry with defence costs due to his complete lack of
cooperation. Included also are disciplinary proceedings and judicial review
proceedings being brought in respect of such disciplinary proceedings. In
addition, Dr Barry is claiming aggravated/exemplary damages.

The cost to the MDU of defending this claim is estimated at £650,000 which
includes an estimate of any costs which the MDU may have to pay on behalf of Dr
Barry but does not include an estimate of amounts the MDU may be required to
pay in the unlikely event that the MDU is required to assist Dr Barry.

Page 16

 

SCHEDULE 2

PREFERENCE SHARE RIGHTS

The rights attaching to the Preference Shares are as follows:

Dividends

A.1     The holders of Preference Shares shall be entitled, in priority to the
holders of any other class of share in the Company’s share capital, to receive
out of the profits of the Company available for distribution (before any sum is
transferred to reserves) a fixed cumulative preferential dividend (the
Preference Dividend) at the rate of [     ] per cent. per annum (exclusive of any
associated tax credit) on the nominal amount of each Preference Share held by
them respectively.

A.2     The Preference Dividend shall accrue on a daily basis and shall be payable
and immediately due as a debt from the Company (automatically and without any
declaration or resolution of the Directors of the Company) when the relevant
Preference Shares are redeemed or on 31 December 2011 (whichever is the
earlier). The Preference Dividend shall be paid to the holders of the
Preference Shares whose names appear on the register immediately before the
relevant Preference Shares are redeemed. Any part of the Preference Dividend
may be paid prior to the date on which it is payable without penalty. For the
avoidance of doubt, if any part of the Preference Dividend is paid prior to the
date on which it is payable, that part of the Preference Dividend shall cease
to accrue from the date on which it is paid.

A.3     The Preference Dividend shall be payable in priority to the payment of any
dividend on any other class of shares of the Company.

Capital

A.5     On a distribution of assets of the Company among its members on a winding
up or other return of capital the holders of the Preference Shares shall be
entitled, in priority to any holder of any other class of shares, to receive an
amount equal to the aggregate of the capital paid up or credited as paid up on
each Preference Share (including any share premium) and a sum equal to any
arrears and accruals of the Preference Dividend (whether earned or declared or
not) payable on such share calculated up to and including the date of the
commencement of the winding up or (in any other case) the date of the return of
capital.

Class consents

A.6     The written consent of the holders of three-quarters in nominal value of
the issued Preference Shares or the sanction of an extraordinary resolution
passed at a separate general meeting of the holders of the Preference Shares is
required:

	A.6.1	 	if the special rights and privileges attaching to the Preference
Shares are to be varied or abrogated or otherwise directly affected
in any way;

Page 17

 

	A.6.2	 	if any shares or securities are to be created, allotted or issued by
the Company which rank in priority to or equally with the Preference
Shares (or any right to call for the allotment or issue of such
shares or securities is to be granted by the Company).

A.7     All provisions of the Articles relating to general meetings of the Company
shall apply mutatis mutandis to every general meeting of the holders of the
Preference Shares.

Redemption

	B.1	 	Subject to the Companies Act 1985, the Company shall:
	 
	B.1.1	 	have the right at any time to redeem any Preference Share (provided
that it is credited as fully paid) by giving to the registered
holder not less than 4 weeks and not more than 8 weeks written
notice of its intention to do so (the Redemption Notice); and
	 
	B.1.2	 	in any event on 31 December 2011 redeem all of the Preference Shares
which are still in issue at that date (and the Company shall serve a
Redemption Notice in respect of all such shares not less than 2
weeks and not more than 4 weeks prior to 31 December 2011); and if,
in accordance with the Companies Act 1985, the Preference Shares
shall not on any such date be capable of being redeemed by the
Company, such redemption shall be effected as soon as is possible
after the Preference Shares shall have become capable of being
redeemed.

B.2     The Redemption Notice must specify the number of Preference Shares to be
redeemed, the amount payable on redemption and the time (Redemption Date) and
place in England or Switzerland at which:

	B.2.1	 	the share certificates in respect of the Preference Shares must
delivered to the Company for cancellation; and
	 
	B.2.2	 	the Company shall pay to the registered holders of the Preference
Shares to be redeemed by bankers draft or telegraphic transfer the
amount per share set out in Article B.3 below and, if some but not
all of the Preference Shares are being redeemed, shall issue such
registered holders with a balance share certificate for the
Preference Shares that are not redeemed

and the holders of the Preference Shares to be redeemed shall be bound by the
Redemption Notice.

B.3     The amount to be paid on redemption of each Preference Share shall equal
the amount credited as paid up on it (including any share premium) together
with all arrears or accruals of the Preference Dividend calculated up to and
including the Redemption Date and
in the case of a partial redemption proportionately in respect of each holding
of Redeemable Preference Shares.

Page 18

 

B.4     The Preference Dividend shall cease to accrue on any Preference Shares to
be redeemed on the Redemption Date except on any share for which the Company
has failed or refused to pay the redemption amount on due presentation of the
certificate(s) (or an indemnity in a reasonably satisfactory form)

B.5     If any holder of a Preference Share to be redeemed fails or refuses to
surrender the share certificate(s) or indemnity for such Preference Share (or
fails or refuses to accept the redemption money payable in respect of it), the
Company shall retain such money and hold it and the interest earned thereon on
trust for such holder.

B.6     No Preference Share redeemed by the Company shall be capable of re-issue.

B.7     If at any time before redemption the Company by reason of a restriction
arising under statute fails to redeem all of the Preference Shares due to be
redeemed, without prejudice to any remedies open to the holders of the
Preference Shares by reason of such failure (including the right to petition
the Court for the winding up of the Company), the Company shall at such time
redeem such of those Preference Shares as it is at liberty to redeem and shall
redeem the remainder of such Preference Shares so soon thereafter as the
Company is at liberty to do so.

Restrictions

C.1     So long as any Preference Share remains in issue and other than solely for
the purpose of funding the redemption of the Preference Shares the Company
shall be subject to the following restrictions unless it shall have obtained
the consent in writing of the holders of three-quarters in nominal value of the
Preference Shares then in issue:

	C.1.1	 	the Company shall not authorise or create, or increase the amount
of, any shares of any class or any securities convertible into any
shares of any class ranking as regards participation in the profits
or assets of the Company in priority to or pari passu with the
Preference Shares or being in any circumstances redeemable in whole
or in part on a date earlier than one day after the date when all
the Preference Shares have been redeemed; and
	 
	C.1.2	 	the Company shall not reduce its share capital or any share premium
account or capital redemption reserve and neither the Company nor
any of its subsidiaries shall purchase or provide any financial
assistance for the acquisition of shares in the Company other than
Preference Shares.

General

D.1     The Preference Shares shall be transferable by instrument of transfer in
any usual or common form or in any other form which may be approved by the
Directors.

D.2     The provisions of the Articles relating to variation of share rights and to
transfers and transmission of shares save for the first sentence in Article 24
of Table A shall apply to the Preference Shares.

Page 19

 

D.3     The Company shall send to the holders of the Preference Shares a copy of
every document sent by the Company to the holders of its Ordinary Shares at the
same time as such document is sent to the holders of its Ordinary Shares.

Page 20exv4w34

 

EXHIBIT 4.34

	C L I F F O
R D	 	LIMITED
LIABILITY PARTNERSHIP
	C H A N C E	 	 

CGU INTERNATIONAL INSURANCE PLC

AND

ROYAL & SUN ALLIANCE INSURANCE PLC

AND

CONVERIUM AG

AND

MÜNCHENER RÜCKVERSICHERUNGS-GESELLSCHAFT AKTIENGESELLSCHAFT IN

MÜNCHEN

AND

NORTHERN STATES AGENCY, INC.

	 
	

AGREEMENT FOR THE SALE AND

PURCHASE OF CGU INTERNATIONAL INSURANCE PLC’S

AND PART OF ROYAL & SUN ALLIANCE INSURANCE

PLC’S SHAREHOLDING IN GLOBAL AEROSPACE

UNDERWRITING MANAGERS LIMITED

 

 

CONTENTS

	 	 	 	 	 
	Clause	 	Page
	1. Interpretation
	 	 	5	 
	2. Sale And Purchase
	 	 	18	 
	3. Deferred Consideration
	 	 	19	 
	4. Determination Of 2002 Relevant Profit
	 	 	20	 
	5. Determination Of Amount In Respect Of Profit Commission Due To Sellers
	 	 	22	 
	6. Conduct Of Business Between Completion And The Third Earn-Out Payment
Date
	 	 	25	 
	7. Intra-Group Debt
	 	 	25	 
	8. Conditions
	 	 	26	 
	9. Completion
	 	 	29	 
	10. The Sellers’ Warranties And Pre-Completion Conduct
	 	 	30	 
	11. Sellers’ Undertaking
	 	 	31	 
	12. The Buyers’ Remedies
	 	 	33	 
	13. The Buyers’ Warranties
	 	 	33	 
	14. Confidential Information
	 	 	34	 
	15. Announcements
	 	 	36	 
	16. Assignment
	 	 	36	 
	17. US Pensions Deficit
	 	 	37	 
	18. AAU Supplemental Plan Deficit
	 	 	39	 
	19. Medical Deficit
	 	 	42	 
	20. Competition Matters
	 	 	44	 
	21. Agency Indemnity
	 	 	51	 
	22. Costs
	 	 	55	 
	23. Separation Issues
	 	 	56	 
	24. Merger Control Filings
	 	 	57	 
	25. Withholding Tax And Grossing Up
	 	 	57	 
	26. Entire Agreement
	 	 	58	 
	27. Third Party Rights
	 	 	59	 
	28. General
	 	 	59	 
	29. Notices
	 	 	61	 
	30. Governing Law And Jurisdiction
	 	 	62	 
	Schedule 1 INFORMATION ABOUT THE COMPANY AND ITS SUBSIDIARY UNDERTAKINGS
	 	 	63	 

- 3 -

 

	 	 	 	 	 
	Clause	 	Page
	Schedule 2 COMPLETION REQUIREMENTS
	 	 	76	 
	Schedule 3 SELLERS’ WARRANTIES
	 	 	80	 
	Schedule 4 LIMITATIONS ON THE SELLERS’ LIABILITY
	 	 	105	 
	Schedule 5 REGISTERED INTELLECTUAL PROPERTY RIGHTS
	 	 	111	 
	Schedule 6a THE MATERIAL PROPERTIES
	 	 	114	 
	Schedule 6b THE NON-MATERIAL PROPERTIES
	 	 	116	 
	Schedule 7 INFORMATION TECHNOLOGY
	 	 	122	 
	Schedule 8 ACTION PENDING COMPLETION
	 	 	125	 
	Schedule 9 KEY PERSONNEL
	 	 	127	 

- 4 -

 

THIS AGREEMENT is made on 27 November 2002

BETWEEN:

	(1)	 	CGU INTERNATIONAL INSURANCE PLC, a company incorporated in England and
Wales (registered no. 21487), whose registered office is at St Helen’s, 1
Undershaft, London EC3P 3DQ, England (“CGU”) and ROYAL & SUN ALLIANCE
INSURANCE PLC, a company incorporated in England and Wales (registered no.
93792), whose registered office is at St Mark’s Court, Chart Way, Horsham,
West Sussex RH12 1XL (“RSA”) (together “Sellers” and “Seller” shall mean
either one of them); and
	 
	(2)	 	CONVERIUM AG, a company incorporated in Switzerland whose registered
office is at General Guisan-Quai 26, 8022 Zürich, Switzerland
(“Converium”);
	 
	(3)	 	MÜNCHENER RÜCKVERSICHERUNGS-GESELLSCHAFT AKTIENGESELLSCHAFT IN MÜNCHEN,
whose registered office is at Königinstraße, 107, 80802 München, Germany
(“Munich Re”); and
	 
	(4)	 	NORTHERN STATES AGENCY, INC., a company incorporated in Minnesota, USA,
whose registered office is at 2145 Ford Parkway, Suite 202, St Paul,
Minnesota, United States of America 55116-1862 (“Northern States”);
	 
	 	 	(parties (2), (3) and (4) together “Buyers” and “Buyer” shall mean any one
of them).

WHEREAS:

	(a)	 	The Company (as defined below) is a private company limited by shares
incorporated in England. The Sellers are the sole legal and beneficial
owners of the share capital of the Company.
	 
	(b)	 	CGU has agreed to sell the CGU Shares (as defined below) and RSA has
agreed to sell the RSA Shares (as defined below) to the Buyers for the
consideration and upon the terms set out in this Agreement.

THE PARTIES AGREE as follows:

	1.	 	INTERPRETATION
	 
	1.1	 	In this Agreement:
	 
	 	 	“AAU” means Associated Aviation Underwriters, Inc. a Delaware corporation
and an indirect wholly-owned subsidiary of the Company;
	 
	 	 	“AAU Pool” means the pool arrangement known as the Associated Aviation
Underwriters Pool which is managed by AAU on the terms set out in the AAU
Pool Members Agreement;
	 
	 	 	“AAU Pool Members Agreement” means together the Hull and Casualty Aviation
Insurance Agreement dated 1 January 1994 and the Aviation Insurance
Management Agreement between (i) The American Insurance Company, (ii)
American Motorists Insurance Company, (iii) Centennial Insurance Company,
(iv) The Continental Insurance

- 5 -

 

	 	 	Company, (v) Federal Insurance Company,
(vi) Firemen’s Fund Insurance Company,
(vii) Fireman’s Insurance Company of Newark, New Jersey, (viii) Glens
Falls Insurance Company, (ix) Greenwich Insurance Company and (x) Sun
Insurance Office of America Inc. (each as “Founding Member Companies”) and
AAU dated 1 January 1994 (and any subsequent amendments thereto);
	 
	 	 	“AAU Supplemental Plan” means the Supplemental Retirement Plan to the
Retirement Plan of AAU;
	 
	 	 	“AAU Supplemental Plan Amount” means the AAU Supplemental Plan Deficit
less any amount recovered by any Group Company pursuant to clause 18.4 in
respect of the AAU Supplemental Plan Deficit prior to the date for payment
under clause 18.1;
	 
	 	 	“AAU Supplemental Plan Deficit” means the deficit of assets against
liabilities in the AAU Supplemental Plan being for the purposes of this
Agreement the sum of US$3 million;
	 
	 	 	“Accounts” means each Group Company’s audited individual accounts (as that
term is used in section 226 of the Act) and the Group Accounts and cash
flow statement as at and for the financial year ended on the Last
Accounting Date, the auditors’ reports on those accounts, the directors’
report of each Group Company for that year and in each case the notes to
those accounts;
	 
	 	 	“Accounts Date” means the date on which the 2002 Accounts are signed;
	 
	 	 	“Act” means the Companies Act 1985;
	 
	 	 	“Agents” means, together, the Company and AAU and “Agent” means either one
of them;
	 
	 	 	“Agreed Rate” means:

	 	(a)	 	where the sum owed is denominated in United States dollars, the
rate per annum at which HSBC Bank plc is offering US dollar deposits
of $1 million to prime banks in the London Interbank Market for a
period of one year at or about 11.00 a.m. (London time) on the first
day of the period for which interest is to accrue (or if that day is
not a Business Day on the next Business Day); and
	 
	 	(b)	 	where the sum owed is denominated in pounds sterling, the rate
per annum at which HSBC Bank plc is offering pound sterling deposits
of £1 million to prime banks in the London Interbank Market for a
period of one year at or about 11.00 a.m. (London time) on the first
day of the period for which interest is to accrue (or if that day is
not a Business Day on the next Business Day);

	 	 	“BAIG Pool” means the pool arrangement managed by the Company (then known
as British Aviation Insurance Group Limited) on the terms set out in the
BAIG Pool Members Agreement;
	 
	 	 	“BAIG Pool Members Agreement” means the Deed constituting the BAIG Pool
executed on 22 November 1990 by (i) Aviation & General Insurance Company
Ltd, (ii)

- 6 -

 

	 	 	British Aviation Insurance Company Ltd, (iii) Commercial Union
Assurance Company plc, (iv) Eagle Star, (v) General Accident Fire & Life
Assurance Corporation plc, (vi)
GRE (UK) Ltd, (vii) Norwich Union Fire Insurance Society Ltd, (viii) Pearl
Assurance plc, (ix) Royal Insurance Plc, (x) Sun Alliance & London
Insurance plc and (xi) the Company (then known as British Aviation
Insurance Group Limited);
	 
	 	 	“Business Day” means a day (other than a Saturday or Sunday) on which
banks generally are open in London for the transaction of normal banking
business;
	 
	 	 	“Buyer’s Completion Documents” means the documents which a Buyer will
execute at Completion as specified in Schedule 2 of this Agreement;
	 
	 	 	“Buyer’s Group” means:

	 	(a)	 	for Northern States, OBH Inc. and its subsidiary undertakings
for the time being and from time to time; and
	 
	 	(b)	 	for each Buyer except Northern States, for the time being and
from time to time in respect of each Buyer, such Buyer, its ultimate
parent undertaking and its ultimate parent undertaking’s subsidiary
undertakings from time to time;

	 	 	“Buyer’s Group Undertaking” means:

	 	(a)	 	for Northern States, OBH Inc. and any subsidiary undertaking of
OBH Inc. for the time being and from time to time; and
	 
	 	(b)	 	for each Buyer except Northern States, for the time being and
from time to time in respect of each Buyer, such Buyer, a subsidiary
undertaking or parent undertaking for the time being of such Buyer or
a subsidiary undertaking for the time being of a parent undertaking
of such Buyer;

	 	 	“CGU Loan” means the loan agreement dated 25 September 2000 between (1)
CGU and (2) the Company, the amount outstanding in respect of which being,
at the date of this Agreement, £25,210,189.94;
	 
	 	 	“CGU Shares” means the 12,500,000 fully-paid B Class Shares of £1.00 each
in the capital of the Company owned legally and beneficially by CGU, such
shares to be reclassified as 12,500,000 fully paid ordinary shares of
£1.00 each in the capital of the Company prior to Completion in accordance
with paragraph 1.3.1 of Schedule 2;
	 
	 	 	“Company” means Global Aerospace Underwriting Managers Limited, a company
incorporated in England and Wales (registered no. 02512067), whose
registered office is at Fitzwilliam House, 10 St Mary Axe, London, EC3A
8EQ;
	 
	 	 	“Completion” means the completion of the sale and purchase of the CGU
Shares and the RSA Shares under this Agreement;
	 
	 	 	“Completion Date” means the date which is five Business Days after the
date on which the last of the Conditions is satisfied (not being later
than 30 June 2003);

- 7 -

 

	 	 	“Computer Contracts” means the agreements, arrangements or licences with
third parties relating to Computer Systems or Computer Services, as listed
in Part 2 of Schedule 7;
	 
	 	 	“Computer Hardware” means all computer, telecommunications and network
equipment used by the Group and material to the business of the Group;
	 
	 	 	“Computer Services” means services relating to the Computer Software
material to the business of the Group;
	 
	 	 	“Computer Software” means all computer software used by the Group and
material to the business of the Group, as listed in Part 1 of Schedule 7;
	 
	 	 	“Computer Systems” means the Computer Hardware and/or the Computer
Software used by the Group;
	 
	 	 	“Condition” means
a condition set out in clause 8.1 and “Conditions” means all those conditions;
	 
	 	 	“Consideration” means the Initial Consideration and the Deferred
Consideration, payable by the Buyers to the Sellers as consideration for
the Shares;
	 
	 	 	“Deferred Consideration” means the amounts payable to the Sellers as
additional consideration for the Shares in accordance with clause 3;
	 
	 	 	“Disclosure Letter” means the letter of even date herewith from CGU and
RSA addressed to each of the Buyers in relation to the Warranties;
	 
	 	 	“Draft Certificate” has the meaning set out in clause 4.2;
	 
	 	 	“Eagle Star” means Eagle Star Insurance Company Limited, an insurance
company incorporated in England (registered no. 82051) having its
registered office at 60 St. Mary Axe, London EC3A 8JQ;
	 
	 	 	“Earn-out Periods” means the First Earn-out Period and the Second Earn-out
Period and “Earn-out Period” means either of them;
	 
	 	 	“Employees” means all those employees of each Group Company immediately
prior to the date of this Agreement whose date of start of employment,
period of continuous employment and salary details are set out in an
anonymised form in an Annexure to the Disclosure Letter;
	 
	 	 	“Encumbrance” means any security interest of any nature whatsoever
including without limitation, any mortgage, lien, equity, claim,
restriction, charge or other encumbrance or right exercisable by a third
party having similar effect;
	 
	 	 	“Environment” means all or any of the following media, namely air
(including the air within buildings or other natural or man made
structures above or below ground), water (including surface or ground
water, water in pipe, drainage or sewerage systems) or land;

- 8 -

 

 

	 	 	“Environmental Laws” means all international, European Union, national,
state, federal, regional or local laws (including common law, statute law,
civil, criminal and administrative law), together with all subordinate
legislation and codes of practice, including without limitation guidance
notes, circulars, decisions, regulations and
judgments which each have the force of law and are in force at the date of
Completion relating to Environmental Matters, together with any judicial
or administrative interpretation of each of the foregoing as at
Completion;
	 
	 	 	“Environmental Matters” means all matters relating to the pollution or
protection of the Environment and/or human health and safety;
	 
	 	 	“Euro” means the single currency adopted by Member States of the European
Union under the Treaty on European Monetary Union (as modified or replaced
from time to time);
	 
	 	 	“First Earn-out Payment Date” means unless a later date is determined by
agreement between the Sellers and the Buyers, the tenth Business Day
following the earlier of the acceptance by the parties of the Draft
Certificate or the final determination in accordance with clause 4.4 or clause 4.5
of the 2002 Relevant Profit (as the case may be);
	 
	 	 	“First Earn-out Period” means the underwriting year in respect of the GAUM
Pool commencing on 1 January 2001 and expiring on 31 December 2001,
inclusive of both of these dates;
	 
	 	 	“Fitzwilliam Guarantors” shall bear the same meaning as in the Fitzwilliam
Lease;
	 
	 	 	“Fitzwilliam Lease” means the lease in respect of the second and third
floors of Fitzwilliam House, 10 St Mary Axe, London EC3 dated 16 March
1992 between (1) the Universities Superannuation Scheme (2) British
Aviation Insurance Group Limited (3) Aviation & General Insurance Company
Limited and Others;
	 
	 	 	“GAUM Pool” means the pool arrangement known as the Global Aerospace
Underwriting Pool which is managed by the Company and AAU on the terms set
out in the Old Pool Members Agreement;
	 
	 	 	“Group” means the Company and each Subsidiary Undertaking;
	 
	 	 	“Group Accounts” means, in respect of any financial year, the audited
group accounts (as that term is used in section 227 of the Act) for the
Group;
	 
	 	 	“Group Company” means the Company or a Subsidiary Undertaking;
	 
	 	 	“Indebtedness” means at any time any obligation for the payment or
repayment of money, whether present or future, actual or contingent (with
the exception of trade creditors not in the nature of borrowings arising
from the ordinary course of business) including without limitation any
counter-indemnity obligation in respect of a guarantee, indemnity, bond,
standby or documentary letter of credit or any other instrument issued by
a bank or financial institution and the amount of any liability in respect
of any guarantee or indemnity or any of the items referred to herein;

- 9 -

 

 

	 	 	“Indemnities” means the indemnities and undertakings contained in clauses
17, 18, 19, 20, 21 and 23.5 and “Indemnity” means any one of them;
	 
	 	 	“Indemnity Claim” means a claim by the Buyers (or any one or more of them)
under any one or more of the Indemnities;
	 
	 	 	“Initial Consideration” means that part of the Consideration payable by
the Buyers at Completion, as specified in clause 2.3(a);
	 
	 	 	“In-house Computer Software” means the computer programs in both source
and object code form material to the business of the Group and used by the
Company which were developed by the Company and are not licensed from
third parties, as listed in Part 1, Annex 2 of Schedule 7;
	 
	 	 	“Insolvency Event” in respect of any body corporate means the occurrence
of any of the following:

	 	(a)	 	any procedure has been commenced with a view to the winding-up
or re-organisation of such entity (other than for the purpose of a
solvent amalgamation or reconstruction) and that procedure has not
been terminated or discharged within 30 days;
	 
	 	(b)	 	any procedure has been commenced with a view to the appointment
of an administrator, receiver, administrative receiver or trustee in
bankruptcy in relation to such entity or all or substantially all of
its assets and that procedure has not been terminated or discharged
within 30 days;
	 
	 	(c)	 	the holder of any security over all or substantially all of the
assets of such entity has taken any step to enforce that security and
that enforcement has not been discontinued within 30 days;
	 
	 	(d)	 	all or substantially all of the assets of such entity are
subject to attachment, sequestration, execution or any similar
process and that process has not been terminated or discharged within
30 days;
	 
	 	(e)	 	such entity is unable to pay its debts as they fall due or has
entered into a composition or arrangement with its creditors or any
class of them (other than for the purposes of a solvent amalgamation
or reconstruction); or
	 
	 	(f)	 	such entity has ceased or threatened to cease wholly or
substantially to carry on its business, other than for the purpose of
a solvent amalgamation or reconstruction;

	 	 	“Intellectual Property” means:

	 	(a)	 	patents, trade marks, service marks, rights in designs and
inventions, trade, business and company names, internet domain names
and e-mail addresses, copyrights, database rights (whether registered
or not and any applications to register or rights to apply for
registration of any of the foregoing), know-how, trade secrets and
other confidential information;

- 10 -

 

	 	(b)	 	rights under licences, consents, orders, statutes or otherwise
in relation to a right in paragraph (a);
	 
	 	(c)	 	rights of the same or similar effect or nature as or to those
in paragraph (a) and (b) which now or in the future may subsist in
any part of the world; and
	 
	 	(d)	 	the right to sue for past infringements of any of the foregoing
rights;

	 	 	“Intellectual Property Rights” means all Intellectual Property which is
owned, used or required to be used by a Group Company in, or in connection
with the business of the Group;
	 
	 	 	“Last Accounting Date” means 31 December 2001;
	 
	 	 	“Leading Counsel” means a Queen’s Counsel of at least 5 years’ standing;
	 
	 	 	“Letter of Credit Scheme” means the letter of credit scheme entered into
by the Company with Citibank NA through a master agreement dated 3
December 1991;
	 
	 	 	“Licensed Computer Software” means any and all computer programs material
to the business of the Group in both source and object code form used by
the Company and licensed from third parties, as listed in Part 1, Annex 1
of Schedule 7;
	 
	 	 	“Management Services Agreement” means the agreement of that name relating
to the GAUM Pool dated 27 September 2000;
	 
	 	 	“Medical Amount” means the Medical Deficit less any amount recovered by
any Group Company pursuant to clause 19.3 in respect of the Medical
Deficit prior to the date for payment under clause 19.1;
	 
	 	 	“Medical Deficit” means the aggregate liabilities of the Group under the
Medical Plan, being for the purposes of this Agreement the sum of US$14.5
million;
	 
	 	 	“Medical Plan” means the Life and Health Plans of AAU comprising the Group
Benefits Plan and the group life insurance policy with Metropolitan Life
Insurance Company, to the extent that they relate to post-retirement
benefits;
	 
	 	 	“Mitsui” means Mitsui Sumitomo Insurance Co., Ltd., a company incorporated
in Japan with registered office 27-2, Shinkawa 2-Chome, Chuo-ku, Tokyo,
104-8252, Japan;
	 
	 	 	“New Global Aerospace Pool” means the aerospace pool arrangement in
respect of Specified Risks (as such term is defined in the New Pool
Members Agreement) written after the date of this Agreement and attaching
on or after 1 January 2003 to be managed by the Company and AAU on the
terms set out in the New Pool Members Agreement;
	 
	 	 	“New Pool Members Agreement” means the agreement of even date herewith
between, the Buyers, RSA, Tokio, Mitsui and the Company constituting the
New Global Aerospace Pool;

- 11 -

 

 

	 	 	“New Shareholders Agreement” means a shareholders agreement to be entered
into at Completion by each of the Buyers, RSA and the Company in the
agreed form in respect of their shareholdings in the Company;
	 
	 	 	“Nexus System” means the Nexus In-House Computer Software (as specified in
Annex 2 of Part 1 of Schedule 7) which supports the underwriting, claims
and reinsurance operations of the Company;
	 
	 	 	“Old Pool Members Agreement” means the members agreement dated 27
September 2000 relating to the GAUM Pool (as subsequently amended) in
respect of the underwriting years commencing 1 January 2001 and 1 January
2002;
	 
	 	 	“Ortac” means Ortac Underwriting Agency Limited, a company incorporated in
Guernsey (registered no. 37784) whose registered office is at Polygon
Hall, Le Marchant Street, St Peter Port, Guernsey, Channel Islands;
	 
	 	 	“Proceedings” means any civil, criminal, arbitration, administrative or
other proceeding;
	 
	 	 	“Profit Commission” has the meaning set out in paragraph 1.5 of Schedule 3
of the Old Pool Members Agreement;
	 
	 	 	“Property” and “Properties” means the leasehold property or properties (as
appropriate) comprising the “Material Properties” (details of which are
set out in schedule 6A) and comprising the “Non-Material Properties”
(details of which are set out in schedule 6B) (and includes an individual
property and a part of an individual property);
	 
	 	 	“Property Proceedings” means a civil, criminal, arbitration,
administrative or other proceeding concerning the Properties or any
Property;
	 
	 	 	“Related Persons” means in relation to any party, its ultimate parent
undertaking and its ultimate parent undertaking’s subsidiary undertakings
at the date of this Agreement;
	 
	 	 	“Relevant Claim” means a claim by any Buyer under the Warranties, except a
claim under the Tax Warranties;
	 
	 	 	“Relevant Indemnities” means the Indemnities contained in clauses 20, 21
and 23.5 and “Relevant Indemnity” means any one of them;
	 
	 	 	“Relevant Indemnity Claim” means a claim by the Buyers (or any one of
them) under any one or more Relevant Indemnities;
	 
	 	 	“Relevant Parties” means, for the period from the date of this Agreement
until Completion, the Sellers, and for the period after Completion, the
Buyers;
	 
	 	 	“Relevant Percentage” in respect of Northern States means 40 per cent; in
respect of Munich Re means 24.9 per cent; and in respect of Converium
means 25 per cent;
	 
	 	 	“Relief” means any loss, relief, allowance, exemption, set-off, deduction,
right to repayment or credit or other relief of a similar nature granted
by or available in relation to Tax pursuant to any legislation or
otherwise;

- 12 -

 

	 	 	“Retained Shares” means 2,525,000 of the fully-paid A Class Shares of
£1.00 each in the capital of the Company owned legally and beneficially by
RSA, such shares to be reclassified as 2,525,000 fully paid ordinary
shares of £1.00 each in the capital of the Company prior to Completion in
accordance with paragraph 1.3.1 of Schedule 2 and which will not be sold
by RSA to the Buyers pursuant to this Agreement;
	 
	 	 	“RSA Loan” means the loan agreement dated 25 September 2000 between (1)
RSA and (2) the Company, the amount outstanding in respect of which being,
at the date hereof, £25,210,189.94;
	 
	 	 	“RSA Shares” means 9,975,000, of the fully-paid A Class Shares of £1.00
each in the capital of the Company owned legally and beneficially by RSA,
such shares to be reclassified as 9,975,000 fully paid ordinary shares of
£1.00 each in the capital of the Company prior to Completion in accordance
with paragraph 1.3.1 of Schedule 2;
	 
	 	 	“Second Earn-out Payment Date” means the twenty-first Business Day
following the agreement of the Total Trading Return in respect of the
First Earn-out Period with the external actuaries (as referred to in
paragraph 1.6 of Schedule 3 of the Old Pool Members Agreement) or such
later date as determined by agreement between the Sellers and the Buyers;
	 
	 	 	“Second Earn-out Period” means the underwriting year in respect of the
GAUM Pool commencing on 1 January 2002 and expiring on 31 December 2002,
inclusive of both of these dates;
	 
	 	 	“Seller’s Group” means for the time being and from time to time in respect
of each Seller, such Seller, its ultimate parent undertaking and its
ultimate parent undertaking’s subsidiary undertakings;
	 
	 	 	“Seller’s Group Undertaking” means for the time being and from time to
time in respect of each Seller, such Seller, a subsidiary undertaking or
parent undertaking of such Seller or a subsidiary undertaking for the time
being of a parent undertaking of such Seller;
	 
	 	 	“Senior Employee” means an Employee with an annual salary for the current
year of more than £50,000 (or its equivalent in another currency);
	 
	 	 	“Shares” means the RSA Shares and the CGU Shares;
	 
	 	 	“Shareholders Agreement” means the Shareholders Agreement dated 28 July
2000 between RSA, CGU, CGU Insurance Plc and the Company (then known as
British Aviation Insurance Group Limited);
	 
	 	 	“Subsidiary Undertaking” means a subsidiary undertaking of the Company or
an undertaking in which the Company owns shares, in each case as listed in
part B of schedule 1 and “Subsidiary Undertakings” means all those
undertakings;
	 
	 	 	“Tax” means (a) all forms of taxation including and without limitation any
charge, tax, duty, levy, impost, withholding or liability wherever
chargeable, imposed by any Tax Authority or any national, state, federal,
municipal or local government or governmental

- 13 -

 

	 	 	authority or any other person and whether of UK or any other jurisdiction;
and (b) any penalty, fine, surcharge, interest and costs payable in
connection with any taxation within (a) above;
	 
	 	 	“Tax Authority” and “Taxation Authority” mean any fiscal, revenue, customs
or excise authority anywhere in the world including, without limitation,
the Inland Revenue and H.M. Customs & Excise;
	 
	 	 	“Tax Claim” means a claim by any Buyer under the Tax Deed or under the Tax
Warranties;
	 
	 	 	“Tax Deed” means the tax deed in the agreed form between the Sellers and
the Buyers;
	 
	 	 	“Tax Warranties” means those statements set out in paragraph 4 of Schedule
3;
	 
	 	 	“Taxes Act” means the Income and Corporation Taxes Act 1988;
	 
	 	 	“Third Earn-out Payment Date” means the twenty-first Business Day
following the agreement of the Total Trading Return in respect of the
Second Earn-out Period with the external actuaries (as referred to in
paragraph 1.6 of Schedule 3 of the Old Pool Members Agreement) or such
later date as determined by agreement between the Sellers and the Buyers;
	 
	 	 	“Tokio” means The Tokio Marine and Fire Insurance Co. Ltd, a company
incorporated in Japan with registered office 2-1, Marunouchi 1-Chome,
Chiyoda-ku Tokyo, 100-50 Japan;
	 
	 	 	“Total Trading Return” shall mean, in respect of any Earn-out Period, the
total trading return, as such term is defined in paragraph 1.5 of Schedule
3 of the Old Pool Members Agreement;
	 
	 	 	“TCGA” means the Taxation of Chargeable Gains Act 1992;
	 
	 	 	“US Pensions Deficit” means the deficit of assets against liabilities in
the US Scheme, being for the purposes of this Agreement the sum of US$15
million;
	 
	 	 	“US Pensions Amount” means the US Pensions Deficit less any amount
recovered by any Group Company pursuant to clause 17.4 in relation to the
US Pensions Deficit prior to the date for payment under clause 17.1;
	 
	 	 	“US Scheme” means the Retirement Plan of AAU;
	 
	 	 	“VATA” means, in the United Kingdom, the Value Added Tax Act 1994;
	 
	 	 	“Warranty” means a statement contained in Schedule 3 and “Warranties”
means all those statements;
	 
	 	 	“2001 Pool Members” means the pool members of the GAUM Pool in respect of
the 2001 Underwriting Year being CGU, RSA, Eagle Star, Munich Re, Tokio,
Mitsui, Federal Insurance Company and the Continental Insurance Company;

- 14 -

 

	 	 	“2001 Underwriting Year” means the underwriting year in respect of the
GAUM Pool commencing on 1 January 2001 as provided for in the Old Pool
Members Agreement;
	 
	 	 	“2002 Accounts” means the Group Accounts to be prepared for the financial
year to 31 December 2002;
	 
	 	 	“2002 Financial Year” means the financial year to 31 December 2002;
	 
	 	 	“2002 Relevant Profit” means, in respect of the 2002 Financial Year, an
amount calculated using the following formula:

	 
	A = P - (C + T + D) + G

	 	 	where:

	 	 	 
	A	 	
is the Relevant Profit;
	 	 	 
	P	 	
is the pre-tax profit of the Group in respect of the 2002 Financial
Year as shown in the 2002 Accounts;
	 	 	 
	C	 	
is any amount taken into account in the calculation of P as shown in
the 2002 Accounts by way of accrual for any Profit Commission which
will or may become payable to the Agents under the provisions of the
Old Pool Members Agreement;
	 	 	 
	T	 	
is the amount of Tax payable by Global relating to the 2002 Financial
Year excluding Taxes payable by Global relating to such financial year
in respect of accruals for any Profit Commission;
	 	 	 
	D	 	
is the amount which as at Completion has already been paid to the
Sellers in respect of profits for the 2002 Financial Year; and
	 	 	 
	G	 	
is an amount equal to goodwill amortisation for the 2002 Financial
Year as shown in the 2002 Accounts; and

	 	 	“2002 Underwriting Year” means the underwriting year in respect of the
GAUM Pool commencing on 1 January 2002 as provided for in the Old Pool
Members Agreement.
	 
	1.2	 	In this Agreement, a reference to:

	 	1.2.1	 	 a “subsidiary undertaking” or “parent undertaking” is to be
construed in accordance with section 258 of the Act, to an
“undertaking” or “group undertaking” is to be construed in accordance
with section 259 of the Act and to a “subsidiary” or “holding
company” is to be construed in accordance with section 736 of the
Act;
	 
	 	1.2.2	 	a document in the “agreed form” is a reference to a document
in a form approved on or before the date of this Agreement and for
the purposes of identification initialled by or on behalf of each
party to that document;

- 15 -

 

	 	1.2.3	 	a statutory provision includes a reference to the statutory
provision as modified or re-enacted or both from time to time before
the date of this Agreement and any subordinate legislation made under
the statutory provision (as so modified or re-enacted) before the
date of this Agreement;
	 
	 	1.2.4	 	a “person” includes a reference to any individual, firm,
company, corporation or other body corporate, government, state or
agency of a state or any joint venture, association or partnership,
works council or employee representative body (whether or not having
separate legal personality);
	 
	 	1.2.5	 	a “person” includes a reference to that person’s legal
personal representatives, successors and permitted assigns;
	 
	 	1.2.6	 	a “party” includes a reference to that party’s successors and
permitted assigns;
	 
	 	1.2.7	 	a clause, paragraph or Schedule, unless the context otherwise
requires, is a reference to a clause or paragraph of, or Schedule to,
this Agreement;
	 
	 	1.2.8	 	any English legal term for any action, remedy, method of
judicial proceeding, legal document, legal status, court, official or
any legal concept or thing shall in respect of any jurisdiction other
than England be deemed to include what most nearly approximates in
that jurisdiction to the English legal term and to any English
statute shall be construed so as to include equivalent or analogous
laws of any other jurisdiction;
	 
	 	1.2.9	 	times of the day is to London time and reference to a day is
to a period of 24 hours running from midnight on the previous day;
	 
	 	1.2.10	 	the words “other”, “include” and “including” do not connote
limitation in any way; and
	 
	 	1.2.11	 	to “£” are to pounds sterling and reference to any amount in such
currency shall be deemed to include reference to an equivalent amount
in any other currency.

	1.3	 	The headings in this Agreement do not affect its interpretation.
	 
	1.4	 	Where it is necessary to determine whether a monetary threshold referred
to in Schedule 4 has been reached or exceeded and the value of the
Relevant Claim, Indemnity Claim or Tax Claim is expressed in a currency
other than pounds sterling, the value of that Relevant Claim, Indemnity
Claim or Tax Claim shall be translated into pounds sterling at the closing
mid-point pound spot rate applicable to that amount of that non-pound
currency at close of business in London on the date of receipt by the
Sellers of written notification from the Buyer (and if such claim is a
Relevant Claim, in accordance with paragraph 2 of Schedule 4) of the
existence of such claim (or, if such day is not a Business Day, on the
Business Day immediately preceding such day) as shown in the Financial
Times (London First Edition) published on the next following day or if the
Financial Times (London First Edition) is not published on that day the
closing middle point spot rate quoted by HSBC Bank plc for pounds sterling
applicable to amounts of £1 million or more.

- 16 -

 

	1.5	 	Where it is necessary to determine whether a monetary limit referred to
in Schedule 4 has been reached or exceeded and the value of the Relevant
Claim, Indemnity Claim or Tax Claim is expressed in a currency other than
United States dollars, the value of that Relevant Claim, Indemnity Claim
or Tax Claim shall be translated into United States dollars at the closing
mid-point dollar spot rate applicable to that amount of that non-dollar
currency at close of business in London on the date of receipt by the
Sellers of written notification from the Buyer (and if such claim is a
Relevant Claim, in accordance with paragraph 2 of Schedule 4) of the
existence of such claim (or, if such day is not a Business Day, on the
Business Day immediately preceding such day) as shown in the Financial
Times (London First Edition) published on the next following day or if the
Financial Times (London First Edition) is not published on that day the
closing middle point spot rate quoted by HSBC Bank plc for United States
dollars applicable to amounts of $1 million or more.
	 
	1.6	 	Where any Warranty is qualified by the expression “so far as the Sellers
are aware” or any similar expression, such statement shall be deemed not
to be so qualified unless the Sellers have made reasonable enquiries of
the individuals listed below and if the Sellers have made such enquiries,
the expression “so far as the Sellers are aware” and any similar
expression shall be made on the basis of the knowledge of the Sellers
after having made such enquiries:

	 	1.6.1	 	to the extent such Warranties relate to members of the Group
other than AAU, the individuals referred to are as follows: David
Edward Reeves, Mark Steven Hodges, Peter James Bernhard, Duncan
Macgregor Boyle, Anthony John Medniuk, Kenneth James Mowbray Walder,
Alan Michael Edric Tasker, Cornelis Antonius Carolus Maria
Schrauwers, Clive Anthony Watson, Andrew James Creedon, Andrew
Alexander Duguid, Saleema Brohi, Andrew Critchley and Mark Chapman;
	 
	 	1.6.2	 	to the extent such Warranties relate to AAU, the individuals
referred to shall be those listed in sub-clause 1.6.1 and, in
addition, the following: John Gerard Kelly, Jeffrey Cassidy;
	 
	 	1.6.3	 	to the extent that the Tax Warranties relate to members of the
Group other than AAU, the individuals referred to shall be those
listed in sub-clause 1.6.1 and, in addition, the following: Liza
Taylor and Neil Towers;
	 
	 	1.6.4	 	to the extent that the Tax Warranties relate to AAU, the
individuals referred to shall be those listed in sub-clause 1.6.1
and, in addition, the following: John Gerard Kelly, Jeffrey Cassidy,
Liza Taylor and Neil Towers.

	1.7	 	When a sum is payable by the Sellers to the Buyers under an Indemnity, it
shall be paid to the Buyers in the following proportions:

- 17 -

 

	 	 	 	 	 
	Buyer	 	Relevant Proportion
	
	 	

	Converium
	 	 	27.81	%
	Northern States
	 	 	44.49	%
	Munich Re
	 	 	27.7	%

	1.8	 	In all cases where in this Agreement the Buyers are obliged to procure
that a Group Company shall do or refrain from doing any deed, matter, act
or thing, this obligation shall, in the case of Munich Re in circumstances
where Munich Re is subject to limitations imposed upon its capacity so to
procure by virtue of clause 6.5(ii) of the New Shareholders Agreement,
mean and be interpreted as meaning that Munich Re shall be obliged to do
only all that is within its capacity so to procure, but only to the extent
that Munich Re’s capacity so to procure is fettered due to a conflict of
interest arising solely through its participation in the GAUM Pool.
	 
	2.	 	SALE AND PURCHASE
	 
	2.1	 	On and subject to the terms of this Agreement CGU, as legal and
beneficial owner, agrees to sell with full title guarantee and each of the
Buyers agrees to buy with effect from Completion the number of CGU Shares
set out below together with all rights and benefits attaching to such CGU
Shares at or after Completion, free of any Encumbrance including, without
limitation, claims or other third party rights (including rights of
pre-emption) of any nature whatsoever:

	 	 	 	 	 
	 	 	No. of CGU Shares of £1.00 each to be sold and
	Buyers	 	purchased
	
	 	

	Converium
	 	 	3,476,085	 
	Northern States
	 	 	5,561,735	 
	Munich Re
	 	 	3,462,180	 

	2.2	 	On and subject to the terms of this Agreement RSA, as legal and
beneficial owner, agrees to sell with full title guarantee and each of the
Buyers agrees to buy with effect from Completion the number of RSA Shares
set out below together with all rights and benefits attaching to the RSA
Shares at or after Completion, free of any Encumbrance including, without
limitation, claims or other third party rights (including rights of
pre-emption) of any nature whatsoever:-

	 	 	 	 	 
	 	 	No. of RSA Shares of £1.00 each to be sold and
	Buyers	 	purchased
	
	 	

	Converium
	 	 	2,773,915	 

- 18 -

 

	 	 	 	 	 
	 	 	No. of RSA Shares of £1.00 each to be sold and
	Buyers	 	purchased
	
	 	

	Northern States
	 	 	4,438,265	 
	Munich Re
	 	 	2,762,820	 

	2.3	 	The Consideration for the Shares payable by the Buyers to the Sellers
shall be the aggregate of:

	 	(a)	 	the Initial Consideration, being the sum of US$82,117,480.68
which sum shall be payable by the Buyers to the Sellers as set out in
the table below such amounts to be satisfied in cash at Completion:-

	 	 	 	 	 	 	 	 	 
	Buyers	 	Cash payment to CGU	 	Cash payment to RSA
	
	 	
	 	

	Converium
	 	US$12,851,399.15	 	US$10,030,964.78
	Northern States
	 	US$20,453,274.83	 	US$15,971,007.45
	Munich Re
	 	US$12,811,616.37	 	US$9,999,218.10

	 	 	 	and
	 
	 	(b)	 	the Deferred Consideration to be determined and paid in
accordance with clause 3 (Deferred Consideration).

	2.4	 	For the avoidance of doubt, the obligations of each of the Buyers to
either RSA or CGU as the case may be, under this clause 2 are separate
and independent and not joint.
	 
	2.5	 	Each of the Sellers hereby waives or agrees to procure the waiver of all
rights of pre-emption and other restrictions on transfer over the Shares
conferred on it or any other person under the articles of association of
the Company, any shareholders’ agreement between the Sellers in relation
to the Company, statute or otherwise to permit the sale and purchase of
the Shares.
	 
	3.	 	DEFERRED CONSIDERATION
	 
	3.1	 	The Deferred Consideration shall be the payment to the Sellers of the
aggregate amount of £20 million payable in equal instalments on the dates
set out in clause 3.2 and in the proportions set out in clause 3.3 save
that in the event that the amounts calculated in accordance with clause
3.2 are different from the amount of the corresponding instalment of the
aggregate £20 million payment referred to above, the amount of Deferred
Consideration (and accordingly the corresponding instalment) shall be the
payment to the Sellers of the amount calculated in accordance with clause
3.2, provided always that such sums shall not in aggregate exceed £20
million.
	 
	3.2	 	The Buyers shall pay to the Sellers in the proportions set out in clause
3.3 below:

	 	(a)	 	an amount equal to 89.9 per cent of the 2002 Relevant Profit
determined as set out in clause 4 (Determination of 2002 Relevant
Profit), such amount to be paid in cash on the First Earn-out Payment
Date;

- 19 -

 

	 	(b)	 	an amount in respect of the Profit Commission received by the
Agents under the Old Pool Members Agreement in respect of the First
Earn-out Period, such amount to be determined as set out in clause 5
and paid in cash on the Second Earn-out Payment Date or, if the
circumstances in clause 5.4 apply, in whole or in part at a time or
times thereafter, as provided for in such clause; and
	 
	 	(c)	 	an amount in respect of the Profit Commission received by the
Agents under the Old Pool Members Agreement in respect of the Second
Earn-out Period, such amount to be determined as set out in clause 5
and paid in cash on the Third Earn-out Payment Date or, if the
circumstances in clause 5.4 apply, in whole or in part at a time or
times thereafter, as provided for in such clause.

	3.3	 	The proportions referred to are as follows:

	 	 	 	 	 	 	 	 	 
	 	 	Percentage of Deferred	 	Percentage of Deferred
	 	 	Consideration payable to	 	Consideration payable to
	Buyers	 	CGU	 	RSA
	
	 	
	 	

	Converium
	 	 	15.47	%	 	 	12.34	%
	Northern States
	 	 	24.75	%	 	 	19.75	%
	Munich Re
	 	 	15.40	%	 	 	12.29	%

	3.4	 	The Sellers shall each, if requested by any of the Buyers from time to
time, provide to the Buyers a copy of a properly completed US Internal
Revenue Service Form W-8BEN or other applicable form, certificate or
document specified by the Buyers and prescribed by the US Internal Revenue
Service certifying each Seller’s respective entitlement to a complete
exemption or a reduced rate of US withholding tax in respect of any
payments to be made to the Sellers under this Agreement in respect of
which the Buyers would be liable to withhold tax.
	 
	4.	 	DETERMINATION OF 2002 RELEVANT PROFIT
	 
	4.1	 	The Relevant Parties shall use reasonable endeavours to procure that the
2002 Accounts are prepared by the Company and audited by 31 March 2003 (or
in any event as soon as reasonably practicable thereafter) in accordance
with generally accepted accounting principles and practices in the United
Kingdom and on bases and policies consistent in all material respects with
those adopted in the Accounts subject to any modification necessary to
comply with legal, regulatory or taxation requirements or new accounting
standards.
	 
	4.2	 	The Buyers shall use reasonable endeavours to procure that as soon as
reasonably practicable after Completion and in any event by the later of:

	 	4.2.1	 	the date 15 Business Days after the 2002 Accounts are prepared
and audited in accordance with clause 4.1; and

- 20 -

 

	 	4.2.2	 	if later, the date 15 Business Days after Completion,
	 
	 	(the
“Calculation Date”) the Company shall calculate the amount of the
2002 Relevant Profit based on the 2002 Accounts and shall set out the
amount of Deferred Consideration payable in accordance with clause
3.2(a) on the First Earn-out Payment Date due to each Seller (along with
full details of the calculation thereof) in a certificate (the “Draft
Certificate”) and send a copy of the Draft Certificate to each of the
Sellers and each of the Buyers by no later than 5 Business Days after the
Calculation Date.	 	 

	4.3	 	After Completion the Buyers shall use reasonable endeavours to procure
that the Company shall, in a timely manner, subject to the giving of
confidentiality undertakings reasonably acceptable to the Buyers:

	 	4.3.1	 	provide the Sellers (or either of them) with copies of any
relevant papers and/or relevant materials which the Sellers (or
either of them, as the case may be) may reasonably request at the
Sellers’ cost; and
	 
	 	4.3.2	 	give to the Sellers (or either of them) and their respective
accountants, as soon as reasonably practicable following any request,
such access during normal working hours to the relevant records,
directors, and employees of any Group Company as may reasonably be
required,

	 	 	in order to verify the calculation of the amounts set out in the Draft
Certificate and any figures contained in the 2002 Accounts upon which the
2002 Relevant Profit figure is based PROVIDED THAT the obligations in
this clause 4.3 shall not extend to any information or materials or any
other matter that is in the reasonable opinion of the Company
confidential or subject to legal privilege which would be likely to be
jeopardised by disclosure.
	 
	4.4	 	 If both Sellers accept the matters contained in the Draft Certificate and
the figures in the 2002 Accounts on which the calculation of the 2002
Relevant Profit is based or if neither Seller elects, by notice in writing
to the Buyers, within 20 Business Days of receipt of the Draft Certificate
to refer the matters for determination pursuant to clause 4.5, then the
Draft Certificate and the amount payable to each Seller under clause
3.2(a) as set out in such certificate shall be final and binding upon
the Buyers and the Sellers.
	 
	4.5	 	If either of the Sellers does not agree the Draft Certificate or any of
the figures in the 2002 Accounts upon which the calculations in the Draft
Certificate are based, then the following provisions shall apply:

	 	4.5.1	 	Such Seller shall within the period of 20 Business Days
referred to in clause 4.4 serve written notice on the Buyers and the
other Seller to that effect along with an explanation in reasonable
detail of the reasons behind such disagreement (“Disagreement
Notice”).
	 
	 	4.5.2	 	The Buyers and the Sellers shall, acting in good faith, try to
settle the matters set out in the Disagreement Notice and agree the
relevant matters within the period of 20 Business Days after the date
of service of the Disagreement Notice (the “Resolution
Period”).

- 21 -

 

	 	4.5.3	 	If the Buyer and the Sellers do not reach agreement within the
Resolution Period then the Buyers or the Sellers (or either of them)
may elect, by notice in writing to the other parties, at any time
after the end of the Resolution Period, to refer the disagreement for
determination by an independent firm of chartered accountants
(“Independent Accountants”), acting as experts and not arbitrators
and appointed by agreement between the Buyers and the Sellers or, in
default of agreement within 7 days of receipt of notification of such
election, appointed by the President for the time being of the
Institute of Chartered Accountants in England and Wales (or in his
absence, any appropriate deputy) and, in that regard:

	 	 	 	 
	 	
(a)
	 	the Sellers and the Buyers shall be bound by
the terms of reference and timetable agreed with or, in
default of such agreement, imposed by the Independent
Accountants; and
	 	 	 	 
	 	
(b)
	 	the determination of the Independent
Accountants shall be final and binding upon the Buyers and
the Sellers in the absence of manifest error (and if there is
manifest error the relevant matter shall be referred back to
the Independent Accountants to be re-determined).

	 	4.5.4	 	In making their determination, the Independent Accountants
shall state which of, and to what extent (if at all), those
adjustments requested by the Sellers (or either of them) are
necessary to the Draft Certificate and/or any figures from the 2002
Accounts upon which any calculation therein is based in order that it
complies with this Agreement and the Independent Accountants shall
not consider or propose any adjustments which have not been requested
by the Sellers (or either of them) or which do not affect the Draft
Certificate or any such figures.
	 
	 	4.5.5	 	The costs of the Independent Accountants shall be borne by the
Buyers and the Sellers in such proportions as the Independent
Accountants shall determine failing which they shall be borne in
equal shares by the parties.

	5.	 	DETERMINATION OF AMOUNT IN RESPECT OF PROFIT COMMISSION DUE TO SELLERS
	 
	5.1	 	The Buyers shall procure that the Company shall comply with the relevant
provisions of the Old Pool Members Agreement relating to the calculation
of the Profit Commission in respect of the First Earn-out Period or the
Second Earn-out Period (as the case may be) and, in respect of each such
Earn-out Period, the Buyers shall procure that the Company shall:

	 	(a)	 	consult with the Sellers in a reasonably timely manner in
respect of the proposed calculation of the Total Trading Return and
Profit Commission in respect of the relevant Earn-out Period and,
subject to the giving of confidentiality undertakings reasonably
acceptable to the Buyers, provide copies of any relevant papers
and/or relevant materials which the Sellers (or either of them, as
the case may be) may reasonably request at the Sellers’ cost in
respect of such calculations;

- 22 -

 

	 	(b)	 	give the Sellers reasonable notice in advance of any material
discussions with the external actuaries referred to in paragraph 1.5
of Schedule 3 of the Old Pool Members Agreement relating to the
calculation of the Total Trading Return in respect of the relevant
Earn-out Period and allow such representatives of the Sellers (or
either of them, or their respective advisers) as the Seller(s) may
reasonably request to take part in such discussions;
	 
	 	(c)	 	to the extent permitted by the Old Pool Members Agreement, take
due and reasonable account of the Sellers’ views (including, without
limitation, complying with any reasonable requests which the Sellers
may make) in respect of the calculation of the Total Trading Return
and/or Profit Commission for the relevant Earn-out Period (and/or the
process for agreeing the same with such external actuaries to the
extent permitted by the Old Pool Members Agreement); and
	 
	 	(d)	 	not agree the calculation of the Total Trading Return for the
relevant Earn-out Period with such external actuaries without the
prior written consent of the Sellers (such consent not to be
unreasonably withheld or delayed).

	5.2	 	On agreement being reached in accordance with clause 5.1 between the
Company and such external actuaries in respect of the Total Trading Return
for the relevant Earn-out Period, the Buyers shall procure that the
Company complies with the provisions of paragraph 1.6 of Schedule 3 of the
Old Pool Members Agreement.
	 
	5.3	 	Subject to clause 3.1, the Buyers shall pay to the Sellers, in the manner
provided in clauses 3.2 and 3.3:

	 	(a)	 	on the Second Earn-out Payment Date, an amount equal to 89.9
per cent of net Profit Commission which has been received by the
Agents by such date from or on behalf of members of the GAUM Pool in
respect of the First Earn-out Period under the Old Pool Members
Agreement; and
	 
	 	(b)	 	on the Third Earn-out Payment Date, an amount equal to 89.9 per
cent of net Profit Commission which has been received by the Agents
by such date from or on behalf of members of the GAUM Pool in respect
of the Second Earn-out Period under the Old Pool Members Agreement,

	 	 	where, in either case, “net Profit Commission” shall mean the Profit
Commission so received by the Company after deduction of any amounts in
respect of Taxes payable by any member of the Group in respect of such
receipt.
	 
	5.4	 	In the event that, on or after the Second Earn-out Payment Date or the
Third Earn-out Payment Date (as the case may be), there remain outstanding
any amounts in respect of Profit Commission in respect of the First
Earn-out Period or the Second Earn-out Period (as the case may be) which
are payable to the Agents under the Old Pool Members Agreement by any
member(s) of the GAUM Pool, the Buyers shall:

	 	5.4.1	 	subject to the Company on an after-Tax basis being indemnified
by the Sellers to its and the Buyers’ reasonable satisfaction against
all costs and expenses,

- 23 -

 

	 	 	 	including all costs and expenses in connection with the
institution of any proceedings referred to below, procure that the
Agents continue to take all reasonable steps in the ordinary
course to recover such amounts (and all costs and expenses of
recovering such amounts, including all costs and expenses the
subject of the indemnity referred to above) from such member(s)
and shall take such action and give to the Sellers such
information and assistance as the Sellers (acting jointly) may
reasonably request in writing including, where reasonable, the
institution of proceedings in pursuing any such recovery and, if
the Sellers reasonably request, the instructing of such solicitors
or other professional advisers as the Sellers may nominate (after
consulting with the Buyers regarding such proposed nomination) to
act on behalf of the Company, to act in accordance with the
Sellers’ sole instructions, and shall not settle or compromise
such proceedings without the prior written consent of the Sellers,
such consent not to unreasonably withheld or delayed; and
	 
	 	5.4.2	 	in the event that the Agents (or either of them) receives any
payment in respect of such outstanding amounts (whether as a result
of the actions taken pursuant to clause 5.4.1 or otherwise), the
Buyers shall, within 10 Business Days of such receipt, pay in cash to
the Sellers, in the proportions referred to in clause 3.3, an amount
equal to 89.9 per cent of such receipt after deduction of any amounts
in respect of Taxes payable by any member of the Group in respect of
such receipt.

	5.5	 	In the event that the Sellers reasonably request that the Company should
take any action pursuant to clause 5.4.1, the Sellers shall keep the
Buyers informed on a timely basis of any and all developments in
connection with any such action.
	 
	5.6	 	The Buyers shall have no obligations under clause 5.4.1 to pursue the
recovery of the amounts outstanding in respect of Profit Commission in
respect of the First Earn-out Period or the Second Earn-out Period (as the
case may be) which are payable to the Agents under the Old Pool Members
Agreement by any member(s) of the GAUM Pool unless the Sellers have
requested such in writing on or before 31 December 2008.
	 
	5.7	 	For the purposes of this clause 5:

	 	5.7.1	 	a reference to any Agent shall be taken to include any
Subsidiary (as such term is used in clause 2.25 of the Old Pool
Members Agreement) of such Agent;
	 
	 	5.7.2	 	 a reference to a member of the GAUM Pool shall be taken to
include any nominated company (as such term is used in clause 2.22 of
the Old Pool Members Agreement) of such member; and
	 
	 	5.7.3 	 	any receipt of any amount in respect of Profit Commission from
or on behalf of any member of the GAUM Pool in respect of the First
Earn-out Period or the Second Earn-out Period by any Buyer’s Group
Undertaking or any Group Company other than an Agent shall be taken
to be a receipt by the Agents.

- 24 -

 

	6.	 	CONDUCT OF BUSINESS BETWEEN COMPLETION AND THE THIRD EARN-OUT PAYMENT
DATE
	 
	6.1	 	Each of the Buyers separately and independently undertakes to the Sellers
that, during the period between Completion and the Third Earn-Out Payment
Date:

	 	6.1.1 	 	it shall not, and shall procure that no member of the Group or
of that Buyer’s Group shall, take steps, or cause steps to be taken,
where the main intention of taking such steps or causing such steps
to be taken is to materially adversely affect the amount of the
Deferred Consideration; and
	 
	 	6.1.2	 	 it shall use its reasonable endeavours to ensure that it shall
not, and shall use its reasonable endeavours to procure that no
member of the Group or of that Buyer’s Group shall, take steps, or
cause steps to be taken, where the Buyers are aware that the effect
of taking such steps or causing such steps to be taken is to
materially adversely affect the amount of the Deferred Consideration
provided always that at any time during such period, the Buyers shall
not be required to procure that any member of the Group shall
allocate costs, expenses or liabilities other than in accordance with
its normal practice at such time or otherwise act in a way which is
inconsistent with its normal business practice or its obligations
under any applicable laws and existing contractual agreements at such
time.

	6.2	 	If Completion takes place before 31 December 2002, then during the period
from Completion until 31 December 2002 the Buyers separately and
independently undertake to use their reasonable endeavours to procure that
the Agent’s business is carried on in all material respects in accordance
with the Agent’s agreed budgets and business plans.
	 
	6.3	 	Prior to the Third Earn-out Payment Date, save with the prior written
consent of the Sellers (such consent not to be unreasonably withheld or
delayed), the Buyers will not take steps, nor will they procure that steps
are taken, to wind up the Agents (or either of them) or cause the Agents
(or either of them) to cease carrying on any material part of its
business, save where an Agent is unable to pay its debts (for the purposes
of section 123 of the Insolvency Act 1986) or the directors of an Agent,
acting in good faith, reasonably consider it their duty to cause such
winding-up or cessation.
	 
	7.	 	INTRA-GROUP DEBT
	 
	7.1	 	Subject to compliance with paragraph 1.3.2 of Schedule 2, the Buyers and
RSA shall procure that at Completion: (a) the Company shall pay to CGU an
amount equal to £25,210,189.94 by way of repayment of the CGU Loan; and
(b) the Company shall pay to RSA an amount equal to £25,210,189.94, by way
of repayment of the RSA Loan.
	 
	7.2	 	If the CGU Loan exceeds £25,210,189.94 and/or the RSA Loan exceeds
£25,210,189.94 the Sellers shall immediately on demand pay to the Buyers
(by way of refund or a reduction to the Consideration for the Shares) an
amount equal to 89.9% of the amount by which the CGU Loan and the RSA Loan
exceeded £25,210,189.94 and £25,210,189.94, respectively, together with
interest at the Agreed Rate accruing from Completion to the date of
repayment of such excess(ses) (both dates inclusive). The total

- 25 -

 

	 	 	sum payable by the Sellers to the Buyers under this clause 7.2 shall be
paid to the Buyers in the following proportions:

	 	 	 	 	 
	Buyer	 	Relevant Proportion
	
	 	

	Converium
	 	 	27.81	%
	Northern States
	 	 	44.49	%
	Munich Re
	 	 	27.7	%

	7.3	 	The parties agree that for the purpose of assessing the value of the
shares at Completion in order to assess any common law remedies
(including, without limitation, damages for breach of contract) the value
of the Shares, as at Completion, shall be deemed to be increased to
include the amount outstanding under the CGU Loan and RSA Loan immediately
prior to Completion.
	 
	7.4	 	For the avoidance of doubt, the obligations of each of the Buyers to
either RSA or CGU, as the case may be, under clause 7 are separate and
independent and not joint.
	 
	8.	 	CONDITIONS
	 
	8.1	 	Completion is conditional on the following Conditions being satisfied, on
or before 30 June 2003:

	 	8.1.1 	 	The Commission of the European Communities:

	 	 	 	 
	 	
(a)
	 	issuing a decision pursuant to article 6(1)(b),
article 6(2) or article 8.2 (or having been deemed to have
made such a decision pursuant to Article 10(6)) of Council
Regulation 4064/89 as amended by Council Regulation 1310/97
(“Regulation 4064/89”) that the proposed acquisition of the
Shares falls within the scope of Regulation 4064/89 but is
compatible with the common market (and, if such decision is
given subject to conditions, such conditions having been
jointly approved by the Buyers in their respective sole
discretion) and no prior decision pursuant to article 9(3)(b)
of Regulation 4064/89 having been made; or
	 	 	 	 
	 	
(b)
	 	issuing a decision pursuant to Article 6.1(a)
of Regulation 4064/89 that the proposed acquisition of the
Shares does not fall within the scope of Regulation 4064/89
and the competent national authorities in the European Union
whose consent, approval, clearance or confirmation is either
required or considered by the Buyers and RSA to be desirable
having granted all such consents, approvals, clearances or
confirmations on terms satisfactory to each Buyer and RSA in
their respective sole discretions; or
	 	 	 	 
	 	
(c)
	 	issuing a decision pursuant to Article 9.3(b)
(or having been deemed to have adopted such a decision
pursuant to Article 9(5)) of Regulation

- 26 -

 

	 	 	 	 
	 	 	 	4064/89 referring the whole or part of the case to the
competent authorities of one or more member States of the
European Union with a view to the application to the case of
the national competition laws of such one or more member
States and:

	 	 	 	 	 
	 	 	
(i)
	 	where only part of the case is so
referred, issuing a decision pursuant to Article 6.1(b)
or Article 8.2 (or having been deemed to have made such
a decision pursuant to Article 10(6)) of Regulation
4064/89 in respect of such part of the case as is not so
referred; and
	 	 	 	 	 
	 	 	
(ii)
	 	where the whole or only part of the
case is so referred, the national authorities of the
member States concerned issuing, on terms satisfactory
to each Buyer and RSA in their respective sole
discretion, such consents, approvals, clearances or
confirmations as may be required or considered by the
Buyers and RSA to be desirable in respect of the whole
or such parts of the case as are referred to them.

	 	8.1.2	 	In the event that a filing or filings are required in Canada:

	 	 	 
	(a)	 	
either:

	 	 	 	 	 
	 	 	
(i)
	 	the Commissioner of Competition (the
“Commissioner”) shall have issued an advance ruling
certificate under section 102 of the Competition Act
(Canada) in respect of the proposed acquisition of the
Shares to the effect that he is satisfied that he would
not have sufficient grounds on which to apply to the
Competition Tribunal of Canada for an order under
section 92 of the Competition Act (Canada) with respect
to the proposed acquisition of the Shares; or
	 	 	 	 	 
	 	 	
(ii)
	 	the parties shall have submitted the
notices to the Commissioner required under section 114
of the Competition Act (Canada) and the applicable
waiting period under section 123 of the Competition Act
(Canada) shall have expired, and:

	 	 	 	 	 
	 	 	
(A)
	 	the relevant Buyers having
submitted the notices shall have been advised in
writing by the Commissioner that the Commissioner
has determined that there are not sufficient grounds
to initiate proceedings for an order under section
92 of the Competition Act (Canada) in respect of the
proposed acquisition of the Shares and that any
terms and conditions attached to any such advice
being satisfactory to each Buyer and RSA in their
respective sole discretion; and
	 	 	 	 	 
	 	 	
(B)
	 	the Commissioner shall not
have made an application for an order under section
100 of the Competition Act (Canada) in respect of
the proposed acquisition of the Shares (or if made,
that such order has been rescinded on

- 27 -

 

	 	 	 	 	 
	 	 	 	 	terms and conditions satisfactory to each Buyer
and RSA in their respective sole discretion); and

	 	 	 
	(b)	 	
in the event that the proposed acquisition of
the Shares is reviewable under the Investment Canada Act
(Canada), the Buyers shall have obtained a notice from the
Minister designated by the Governor in Council as the
Minister for the purposes of the Investment Canada Act
(Canada) pursuant to section 21, 22 or 23 or such Act that
the Minister is, or is deemed to be, satisfied that the
proposed acquisition of the Shares by the Buyers is likely to
be of net benefit to Canada.

	 	8.1.3	 	Following submission of a filing in Switzerland:

	 	 	 
	(a)	 	
the Swiss Competition Commission issuing a
comfort letter (“Unbedenklichkeitserklärung”) unconditionally
authorising the proposed acquisition of the Shares under the
Swiss Federal Act on Cartels and Other Restraints of
Competition of 6 October 1995 (“Swiss Cartel Act”), or having
been deemed to have issued such a comfort letter by not
objecting to the proposed acquisition of Shares within the
deadline(s) set out either:

	 	 	 	 	 
	 	 	
(i)
	 	in Art. 32 Para.1 of the Swiss Cartel
Act; or
	 	 	 	 	 
	 	 	
(ii)
	 	if an investigation pursuant to Art.
33 Para 1 of the Swiss Cartel Act has been initiated, in
Art. 33 Para.3 of the Swiss Cartel Act; or

	 	 	 
	
(b)
	 	the Swiss Competition Commission issuing a
decision authorising the proposed acquisition of the Shares
subject to conditions or obligations pursuant to Art. 10 Para
2 of the Swiss Cartel Act, provided such conditions or
obligations are on terms satisfactory to each Buyer and RSA
in their respective sole discretions; or
	 	 	 
	
(c)
	 	the Swiss Competition Commission granting an
exemption for early completion of the proposed acquisition of
the Shares pursuant to Article 32 Para. 2 or Article 33 Para.
2 of the Swiss Cartel Act; or
	 	 	 
	
(d)
	 	subsequent to a prohibition of the proposed
acquisition of the Shares by the Swiss Competition Commission
pursuant to Article 10 of the Swiss Cartel Act, the Swiss
Federal Council issuing a decision authorising such
acquisition pursuant to Article 11 of the Swiss Cartel Act
(and, if such decision is given subject to conditions or
obligations, such conditions or obligations are on terms
satisfactory to each Buyer and RSA in their respective sole
discretion).

	8.2	 	Each of the Buyers and each of the Sellers shall use their respective
reasonable efforts to achieve satisfaction of each Condition as soon as
possible and in any event before 30 June 2003.

- 28 -

 

	8.3	 	If, at any time, any party becomes aware of a fact or circumstance that
is likely to prevent a Condition being satisfied, it shall as soon as
reasonably practicable and in any event within two Business Days, inform
each of the other parties of the matter.
	 
	8.4	 	If one or more of the Conditions set out in clause 8.1 has not been
satisfied on or before 30 June 2003 this Agreement (other than clauses 1,
10.6, 14, 15, 16, 22, 25, 26, 27, 28, 29 and 30) shall automatically
terminate with immediate effect and each party’s further rights and
obligations cease immediately on termination, but termination does not
affect a party’s accrued rights and obligations at the date of
termination.
	 
	9.	 	COMPLETION
	 
	9.1	 	Completion shall take place at the offices of the Clifford Chance Limited
Liability Partnership in London on the Completion Date.
	 
	9.2	 	At Completion the Sellers and the Buyers shall do all those things
respectively required of them in Schedule 2, subject to the provisions
thereof.
	 
	9.3	 	No party is obliged to complete this Agreement unless each of the other
parties complies with all its obligations under this clause 9 and
Schedule 2;
	 
	9.4	 	None of the Buyers nor the Sellers shall be obliged to complete the
purchase of any of the Shares unless the sale and purchase of all the
Shares is completed simultaneously.
	 
	9.5	 	Subject to clause 9.4, if Completion does not take place on the
Completion Date because any Buyer or either of the Sellers fails to comply
with any of its obligations under this clause 9 and/or under Schedule 2
(whether any such failure amounts to a repudiatory breach or not), the
Sellers, acting jointly (but not individually), in the case of a failure
by the Buyers, may by notice to the Buyers, or the Buyers, acting jointly
(but not individually), in the case of a failure by either Seller, may by
notice to the Sellers:

	 	9.5.1	 	 proceed to Completion to the extent reasonably practicable
(without limiting their rights under this Agreement) (and each of the
parties, other than the defaulting Buyer or Seller, agrees it shall
use its reasonable endeavours to proceed to Completion);
	 
	 	9.5.2	 	 postpone Completion to a date not more than ten Business Days
after the Completion Date and not later than 30 June 2003; or
	 
	 	9.5.3	 	 terminate this Agreement.

	9.6	 	 If the Buyers or the Sellers postpone Completion to another date in
accordance with clause 9.5.2, the provisions of this Agreement apply as
if that other date is the Completion Date.
	 
	9.7	 	If the Buyers or the Sellers terminate this Agreement pursuant to clause
9.5.3, each party’s further rights and obligations (other than clauses 1,
10.6, 14, 15, 16, 22, 25, 26, 27, 28, 29 and 30) cease immediately on
termination, but termination shall not affect a party’s accrued rights and
obligations at the date of termination (including, if applicable, the
rights to remedies).

- 29 -

 

	10.	 	THE SELLERS’ WARRANTIES AND PRE-COMPLETION CONDUCT
	 
	10.1	 	 Each of the Sellers jointly and severally warrants to each of the Buyers
in the terms of the Warranties. The Warranties shall be deemed to have
been repeated at Completion jointly and severally by each of the Sellers
to each of the Buyers by reference to the facts and circumstances then
subsisting with the exception of the Warranty in paragraph 5.2 of Schedule
3 which shall not be so repeated. The fact that the Warranty in paragraph
5.2 of Schedule 3 is not repeated at Completion does not affect any
Buyer’s right to claim under any other Warranty.
	 
	10.2	 	 Each of the Sellers’ liability for Relevant Claims and Tax Claims shall
be limited or excluded, as the case may be, if but only to the extent
that, the limitations or exclusions as set out in Schedule 4 apply.
	 
	10.3	 	Each Warranty is to be construed independently and separately and (except
where this Agreement provides otherwise) is not limited by a provision of
this Agreement or another Warranty.
	 
	10.4	 	Between the execution of this Agreement and Completion the Sellers shall:

	 	10.4.1	 	 procure that each Group Company complies with each of the
undertakings set out in Schedule 8; and
	 
	 	10.4.2	 	 notify the Buyers in writing as soon as practicable and, in any
event, within two Business Days of becoming aware of the same if
either of the Sellers becomes aware that they are in breach of any of
the Warranties or may be in breach of any Warranty when the
Warranties are repeated at Completion by reference to the facts and
circumstances then existing or there occurs any act or omission which
constitutes or which would or might constitute a breach of clause
#10.4.1.

	10.5	 	Pending Completion each Buyer and any persons authorised by it shall, on
giving reasonable prior notice and subject in each case to the giving of
confidentiality undertakings reasonably acceptable to the Sellers, be
given any access which they may reasonably request during normal business
hours to the Properties and to all the books and records (including,
without limitation, all statutory books, minute books, leases, contracts,
supplier lists and customer lists) of each Group Company and the directors
and employees of each Group Company shall be instructed to give promptly
all such information and explanations as each Buyer or any such person may
reasonably request.
	 
	10.6	 	Each of the Sellers separately and independently undertakes to each Group
Company that neither of them:

	 	10.6.1	 	has any rights against; and
	 
	 	10.6.2	 	 may make any claim against,

	 	 	any employee, director, agent or officer of any Group Company on whom it
may have relied before agreeing to any term of, or entering into, this
Agreement or any other agreement or document referred to herein (save in
relation to any right or claim arising from wilful default or a fraudulent
act or omission).

- 30 -

 

	11.	 	SELLERS’ UNDERTAKING
	 
	11.1	 	Each of the Sellers separately and independently undertakes to each
Buyer, that it will not and will procure that no member of its Seller’s
Group will:

	 	11.1.1	 	 for a period of two years from Completion be engaged, or directly
or indirectly interested in carrying on any business which competes
with the business carried on by the Group and/or the New Global
Aerospace Pool in the London insurance market or the US insurance
markets, in each case relating to aerospace, aviation and all related
and incidental insurance, reinsurance and alternative risk solution
risks provided that this restriction shall not apply to any business
carried on by any Seller’s Group Undertaking if the aggregate annual
gross written premium derived by all the Seller’s Group Undertakings
of a Seller from such markets does not exceed £10 million;
	 
	 	11.1.2	 	 for a period of two years from Completion, solicit or contact with
a view to his engagement or employment by a member of that Seller’s
Group, any director (other than, in the case of RSA, a director of
the Company or any other Group Company appointed by RSA in accordance
with the terms of the New Shareholders Agreement), officer, employee
or manager of a Group Company as listed in Schedule 9;
	 
	 	11.1.3	 	 for a period of two years from Completion solicit or accept the
custom of any person in respect of services in either the London
insurance market or US insurance markets competitive with those
supplied by any member of the Group during the period of six months
prior to Completion, such person having been a customer of the Group
in respect of such services during such period; or
	 
	 	11.1.4	 	 for a period of two years from Completion (i) disclose to any
person whatsoever, or (ii) use to the detriment of any Group Company,
or (iii) through failure to exercise all reasonable care and due
diligence, cause any unauthorised disclosure or use of, any
commercial information relating to the business of the Group which is
confidential, save to the extent that such disclosure would be
permitted, mutatis mutandis, pursuant to clause 14.2.

	11.2	 	 Nothing contained in clause 11.1 shall:

	 	11.2.1	 	 preclude or restrict the Sellers or any Seller’s Group Undertaking
from holding not more than ten per cent of the issued share capital
of any company whose shares are listed on a recognised stock exchange
nor from carrying on any business that such Seller or Seller’s Group
Undertaking carries on at the date of this Agreement in the way that
such business is currently carried on at such date; or
	 
	 	11.2.2	 	 preclude or restrict Morley Fund Management Limited or any of its
related trading entities from holding (directly or indirectly and, in
either case, in its capacity as manager of its clients’ investment
portfolios) any issued share capital of any company; or

- 31 -

 

	 	11.2.3	 	 apply to RSA in respect of or in connection with its holding of the
Retained Shares (and any further such shares in the capital of the
Company it may acquire in future) for so long as such shares are
retained by RSA or any Seller’s Group Undertaking of RSA; or
	 
	 	11.2.4	 	 apply to RSA or any Seller’s Group Undertaking of RSA in respect of
or in connection with participation (whether as insurer, reinsurer or
retrocessionnaire) in the New Global Aerospace Pool or any successor
pool thereto; or
	 
	 	11.2.5	 	 apply to either Seller or any Seller’s Group Undertaking in respect
of or in connection with any continued activities relating to the
run-off of the risks insured by the GAUM Pool, the BAIG Pool or any
other pool administered by an Agent and of which a Seller is a member
(whether as insurer, reinsurer or retrocessionnaire); or
	 
	 	11.2.6	 	 preclude or restrict the Sellers or any Seller’s Group Undertaking
from:

	 	 	 	 
	 	
(a)
	 	acquiring, being acquired by or merging with an
undertaking which has a competitive business as part of its
business or the business of any of its group undertakings
which will become part of the group undertakings of the
Seller as a result of the aforementioned acquisition or
merger; or
	 	 	 	 
	 	
(b)
	 	acquiring a business which is, in part, a
competitive business,

	 	 	 	PROVIDED THAT such competitive business does not, in the case of
(a) above, form a material part of the total business of the group
undertakings which will become part of the group undertakings of
the Seller as a result of the aforementioned acquisition or
merger, or, in respect of (b) above form a material part of the
business so acquired.
	 
	 	 	 	For the purposes of this sub-clause 11.2.6:

	 	 	 	 
	 	
(i)
	 	a
“competitive business” means a business which
is competitive with all or part of the business of the Group
in either the London insurance market or the US insurance
markets; and
	 	 	 	 
	 	
(ii)
	 	“material” means that the competitive business
generates more than 10% of the annual gross written premium
generated by, in the case of (a) above, all of the businesses
of the group undertakings in aggregate which will become part
of the group undertaking of the Seller as a result of the
acquisition or merger (or a series of related acquisitions or
mergers) or, in respect of (b) above, the business so
acquired (as a result of either one acquisition or a series
of related acquisitions); or

	 	11.2.7	 	 for the avoidance of doubt, apply to any Seller’s Group Undertaking
once such Seller’s Group Undertaking is no longer a subsidiary
undertaking or parent undertaking of the relevant Seller or a
subsidiary undertaking of a parent undertaking of the relevant
Seller.

- 32 -

 

	11.3	 	If any undertaking contained in this clause 11 shall be held to be void
but would be valid if deleted in part or reduced in application, such
undertaking shall apply with such deletion or modification as may be
necessary to make it valid and enforceable. Without prejudice to the
generality of the foregoing, such period (as the same may previously have
been reduced by virtue of this clause 11.3) shall take effect as if
reduced by six months until the resulting period shall be valid and
enforceable.
	 
	11.4	 	For the avoidance of doubt, the obligations of each of the Sellers to
each of the Buyers under this clause 11 are separate and independent, not
joint.
	 
	11.5	 	The Sellers agree that the undertakings contained in this clause 11 are
reasonable and are entered into for the purposes of protecting the
goodwill of the business of each member of the Group.
	 
	11.6	 	For the purposes of this clause 11, “business of the Group” shall be
deemed to include the business conducted through the GAUM Pool and, to the
extent such business relates to aerospace, aviation and all related
incidental insurance, reinsurance and alternative risk solution risks,
through the New Global Aerospace Pool.
	 
	12.	 	THE BUYERS’ REMEDIES
	 
	12.1	 	 Notwithstanding that the Buyers (or any of them) become aware at any time
after execution of this Agreement, whether before or after Completion and
whether or not by reason of the Disclosure Letter (or any of the documents
annexed to the Disclosure Letter) or by reason of any notification by the
Sellers pursuant to clause 10.4.2:

	 	12.1.1	 	 of a fact or circumstance which gives rise to or which would or
might give rise to a Relevant Claim or a claim under the Tax
Warranties;
	 
	 	12.1.2	 	 that there has been a breach of any Warranty or any other provision
of this Agreement; or
	 
	 	12.1.3	 	 that there may be a claim against the Sellers under any
representation, statement, assurance, covenant, undertaking,
indemnity, guarantee or commitment given by or on behalf of the
Seller in connection with this Agreement,

	 	 	the Buyers shall not, save as provided in clause 9, be entitled to
rescind this Agreement or treat this Agreement as terminated and,
accordingly, each of the Buyers waive all and any rights of rescission
and/or termination they may have in respect of any such matter (howsoever
arising or deemed to arise), other than those provided in clause 9 and any
such rights in respect of fraud or wilful non-disclosure.
	 
	13.	 	THE BUYERS’ WARRANTIES
	 
	13.1	 	Each Buyer separately and independently warrants to each of the Sellers
that:

	 	13.1.1	 	 it has the requisite capacity, power and authority, and has taken
all action necessary, to execute, deliver and perform its obligations
under this Agreement;

- 33 -

 

	 	13.1.2	 	 its obligations under this Agreement and the Buyer’s Completion
Documents are, or when the relevant Buyer’s Completion Document is
executed will be, enforceable in accordance with their respective
terms;
	 
	 	13.1.3	 	 the execution and delivery of, and the performance by it of its
obligations under, this Agreement and the Buyer’s Completion
Documents will not:

	 	 	 	 
	 	
(a)
	 	result in a breach of any provision of its
memorandum or articles of association or by-laws or its
equivalent constitutional documents;
	 	 	 	 
	 	
(b)
	 	result in a breach by it of, or constitute a
default by it under, any instrument to which it is a party or
by which it is bound and which is material in the context of
the transactions contemplated by this Agreement;
	 	 	 	 
	 	
(c)
	 	result in a breach by it of any order, judgment
or decree of any court or governmental agency to which it is
a party or by which the Buyer is bound or submits and which
is material in the context of the transactions contemplated
by this Agreement; or
	 	 	 	 
	 	
(d)
	 	save as referred to in clause 8.1 and clause
24, require it to obtain any consent or approval of, or give
any notice to or make any registration with, any governmental
or other regulatory authority which has not been obtained or
made at the date hereof both on an unconditional basis and on
a basis which cannot be revoked (save pursuant to any legal
or regulatory entitlement to revoke the same other than by
reason of any misrepresentation or misstatement) to the
extent such consent, approval, notice or regulation is
material in the context of the transaction contemplated by
this Agreement.

	14.	 	CONFIDENTIAL INFORMATION
	 
	14.1	 	Subject to clause 14.2 and clause 15, each of the Sellers undertakes to
each of the Buyers (for each such Buyer’s own benefit and as agent and
trustee for each Buyer’s Group Undertaking) and each of the Buyers
undertakes to each of the Sellers (for each such Seller’s own benefit and
as agent and trustee for each Seller’s Group Undertaking), that it shall
(and, in the case of each Seller, that it shall procure that each Seller’s
Group Undertaking shall, and, in the case of each Buyer, that it shall
procure that each Buyer’s Group Undertaking shall) treat as confidential
and shall not use or disclose to any other person all information received
or obtained as a result of entering into or performing this Agreement
which relates to:

	 	14.1.1	 	 any other party including, where that other party is a Seller, that
Seller’s Group and where that other party is a Buyer, that Buyer’s
Group;
	 
	 	14.1.2	 	 the provisions or the subject matter of this Agreement or any
document referred to herein and any claim or potential claim
thereunder; or
	 
	 	14.1.3	 	 the negotiations relating to this Agreement or any documents
referred to herein.

- 34 -

 

	14.2	 	Clause 14.1 does not apply to disclosure of any such information as is
referred to in this clause 14.2:

	 	14.2.1	 	 which is required to be disclosed by law or for the purpose of any
judicial proceedings, by a rule of a listing authority or stock
exchange to which any party is subject or submits or by a
governmental authority or other authority with relevant powers to
which any party is subject or submits, whether or not the requirement
has the force of law provided that the disclosure shall, so far as is
practicable, be made after consultation with the other parties and
after taking into account the other parties’ reasonable requirements
as to its timing, content and manner of making or despatch;
	 
	 	14.2.2 	 	to the extent required by, or necessary in the opinion of that
party for, any securities exchange or regulatory or governmental body
or Tax Authority to which any Seller’s Group Undertaking or Buyer’s
Group Undertaking is subject, wherever situated;
	 
	 	14.2.3	 	 to an adviser for the purposes of advising in connection with the
transactions contemplated by this Agreement provided that such
disclosure is necessary or desirable for these purposes and is on the
basis that clause 14.1 applies to the disclosure by the adviser;
	 
	 	14.2.4	 	 to any director, officer or employee of any Buyer or that Buyer’s
Group or of a Seller’s Group Undertaking whose function requires him
to have the relevant confidential information;
	 
	 	14.2.5	 	 to the extent that the information has been made public other than
through breach of this Agreement;
	 
	 	14.2.6	 	 to any connected company (as defined in clause 16.1) of any party
in connection with any assignment permitted under clause 16.1;
	 
	 	14.2.7	 	 to the extent confidential information (as such term is defined in
clause 8.7 of the Old Pool Members Agreement) is required or
permitted to be disclosed under the provisions of clause 8
(Confidentiality) of the Old Pool Members Agreement;
	 
	 	14.2.8	 	 to the extent confidential information (as such term is defined in
clause 16.8 of the New Pool Members Agreement) is required or
permitted to be disclosed under the provisions of clause 16
(Confidentiality) of the New Pool Members Agreement; or
	 
	 	14.2.9	 	 to an insurance broker and/or insurer in order to enable the Seller
to insure its liabilities in respect of Relevant Claims and/or Tax
Claims and/or Relevant Indemnity Claims PROVIDED THAT any such broker
and/or insurer executes a confidentiality undertaking in such form as
may reasonably be required by the Buyers.

- 35 -

 

	14.3	 	The restrictions contained in this clause shall continue to apply without
limit in time and whether or not this Agreement is terminated.
	 
	15.	 	ANNOUNCEMENTS
	 
	15.1	 	Subject to clause 15.2, no party may, before or after Completion, make
or send a public announcement, communication or circular concerning the
transactions referred to in this Agreement unless it has first obtained
each other party’s written consent, which may not be unreasonably withheld
or delayed.
	 
	15.2	 	 Clause 15.1 does not apply to a public announcement, communication or
circular:

	 	15.2.1	 	 made or sent jointly by the Buyers after Completion to any
customer, client or supplier of a Group Company informing it of the
Buyers’ purchase of the Shares and/or announcing the creation of the
New Global Aerospace Pool;
	 
	 	15.2.2	 	 required by law, by a rule of a listing authority or stock exchange
to which either party is subject or submits or by a governmental
authority or other authority with relevant powers to which any party
is subject or submits, whether or not the requirement has the force
of law provided that the public announcement, communication or
circular shall, so far as is practicable, be made after consultation
with the other parties and after taking into account the other
parties’ reasonable requirements as to its timing, content and manner
of making or despatch; or
	 
	 	15.2.3	 	 which the other parties have given their prior written approval to,
such approval not to be unreasonably withheld or delayed.

	15.3	 	 The provisions of this clause shall remain in full force and effect
notwithstanding the termination of this Agreement and each party to this
Agreement shall remain bound by the provisions of this clause for a period
of five years from Completion.
	 
	16.	 	ASSIGNMENT
	 
	16.1	 	 Any party may, without the consent of the other parties, assign to a
connected company the benefit of all or any or any part of any other
party’s obligations to it under this Agreement and/or any benefit arising
under or out of this Agreement provided however that such assignment shall
not be absolute but shall be expressed to have effect only for so long as
the assignee remains a connected company. For the purposes of this clause
16.1, “connected company” means, for a Seller, any Seller’s Group
Undertaking and, for a Buyer, any Buyer’s Group Undertaking.
	 
	16.2	 	 No party shall assign, transfer, declare a trust of the benefit of or in
any other way alienate any of its rights under this Agreement whether in
whole or in part to a company which is not a connected company without the
consent in writing of each of the other parties.
	 
	16.3	 	 Any party shall following an assignment under clauses 16.1 and 16.2
notify the other parties within 14 days of such an assignment.

- 36 -

 

	17.	 	US PENSIONS DEFICIT
	 
	17.1	 	On 31 January 2003 or the first Business Day falling 45 days after
Completion, whichever is the later, the Sellers covenant to pay as an
adjustment to the Consideration the US Pensions Amount to the Buyers
together with interest at the Agreed Rate accruing, if such payment is
made after 31 January 2003, from 31 January 2003 until the date of payment
under this clause 17.1 (both dates inclusive).
	 
	17.2	 	 In this clause 17, the following terms shall bear the following meanings:
	 
	 	 	“Relevant Pools” means any pool(s) in respect of which the Agents (or
either of them) have acted as agent and/or manager and to which all or
part of the expense of funding the US Pensions Deficit may fairly be
attributed;
	 
	 	 	“Responsible Member” means each member of any Relevant Pool to whom all or
part of the US Pensions Deficit may fairly be attributed under, as the
case may be:

	 	 	 	 	 
	 	 	
(a)
	 	the provisions and/or indemnities contained in
any applicable pool members agreements governing any Relevant
Pool; and/or
	 	 	 	 	 
	 	 	
(b)
	 	any applicable common law or statutory
indemnities.

	17.3	 	The Sellers shall use reasonable endeavours to procure that the
appropriate Group Company shall as soon as possible but in any event
before Completion calculate the proportion of the US Pensions Deficit
which, in its reasonable estimation, each Responsible Member is liable for
under, as the case may be:
	 

	 	 	 	 	 
	 	 	(a)	 	the provisions and/or indemnities contained in
any applicable pool members agreements governing any Relevant
Pool; and/or
	 
	 	 	(b)	 	any applicable common law or statutory
indemnities.

	17.4	 	 From the date when the calculations required by clause 17.3 are made
until Completion, the Sellers shall procure, and after Completion the
Buyers shall procure, that the appropriate Group Company has made all
reasonable efforts to seek recovery promptly, and in accordance with the
provisions and/or indemnities referred to in clause 17.3, of each
Responsible Member’s relevant proportion of the US Pensions Deficit under
the provisions and/or indemnities referred to in clause 17.3.
	 
	17.5	 	Each of the Sellers shall, and shall procure that any relevant Seller’s
Group Undertaking shall, pay its relevant proportion of the US Pensions
Deficit in accordance with the terms of the relevant pool members
agreement and/or any applicable common law or statutory indemnities.
	 
	17.6	 	 Following receipt of payment made by any Seller under clause 17.1 and
subject to:

	 	 	 
	(a)	 	
the provisions of clause 17.8; and
	 	 	 
	(b)	 	
the appropriate member of the Group or Buyer’s Group being
indemnified on an after-Tax basis by the Sellers to its reasonable
satisfaction against all costs and

- 37 -

 

	 	 	 
	 	 	
expenses, including all costs and expenses in connection with the
institution of any proceedings referred to below,

	 	 	the Buyers shall, subject to and in accordance with the appropriate Group
Company’s calculation of the proportion of the US Pensions Deficit for
which, in its reasonable estimation, each Responsible Member is liable for
in accordance with the provisions and/or indemnities referred to in clause
17.3, procure that the relevant Buyer’s Group Undertaking or Group Company
shall continue to pursue all reasonable means of recovery of the US
Pensions Amount (and all costs and expenses of recovering such amounts,
including all costs and expenses the subject of the indemnity referred to
above) from the Responsible Members and shall take such action and give to
the Sellers such information and assistance as the Sellers (acting
jointly) may reasonably request in writing including, where reasonable,
the institution of proceedings in pursuing any such recovery and, if the
Sellers reasonably request, the instructing of such solicitors or other
professional advisers as the Sellers may nominate (after consulting with
the Buyers regarding such proposed nomination) to act on behalf of the
relevant company in the Group or Buyer’s Group, to act in accordance with
the Sellers’ sole instructions, and shall not settle or compromise any
such proceedings without the prior written consent of the Sellers, such
consent not to be unreasonably withheld or delayed.
	 
	17.7	 	In the event that the Sellers reasonably requests that the relevant
Buyer’s Group Undertaking or Group Company should take any action pursuant
to clause 17.6, the Sellers shall keep the Buyers informed on a timely
basis of any and all developments in connection with any such action.
	 
	17.8	 	The Buyers shall have no obligation under clause 17.6 to pursue the
recovery of the US Pensions Amount from a Responsible Member unless the
Sellers have requested such (including reasonable details of which action
is required) in writing on or before 31 December 2008.
	 
	17.9	 	If following payment by the Sellers in accordance with clause 17.1:

	 	17.9.1	 	 any Group Company subsequently recovers from any Responsible Member
any amount in respect of that Responsible Member’s relevant
proportion of the US Pensions Deficit, then the Buyers shall pay or
shall procure the payment as an adjustment to the Consideration to
the Sellers (in such proportions as the Sellers jointly instruct in
writing) of an amount equal to the amount recovered by the Group
Company within 15 Business Days of its receipt by such Group Company
or, if lower, an amount equal to that paid by the Sellers to the
Buyers in accordance with this clause 17 in either case less any
amount payable by the relevant Group Company in respect of tax on the
amount so recovered; and/or
	 
	 	17.9.2	 	 any Buyer’s Group Undertaking recovers from any Responsible Member
any amount in respect of that Responsible Member’s relevant
proportion of the US Pensions Deficit, then the Buyer (which is in
the same Buyer’s Group as that Buyer’s Group Undertaking) shall pay
or shall procure the payment as an adjustment to the Consideration to
the Sellers of (in such proportions as the Sellers jointly instruct
in writing) an amount equal to the amount recovered by

- 38 -

 

	 	 	 	the Buyer’s Group Undertaking within 15 Business Days of its
receipt by such Buyer’s Group Undertaking, or, if lower, an amount
equal to that paid by the Sellers to the Buyers in accordance with
clause 17 in either case less any amount payable by the relevant
Group Company in respect of tax on the amount so recovered,

	 	 	PROVIDED THAT the total aggregate amount paid to the Sellers pursuant to
clauses 17.9.1 and 17.9.2 shall not exceed the amount of the payment made
by the Sellers in accordance with clause 17.1.
	 
	17.10	 	        The Buyers
acknowledge and affirm that any payment made by the Sellers
under clause 17.1 in respect of the US Pensions Amount, less any sums paid
to the Sellers pursuant to clause 17.9, shall be used in its entirety for
the sole benefit of the US Scheme.
	 
	17.11	 	        The Sellers’
obligations under this clause 17 shall be joint and
several.
	 
	17.12	 	        In the event that:

	 	17.12.1	 	 the calculation of the 2002 Relevant Profit pursuant to clause 4
has taken into account a deduction or provision in the 2002 Accounts
that relates to the US Pensions Deficit; and
	 
	 	17.12.2	 	 the Sellers have made a payment to the Buyers prior to the
Accounts Date in respect of the US Pensions Deficit under clause
17.1,

	 	 	 	then the amount of the Deferred Consideration payable under clause 3.2(a)
shall, subject to clause 3.1, be increased by an amount equal to the
deduction or provision referred to in paragraph 17.12.1, provided that:

	 	(a)	 	such increase shall not exceed the amount paid by the Sellers
to the Buyers before the Accounts Date under clause 17.1; and
	 
	 	(b)	 	the Deferred Consideration shall not be greater than the amount
which the Deferred Consideration would have been without taking into
consideration the deduction or provision referred to in clause
17.12.1.

	18.	 	AAU SUPPLEMENTAL PLAN DEFICIT
	 
	18.1	 	On 31 January 2003 or the first Business Day falling 45 days after
Completion, whichever is the later, the Sellers covenant to pay as an
adjustment to the Consideration the AAU Supplemental Plan Amount to the
Buyers together with interest at the Agreed Rate accruing, if such payment
is made after 31 January 2003, from 31 January 2003 until the date of
payment under this clause 18.1 (both dates inclusive).
	 
	18.2	 	In this clause 18, the following terms shall bear the following meanings:
	 
	 	 	“Relevant Pools” means any pool(s) in respect of which the Agents (or
either of them) have acted as agent and/or manager and to which all or
part of the expense of funding the AAU Supplemental Plan Deficit may
fairly be attributed;

- 39 -

 

	 	 	“Responsible Member” means each member of any Relevant Pool to whom all or
part of the AAU Supplemental Plan Deficit may fairly be attributed under,
as the case may be:

	 	 	 	 	 
	 	 	
(a)
	 	the provisions and/or indemnities contained in
any applicable pool members agreements governing any Relevant
Pool; and/or
	 	 	 	 	 
	 	 	
(b)
	 	any applicable common law or statutory
indemnities.

	18.3	 	The Sellers shall use reasonable endeavours to procure that the
appropriate Group Company shall as soon as possible but in any event
before Completion calculate the proportion of the AAU Supplemental Plan
Amount which, in its reasonable estimation, each Responsible Member is
liable for under, as the case may be:

	 	 	 	 	 
	 	 	
(a)
	 	the provisions and/or indemnities contained in
any applicable pool members agreements governing any Relevant
Pool; and/or
	 	 	 	 	 
	 	 	
(b)
	 	any applicable common law or statutory
indemnities.

	18.4	 	 From the date when the calculations required by clause 18.3 are made
until Completion, the Sellers shall procure, and after Completion the
Buyers shall procure, that the appropriate Group Company has made all
reasonable efforts to seek recovery promptly, and in accordance with the
provisions and/or indemnities referred to in clause 18.3, of each
Responsible Member’s relevant proportion of the AAU Supplemental Plan
Deficit under the provisions and/or indemnities referred to in clause
18.3.
	 
	18.5	 	Each of the Sellers shall, and shall procure that any relevant Seller’s
Group Undertaking shall, pay its relevant proportion of the AAU
Supplemental Plan Deficit in accordance with the terms of the relevant
pool members agreement or any applicable common law and/or statutory
indemnities.
	 
	18.6	 	Following receipt of payment made by any Seller under clause 18.1 and
subject to:

	 	(a)	 	the provisions of clause 18.8; and
	 
	 	(b)	 	the appropriate member of the Group or the Buyer’s Group being
indemnified on an after-Tax basis by the Sellers to its reasonable
satisfaction against all costs and expenses, including all costs and
expenses in connection with the institution of any proceedings
referred to below,

	 	 	the Buyers shall, subject to and in accordance with the appropriate Group
Company’s calculation of the proportion of the AAU Supplemental Plan
Deficit for which, in its reasonable estimation, each Responsible Member
is liable for in accordance with the provisions and/or indemnities
referred to in clause 18.3, procure that the relevant Buyer’s Group
Undertaking or Group Company shall continue to pursue all reasonable means
of recovery of the AAU Supplemental Plan Amount (and all costs and
expenses of recovering such amounts including all costs and expenses the
subject of the indemnity referred to above) from the Responsible Members
and shall take such action and give to the Sellers such information and
assistance as the Sellers (acting jointly) may reasonably request in
writing including, where reasonable, the institution of proceedings in
pursuing

- 40 -

 

	 	 	any such recovery and, if the Sellers reasonably request, the instructing
of such solicitors or other professional advisers as the Sellers may
nominate (after consulting with the Buyers regarding such nomination) to
act on behalf of the relevant company in the Group or Buyer’s Group, to
act in accordance with the Sellers’ sole instructions, and shall not
settle or compromise any such proceedings without the prior written
consent of the Sellers, such consent not to be unreasonably withheld or
delayed.
	 
	18.7	 	In the event that the Sellers reasonably request that the relevant
Buyer’s Group Undertaking or Group Company should take any action pursuant
to clause 18.6, the Sellers shall keep the Buyers informed on a timely
basis of any and all developments in connection with any such action.
	 
	18.8	 	The Buyers shall have no obligations under clause 18.6 to pursue the
recovery of the AAU Supplemental Plan Amount from a Responsible Member
unless the Sellers have requested such (including reasonable details of
what action is required) in writing on or before 31 December 2008.
	 
	18.9	 	If, following payment by the Sellers in accordance with clause 18.1:

	 	18.9.1	 	 any Group Company subsequently recovers from any Responsible Member
any amount in respect of that Responsible Member’s relevant
proportion of the AAU Supplemental Plan Deficit, then the Buyers
shall pay or shall procure the payment as an adjustment to the
Consideration to the Sellers (in such proportions as the Sellers
jointly instruct in writing) of an amount equal to the amount
recovered by the Group Company within 15 Business Days of its receipt
by such Group Company or, if lower, an amount equal to that paid by
the Sellers to the Buyers in accordance with this clause 18 in either
case less any amount payable by the relevant Group Company in respect
of tax on the amount so recovered; and/or
	 
	 	18.9.2	 	 any Buyer’s Group Undertaking recovers from any Responsible Member
any amount in respect of that Responsible Member’s relevant
proportion of the AAU Supplemental Plan Deficit, then the Buyer
(which is in the same Buyer’s Group as that Buyer’s Group
Undertaking) shall pay or shall procure the payment as an adjustment
to the Consideration to the Sellers of (in such proportions as the
Sellers jointly instruct in writing) an amount equal to the amount
recovered by the Buyer’s Group Undertaking within 15 Business Days of
its receipt by such Buyer’s Group Undertaking or, if lower, an amount
equal to that paid by the Sellers to the Buyers in accordance with
this clause 18 in either case less any amount payable by the relevant
Group Company in respect of tax on the amount so recovered,

	 	 	PROVIDED THAT the total aggregate amount paid to the Sellers pursuant to
clauses 18.9.1 and 18.9.2 shall not exceed the amount of the payment made
by the Sellers in accordance with clause 18.1.
	 
	18.10	 	         The Buyers
acknowledge and affirm that any payment made by the Sellers
under clause 18.1 in respect of the AAU Supplemental Plan Amount, less any
sums paid

- 41 -

 

	 	 	to the Sellers pursuant to clause 18.9, shall be used for the
sole benefit of the AAU Supplemental Plan.
	 

	18.11	 	 The Sellers’ obligations under this clause 18 shall be joint and
several.
	 
	18.12	 	 In the event that:

	 	18.12.1	 	 the calculation of the 2002 Relevant Profit pursuant to clause 4
has taken into account a deduction or provision in the 2002 Accounts
that relates to the AAU Supplemental Plan Deficit; and
	 
	 	18.12.2	 	 the Sellers have made a payment to the Buyers prior to the
Accounts Date in respect of the AAU Supplemental Plan Deficit under
clause 18.1,

	 	 	then the amount of the Deferred Consideration payable under clause 3.2(a)
shall, subject to clause 3.1, be increased by an amount equal to the
deduction or provision referred to in paragraph 18.12.1, provided that:

	 	(a)	 	such increase shall not exceed the amount paid by the Sellers
to the Buyers before the Accounts Date under clause 18.1; and
	 
	 	(b)	 	the Deferred Consideration shall not be greater than the amount
which the Deferred Consideration would have been without taking into
consideration the deduction or provision referred to in clause
18.12.1.

	19.	 	MEDICAL DEFICIT
	 
	19.1	 	 On 31 January 2003 or the first Business Day falling 45 days after
Completion, whichever is the later, the Sellers covenant to pay as an
adjustment to the Consideration the Medical Amount to the Buyers together
with interest at the Agreed Rate accruing, if such payment is made after
31 January 2003, from 31 January 2003 until the date of payment under this
clause 19.1 (both dates inclusive).
	 
	19.2	 	In this clause 19, the following terms shall bear the following meanings:
	 
	 	 	“Relevant Pools” means any pool(s) in respect of which the Agents (or
either of them) have acted as agent and/or manager and to which all or
part of the expense of funding the Medical Deficit may fairly be
attributed;
	 
	 	 	“Responsible Member” means each member of any Relevant Pool to whom all or
part of the Medical Deficit may fairly be attributed under, as the case
may be:

	 	 	 	 	 
	 	 	
(a)
	 	the provisions and/or indemnities contained in
any applicable pool members agreements governing any Relevant
Pool; and/or
	 	 	 	 	 
	 	 	
(b)
	 	any applicable common law or statutory
indemnities.

	19.3	 	The Relevant Parties shall procure, that the appropriate Group Company
shall use all reasonable efforts to recover each Responsible Member’s
relevant proportion of the Medical Deficit under, as the case may be:

- 42 -

 

	 	 	 	 	 
	 	 	
(a)
	 	the provisions and/or indemnities contained in
any applicable pool members agreements governing any Relevant
Pool; and/or
	 	 	 	 	 
	 	 	
(b)
	 	any applicable common law or statutory
indemnities,

	 	 	in such instalments and at such times as the relevant Group Company agrees
with the Sellers (such agreement not to be unreasonably withheld or
delayed) will maximise the amounts recovered.
	 
	19.4	 	 Following receipt of payment made by any Seller under clause 19.1 and
subject to the appropriate member of the Group or the Buyer’s Group being
indemnified on an after-Tax basis by the Sellers to its reasonable
satisfaction against all costs and expenses, including all costs and
expenses in connection with the institution of proceedings referred to
below, the Buyers shall, subject to and in accordance with the appropriate
Group Company’s calculation of the proportion of the Medical Deficit for
which, in its reasonable estimation, each Responsible Member is liable for
in accordance with the provisions and/or indemnities referred to in clause
19.3, procure that the relevant Buyer’s Group Undertaking or Group Company
shall pursue all reasonable means of recovery of the Medical Amount (and
all costs and expenses of recovering such amounts, including all costs and
expenses the subject of the indemnity referred to above) from the
Responsible Members and shall take such action and give to the Sellers
such information and assistance as the Sellers (acting jointly) may
reasonably request in writing including, where reasonable, the institution
of proceedings in pursuing any such recovery and, if the Sellers
reasonably request, the instructing of such solicitors or other
professional advisers as the Sellers may nominate (after consulting with
the Buyers regarding such proposed nominations) to act on behalf of the
relevant company in the Group or Buyer’s Group, to act in accordance with
the Sellers’ sole instructions, and shall not settle or compromise any
such proceedings without the prior written consent of the Sellers, such
consent not to be unreasonably withheld or delayed.
	 
	19.5	 	 In the event that the Sellers reasonably request that the Company should
take any action pursuant to clause 19.4, the Sellers shall keep the Buyers
informed on a timely basis of any and all developments in connection with
any such action.
	 
	19.6	 	 If, following payment by the Sellers in accordance with clause 19.1:

	 	19.6.1	 	 any Group Company subsequently recovers from any Responsible Member
any amount in respect of that Responsible Member’s relevant
proportion of the Medical Deficit, then the Buyers shall pay or shall
procure the payment as an adjustment to the Consideration to the
Sellers of (in such proportions as the Sellers jointly instruct in
writing) an amount equal to the amount recovered by the Group Company
within 15 Business Days of its receipt by such Group Company or, if
lower an amount equal to that paid by the Sellers to the Buyers in
accordance with this clause 19 in either case less any amount payable
by the relevant Group Company in respect of tax on the amount so
recovered; or
	 
	 	19.6.2	 	 any Buyer’s Group Undertaking recovers from any Responsible Member
any amount in respect of that Responsible Member’s relevant
proportion of the

- 43 -

 

	 	 	 	Medical Deficit, then the Buyer (which is in the same Buyer’s
Group as that Buyer’s Group Undertaking) shall pay or shall
procure that the relevant Buyer’s Group Undertaking pays as an
adjustment to the Consideration to the Sellers (in such
proportions as the Sellers jointly instruct in writing) an amount
equal to the amount recovered by the Buyer’s Group Undertaking
within 15 Business Days of its receipt by such Buyer’s Group
Undertaking, or, if lower an amount equal to that paid by the
Sellers to the Buyers in accordance with this clause 19 in either
case less any amount payable by the relevant Group Company in
respect of tax on the amount so recovered,

	 	 	PROVIDED THAT the total aggregate amount paid to the Sellers pursuant to
clauses 19.6.1 and 19.6.2 shall not exceed the amount of the payment made
by the Sellers in accordance with clause 19.1.
	 
	19.7	 	The Buyers acknowledge and affirm that any payment made by the Sellers
under clause 19.1 in respect of the Medical Amount, less any sums paid to
the Sellers pursuant to clause 19.6, shall be used for the sole benefit of
the Medical Plan.
	 
	19.8	 	The Sellers’ obligations under this clause 19 shall be joint and several.
	 
	19.9	 	In the event that:

	 	19.9.1	 	 the calculation of the 2002 Relevant Profit pursuant to clause 4
has taken into account a deduction or provision in the 2002 Accounts
that relates to the Medical Deficit; and
	 
	 	19.9.2	 	 the Sellers have made a payment to the Buyers prior to the Accounts
Date in respect of the Medical Deficit under clause 19.1,

	 	 	then the amount of the Deferred Consideration payable under clause 3.2(a)
shall, subject to clause 3.1, be increased by an amount equal to the
deduction or provision referred to in paragraph 19.9.1, provided that:

	 	(a)	 	such increase shall not exceed the amount paid by the Sellers
to the Buyers before the Accounts Date under clause 19.1; and
	 
	 	(b)	 	the Deferred Consideration shall not be greater than the amount
which the Deferred Consideration would have been without taking into
consideration the deduction or provision referred to in clause
19.9.1.

	20.	 	COMPETITION MATTERS
	 
	20.1	 	 Subject to the following provisions of this clause 20, the Sellers
covenant to pay to the Buyers an amount equal to 89.9% of:

	 	20.1.1	 	 any fines or penalties (including interest payable thereon) which
are imposed on a Group Company by any competent competition or
anti-trust authority in any jurisdiction (each a “Competent
Authority”) in respect of any infringement by a Group Company of
Article 81 and/or Article 82 of the EC Treaty, the Chapter I
prohibition and/or the Chapter II prohibition of the Competition Act
1998

- 44 -

 

	 	 	 	and/or any other applicable competition or anti-trust legislation
arising out of the activities of the Group on or after 1 January
2001 and prior to the date of this Agreement (the “2001-2002
Activities”);
	 
	 	20.1.2	 	 all reasonable costs and expenses which any member of the Group may
reasonably incur in responding to or defending any Competent
Authority enquiry, investigation or proceedings to the extent that
they relate to the 2001-2002 Activities; and/or
	 
	 	20.1.3	 	 any damages (including interest payable thereon) resulting from any
judgment made against a Group Company by any court in respect of any
infringement by a Group Company of any applicable competition or
anti-trust legislation arising out of the 2001-2002 Activities and
all payments (including interest payable thereon) made by any member
of the Group by way of settlement of any proceeding before any court
in relation to any such infringements and/or alleged infringements
and all costs and expenses which any member of the Group may
reasonably incur or be required to pay in responding to or defending
any proceeding before a court in relation to any such infringement or
alleged infringement (including, but not limited to, the payments of
its own or another party’s costs incurred in connection with any
proceedings),

	 	 	(being together, for the purposes of this clause 20, the “2001-2002
Indemnified Amounts”).
	 
	20.2	 	 In this clause 20, the following terms shall bear the following meaning:
	 
	 	 	“2001-2002 Recovery Notice” means a written notice served on a 2001-2002
Responsible Member;
	 
	 	 	“2001-2002 Relevant Pools” mean any pool(s) in respect of which the Agents
(or either of them) have acted as agent and/or manager and to which all or
part of the expense of funding the 2001-2002 Indemnified Amounts may
fairly be attributed;
	 
	 	 	“2001-2002 Responsible Member” means each member of a 2001-2002 Relevant
Pool to whom all or part of the 2001-2002 Indemnified Amounts may fairly
be attributed under, as the case may be:

	 	 	 	 	 
	 	 	
(a)
	 	the provisions and/or indemnities contained in
any applicable pool members agreement governing any Relevant
Pool; and
	 	 	 	 	 
	 	 	
(b)
	 	any applicable common law or statutory
indemnities;

	 	 	“New York Recovery Notice” means a written notice served on a New York
Responsible Member;
	 
	 	 	“New York Relevant Pool” mean any pool in respect of which the Agents (or
either of them) have acted as agent and/or manager to which all or part of
the New York Indemnified Amounts may fairly be attributed under the
relevant pool members agreement;

- 45 -

 

	 	 	“New York Responsible Member” means each member of any New York Relevant
Pool in respect of whom all or part of the New York Indemnified Amounts
may fairly be attributed under, as the case may be:

	 	 	 	 
	 	
(a)
	 	the provisions and/or indemnities contained in
any applicable pool members agreement governing any Relevant
Pool; and/or
	 	 	 	 
	 	
(b)
	 	any applicable common law or statutory
indemnities,

	 	 	(and, for the avoidance of doubt, not being Munich Re or any member of its
Buyer’s Group);
	 
	 	 	“Indemnified Amounts” means the 2001-2002 Indemnified Amounts and the New
York Indemnified Amounts;
	 
	 	 	“Responsible Member” means each 2001-2002 Responsible Member and each New
York Responsible Member.
	 
	20.3	 	The Sellers shall not be liable to make any payment under clause 20.1 in
relation to any 2001-2002 Indemnified Amount unless and until the Buyers
have, or have procured that the appropriate Buyer’s Group Undertaking or
Group Company has:

	 	20.3.1	 	 served on each 2001-2002 Responsible Member a 2001-2002 Recovery
Notice seeking recovery promptly of that 2001-2002 Responsible
Member’s relevant proportion of 2001-2002 Indemnified Amounts under,
as the case may be:

	 	 	 	 
	 	
(a)
	 	the provisions and/or indemnities contained in
any applicable pool member’s agreement governing any
2001-2002 Relevant Pool; and/or
	 	 	 	 
	 	
(b)
	 	any applicable common law or statutory
indemnities; and

	 	20.3.2	 	 for a period of 45 days from the service of a 2001-2002 Recovery
Notice on a 2001-2002 Responsible Member, made reasonable efforts to
seek recovery promptly, and in accordance with the provisions and/or
indemnities referred to in clause 20.3.1, of that 2001-2002
Responsible Member’s relevant proportion of the 2001-2002 Indemnified
Amounts under the provisions and/or indemnities referred to above
PROVIDED THAT the Buyers or, as the case may be, the relevant Buyer’s
Group Undertaking or Group Company shall in any event be deemed to
have made all reasonable efforts in respect of a particular 2001-2002
Responsible Member from which no recovery has been made if an
Insolvency Event has occurred and is continuing in respect of that
2001-2002 Responsible Member.

	20.4	 	To the extent permitted by law, regulation or any obligation imposed on a
Group Company by a Competent Authority, the Buyers will procure that each
member of the Group will promptly disclose to all of the parties any
communication received from any Competent Authority relating to the
2001-2002 Activities.

- 46 -

 

	20.5	 	 The Buyers shall and shall procure that each Buyer’s Group Undertaking
and each member of the Group shall, to the extent permitted by law,
regulation and any obligation imposed on a Group Company by a Competent
Authority:

	 	20.5.1	 	 consult with the Sellers before any Buyer’s Group Undertaking or
any member of the Group (or, in either case, any director, employee,
agent, advisor or representative thereof) discusses the 2001-2002
Activities with any Competent Authority or makes any filing,
submission or notification to a Competent Authority in relation to
the 2001-2002 Activities;
	 
	 	20.5.2	 	 consult with the Sellers and give such information and assistance
to the Sellers as the Sellers may reasonably request in relation to
any action by any Buyers’ Group Undertaking or any member of the
Group to avoid, dispute, resist, mitigate, defend or appeal the
imposition by a Competent Authority of any fine or penalty of the
kind referred to in clause 20.1.1 including (without limitation)
consulting with the Sellers on the making of any submission or
notification to a Competent Authority in relation to the 2001-2002
Activities;
	 
	 	20.5.3	 	 make no admission of liability, agreement, settlement or compromise
with any Competent Authority in relation to any fine or penalty as
referred to in clause 20.1.1 without the prior written consent of
the Sellers (such consent not to be unreasonably withheld or
delayed);
	 
	 	20.5.4	 	 consult with the Sellers and give such information and assistance
to the Sellers as the Sellers may reasonably request in relation to
any action by any Buyers’ Group Undertaking or any member of the
Group to avoid, dispute, resist, mitigate, defend or appeal any
proceedings of the kind referred to in clause 20.1.3; and
	 
	 	20.5.5	 	 make no admission of liability, agreement, settlement or compromise
in respect of any proceedings as referred to in clause 20.1.3
without the prior written consent of the Sellers (such consent not to
be unreasonably withheld or delayed).

	20.6	 	 Each of the Sellers shall, and shall procure that that relevant Seller’s
Group Undertaking shall, comply with any 2001-2002 Recovery Notice served
upon it in its capacity as a 2001-2002 Responsible Member in accordance
with the terms of such Recovery Notice and in accordance with the terms of
the Old Pool Members Agreement and/or the Management Services Agreement
and/or any applicable common law or statutory indemnities.
	 
	20.7	 	 In the event that:

	 	20.7.1	 	 the calculation of the 2002 Relevant Profit pursuant to clause 4
has taken into account a deduction or provision in the 2002 Accounts
that relates to a 2001-2002 Indemnified Amount; and
	 
	 	20.7.2	 	 the Sellers have made a payment to the Buyers prior to the Accounts
Date in respect of that 2001-2002 Indemnified Amount under clause
20.1,

- 47 -

 

	 	then the amount of the Deferred Consideration payable under clause 3.2(a)
shall, subject to clause 3.1, be increased by an amount equal to 89.9% of
the deduction or provision referred to in paragraph 20.7.1, provided that:

	 	(a)	 	such increase shall not exceed the amount paid by the Sellers
to the Buyers before the Accounts Date under clause 20.1; and
	 
	 	(b)	 	the Deferred Consideration shall not be greater than the amount
which the Deferred Consideration would have been without taking into
consideration the deduction or provision referred to in clause
20.7.1.

	20.8	 	Subject to the following provisions of this clause 20, the Sellers
undertake to indemnify and keep indemnified the Buyers, from and against
89.9% of any damages (including interest payable thereon) resulting from
any award made against the Company by the Arbitral Tribunal in New York
(the “New York Arbitral Tribunal”) in the arbitration proceedings between
Echostar Satellite Corporation, Echostar DBS Corporation -v- La Reunion
Spatiale et al, Case No. 50J 153 00 25800 (the “New York Arbitration”) in
respect of any infringement by the Company of any applicable competition
or anti-trust legislation and all payments (including interest payable
thereon) made by any member of the Group by way of settlement of any claim
in the New York Arbitration that there had been an infringement of
applicable competition or anti-trust legislation by the Company and all
costs and expenses which the Company may reasonably incur or be required
to pay in responding to or defending any claim in the New York Arbitration
that the Company infringed applicable competition or anti-trust litigation
(including, but not limited to, the payments of its own or another party’s
costs incurred in connection with such a claim) (the “New York Indemnified
Amounts”).
	 
	20.9	 	The Sellers shall not be liable to make any payment under clause 20.8 in
relation to a New York Indemnified Amount unless and until the Buyers
have, or have procured that the appropriate Buyer’s Group Undertaking or
Group Company has:

	 	20.9.1	 	 served on each New York Responsible Member a New York Recovery
Notice seeking recovery promptly of that New York Responsible
Member’s relevant proportion of New York Indemnified Amounts under,
as the case may be:

	 	 	 	 
	 	
(a)
	 	the provisions and/or indemnities contained in
any applicable pool members agreement governing any New York
Relevant Pool; and/or
	 	 	 	 
	 	
(b)
	 	any applicable common law or statutory
indemnities; and

	 	20.9.2	 	 for a period of 45 days from the service of a New York Recovery
Notice on a New York Responsible Member, made reasonable efforts to
seek recovery promptly, and in accordance with the provisions and/or
indemnities referred to in clause 20.9.1, of that New York
Responsible Member’s relevant proportion of the New York Indemnified
Amounts under the provisions and/or indemnities referred to in clause
20.9.1 above PROVIDED THAT the Buyers or, as the case may be, the
relevant Buyer’s Group Undertaking or Group Company shall in any
event be deemed to have made all reasonable efforts in respect of a
particular New York Responsible Member from which no recovery has
been

- 48 -

 

	 	 	 	made if an Insolvency Event has occurred and is continuing in
respect of that New York Responsible Member.

	20.10	 	         Each of the Sellers shall, and shall procure that each relevant Seller’s
Group Undertaking shall, comply with any New York Recovery Notice served
upon it in its capacity as a member of a New York Relevant Pool in
accordance with the terms of such New York Recovery Notice and in
accordance with the terms of the applicable pool members agreement
governing any New York Relevant Pool and/or any applicable common law or
statutory indemnities.
	 
	20.11	 	        
 The Buyers shall and shall procure that each Buyer’s Group Undertaking
and each member of the Group shall:

	 	20.11.1	 	 consult with the Sellers and give such information and assistance
to the Sellers as the Sellers may reasonably request in relation to
any action by any Buyers’ Group Undertaking or any member of the
Group to avoid, dispute, resist, mitigate, defend or appeal any
proceedings of the kind referred to in clause 20.8; and
	 
	 	20.11.2	 	 make no admission of liability, agreement, settlement or
compromise in respect of any proceedings as referred to in clause
20.8 without the prior written consent of the Sellers (such consent
not to be unreasonably withheld or delayed).

	20.12	 	        
 In the event that:

	 	20.12.1 	 	the calculation of the 2002 Relevant Profit pursuant to clause 4
has taken into account a deduction or provision in the 2002 Accounts
that relates to a New York Indemnified Amount; and
	 
	 	20.12.2	 	 the Sellers have made a payment to the Buyers prior to the
Accounts Date in respect of that New York Indemnified Amount under
clause 20.7,

	 	 	then the amount of the Deferred Consideration payable under clause 3.2(a)
shall, subject to clause 3.1, be increased by an amount equal to 89.9% of
the deduction or provision referred to in paragraph 20.12.1, provided
that:

	 	(a)	 	such increase shall not exceed the amount paid by the Sellers
to the Buyers before the Accounts Date under clause 20.8; and
	 
	 	(b)	 	the Deferred Consideration shall not be greater than the amount
which the Deferred Consideration would have been without taking into
consideration the deduction or provision referred to in clause
20.12.1.

	20.13	 	 	 Following receipt of payment made by any Seller under the indemnities
provided for under this clause 20 and subject to:

	 	(a)	 	the provisions of clause 20.14; and

- 49 -

 

	 	(b)	 	the appropriate member of the Group or the Buyer’s Group being
indemnified on an after-Tax basis by the Sellers to its reasonable
satisfaction against all costs and expenses, including all costs and
expenses in connection with the institution of proceedings referred
to below,

	 	 	the Buyers shall, subject to and in accordance with the appropriate Group
Company’s calculation of the proportion of the Indemnified Amount for
which, in its reasonable estimation, each Responsible Member is liable in
accordance with the provisions and/or indemnities referred to in clauses
20.3 and 20.9, procure that the relevant Buyer’s Group Undertaking or
Group Company shall continue to pursue all reasonable means of recovery of
the Indemnified Amounts (and all costs and expenses of recovering such
amounts including all costs and expenses the subject of the indemnity
referred to above), from the relevant Responsible Members who have not
satisfied the liability in full and shall take such action and give to the
Sellers such information and assistance as the Sellers (acting jointly)
may reasonably request in writing including, where reasonable, the
institution of proceedings in pursuing any such recovery and, if the
Sellers reasonably request, the instructing of such solicitors or other
professional advisers as the Sellers may nominate (after consulting with
the Buyers regarding such proposed nomination) to act on behalf of the
relevant company in the Group or Buyer’s Group, to act in accordance with
the Sellers’ sole instructions, and shall not settle or compromise such
proceedings without the prior written consent of the Sellers, such consent
not to be unreasonably withheld or delayed.
	 
	20.14	 	          The Buyers shall have no obligations under clause 20.13 to pursue the
recovery of the Indemnified Amounts from a Responsible Member unless the
Sellers have requested such (including reasonable detail of what action is
required) in writing on or before 31 December 2008 (in respect of the
Indemnified Amounts referred to in clause 20.1.1, 20.1.2 and clause 20.8)
or on or before the first anniversary of the date of any fine or penalty
imposed by a Competent Authority (in respect of the Indemnified Amounts
referred to in clause 20.1.3).
	 
	20.15	 	             If, following any payment by the Sellers in accordance with this clause
20:

	 	20.15.1	 	 any Group Company subsequently recovers from any Responsible
Member any amount in respect of that Responsible Member’s relevant
proportion of the Indemnified Amounts, then the Buyers shall pay or
shall procure the payment to the Sellers of (in such proportions as
the Sellers jointly instruct in writing) an amount equal to 89.9% of
the amount recovered by the Group Company within 15 Business Days of
its receipt by such Group Company or, if lower, an amount equal to
that paid by the Sellers to the Buyers in accordance with this clause
20 in either case less any amount payable by the relevant Group
Company in respect of tax on the amount so recovered; and/or
	 
	 	20.15.2	 	 any Buyer’s Group Undertaking recovers from any Responsible Member
any amount in respect of that Responsible Member’s relevant
proportion of the Indemnified Amounts, then the Buyer (which is in
the same Buyer’s Group as that Buyer’s Group Undertaking) shall pay
or shall procure the payment to the Sellers of (in such proportions
as the Sellers jointly instruct in writing) an

- 50 -

 

	 	 	 	amount equal to 89.9% of the amount recovered by the Buyer’s Group
Undertaking within 15 Business Days of its receipt by such Group
Company or, if lower, an amount equal to that paid by the Sellers
to the Buyers in accordance with this clause 20 in either case
less any amount payable by the relevant Group Company in respect
of tax on the amount so recovered,

	 	 	PROVIDED THAT the total aggregate amount paid to the Sellers under clauses
20.15.1 and 20.15.2 shall not exceed the payment made by the Sellers in
accordance with clause 20.
	 
	20.16	 	         
 The Sellers’ obligations under this clause 20 shall be joint and
several.
	 
	20.17	 	         
 Payments by the Sellers of any sums due under clause 20 shall be made
within fifteen Business Days of a written demand by the relevant Buyer.
	 
	20.18	 	         
 The Sellers shall have no liability under clause 20.1.1 or 20.1.2 unless
the Buyers have served a written demand on each Seller after Completion,
providing reasonable detail of the 2001-2002 Indemnified Amounts claimed,
by no later than 31 December 2008 and the Sellers shall have no liability
under clause 20.1.3 unless the Buyers have served a written demand on
each Seller, providing reasonable detail of the 2001-2002 Indemnified
Amounts claimed, by the first anniversary of the date of any fine or
penalty imposed by a Competent Authority.
	 
	20.19	 	         
 The Sellers shall have no liability under clause 20.8 unless the Buyers
have served a written demand on each Seller, providing reasonable detail
of the New York Indemnified Amounts claimed, by no later than 31 December
2008.
	 
	21.	 	AGENCY INDEMNITY
	 
	21.1	 	 Subject to the following provisions of this clause 21, the Sellers
hereby jointly and severally covenant to pay the Buyers an amount equal to
89.9% of any Principal Liability.
	 
	21.2	 	 For the purposes of this clause 21, “Principal” shall mean any person,
except any member of the New Global Aerospace Pool in its capacity as a
member of the New Global Aerospace Pool, who at Completion shall be and/or
at any time prior to Completion shall have been a party to the Old Pool
Members Agreement, the AAU Pool Members Agreement, the BAIG Pool Members
Agreement, the Management Services Agreement or a participant in any
insurance pool for which the Company or any Group Company acts or has
acted as agent, or a person for whom the Company or any Group Company
provides or at any time has provided insurance or reinsurance run-off
services or other services.
	 
	21.3	 	 For the purposes of this clause 21, “Principal Claim” shall mean any
action, claim, demand, liability or cause of action by any Principal
against any Group Company.
	 
	21.4	 	 For the purpose of this clause 21, “Principal Liability” shall mean each
loss, cost, liability, claim or expense suffered or incurred by any Group
Company which:

- 51 -

 

	 	(a)	 	arises from a Principal Claim for which any Group Company is
liable to any Principal; and
	 
	 	(b)	 	results from any act or omission of such Group Company at any
time prior to Completion and such act or omission constitutes a
breach of contract, negligence, breach of duty, breach of trust,
breach of fiduciary duty, fraud or other default on the part of any
such Group Company; and
	 
	 	(c)	 	 
	 

	 	 	(i)	 	in the reasonable opinion of the Buyers (acting
jointly) and the Sellers (acting jointly); or
	 
	 	 	(ii)	 	in the written opinion of Leading Counsel (in
the case of a claim under English law) or a suitably
qualified law firm (in the case of a claim under a law other
than English law) appointed by the relevant Group Company
with the consent of the Sellers (acting jointly) (such
consent not to be unreasonably withheld or delayed) or in the
event that such consent is not obtained, a Leading Counsel
appointed by the current President of the Law Society of
England and Wales (in the case of a claim under English law)
or a suitably qualified law firm appointed by his equivalent
in any other relevant jurisdiction (in the case of a claim
under a law other than English law)); or
	 
	 	 	(iii)	 	it has been established by reason of a
judgment (including a first instance or summary judgment),
order or decree of any court of competent jurisdiction
(whether pursuant to clause 21.5 or otherwise),

	 
	 	 	 	does not fall within the scope of any indemnity given by the
Principal(s) to such Group Company in its agreement with that
Group Company or any indemnity which arises by operation of law or
statute or, in either case, such indemnity is invalid, void or
unenforceable.

	21.5	 	In the event of any Principal Claim or in the event of any Buyer becoming
aware of any facts or circumstances which such Buyer is aware are
reasonably likely to give rise to a Principal Claim, the Buyers shall and
shall procure that any relevant Buyer’s Group Undertaking or Group Company
shall:

	 	 	21.5.1	 	as soon as reasonably practicable after they become aware of such
Principal Claim (or, as the case may be, such facts or
circumstances), notify each of the Sellers in writing of the same;
	 
	 	 	21.5.2	 	subject to all relevant Buyer’s Group Undertakings and members of
the Group being indemnified and secured on an after-Tax basis by the
Sellers to the Buyers’ reasonable satisfaction against all and any
liability, costs, damages or expenses which may be incurred thereby
and subject to the giving of confidentiality undertakings reasonably
acceptable to the Buyers give such information and access to
personnel, premises, documents and records to the Sellers and their
professional advisers as the Sellers may reasonably request in

- 52 -

 

	 	 	 	 	writing and take such action as the Sellers may reasonably request
in writing in order to avoid, dispute, resist, mitigate, settle,
compromise, defend or appeal any Principal Claim or adjudication
with respect thereto;
	 
	 	 	21.5.3	 	at the request of the Sellers, allow the Sellers (upon reasonable
prior notice) to take the sole conduct of such action as the Sellers
may deem appropriate in connection with any Principal Claim in the
name of the relevant Group Company(s) and, in that connection, the
Buyers shall give or cause to be given to the Sellers all such
assistance as the Sellers may reasonably require in avoiding,
disputing, resisting, settling, compromising, defending or appealing
any Principal Claim and the Sellers may instruct such solicitors or
other professional advisers as the Sellers may nominate, having
consulted with the Buyers regarding such proposed nomination, to act
on behalf of the relevant Group Company(s), as appropriate, but to
act in accordance with the Sellers’ sole instructions, taking into
account all reasonable comments and opinions expressed in writing by
or on behalf of the Buyers or any Group Company;
	 
	 	 	21.5.4	 	make no admission of liability, agreement, settlement or compromise
with any Principal in relation to any Principal Claim without the
prior written consent of the Sellers (such consent not to be
unreasonably delayed or withheld); and
	 
	 	 	21.5.5	 	take all reasonable steps to mitigate any loss suffered by the
relevant Group Company and/or any Principal in respect of which a
claim could be or has been, made under clause 21.1.

	21.6	 	In the event that the Sellers take sole conduct of an action in
connection with any Principal Claim, the Sellers shall keep the Buyers
informed of any and all developments in connection with any action taken
by the Sellers on behalf of any Group Company.
	 
	21.7	 	Following payment by the Sellers in respect of a Principal Liability and
subject to the provisions of clause 21.8, the Buyers shall and shall
procure that any Buyer’s Group Undertaking or Group Company shall:

	 	 	21.7.1	 	subject to all relevant Buyer’s Group Undertakings and members of
the Group being indemnified and secured on an after-Tax basis by the
Sellers to the Buyers’ reasonable satisfaction against all and any
liabilities, costs, damages or expenses which may be incurred thereby
and subject to the giving of confidentiality undertakings reasonably
acceptable to the Buyers, give such information and access to
personnel, premises, documents and records to the Sellers and their
professional advisers as the Sellers may reasonably request in
writing and take such action as the Sellers may reasonably request in
writing in order to recover from any person who may be liable (in
whole or in part) for the Principal Liability;
	 
	 	 	21.7.2	 	subject to all relevant Buyer’s Group Undertakings and members of
the Group being indemnified and secured on an after-Tax basis by the
Sellers to the Buyer’s reasonable satisfaction against all and any
liabilities, cost, damages or expenses which may be incurred thereby:

- 53 -

 

	 	 	 	(a)	 	at the request of the Sellers, allow the
Sellers (upon reasonable prior notice) to take the sole
conduct of such action as the Sellers may deem appropriate in
connection with any recovery from any person who may be
liable (in whole or in part) for the Principal Liability in
the name of the relevant Group Company(s), including
instituting legal proceedings and, in that connection, the
Buyers shall give or cause to be given to the Sellers all
such assistance as the Sellers may reasonably require and the
Sellers may instruct such solicitors or other professional
advisers as the Sellers may nominate, having consulted with
the Buyers regarding such proposed nomination, to act on
behalf of the relevant Group Company(s), as appropriate, but
to act in accordance with the Sellers’ sole instructions,
taking into account all reasonable comments and opinions
expressed in writing by or on behalf of the Buyers or any
Group Company;
	 
	 	 	 	(b)	 	make no admission of liability, agreement,
settlement or compromise with any person who may be liable in
whole or part for a Principal Liability without the prior
written consent of the Sellers (such consent not to be
unreasonably delayed or withheld).

	21.8	 	The Buyers shall have no obligation under clause 21.7 to pursue the
recovery of a Principal Liability unless the Sellers have requested such
(including reasonable detail of what action is required) in writing on or
before 31 December 2008.
	 
	21.9	 	In the event that the Sellers take sole conduct of any action in
connection with any right of recovery in respect of a Principal Liability,
the Sellers shall keep the Buyers informed of any and all developments in
connection with any action taken by the Sellers on behalf of any Group
Company.
	 
	21.10	 	     The Buyers shall procure that any payment made by the Sellers to any
Group Company in respect of a Principal Liability is used solely to settle
or compromise the Principal Liability.
	 
	21.11	 	     If, following any payment by the Sellers in accordance with this clause
21:

	 	 	21.11.1	 	any Group Company subsequently recovers from any person any amount
in respect of the Principal Liability (whether pursuant to clause
21.7 or otherwise), then the Buyers shall pay or shall procure the
payment to the Sellers of (in such proportions as the Sellers jointly
instruct in writing) an amount equal to 89.9% of the amount recovered
by the Group Company within 15 Business Days of its receipt by such
Group Company or, if lower, an amount equal to that paid by the
Sellers to the Buyers in accordance with this clause 21 less in
either case any amount payable by the relevant Group Company in
respect of tax on the amount so recovered; and/or
	 
	 	 	21.11.2	 	any Buyer’s Group Undertaking recovers from any person any amount
in respect of the Principal Liability (whether pursuant to clause
21.7 or otherwise), then the Buyer (which is in the same Buyer’s
Group as that Buyer’s Group Undertaking) shall pay or shall procure
the payment to the Sellers of (in such

- 54 -

 

	 	 	 	 	proportions as the Sellers jointly instruct in writing) an amount
equal to 89.9% of the amount recovered by the Buyer’s Group
Undertaking within 15 Business Days of its receipt by such Group
Company or, if lower, an amount equal to that paid by the Sellers
to the Buyers in accordance with this clause 21 less in either
case any amount payable by the relevant Group Company in respect
of tax on the amount so recovered,

	 	 	PROVIDED THAT the total aggregate amount paid to the Sellers under clauses
21.11.1 and 21.11.2 shall not exceed the payment made by the Sellers in
accordance with clause 21.1.
	 
	21.12	 	     For the avoidance of doubt, the Sellers shall not be liable under this
clause 21 for any amounts which fall within the Indemnities set out in
clauses 17, 18, 19 and 20.
	 
	21.13	 	     Payments by the Sellers of any sums due under clause 21.1 in respect of
any Principal Liability shall be made within 15 Business Days of a written
demand by the relevant Group Company.
	 
	21.14	 	     No Buyer shall have a claim under this clause 21 to the extent it has,
at the date hereof, actual knowledge of the existence of any Principal
Claim.
	 
	21.15	 	     The Sellers shall have no liability under this clause 21 to the Buyers
unless that Buyer serves a written demand on the Sellers, giving
reasonable details of the Principal Claim, by no later than 31 December
2008.
	 
	21.16	 	     In the event that:
	 

	 	 	21.16.1	 	the calculation of the 2002 Relevant Profit pursuant to clause 4
has taken into account a deduction or provision in the 2002 Accounts
that relates to a Principal Liability; and

	 	 	21.16.2	 	the Sellers have made a payment to the Buyers prior to the
Accounts Date in respect of that Principal Liability under clause
21.1,
	 

	 	 	 	then the amount of the Deferred Consideration payable under clause 3.2(a)
shall, subject to clause 3.1, be increased by an amount equal to 89.9% of
the deduction or provision referred to in paragraph 21.16.1, provided
that:

	 	 	(a)	 	such increase shall not exceed the amount paid by the Sellers
to the Buyers before the Accounts Date under clause 21.1; and

	 	 	(b)	 	the Deferred Consideration shall not be greater than the amount
which the Deferred Consideration would have been without taking into
consideration the deduction or provision referred to in clause
21.16.1.

	22.	 	COSTS
	 
	 	 	Except where this Agreement provides otherwise, each party shall pay its
own legal, accountancy and other costs and expenses relating to the
negotiation, preparation,

- 55 -

 

	 	 	execution and performance by it of this Agreement and of each document
referred to in it.
	 
	23.	 	SEPARATION ISSUES
	 
	23.1	 	Each of the Buyers and RSA shall use their respective reasonable
endeavours to procure that the landlord under the Fitzwilliam Lease enters
into a deed of release (i) confirming that the Fitzwilliam Guarantors be
released from their obligations under the Fitzwilliam Lease, and (ii)
providing that RSA, Converium, Munich Re and Northern States will, subject
to clause 23.3, guarantee the performance of the Company’s obligations
under the Fitzwilliam Lease. For the avoidance of doubt, reasonable
endeavours shall not, for the purposes of clause 23, include the Buyers
and/or RSA assuming any obligations or liabilities as guarantors over and
above the Fitzwilliam Guarantors’ obligations and liabilities contained in
the Fitzwilliam Lease or paying any additional material sum including,
without limitation a fine or premium.
	 
	23.2	 	In the event that the above mentioned release is not obtained and in any
event if a claim is made by the landlord against the Sellers in their
capacity as Fitzwilliam Guarantors in respect of any default occurring
after Completion and before the Sellers are released as Fitzwilliam
Guarantors by the landlord, each of the Buyers and RSA will indemnify,
subject to clause 23.3, without any right of set-off, deduction or
counter-claim, the Sellers from any liability properly incurred by the
Sellers in their capacity as Fitzwilliam Guarantors in respect of any
default occurring after the date of Completion provided always that each
of the Sellers hereby undertakes to take reasonable steps to mitigate any
liability properly incurred by the Sellers in their capacity as
Fitzwilliam Guarantors under the Fitzwilliam Lease.
	 
	23.3	 	The obligations of each of the Buyers and RSA under the deed of release
referred to in clause 23.1 and the indemnity referred to in clause 23.2
are several where their respective liability is limited to the Relevant
Percentage of liability incurred by the Sellers under clause 23.2, where
“Relevant Percentage” means for the purposes of this clause 23, in respect
of each of the Buyers and RSA, the following amounts:

	 	 	 	 	 
	Party	 	Relevant Percentage
	Northern States
	 	 	40	%
	Converium
	 	 	25	%
	Munich Re
	 	 	24.9	%
	RSA
	 	 	10.1	%

	23.4	 	Each of the Sellers hereby undertakes that in the event that a claim is
made by the landlord against the Buyers after Completion then, to the
extent that such claim relates to a default occurring prior to Completion
and that claim would, if made against the Fitzwilliam Guarantors under the
Fitzwilliam Lease be a valid claim, the Sellers will

- 56 -

 

	 	 	indemnify without any right of set-off, deduction or counter-claim the
Buyers from any liability incurred by the Buyers in respect of such claim.
	 
	23.5	 	Each of the Sellers agrees to use reasonable endeavours to secure at
Completion the release of each Group Company from any indemnity,
guarantee, surety, letter of comfort or other contingent liability or
commitment given or entered into by any member of the Group in relation to
obligations or liabilities of any member of either of the Sellers’ Groups
and, prior to such releases, each of the Sellers undertake to the Buyers
(for itself and as agent on and behalf of each member of the Group) to
keep the Buyers and the relevant member of the Group fully indemnified
against any liability arising under such indemnity, guarantee, surety,
letter of comfort or other contingent liability or commitment, together
with any costs reasonably incurred by the Buyers or the member of the
Group in connection therewith PROVIDED THAT this clause shall not apply to
any indemnity, guarantee, surety, letter of comfort or other contingent
liability or commitment given or entered into by any member of the Group
on behalf of either or both of the Sellers in their capacity as a member
of any underwriting pool managed by any Group Company.
	 
	24.	 	MERGER CONTROL FILINGS
	 
	24.1	 	In the event that a merger control filing or filings are required in
Argentina, Brazil, and/or Taiwan:

	 	 	24.1.1	 	the Sellers shall, and shall use reasonable endeavours to procure
that the Company shall, offer the Buyers and the Company all
information reasonably required to complete the filing or filings
required by law; and
	 
	 	 	24.1.2	 	the Buyers undertake to submit any such filing or filings as soon
as reasonably practicable after the date of this Agreement; and
	 
	 	 	24.1.3	 	Completion shall not be subject to any party obtaining approval
from the local regulators in any of Argentina, Brazil or Taiwan, but
if, following any such filing or filings, any of the parties are
prohibited by the relevant competition authorities in any such
jurisdiction from carrying out any of their obligations under this
Agreement (including, without limitation, completing this Agreement),
such parties shall not be required to perform such obligations until
such prohibition has been lifted.

	25.	 	WITHHOLDING TAX AND GROSSING UP
	 
	25.1	 	Each party shall pay all sums payable by it under this Agreement free and
clear of all deductions or withholdings unless the law requires a
deduction or withholding. If a deduction or withholding is so required and
except in the case of interest payments the relevant party shall pay such
additional amount as will ensure that the net amount the payee receives
equals the full amount which it would have received had the deduction or
withholding not been required PROVIDED THAT no such additional amounts
will be paid in respect of the Deferred Consideration.

- 57 -

 

	25.2	 	If any Tax authority brings any sum paid by the Sellers under the
Warranties or pursuant to this Agreement, or by the Buyers in relation to
any claim by the Sellers under clause 23.2, into charge to Tax (other than
interest but including any circumstances where any Relief is available in
respect of such charge to Tax) then such party shall pay such additional
amount as will ensure that the total amount paid, less the Tax chargeable
on such amount (or that would be so chargeable but for such Relief) is
equal to the amount that would otherwise be payable under this Agreement.
	 
	25.3	 	In the case of payments made by the Sellers under clauses 17, 18 and 19
of this Agreement, if the Buyers or any Group Companies make payments to
other Group Companies for the purpose of putting funds in the appropriate
Group Company in order to use the payment to satisfy the deficit, or
otherwise in the circumstances envisaged by the clause (such Group Company
being the “Receiving Company”), and if such payments result in any Tax
authority bringing any sum paid into charge to Tax (other than interest
but including any circumstances where any Relief is available in respect
of such charge to Tax) then the Sellers shall pay to the Receiving Company
forthwith such additional amount as will ensure that the total amount
received by the Receiving Company, less the Tax chargeable on all payments
made by the Group Companies (or that would be so chargeable but for such
Relief) is equal to the amount that would otherwise be payable under this
Agreement. The Buyers undertake to use all reasonable endeavours having
regard to (amongst other matters) the commercial interests of the Buyers
in the Company, the New Shareholders Agreement and the desired proportions
of shareholdings of the Buyers and RSA in the Company to ensure that,
provided such course of action will result in the relevant Group Company
being able to use the payment in the manner envisaged by the relevant
clause, the payments to Group Companies will be done in the most
tax-efficient manner that will result in the least additional payments
being required from the Sellers under this clause 25.3.
	 
	26.	 	ENTIRE AGREEMENT
	 
	26.1	 	Each party on behalf of itself and as agent for each of its Related
Persons acknowledges and agrees with each other party (each such party
acting on behalf of itself and as agent for each of its Related Persons)
that:-

	 	 	26.1.1	 	this Agreement, the side letter between the parties relating to
stay bonuses in relation to certain Employees and each document
referred to in the Agreement (including, without limitation, the
Disclosure Letter and the Tax Deed) constitutes the entire agreement
and supersedes any previous agreements between the parties relating
to the subject matter of this Agreement and such documents referred
to in this Agreement;
	 
	 	 	26.1.2	 	neither it nor any of its Related Persons has relied on or been
induced to enter into this Agreement or any document referred to in
it in reliance upon nor has any such party been given any warranty,
representation, statement, assurance, covenant, undertaking,
indemnity, guarantee or commitment (whether contractual or otherwise)
other than as expressly set out in this Agreement or any document
referred to herein.

- 58 -

 

	26.2	 	No party is liable to any other party (in equity, contract or tort
(including negligence), under the Misrepresentation Act 1967 or in any
other way) for a representation, statement, assurance, covenant,
undertaking, indemnity, guarantee or commitment (whether contractual or
otherwise) that is not set out in this Agreement or any document referred
to in it.
	 
	26.3	 	Nothing in this clause 26 shall have the effect of limiting or
restricting any liability arising as a result of any fraud including,
without limitation, fraudulent concealment.
	 
	27.	 	THIRD PARTY RIGHTS
	 
	27.1	 	Subject to this clause and to clause 10.6, a person who is not a party to
this Agreement has no right under the Contracts (Rights of Third Parties)
Act 1999 (the “Third Parties Act”) to enforce any term of this Agreement
but this does not affect any right or remedy of a third party which exists
or is available apart from the Third Parties Act.
	 
	27.2	 	Any employee, director, agent or officer of any Group Company referred to
in clause 10.6 (each a “Third Party”) may enforce the terms of clause
10.6, subject to and in accordance with this clause and clause 30 and the
provisions of the Third Parties Act.
	 
	27.3	 	The parties to this Agreement do not require the consent of any Third
Party to vary or, to the extent they may do so, rescind or terminate this
Agreement.
	 
	27.4	 	If a Third Party brings proceedings to enforce the terms of clause 10.6,
then, in addition to the defences, set-offs and counterclaims available to
it by virtue of sections 3(2) and 3(4) of the Third Parties Act, the
Sellers shall have available to them by way of defence or set-off any
matter that would have been available by way of defence or set-off if the
proceedings had been brought by the Buyers.
	 
	27.5	 	If the Sellers are in breach of clause 10.6 the Buyers may not recover
from the Sellers any sum in respect of a Third Party’s loss arising from
that breach or the expense to the Buyers of making good to a Third Party
the default of the Sellers.
	 
	27.6	 	No Third Party may assign or transfer or purport to assign or transfer a
right to enforce clause 10.6 of this Agreement under the Third Parties Act
without having first obtained the parties’ written consent.
	 
	27.7	 	No Third Party may take proceedings to enforce clause 10.6 of this
Agreement unless and until it gives notice in writing to the Sellers
agreeing irrevocably to the provisions of clause 30 of this Agreement.
	 
	28.	 	GENERAL
	 
	28.1	 	A variation of this Agreement is valid only if it is in writing and
signed by or on behalf of each party to it. The expression “variation”
shall include any variation, supplement, deletion or replacement however
effected.
	 
	28.2	 	The failure to exercise or delay in exercising a right or remedy provided
by this Agreement or by law does not impair or constitute a waiver of the
right or remedy or an impairment of or a waiver of other rights or
remedies. No single or partial exercise of a

- 59 -

 

	 	 	right or remedy provided by this Agreement or by law prevents further
exercise of the right or remedy or, the exercise of another right or
remedy.
	 
	28.3	 	Unless otherwise stated, the obligations of each Seller to each Buyer
under this Agreement are separate and independent obligations. Each of the
Sellers’ rights and remedies contained in this Agreement are cumulative,
may be exercised as often as such party considers appropriate and are not
exclusive of rights or remedies provided by law.
	 
	28.4	 	Unless otherwise stated, the obligations of each Buyer to each Seller
under this Agreement are separate and independent obligations. Each of the
Buyers’ rights and remedies contained in this Agreement are cumulative,
may be exercised as often as such party considers appropriate and are not
exclusive of rights or remedies provided by law.
	 
	28.5	 	Except to the extent that they have been performed and except where this
Agreement provides otherwise, the obligations contained in this Agreement
remain in force after Completion.
	 
	28.6	 	If a party fails to pay a sum due from it under this Agreement on the due
date of payment in accordance with the provisions of this Agreement, that
party shall pay interest on the overdue sum from the due date of payment
until the date on which its obligation to pay the sum is discharged at a
rate of 2% above the Agreed Rate for the currency in which the debt is
denominated (accrued daily and compounded monthly).
	 
	28.7	 	Any payment made by either of the Sellers to any of the Buyers in respect
of a Relevant Claim, a Tax Claim or Indemnity Claim shall be treated by
the relevant Buyer and the relevant Seller as a reduction in the
Consideration of either of the CGU Shares or the RSA Shares (as the case
may be) to be paid to the relevant Seller from whom the payment was
received to the extent of the payment.
	 
	28.8	 	Save as otherwise provided herein, any payment to be made by any party
under this Agreement shall be made in full without any set-off,
restriction, condition or deduction for or on account of any counterclaim
(including any set-off under any contract with a member of either Seller’s
Group).
	 
	28.9	 	If at any time any provision of this Agreement is or becomes illegal,
invalid or unenforceable under the laws of any jurisdiction, that shall
not affect:

	 	 	28.9.1	 	the legality, validity or enforceability in that jurisdiction of
any other provision of this Agreement; or
	 
	 	 	28.9.2	 	the legality, validity or enforceability under the law of any other
jurisdiction of that or another provision of this Agreement.

	28.10	 	     This Agreement may be executed in any number of counterparts, each of
which when executed and delivered is an original and all of which together
evidence the same agreement.
	 
	28.11	 	     Following Completion each of the Sellers shall from time to time
forthwith upon request from any Buyer at the Seller’s expense do or
procure the doing of all acts and/or execute or procure the execution of
all such documents in a form reasonably

- 60 -

 

	 	 	satisfactory to that Buyer for the purpose of vesting in the Buyer the full legal and
beneficial title to the Shares purchased by it hereunder and otherwise
giving the Buyers the full benefit of this agreement.
	 
	29.	 	NOTICES
	 
	29.1	 	A notice or other communication under or in connection with this
Agreement (a “Notice”) shall be:

	 	 	29.1.1	 	in writing;
	 
	 	 	29.1.2	 	in the English language; and
	 
	 	 	29.1.3	 	delivered personally or sent by first class post pre-paid recorded
delivery (and air mail if overseas) to the party due to receive the
Notice to the address set out in clause 29.3 or to another address,
person or fax number specified by that party by not less than seven
days’ written notice to the other parties received before the Notice
was despatched.

	29.2	 	Unless there is evidence that it was received earlier, a Notice is deemed given if:

	 	 	29.2.1	 	delivered personally, when left at the address referred to in clause 29.1.3;
	 
	 	 	29.2.2	 	sent by mail, except air mail, two Business Days after posting it;
	 
	 	 	29.2.3	 	sent by air mail, six Business Days after posting it; and
	 
	 	 	29.2.4	 	sent by fax, when confirmation of its transmission has been
recorded by the sender’s fax machine.

	29.3	 	The address referred to in clause 29.1.3 is:

	 	 	 	 	 	 	 
	 	 	 	 	 	 	Marked for the
	Name of party	 	Address
	 	Fax No.	 	attention of
	CGU	 	
St Helens

1 Undershaft

London

EC3P 3DQ
	 	00 44 207 662 7295
	 	Group Legal

Services Director
	 
	RSA	 	
St. Mark’s Court

Chart Way

Horsham

West Sussex

RH12 1XL
	 	00 44 207 569 6607
	 	Company Secretary
	 
	Converium	 	
General Guisan-
Quai 26

8022 Zürich

Switzerland
	 	00411 639 9066
	 	Chris

Bell/Christian

Felderer

- 61 -

 

	 	 	 	 	 	 	 
	 	 	 	 	 	 	Marked for the

	Name of party	 	Address
	 	Fax No.	 	attention of

	Munich Re	 	
Königinstraße 107

80802 München

Germany
	 	0049 89 3891 3622
	 	Thomas Braune,
Head
of Group

Investments
Hartmut Hesse,
Head of
Aviation
and Space
	 
	Northern States	 	
3024 Harney Street,

Omaha, Nebraska,

USA 68131
	 	00 1 402 536 3030
	 	General Counsel

	30.	 	GOVERNING LAW AND JURISDICTION
	 
	30.1	 	This Agreement is governed by English law.
	 
	30.2	 	The courts of England have exclusive jurisdiction to settle any dispute
arising from or connected with this Agreement (a “Dispute”) save that this
clause 30.2 shall not apply in relation to proceedings commenced to
enforce a judgment.
	 
	30.3	 	The parties agree that the courts of England are the most appropriate and
convenient courts to settle any Dispute and, accordingly, that they will
not argue to the contrary.
	 
	30.4	 	The parties agree that the documents which start any Proceedings and any
other documents required to be served in relation to those Proceedings may
be served on any party in accordance with clause 29. These documents may,
however, be served in any other manner allowed by law. This clause applies
to all Proceedings wherever started.

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SCHEDULE 1

INFORMATION ABOUT THE COMPANY AND ITS SUBSIDIARY UNDERTAKINGS

PART A: THE COMPANY

	 	 	 	 	 	 	 
	1.	 	
Registered number:
	 	 	02512067	 
	 	 	 	 	 	 	 
	2.	 	
Place of incorporation:
	 	 	England	 
	 	 	 	 	 	 	 
	3.	 	
Address of registered
office:
	 	 	Fitzwilliam
House
10 St Mary Axe

London, EC3A 8EQ	 
	 	 	 	 	 	 	 
	4.	 	
Type of company:
	 	 	Private Limited Company	 
	 	 	 	 	 	 	 
	5.	 	
Authorised share capital:
	 	 	25,000,000 shares of £1.00 each divided
in 12,500,000 A class shares of £1.00
each and 12,500,000 B class shares of
£1.00 each	 
	 	 	 	 	 	 	 
	6.	 	
Issued share capital:
	 	 	25,000,000 shares of £1.00 each divided
in 12,500,000 A class shares of £1.00
each and 12,500,000 B class shares of
£1.00 each	 
	 	 	 	 	 	 	 
	7.	 	
Directors:
	 	 	David Edward
Reeves

Mark Steven Hodges

Peter James Bernhard

Duncan Macgregor Boyle

Anthony John Medniuk

Cornelis Antonius Carolus Maria Schrauwers	 
	 	 	 	 	 	 	 
	8.	 	
Secretary:
	 	 	David Littlefair	 
	 	 	 	 	 	 	 
	9.	 	
Accounting reference date:
	 	 	31 December	 
	 	 	 	 	 	 	 
	10.	 	
Auditors:
	 	 	PricewaterhouseCoopers	 
	 	 	 	 	 	 	 
	11.	 	
Shareholders:
	 	 	RSA 12,500,000 A Class Shares of £1.00
each

CGU 12,500,000 B Class Shares of £1.00
each	 
	 	 	 	 	 	 	 
	12.	 	
Tax Residence:
	 	 	UK	 
	 	 	 	 	 	 	 
	13.	 	
Mortgages and Charges
registered at Companies House
on 25 November 2002:
	 	 	None	 

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PART B: THE SUBSIDIARY UNDERTAKINGS

A: British Aviation Insurance Group
(Technical Services) Limited

	 	 	 	 	 	 	 
	1.	 	
Registered number:
	 	 	03277960	 
	 	 	 	 	 	 	 
	2.	 	
Place of incorporation:
	 	 	England	 
	 	 	 	 	 	 	 
	3.	 	
Address of registered office:
	 	 	Fitzwilliam House

10 St Mary Axe

London, EC3A 8EQ	 
	 	 	 	 	 	 	 
	4.	 	
Type of company:
	 	 	Private Limited Company	 
	 	 	 	 	 	 	 
	5.	 	
Authorised share capital:
	 	 	100 ordinary shares of £1.00 each	 
	 	 	 	 	 	 	 
	6.	 	
Issued share capital held by the

Company:
	 	 	1 ordinary share of £1.00	 
	 	 	 	 	 	 	 
	7.	 	
Issued share capital held other than
by the Company and by whom:
	 	 	None	 
	 	 	 	 	 	 	 
	8.	 	
Directors:
	 	 	Michael Robert
Dempsey

Anthony John Medniuk

Alan Michael Edric Tasker

Kenneth James Mowbray Walder

Robert James Wilkinson	 
	 	 	 	 	 	 	 
	9.	 	
Secretary:
	 	 	David Littlefair	 
	 	 	 	 	 	 	 
	10.	 	
Accounting reference date:
	 	 	31 December	 
	 	 	 	 	 	 	 
	11.	 	
Auditors:
	 	 	PricewaterhouseCoopers	 
	 	 	 	 	 	 	 
	12.	 	
Tax Residence:
	 	 	UK	 
	 	 	 	 	 	 	 
	13.	 	
Mortgages and Charges registered at
Companies House on 25 November 2002:
	 	 	None	 

- 64 -

 

B: British Aviation Insurance Group Underwriting Services Limited

	 	 	 	 	 	 	 
	1.	 	
Registered number:
	 	 	03365781	 
	 	 	 	 	 	 	 
	2.	 	
Place of incorporation:
	 	 	England	 
	 	 	 	 	 	 	 
	3.	 	
Address of registered office:
	 	 	Fitzwilliam House

10 St Mary Axe

London, EC3A 8EQ	 
	 	 	 	 	 	 	 
	4.	 	
Type of company:
	 	 	Private Limited Company	 
	 	 	 	 	 	 	 
	5.	 	
Authorised share capital:
	 	 	50,000 ordinary shares of £1.00 each	 
	 	 	 	 	 	 	 
	6.	 	
Issued share capital held by the

Company:
	 	 	31,250 ordinary shares of £1.00 each	 
	 	 	 	 	 	 	 
	7.	 	
Issued share capital held other
than by the Company and by whom:	 	 	 	 
	 	 	 	 	 	 	 
	 	 	
Shareholder:
	 	 	No. of ordinary
shares of £1.00 each:	 
	 	 	

	 	 	
	 
	 	 	
Eagle Star Insurance Company Limited
	 	 	5,000	 
	 	 	
Mitsui Sumitomo Insurance Company Limited
	 	 	3,750	 
	 	 	
Munich Reinsurance Company
	 	 	5,000	 
	 	 	
The Tokio Marine & Fire Insurance

Company Limited
	 	 	5,000	 
	 	 	 	 	 	 	 
	8.	 	
Directors:
	 	 	Peter James
Bernhard

Peter Leslie Butler

Dirk Lohmann

Anthony John Medniuk

David Edward Reeves

Cornelis Antonius Carolus Maria Schrauwers

Alan Michael Edric Tasker

Thomas Thomsen

Hiroshi Miyamoto

Tsuneaki Tokoro	 
	 	 	 	 	 	 	 
	9.	 	
Secretary:
	 	 	David Littlefair	 
	 	 	 	 	 	 	 
	10.	 	
Accounting reference date:
	 	 	31 December	 
	 	 	 	 	 	 	 
	11.	 	
Auditors:
	 	 	PricewaterhouseCoopers	 
	 	 	 	 	 	 	 
	12.	 	
Tax Residence:
	 	 	UK	 
	 	 	 	 	 	 	 
	13.	 	
Mortgages and Charges
registered at Companies House
	 	 	None	 

- 65 -

 

	 	 	 	 	 	 	 
	
on 25 November 2002:	 	 	 	 

- 66 -

 

C: Global Aerospace Underwriters
Limited - Dormant

	 	 	 	 	 	 	 
	1.	 	
Registered number:
	 	 	04000608	 
	 	 	 	 	 	 	 
	2.	 	
Place of incorporation:
	 	 	England	 
	 	 	 	 	 	 	 
	3.	 	
Address of registered office:
	 	 	Fitzwilliam House

10 St Mary Axe

London, EC3A 8EQ	 
	 	 	 	 	 	 	 
	4.	 	
Type of company:
	 	 	Private Limited Company	 
	 	 	 	 	 	 	 
	5.	 	
Authorised share capital:
	 	 	1000 ordinary shares of £1.00 each	 
	 	 	 	 	 	 	 
	6.	 	
Issued share capital held by

the Company:
	 	 	1 ordinary share of £1.00	 
	 	 	 	 	 	 	 
	7.	 	
Issued share capital held other
than by the Company and by whom:
	 	 	None	 
	 	 	 	 	 	 	 
	8.	 	
Directors:
	 	 	Peter James Bernhard

Anthony John Medniuk	 
	 	 	 	 	 	 	 
	9.	 	
Secretary:
	 	 	David Littlefair	 
	 	 	 	 	 	 	 
	10.	 	
Accounting reference date:
	 	 	31 December	 
	 	 	 	 	 	 	 
	11.	 	
Auditors:
	 	 	(dormant company not subject to
external audit)	 
	 	 	 	 	 	 	 
	12.	 	
Tax Residence:
	 	 	UK	 
	 	 	 	 	 	 	 
	13.	 	
Mortgages and Charges
registered at Companies House
on 25 November 2002:
	 	 	None	 

- 67 -

 

D: BAIG Limited - Dormant

	 	 	 	 	 	 	 
	1.	 	
Registered number:
	 	 	02512076	 
	 	 	 	 	 	 	 
	2.	 	
Place of incorporation:
	 	 	England	 
	 	 	 	 	 	 	 
	3.	 	
Address of registered office:
	 	 	Fitzwilliam House

10 St Mary Axe

London, EC3A 8EQ	 
	 	 	 	 	 	 	 
	4.	 	
Type of company:
	 	 	Private Limited Company	 
	 	 	 	 	 	 	 
	5.	 	
Authorised share capital:
	 	 	100 ordinary shares of £1.00 each	 
	 	 	 	 	 	 	 
	6.	 	
Issued share capital held by the

Company:
	 	 	2 ordinary shares of £1.00 each	 
	 	 	 	 	 	 	 
	7.	 	
Issued share capital held other
than by the Company and by whom:
	 	 	None	 
	 	 	 	 	 	 	 
	8.	 	
Directors:
	 	 	Michael Robert Dempsey

Anthony John Medniuk	 
	 	 	 	 	 	 	 
	9.	 	
Secretary:
	 	 	David Littlefair	 
	 	 	 	 	 	 	 
	10.	 	
Accounting reference date:

	 	 	31 December	 
	 	 	 	 	 	 	 
	11.	 	
Auditors:
	 	 	(dormant company not subject to
external audit)	 
	 	 	 	 	 	 	 
	12.	 	
Tax Residence:
	 	 	UK	 
	 	 	 	 	 	 	 
	13.	 	
Mortgages and Charges
registered at Companies House
on 25 November 2002:
	 	 	None	 

- 68 -

 

E: Global Limited - Dormant

	 	 	 	 	 	 	 
	1.	 	
Registered number:
	 	 	04029372	 
	 	 	 	 	 	 	 
	2.	 	
Place of incorporation:
	 	 	England	 
	 	 	 	 	 	 	 
	3.	 	
Address of registered office:
	 	 	Fitzwilliam House

10 St Mary Axe

London, EC3A 8EQ	 
	 	 	 	 	 	 	 
	4.	 	
Type of company:
	 	 	Private Limited Company	 
	 	 	 	 	 	 	 
	5.	 	
Authorised share capital:
	 	 	1000 ordinary shares of £1.00 each	 
	 	 	 	 	 	 	 
	6.	 	
Issued share capital held by

the Company:
	 	 	1 ordinary share of £1.00 each	 
	 	 	 	 	 	 	 
	7.	 	
Issued share capital held other
than by the Company and by whom:
	 	 	None	 
	 	 	 	 	 	 	 
	8.	 	
Directors:
	 	 	Peter James Bernhard

Anthony John Medniuk	 
	 	 	 	 	 	 	 
	9.	 	
Secretary:
	 	 	David Littlefair	 
	 	 	 	 	 	 	 
	10.	 	
Accounting reference date:
	 	 	31 December	 
	 	 	 	 	 	 	 
	11.	 	
Auditors:
	 	 	(dormant company not subject to
external audit)	 
	 	 	 	 	 	 	 
	12.	 	
Tax Residence:
	 	 	UK	 
	 	 	 	 	 	 	 
	13.	 	
Mortgages and Charges
registered at Companies House
on 25 November 2002:
	 	 	None	 

- 69 -

 

F: Global Aerospace Underwriting Managers (USA) Inc

	 	 	 	 	 	 	 
	1.	 	
Registered number:
	 	 	3260557
	 	 	 	 	 	 	 
	2.	 	
Place of incorporation:
	 	 	Delaware, USA
	 	 	 	 	 	 	 
	3.	 	
Address of registered office:
	 	 	51 John F. Kennedy
Parkway

Short Hills

New Jersey

USA 07078
	 	 	 	 	 	 	 
	4.	 	
Type of company:
	 	 	Limited liability corporation
	 	 	 	 	 	 	 
	5.	 	
Authorised share capital:
	 	 	100 common shares of US$0.01 each
	 	 	 	 	 	 	 
	6.	 	
Issued share capital held by the

Company:
	 	 	100 common shares of US$0.01 each
	 	 	 	 	 	 	 
	7.	 	
Issued share capital held other than
by the Company and by whom:
	 	 	None
	 	 	 	 	 	 	 
	8.	 	
Directors:
	 	 	Anthony John
Medniuk

Peter James Bernhard

Kenneth James Mowbray Walder
	 	 	 	 	 	 	 
	9.	 	
Secretary:
	 	 	Kenneth James Mowbray Walder
	 	 	 	 	 	 	 
	10.	 	
Accounting reference date:
	 	 	31 December
	 	 	 	 	 	 	 
	11.	 	
Auditors:
	 	 	PricewaterhouseCoopers
	 	 	 	 	 	 	 
	12.	 	
Tax Residence:
	 	 	USA
	 	 	 	 	 	 	 
	13.	 	
Mortgages and charges
registered against:	 	 	 
	 	 	 	 	 	 	 
	 	 	(a)	
the register maintained
by the Secretary of State,
Delaware on 13 November 2002
	 	 	None
	 	 	 	 	 	 	 
	 	 	(b)	
the register maintained
by the Secretary of State,
New Jersey on 15 November
2002
	 	 	None
	 	 	 	 	 	 	 
	 	 	(c)	
the register maintained
by Essex County, New Jersey
on 15 November 2002
	 	 	None
	 	 	 	 	 	 	 
	 	 	(d)	
the register maintained
by New Castle County,
Delaware on 19 November 2002
	 	 	None

G: Associated Aviation Underwriters Inc.

- 70 -

 

	 	 	 	 	 	 
	1.	 	
Registered number:
	 	 	2354437
	 	 	 	 	 	 
	2.	 	
Branch Registration Number:
	 	 	BR004329
	 	 	 	 	 	 
	3.	 	
Place of incorporation:
	 	 	Delaware, U.S.A.
 (United States
Company registered in England
 and Wales)

	 	 	 	 	 	 
	4.	 	
Address of registered office:
	 	 	51 John F Kennedy Parkway

Short Hills

New Jersey 07078

U.S.A.
	 	 	 	 	 	 
	5.	 	
Address of branch office:
	 	 	Fitzwilliam House

10 St Mary Axe

London EC3A 8EQ
	 	 	 	 	 	 
	6.	 	
Type of company:
	 	 	Other Company Type
	 	 	 	 	 	 
	7.	 	
Authorised share capital:
	 	 	3,000 shares of $0.01 per share
	 	 	 	 	 	 
	8.	 	
Issued share capital held by the
 Company:
	 	 	None
	 	 	 	 	 	 
	9.	 	
Issued share capital held
other than by
 the Company and by
whom:	 	 	 
	 	 	 	 	 	 
	 	 	
Shareholder:
	 	 	No. of shares of $0.01 each:
	 	 	

	 	 	

	 	 	 	 	 	 
	 	 	
Global Aerospace
Underwriting
 Managers
(USA) Inc.
	 	 	200
	 	 	 	 	 	 
	10.	 	
Directors:
	 	 	Anthony John Medniuk

Peter James Bernhard

Andrew Alexander Duguid

Kenneth James Mowbray Walder

Jeffrey Cassidy (U.S. resident)

Kevin Patrick Hilliard (U.S. resident)

Brian McBride (U.S. resident) 
	 	 	 	 	 	 
	11.	 	
Secretary:
	 	 	Leonidas George Demas (U.S. resident)
	 	 	 	 	 	 
	12.	 	
Authorised representative:
	 	 	David Littlefair
	 	 	 	 	 	 
	13.	 	
Accounting reference date:
	 	 	31 December
	 	 	 	 	 	 
	14.	 	
Auditors:
	 	 	PricewaterhouseCoopers
	 	 	 	 	 	 
	15.	 	
Tax Residence:
	 	 	USA

- 71 -

 

	 	 	 	 	 	 	 
	16.	
Mortgages and charges:	 	 	 	 
	 	 	 	 	 	 
	 	(a)	
the register
maintained by the

Secretary of State,
Delaware
 on 13
November 2002
	 	 	None	 
	 	 	 	 	 	 
	 	(b)	
the register
maintained by the

Secretary of State,
New Jersey
 on 15
November 2002
	 	1.

2.

3.	1943237 secured
party Fleet Business

Credit Corporation

1685111 secured party C I T Leasing

Corporation

1849192 secured party IBM Credit

Corporation	 
	 	 	 	 	 	 	 
	 	(c)	
the register
maintained by
 Essex
County, New Jersey on

15 November 2002
	 	 	None	 
	 	 	 	 	 	 	 
	 	(d)	
the register
maintained by
 New
Castle County,
Delaware
 on 19
November 2002
	 	 	None	 

- 72 -

 

H: Global Aerospace Underwriting Managers (Canada) Limited

	 	 	 	 	 
	1.	 	
Registered number:
	 	275466-5
	 	 	 	 	 	 	 
	2.	 	
Place of incorporation:
	 	Canada
	 	 	 	 	 	 	 
	3.	 	
Address of registered office:
	 	100 Renfrew Drive

Suite 200

Markham, Ontario

Canada L3R 9R6
	 	 	 	 	 	 	 
	4.	 	
Type of company:
	 	Corporation incorporated under the
Canada
 Business Corporations Act
	 	 	 	 	 	 	 
	5.	 	
Authorised share capital:
	 	unlimited number of common shares,

unlimited number of preference
shares.
	 	 	 	 	 	 	 
	6.	 	
Issued share capital held by the
Company:
	 	25,000 common shares of CAD$1.00 each.
	 	 	 	 	 	 	 
	7.	 	
Directors:
	 	Anthony J Medniuk

Graham Lilley

Joseph Zigrossi

Michael Wills

Jean Laurin

Silvi Irons

John D’Angelone
	 	 	 	 	 	 	 
	8.	 	
Secretary:
	 	Silvi Irons
	 	 	 	 	 	 	 
	9.	 	
Accounting reference date:
	 	31 December
	 	 	 	 	 	 	 
	10.	 	
Auditors:
	 	PricewaterhouseCoopers
	 	 	 	 	 	 	 
	11.	 	
Tax Residence:
	 	Canada
	 	 	 	 	 	 	 
	12.	 	
Mortgages and charges registered on 13 November 2002 against either

	 	Personal Property Security Act
(Ontario)
 register charges:
	(a)	 	
the register maintained under the
Bank Act
 (Canada) at the Bank of Canada
office,
 Toronto, Ontario, Canada; or
	 	20000106 1629 1424 6212 (7 years) for

secured party Newcourt Financial Ltd

19981029 1752 1531 6041 (7 years) for
	(b)	 	
the register maintained under the
Personal
 Property Security Act (Ontario)
at the
 Province of Ontario register,
Ontario, Canada:
	 	secured party
Newcourt Financial Ltd

19981029 1752 1531 6042 (75 years)
for
 secured party Newcourt Financial
Ltd

I: British Aviation Insurance Group
(Canada) Limited - Dormant

- 73 -

 

	 	 	 	 	 
	1.	 	
Registered number:
	 	383824-2
	 	 	 	 	 	 	 
	2.	 	
Place of incorporation:
	 	Canada
	 	 	 	 	 	 	 
	3.	 	
Address of registered office:
	 	100 Renfrew
Drive

Suite 200

Markham, Ontario

Canada L3R 9R6
	 	 	 	 	 	 	 
	4.	 	
Type of company:
	 	Corporation incorporated under the

Canada Business Incorporations Act
	 	 	 	 	 	 	 
	5.	 	
Authorised share capital:
	 	unlimited number of common shares,
unlimited
 number of preference shares
	 	 	 	 	 	 	 
	6.	 	
Issued share capital held by the
Company:
	 	25 common shares of CAD$1.00 each
	 	 	 	 	 	 	 
	7.	 	
Directors:
	 	Joe Zigrossi

John D’Angelone
	 	 	 	 	 	 	 
	8.	 	
Secretary:
	 	Silvi Irons
	 	 	 	 	 	 	 
	9.	 	
Accounting reference date:
	 	31 December
	 	 	 	 	 	 	 
	10.	 	
Auditors:
	 	(dormant company not subject to
external audit)
	 	 	 	 	 	 	 
	11.	 	
Tax Residence:
	 	Canada
	 	 	 	 	 	 	 
	12.	 	
Mortgages and charges
registered on 13 November against
either
	 	None
	 	 	 	 	 	 	 
	(a)	 	
the register maintained under
the Bank Act (Canada) at the Bank
of Canada office, Toronto, Ontario,
Canada; or	 	 
	 	 	 	 	 	 	 
	(b)	 	
the register maintained under
the Personal
 Property Security Act
(Ontario) at the
 Province of
Ontario register, Ontario,
 Canada:	 	 

- 74 -

 

J: Ortac Underwriting Agency Limited (Guernsey)

	 	 	 	 	 	 	 
	1.	 	
Registered number:
	 	 	37784	 
	 	 	 	 	 	 	 
	2.	 	
Place of incorporation:
	 	 	Guernsey	 
	 	 	 	 	 	 	 
	3.	 	
Address of registered office:
	 	 	Polygon Hall

Le Marchant Street

St Peter Port

Guernsey

Channel Islands	 
	 	 	 	 	 	 	 
	4.	 	
Type of company:
	 	 	Private Limited Company	 
	 	 	 	 	 	 	 
	5.	 	
Authorised share capital:
	 	 	100,000 shares of £1 each	 
	 	 	 	 	 	 	 
	6.	 	
Issued share capital held by the
 Company:
	 	 	33,333 shares of £1 each	 
	 	 	 	 	 	 	 
	7.	 	
Issued share capital held other than by the
company and by whom:	 	 	 	 
	 	 	 	 	 	 	 
	 	 	
Shareholder:
	 	 	No. of shares of £1 each:	 
	 	 	

	 	 	
	 
	 	 	
Higham Limited

Heritage Management Holdings Limited
	 	 	33,333

33,334	 
	 	 	 	 	 	 	 
	8.	 	
Directors:
	 	 	Martin Charles Belcher

Richard John Tee

Peter Bernhard

Ralf Tillenburg	 
	 	 	 	 	 	 	 
	9.	 	
Secretary:
	 	 	D H Richards	 
	 	 	 	 	 	 	 
	10.	 	
Auditors:
	 	 	Pricewaterhouse Coopers	 
	 	 	 	 	 	 	 
	11.	 	
Tax Residence:
	 	 	Guernsey	 

- 75 -

 

SCHEDULE 2

COMPLETION REQUIREMENTS

	1.	 	Sellers’ obligations
	 
	1.1	 	At Completion:

	 	1.1.1	 	CGU shall deliver to each Buyer duly executed transfer(s) in
respect of the number of CGU Shares set out against its name in
clause 2.1 and RSA shall deliver to each Buyer duly executed
transfer(s) in respect of the number of RSA Shares set out against
its name in clause 2.2, in every case in favour of the relevant Buyer
or its nominee(s) (subject to written notification to the Seller not
less than two days before Completion) along with the share
certificate(s) for the CGU Shares or RSA Shares (as the case may be)
(or an indemnity in lieu thereof in a form reasonably acceptable to
the Buyers);
	 
	 	1.1.2	 	each Seller shall deliver to each Buyer as evidence of the
authority of each person executing a document referred to in this
Schedule on such Seller’s behalf:
	 

	 	 	(a)	 	a copy of the minutes of a duly held meeting of
the directors of the relevant Seller (or a duly constituted
committee thereof) authorising the execution by the relevant
Seller of the document and, where such execution is
authorised by a committee of the board of directors of that
Seller, a copy of the minutes of a duly held meeting of the
directors constituting such committee or a relevant extract
thereof; or
	 
	 	 	(b)	 	a copy of a power of attorney conferring the
authority,

	 	 	 	in each case certified to be true and complete and that it has not
been revoked or superseded by a director or the secretary of the
Seller in question;
	 
	 	1.1.3	 	CGU shall deliver to each Buyer an irrevocable power of
attorney in the agreed form duly executed by CGU in favour of each
Buyer or its nominee(s) in respect of the CGU Shares purchased by it
hereunder;
	 
	 	1.1.4	 	RSA shall deliver to each Buyer an irrevocable power of
attorney in the agreed form duly executed by RSA in favour of each
Buyer or its nominee(s) in respect of the RSA Shares purchased by it
hereunder; and
	 
	 	1.1.5	 	each Seller shall deliver to the Buyers resignations from the
board of each Group Company of which such person is a director in the
agreed form from Cornelis Antonius Carolus Maria Schrauwers, Mark
Steven Hodges and Duncan Macgregor Boyle, expressed to take effect
from the end of the meeting held pursuant to paragraph 1.4;
	 
	 	1.1.6	 	the Sellers shall deliver to the Buyers the Tax Deed duly
executed by the Sellers.

- 76 -

 

	1.2	 	At Completion the Sellers shall deliver to the Buyers, or if the Buyers
shall so agree, make available to the Buyers:

	 	1.2.1	 	(in the case of RSA) the New Shareholders’ Agreement duly
executed by RSA;
	 
	 	1.2.2	 	a letter confirming the whereabouts of the title deeds,
leases, licences and other documents relating to the Properties;
	 
	 	1.2.3	 	any waivers or consents by members of any Group Company or
other persons which the Buyers have jointly specified prior to
Completion in the agreed terms so as to enable the Buyer or their
nominees to be registered as the holders of the Shares;
	 
	 	1.2.4	 	a letter confirming the whereabouts of the common seals,
certificates of incorporation and statutory books (such books to be
written up to immediately before Completion), share certificate books
and cheque books of each Group Company;
	 
	 	1.2.5	 	to the extent not in the possession of any Group Company, any
material books of account or references as to customers and/or
suppliers and other material records and all insurance policies in
respect of the businesses of any Group Company;
	 
	 	1.2.6	 	to the extent not in the possession of any Group Company, all
material licences, consents, permits and authorisations obtained by
or issued solely to any Group Company;
	 
	 	1.2.7	 	to the extent not in the possession of any Group Company,
share certificates relating to all of the issued shares in the
capital of each of the Subsidiaries; and
	 
	 	1.2.8	 	to the extent not in the possession of any Group Company, all
books and records of the Company relating to the employees and/or
directors of each member of the Group.

	1.3	 	The Sellers shall procure that prior to Completion:

	 	1.3.1	 	they shall have taken, and shall have procured that all other
parties have taken, all actions necessary to re-classify all of the
12,500,000 issued A class shares of £1.00 each in the capital of the
Company and all of the 12,500,000 issued B class shares of £1.00 each
in the capital of the Company, as 25,000,000 fully paid ordinary
shares of £1.00 each, such ordinary shares to rank pari passu in all
respects; and
	 
	 	1.3.2	 	the provisions of sections 155 to 158 inclusive of the Act
have been duly complied with in relation to any financial assistance
(within the meaning of section 151 and 152 of the Act) given or
proposed to be given by the Company in connection with this Agreement
and the auditors of the Company have issued the requisite certificate
to the Company regarding net assets.

- 77 -

 

	1.4	 	The Sellers shall procure that at or prior to Completion (and prior to
the taking effect of the resignations referred to in paragraph 1.1.5
above) a meeting of the board of directors of the Company is held at which
the directors:

	 	1.4.1	 	vote in favour of the registration of each Buyer or its
nominee(s) as member(s) of the Company in respect of the Shares to be
purchased by it (subject to the production of properly stamped
transfers);
	 
	 	1.4.2	 	authorise the execution and delivery to each Buyer of a
certificate in respect of the Shares purchased by it and to RSA in
respect of the Retained Shares;
	 
	 	1.4.3	 	appoint persons nominated by the Buyers as directors of the
Company with effect from the end of the meeting; and
	 
	 	1.4.4	 	accept the resignations of Cornelis Antonius Carolus Maria
Schrauwers, Mark Steven Hodges and Duncan Macgregor Boyle as
directors so as to take effect from the end of the meeting.

	2.	 	Buyers’ obligations
	 
	2.1	 	At Completion:

	 	2.1.1	 	each of the Buyers shall deliver to each of the Sellers as
evidence of the authority of each person executing a document
referred to in this Schedule on that Buyer’s behalf:

	 	 	(i)	 	a copy of the minutes (or an extract thereof
certified by a director or secretary of the Buyer) of a duly
held meeting of the directors (or other appropriate officers)
of the relevant Buyer (or a duly constituted committee
thereof) authorising the execution by that Buyer of the
document and, where such execution is authorised by a
committee of the board of directors of that Buyer, a copy of
the minutes of a duly held meeting of the directors or other
such officers constituting such committee or the relevant
extract thereof (or in the case of Converium a copy of the
minutes of Converium Holding Limited in the agreed form); or
	 
	 	 	(ii)	 	a copy of a power of attorney conferring the
authority

	 	 	 	in each case certified to be true and complete (or a true and
complete extract) and that it has not been revoked or superseded
by a director or secretary of the Buyer in question.
	 
	 	2.1.2	 	each Buyer shall deliver to RSA the New Shareholders’
Agreement executed by it;
	 
	 	2.1.3	 	each Buyer shall provide for the transfer in readily available
funds by CHAPS or SWIFT the Initial Consideration due to be paid by
it to each of the Sellers under clause 2.3;

- 78 -

 

	 	2.1.4	 	each Buyer shall procure that the loan repayments to the
Sellers pursuant to clause 7.1 are made by means of transfer in
readily available funds by CHAPS or SWIFT to the bank accounts
specified in paragraph 2.2 below;
	 
	 	2.1.5	 	the Buyers shall deliver to the Sellers the Tax Deed duly
executed by the Buyers.

	2.2	 	Unless otherwise specified by the relevant Seller not less than 2
Business days prior to Completion:

	 	2.2.1	 	payments due to RSA at Completion shall be made to RSA’s
“RSAIPLC – Global Risks Reinsurance USD” account at HSBC Bank plc, of
27-32 Poultry, London, PO Box 181, EC2P 2BX, Sort Code: 40-05-15,
Account No: 35729639.
	 
	 	2.2.2	 	payments due to CGU at Completion shall be made to CGU’s
account at Citibank NA, of 336 Strand, London, WC2R 1HB, Account No.
1842692 (SWIFT: CITIGB2L).

	3.	 	Mutual obligations
	 
	3.1	 	The Sellers and the Buyers shall, prior to Completion, jointly notify the
Guernsey Financial Services Commission in writing of the change of control
in Ortac that will occur as a result of the sale and purchase of the
Shares.

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SCHEDULE 3

SELLERS’ WARRANTIES

	1.	 	CAPACITY AND AUTHORITY
	 
	1.1	 	Capacity, power, authority and action

	 	1.1.1	 	The Sellers have the requisite capacity, power and authority
and have taken all action necessary, to execute, deliver and exercise
their rights, and perform their obligations under this Agreement and
each document to be executed by the Sellers at or before Completion.
	 
	 	1.1.2	 	Save to the extent provided for in clauses 8 and 24 of this
Agreement, the Sellers have obtained all applicable governmental,
statutory, regulatory or other consents, licences, waivers or
exemptions to empower them to enter into and perform their
obligations under this Agreement.
	 
	 	1.1.3	 	The Company has requisite capacity, power and authority to
conduct its business as conducted at the date of this Agreement.

	1.2	 	Binding agreements
	 
	 	 	The Sellers’ obligations under this Agreement and each document to be
executed by the Sellers at or before Completion are, or when the relevant
document is executed will be, enforceable in accordance with their
respective terms.
	 
	1.3	 	No Breach
	 
	 	 	The execution and delivery of, and the performance by the Sellers of their
obligations under this Agreement and any other documents to be executed by
the Sellers pursuant to or in connection with this Agreement will not:

	 	1.3.1	 	result in a breach of any provision of the memorandum or
articles of the Sellers; or
	 
	 	1.3.2	 	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 which is material
in the context of the business of the Group as a whole or result in a
breach of any order, judgement or decree of any Court, governmental
agency or regulatory body to which the Sellers or the Company is a
party or by which any of the Sellers or the Company is a party or by
which any of the Sellers or any of their respective assets or the
Company is bound; or
	 
	 	1.3.3	 	save as provided in clause 8 (Conditions), require the Sellers
to obtain any consent or approval of, or give any notice or make any
registration with, any governmental or other authority or person
which has not been obtained or made at the date hereof both on an
unconditional basis and on a basis which cannot be revoked.

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	2.	 	SHARES AND SUBSIDIARY UNDERTAKINGS
	 
	2.1	 	The Shares

	 	2.1.1	 	The Sellers are the sole legal and beneficial owners of the
Shares and the Retained Shares and such shares constitute the entire
issued and allotted share capital of the Company and all of them are
fully paid up.
	 
	 	2.1.2	 	There is no Encumbrance, and there is no agreement,
arrangement or obligation to create or give an Encumbrance, in
relation to any of the Shares or the Retained Shares including,
without limitation, an option or right of pre-emption or conversion
and the Shares and the Retained Shares are free from other third
party rights of any nature whatsoever.

	2.2	 	Accuracy of information, Group structure and corporate matters

	 	2.2.1	 	The information given in Schedule 1 (Information about the
Company and its Subsidiary Undertakings) is complete (having regard
to the subject categories contained in that Schedule), true and
accurate.
	 
	 	2.2.2	 	There is no Encumbrance, and there is no agreement,
arrangement or obligation to create or give an Encumbrance in
relation to any of the shares or unissued shares in the capital of
any of the Subsidiary Undertakings. No person has claimed to be
entitled to an Encumbrance in relation to any of the shares of any of
the Subsidiary Undertakings. No Group Company is under any
obligation (whether actual or contingent) to sell, charge or
otherwise dispose of any shares in any of the Subsidiary Undertakings
or any interest therein to any person.
	 
	 	2.2.3	 	The Company does not own any shares or stock in the capital of
nor does it have any beneficial or other interest in any company or
business organisation other than the Subsidiary Undertakings, nor
does the Company or any Group Company control or take part in the
management of any other company or business organisation other than
in the course of providing insurance, reinsurance or run-off
services.
	 
	 	2.2.4	 	The copies of the memorandum and articles of association (or
equivalent constitutional documents) of the Company and each member
of the Group which are attached to the Disclosure Letter are complete
and accurate in all respects and fully set out the rights and
restrictions attaching to each class of share capital of the member
of the Group to which they relate.
	 
	 	2.2.5	 	The statutory books, books of account and other records of
each member of the Group are up-to-date and have been properly kept
and contain a record which is accurate and complete in all material
respects and no notice or allegation that any of them is incorrect or
should be rectified has been received.
	 
	 	2.2.6	 	All accounts, documents and returns which should have been
delivered by the Company or any member of the Group to the Registrar
of Companies or any
other authority or any equivalent overseas registry or authority
within the last 2 years have been so delivered.

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	3.	 	ACCOUNTS
	 
	3.1	 	The Accounts:

	 	3.1.1	 	show a true and fair view of the assets, liabilities and state
of affairs of the Company and the Group as at the Last Accounting
Date and of the profits and losses of the Company and the Group for
the financial year ended on the Last Accounting Date; and
	 
	 	3.1.2	 	were, in respect of each member of the Group, prepared in
accordance with accounting practices and standards specified in the
notes to the Accounts and those generally accepted and applicable in
the jurisdiction or territory in which such member of the Group was
incorporated at the time they were audited.

	3.2	 	The results shown by the audited profit and loss accounts of each of the
Company and AAU and the audited profit and loss account within the Group
Accounts for the last three financial years of each of the Company and AAU
and the Group ended on the Last Accounting Date have not (except as
disclosed in those accounts) been affected by an extraordinary or
exceptional item (as defined for accounting purposes) or a non recurring
item or by transactions entered into otherwise than on commercial terms.
	 
	3.3	 	he rates of depreciation and amortisation used in the audited accounts
of each Group Company for the three financial years of each Group Company
ended on the Last Accounting Date were sufficient to ensure that each
fixed asset of the Company will be written down to nil by the end of its
useful life.
	 
	3.4	 	No member of the Group is engaged in any financing (including the
incurring of any borrowing or any indebtedness in the nature of acceptance
or acceptance credits) of a type which would not be required to be shown
or reflected in the Accounts.
	 
	4.	 	TAX
	 
	4.1	 	General

	 	4.1.1	 	Each member of the Group has paid all Tax which it has become
liable to pay and is not, and has not in the six years ending on the
date of this Agreement been, liable to pay a penalty, surcharge, fine
or interest in connection with Tax and, so far as the Sellers are
aware, there are no circumstances by reason of which any member of
the Group may become liable to pay any penalty, surcharge, fine or
interest in connection with Tax.
	 
	 	4.1.2	 	Without prejudice to paragraph 4.1.1, each member of the Group
has deducted or withheld all Tax which it has been obliged by law to
deduct or withhold from amounts paid by it and has properly accounted
to the relevant Tax Authority for all amounts of Tax so deducted or
withheld.
	 
	 	4.1.3	 	Each member of the Group has within applicable time limits
made all returns, provided all information, given all notices and
maintained all records in relation to Tax as it is required to make,
provide, give or maintain and all such returns, information and
notices are correct and accurate in all material respects, so far

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	 	 	 	as
the Sellers are aware, and are not the subject of any dispute and has
fully complied on a timely basis with all notices served on it and
any other requirements lawfully made of it by any Tax Authority.
	 
	 	4.1.4	 	Each member of the Group has properly deducted Tax at source
and has properly operated any pay-roll tax system and has complied
with each reporting obligation in connection with benefits provided
(whether by the relevant member of the Group or by any other person)
for the member of the Group’s directors, other officers and employees
or ex-employees.
	 
	 	4.1.5	 	No Tax Authority has agreed to operate any special arrangement
(that is, an arrangement which is not based on a strict application
of all relevant Tax legislation, published extra-statutory
concessions and published statements of practice) in relation to the
affairs of any member of the Group. All notices and other
communications from a Tax Authority requiring or permitting a member
of the Group to deal with its Tax affairs in a particular manner or
on a particular basis are in the possession of the relevant member of
the Group and copies thereof have been made available to the Buyer.
	 
	 	4.1.6	 	No member of the Group is involved in any dispute in relation
to Tax with any Tax Authority and, so far as the Sellers are aware,
no Tax Authority has investigated or indicated that it intends to
investigate the tax affairs of any member of the Group other than
under the normal tax audit procedures of the relevant Tax Authority
and there are no facts which might cause such an investigation to be
instituted.

	4.2	 	Arm’s length dealings

	 	4.2.1	 	So far as the Sellers are aware, no member of the Group is or
has been a party to or otherwise involved in any transaction,
agreement or arrangement otherwise than by way of a bargain at arm’s
length, or any transaction, agreement or arrangement (whether or not
by way of a bargain at arm’s length) under which it has been or is or
may be required to make any payment for any goods, services or
facilities provided to it which is in excess of the market value of
such goods, services or facilities or under which it has been, or is
or may be required to provide goods, services or facilities for a
consideration which is less than the market value of such goods,
services or facilities and/or in consequence of which it is or might
be liable to Tax in respect of an amount deemed for Tax purposes to
be income or gains of the member of the Group but not actually income
or gains of the member of the Group and no notice or enquiry has been
made by any Tax Authority in connection with any such transaction.

	4.3	 	Value Added Tax or Turnover Tax

	 	4.3.1	 	So far as the Sellers are aware, no member of the Group has,
or has agreed to, become an agent, manager or factor of, or fiscal
representative of or for, any person not resident in its jurisdiction
for the purposes of the relevant VAT legislation.

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	 	4.3.2	 	Each member of the Group:

	 	 	(a)	 	is registered, in relation to any member of the
Group incorporated in the United Kingdom, or, in relation to
any other member of the Group if required by the VATA, for
the purposes of the VATA and, in relation to any other member
of the Group, for the purposes of equivalent legislation in
jurisdictions outside the United Kingdom;
	 
	 	 	(b)	 	has made, given, obtained and kept up-to-date,
proper records, invoices and documents appropriate or
required for the purposes of the VATA or equivalent
legislation in jurisdictions outside the United Kingdom in
relation to which legislation the relevant member of the
Group is registered;
	 
	 	 	(c)	 	has complied in all material respects with all
other applicable value added tax or turnover tax legislation
and in particular has filed all returns and made all payments
of value added tax or other turnover tax on a timely basis;
and
	 
	 	 	(d)	 	has not been required by a Tax Authority to
give security under the VATA or equivalent legislation in
jurisdictions outside the United Kingdom.

	 	4.3.3	 	No member of the Group is a member of a group of companies for
the purpose of the VATA (groups of companies) or for the purposes of
equivalent legislation in jurisdictions outside the United Kingdom
other than the group of companies of which the representative member
is Global Aerospace Underwriting Managers Limited. The Disclosure
Letter contains details of each company which is a member of that
group.

	4.4	 	Stamp Duty
	 
	 	 	So far as the Sellers are aware, all documents, which are necessary to
establish the title of any member of the Group to any asset, or by virtue
of which any member of the Group has any right, have been duly stamped and
no such documents which are outside the United Kingdom would attract stamp
duty if they were brought into the United Kingdom.
	 
	4.5	 	General
	 
	 	 	No action has been taken by any member of the Group in respect of which
any consent or clearance from a Tax Authority was required save in
circumstances where such consent or clearance was validly obtained and
where any conditions attaching thereto were, and continue to be, met.
	 
	4.6	 	Deductions
	 
	 	 	No member of the Group is under any obligation to make at any time any
payment outside its ordinary course of business nor has any such member
made any payment outside its ordinary course of business of a revenue
nature in excess of £10,000 or incurred an obligation to make any such
payment since the Last Accounting Date which

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	 	 	will not be wholly deductible
for the purposes of any corporate income or profit-based Tax in any
relevant jurisdiction.
	 
	4.7	 	Secondary Liability

	 	4.7.1	 	So far as the Sellers are aware, no transaction, act, omission
or event has occurred (including without limitation the execution or
implementation of this agreement) in consequence of which any member
of the Group is or may be held liable for tax or may otherwise be
held liable for or to indemnify any person in respect of any Tax
which is primarily or directly chargeable against or attributable to
any person other than a member of the Group.
	 
	 	4.7.2	 	So far as the Sellers are aware, no transaction, act, omission
or event has occurred which has resulted or could result in any
charge, lien, security interest, encumbrance or other third party
right arising over any member of the Group’s assets in respect of
unpaid Tax.

	4.8	 	Residence

	 	4.8.1	 	So far as the Sellers are aware, no member of the Group is
liable to Tax in any jurisdiction other than the jurisdiction in
which it is incorporated nor does any member of the Group have or has
ever had a permanent establishment in a jurisdiction other than the
jurisdiction of incorporation.
	 
	 	4.8.2	 	So far as the Sellers are aware, no member of the Group is an
agent or permanent establishment of another company, person, business, or enterprise for the purpose of assessing the company, person,
business, or enterprise to Tax in the country of residence of the
first company.

	4.9	 	Double Taxation
	 
	 	 	Each member of the Group has made all claims necessary to obtain relief
from double taxation under any relevant bilateral convention relating to
double taxation in respect of income, profits, gains or payments accrued
in the Accounts or made prior to the Last Accounting Date.
	 
	4.10	 	Tax Sharing
	 
	 	 	No member of the Group is bound by or party to any Tax indemnity, Tax
sharing or Tax allocation agreement in respect of which claims against the
member of the Group would not be time barred.
	 
	4.11	 	Groups

	 	4.11.1	 	So far as the Sellers are aware, no member of the Group is or has
ever been a member of any other group of companies or a fiscal
consolidation or a fiscal unity for the purposes of any corporate
income Tax.
	 
	 	4.11.2	 	All members of the Group resident in the United Kingdom for tax
purposes together comprise a group for the purposes of Chapter IV of
Part X of the Taxes Act (“TA”) and, so far as the Sellers are aware,
there are no circumstances or

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	 	 	 	arrangements as a result of which any
member of the Group will cease to form part of such Group.

	4.12	 	Loan Relationships

	 	4.12.1	 	Each member of the Group resident in the United Kingdom for tax
purposes is and has since the Last Accounting Date been taxed on an
authorised accruals basis of accounting in relation to all loan
relationships which are creditor relationships as defined in section
103 of the Finance Act 1996 (“FA”).
	 
	 	4.12.2	 	Each member of the Group obtains and has since the Last Accounting
Date obtained Tax relief on an authorised accruals basis of
accounting in relation to all loan relationships which are debtor
relationships as mentioned in section 103 of the FA 1996 and the
deduction given in computing the taxable profits of the member of the
Group in consequence of that relationship is not less than the
interest accruing for the period concerned.
	 
	 	4.12.3	 	So far as the Sellers are aware, no member of the Group has since
the Last Accounting Date held or been the debtor under any deep
discount securities as defined in paragraph 1 of schedule 4 of the TA
or any deep gain securities as defined in paragraph 1 of schedule 11
of the FA 1989 or any relevant discounted security as mentioned in
schedule 13 of the FA 1996.

	4.13	 	Payments of Corporation Tax

	 	4.13.1	 	Each member of the Group resident in the United Kingdom for tax
purposes has duly paid all instalments of corporation tax due and
payable prior to Completion within the appropriate time limits. The
calculation of the total liability of a member of the Group for a
relevant accounting period starting prior to Completion in accordance
with the provisions of Corporation Tax (Instalment Payments)
Regulations 1998 (the CT Regulations) was made on the basis of
information that was complete and accurate in all material respects
at the time that such liability was required to be calculated for the
purposes of the CT Regulations.
	 
	 	4.13.2	 	So far as the Sellers are aware, no member of the Group has been a
party to or otherwise involved in any transaction, scheme, or
arrangement and no event has occurred in relation to a member of the
Group to which Regulation 14 of the CT Regulations could apply.

	4.14	 	Group Payment Arrangements

	 	4.14.1	 	For the purposes of this Warranty, “Group Payment Arrangement”
means an arrangement entered into pursuant to section 36 of the
Finance Act 1998, and expressions used and defined in the Group
Payment Arrangement shall have the same meanings in this Warranty.
	 
	 	4.14.2	 	No member of the Group resident in the United Kingdom for tax
purposes is, or has in the last three years been, party to a Group
Payment Arrangement, whether as a Participating Company or as the
Nominated Company.

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	4.15	 	ACT
	 
	 	 	No member of the Group resident in the United Kingdom for tax purposes has
at any time had any unrelieved surplus ACT, as defined in the Shadow ACT
Regulations.
	 
	4.16	 	Employees and Pensions

	 	4.16.1	 	No member of the Group resident in the United Kingdom for tax
purposes has adopted or operates, or is part of any scheme approved,
or for which approval has been or is to be sought, under section 202
of the Taxes Act (Charities: Payroll Deduction Scheme).
	 
	 	4.16.2	 	Since the Last Accounting Date, no payment has been made to any
member of the Group resident in the United Kingdom for tax purposes
to which section 601 of the Taxes Act applies (pension scheme
surpluses: payments to employers).
	 
	 	4.16.3	 	So far as the Sellers are aware, no tax relief for any contribution
made or that may be made to any pension scheme after the Last
Accounting Date will be restricted under section 112 of the Finance
Act 1993 by reference to contributions made in or provisions for
contributions made in respect of any period ending on or prior to the
Last Accounting Date.

	4.17	 	Group Relief

	 	4.17.1	 	No member of the Group is liable to surrender Group Relief to any
Seller’s Group Undertaking.
	 
	 	4.17.2	 	No member of the Group has received and is not entitled to receive
any payment in respect of the surrender of Group Relief from any
Seller’s Group Undertaking.
	 
	 	4.17.3	 	No member of the Group is liable to make any payment in respect of
the surrender of Group Relief from any Seller’s Group Undertaking.

	4.18	 	Accounts

	 	4.18.1	 	The Accounts of each Group Company make full provision or reserve
within generally accepted accounting principles in respect of any
period ended on or before the Last Accounting Date for all Tax
assessed or liable to be assessed on any member of the Group or for
which it is accountable at the Last Accounting Date whether or not
the member of the Group has or may have any right of
reimbursement against any other person including in particular
(but without prejudice to the generality of the foregoing) Tax in
respect of property (of whatever nature) income, profits or gains
held, earned, accrued, or received by or to a person on or before
the Last Accounting Date or by reference to any event occurring,
act done or circumstances existing on or before that date
including distributions made down to such date or provided for in
the Accounts of each Group Company and proper provision has been
made and shown in the Accounts of each Group Company for deferred
taxation in accordance with generally accepted accounting
principles.

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	 	4.18.2	 	Since the Last Accounting Date, no member of the Group has been
involved in any transaction which has given or may give rise to a
liability to Tax on any member of the Group (or would have given or
might give rise to such a liability but for the availability of any
Relief) other than Tax in respect of normal trading income or
receipts of the member of the Group concerned arising from
transactions entered into by it in the ordinary course of business.
	 
	 	4.18.3	 	Since the Last Accounting Date, no disposal has taken place or
other event occurred which has or may have the effect of
crystallising a liability to Tax which, if such disposal or event had
been planned or predicted at the Last Accounting Date, should have
been reflected in the provision for deferred Tax contained in the
Accounts of each Group Company and so far as the Sellers are aware,
no event has occurred which has or may have the effect of prejudicing
any Relief taken into account in computing or eliminating the
provision for deferred Tax contained in the Accounts of each Group
Company.

	4.19	 	Capital Assets

	 	4.19.1	 	The book value of each asset of any member of the Group as shown in
or adopted for the purposes of the Accounts is such that if any asset
(being an asset expenditure relating to which would be taken into
account in computing whether a balancing charge or similar clawback
of relief in jurisdictions outside the United Kingdom would arise on
a disposal) were disposed of at Completion at its book value as shown
in or adopted for the purpose of the Accounts, (or if acquired at the
Accounts Date at cost) no balancing charge (or similar clawback of
relief in jurisdictions outside the United Kingdom) would be incurred
in respect of such asset.
	 
	 	4.19.2	 	No asset of any member of the Group has any “held-over gain” as
referred to in section 154 of the TCGA.

	4.20	 	Effect of Completion
	 
	 	 	So far as the Sellers are aware, no member of the Group will become liable
to pay any Tax or suffer an alteration in the manner in which it is
assessed for Tax, or lose any relief or allowances otherwise available to
it as a result of entering into this Agreement or Completion.
	 
	4.21	 	Major changes
	 
	 	 	So far as the Sellers are aware, there has been no major change in the
nature or conduct of any trade or business carried on by any member of the
Group nor has any other event or series of events occurred (including a
significant increase in the amount of any member of the Group’s capital
and any change in ownership of any member of the Group) which might,
either alone or combined with any other such event or with any of the
transactions contemplated by this Agreement, cause the disallowance or the
carry forward or back of losses or other reliefs or the disallowance of
the carry forward or back, set-off or surrender of advance corporation tax
under any of the provisions of sections 768 to 768D of the Taxes Act
(change in ownership of company) or sections

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	 	 	245 to 245B (inclusive) of
the Taxes Act (ACT set off), or which might cause the restriction of the
set-off of unrelieved surplus ACT pursuant to regulations 16, 17 or 18 of
the Shadow ACT Regulations, or which might cause a trade to be disregarded
by virtue of paragraph 8
of Schedule 7A to the TCGA.
	 
	5.	 	CHANGES SINCE THE LAST ACCOUNTING DATE
	 
	 	 	Since the Last Accounting Date:
	 
	5.1	 	the business of the Group has carried on in all material respects in the
ordinary and usual course and so as to maintain the business as a going
concern;
	 
	5.2	 	there has been no material adverse change in the financial position or
(save to the extent that the same would be likely to affect to a similar
extent generally all companies carrying on similar businesses in the place
where the relevant Group Company carries on its business) trading position
of any Group Company;
	 
	5.3	 	there has been no material reduction in the value of those fixed assets
specified in the Accounts;
	 
	5.4	 	no Group Company has declared, paid or made a dividend or distribution
(including, without limitation, a distribution within the meaning of the
Taxes Act) except for any dividends provided for in the Accounts;
	 
	5.5	 	no Group Company has created, allotted, issued, acquired, repaid or
redeemed share or loan capital or made an agreement or arrangement or
undertaken an obligation to do any of those things;
	 
	5.6	 	except to the extent expressly provided for in Schedule 2 no resolution
in general meeting or written resolution of the shareholders of any Group
Company has been passed other than resolutions relating to the routine
business of general meetings;
	 
	5.7	 	no change in the accounting reference period of any member of the Group
has been made;
	 
	5.8	 	no Group Company has, other than in the ordinary course of trading:

	 	5.8.1	 	disposed of, or agreed to dispose of, an asset; or

	 	5.8.2	 	assumed or incurred, or agreed to assume or incur, a
liability, obligation or expense (mutual or contingent);

	 	 	and in the case of a disposal or agreement to dispose of an asset for an
amount which is lower than book value or an open market arm’s length
value, whichever is the higher;
	 
	5.9	 	no Group Company has acquired or agreed to acquire an asset for an amount
which is higher than open market arm’s length value;
	 
	5.10	 	no Group Company has, other than in the ordinary course of business,
made, or agreed to make, capital expenditure exceeding in total £100,000
or incurred, or agreed to incur, a commitment or connected commitments
involving capital expenditure exceeding in total £100,000;

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	5.11	 	no Group Company has, other than in the ordinary course of business,
repaid any sum in the nature of borrowings in advance of any due date or
made any loan or incurred any indebtedness (including in each case intra
group);
	 
	5.12	 	no Group Company has, other than in the ordinary course of business, paid
or is under an obligation to pay any service, management or similar
charges or any interest or amount in the nature of interest to any other
person or incurred any liability to make such payment or made any payment
to any member of either of the Sellers’ Group whatsoever.
	 
	6.	 	CONTRACTS AND COMMITMENTS
	 
	6.1	 	Other than the Old Pool Members Agreement, the Pool Members Amendment
Agreement, the New Pool Members Agreement, the Management Services
Agreement, the AAU Pool Members Agreement, the BAIG Pool Members
Agreement, the Shareholders Agreement, the CGU Loan and the RSA Loan no
Group Company is a party to:

	 	6.1.1	 	any contract or arrangement which is material in the context
of the Business of the group as a whole or onerous with the Sellers
or a Seller’s Group Undertaking and has not guaranteed any
liabilities of the Sellers or a Seller’s Group Undertaking and is not
a party to any contract or arrangement with any director, employee,
consultant of the Sellers or a Seller’s Group Undertaking;
	 
	 	6.1.2	 	any agreement or arrangement entered into otherwise than by
way of a bargain at arm’s length;
	 
	 	6.1.3	 	any agency or management agreement other than in relation to
underwriting agency, run-off or other insurance or reinsurance
services;
	 
	 	6.1.4	 	any contract or arrangement which materially restricts its
freedom to carry on its business in any part of the world in such
manner as it may think fit;
	 
	 	6.1.5	 	any joint venture agreement or arrangement or any agreement or
arrangement under which it participates with any person in any
business;
	 
	 	6.1.6	 	any contract or arrangement which is material in the context
of the business of the Group as a whole and which can be terminated
in the event of any change in the underlying ownership or control of
the Company or any member of the Group;
	 
	 	6.1.7	 	any material agreement or arrangement which, by virtue of the
acquisition of the Shares by the Buyers or other performance of the
terms of this Agreement will result in:

	 	 	(a)	 	any other party being relieved of any
obligation or becoming entitled to exercise any right
(including any right of termination or any right of
pre-emption or other option); or
	 
	 	 	(b)	 	any Group Company being in default under any
such agreement or arrangement or losing any benefit, right or
licence which it currently

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	 	 	 	 	enjoys or in a liability or obligation of any Group Company
being created or increased;

	 
	 	6.1.8	 	any material agreement or arrangement, entered into outside
the ordinary course of business, to which any member of either of the
Sellers’ Groups is party or in which any member of either of the
Seller’s Groups (or any directors of either of the Sellers’ Groups)
is legally or financially interested.

	6.2	 	The Sellers are not aware of any breach of, or any invalidity, or grounds
for determination, rescission, avoidance or repudiation of, any contract
to which any member of the Group is a party the loss of which contract
would be material in the context of the Group taken as a whole.
	 
	6.3	 	The Company has complied in all material respects with the provisions of
the Old Pool Members Agreement, the Management Services Agreement and the
Shareholders Agreement and all of its other underwriting agency contracts
and in the performance of those agreements has not breached any duty owed
to any party, contravened any law or regulation, or acted negligently.
	 
	7.	 	BANK BORROWINGS AND LIABILITIES

	 	7.1.1	 	The total amount of Indebtedness of any member of the Group
from its bankers does not exceed any limitation contained in any of
its financing arrangements and the total amount of Indebtedness of
any member of the Group does not exceed any limitation on its
borrowing contained in its articles of association or in any
debenture or other instrument.
	 
	 	7.1.2	 	No event which is (i) an event of default under, or (ii) is a
material breach of, or (iii) would entitle any third party to call
for repayment prior to normal banking maturity under any of the terms
of any loan capital, borrowing, debenture or financial facility of
any member of the Group has occurred or been alleged.
	 
	 	7.1.3	 	Other than as arising pursuant to clause 7 (Intra Group Debt),
or as arising as a result of loans made to a Group Company by the
Buyers and RSA (where the aggregate amount of loans made by RSA to a
Group Company does not exceed £5,092,458.37), or as referred to in
paragraphs 7.1.4 and 7.1.5 below, the aggregate value of the
outstanding Indebtedness of the Group, whether or not of a type which
would be required to be shown or reflected in the Accounts, does not
exceed £250,000. No member of the Sellers’ Group has done anything
whereby the continuance of any financing arrangements referred to in
this clause 7 (including without limitation, those referred to in
paragraphs 7.1.4 and 7.1.5 below) in full force and effect might be
affected or prejudiced.
	 
	 	7.1.4	 	The aggregate of all outstanding liabilities of any member of
the Group arising in relation to any letters of credit issued
pursuant to the Letter of Credit Scheme as at 21 November 2002 does
not exceed US$12,268,859.32.
	 
	 	7.1.5	 	The aggregate of all outstanding liabilities of any member of
the Group arising in relation to any letters of credit issued other
than pursuant to the Letter of Credit Scheme as at 21 November 2002
does not exceed US$10,851,836.61.

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	 	7.1.6	 	There are no Encumbrances affecting any of the assets of any
member of the Group.
	 
	 	7.1.7	 	There are no contracts or commercial arrangements which are
material in the context of the business of the Group as a whole to
which any member of the Group is a party that are dependent on, or
would be adversely affected by the termination of, any financial
facility available to any member of the Group (including, but not
limited to, the Letter of Credit Scheme) that will not remain in
place following Completion.
	 
	 	7.1.8	 	No member of the Group is a party to or is liable (including
contingently) under a guarantee, indemnity or other agreement to
secure or incur a financial or other obligation with respect to the
obligation of another person who is not a member of the Group.
	 
	 	7.1.9	 	No part of the loan capital, borrowing or Indebtedness in the
nature of borrowing of any member of the Group is dependent on the
guarantee or indemnity of, or Encumbrance provided by, another person
save that this warranty shall not apply to any loan capital,
borrowing or Indebtedness where the person to whom such indebtedness
is owed is another member of the Group.

	8.	 	INSOLVENCY

	 	8.1.1	 	No order has been made and no resolution has been passed for
the winding up of any member of the Group or the Sellers and no
petition has been presented for the purpose of winding up any member
of the Group or the Sellers.
	 
	 	8.1.2	 	No administration order has been made and no petition for such
an order has been presented in respect of any member of the Group or
the Sellers.
	 
	 	8.1.3	 	No receiver (which expression shall include an administrative
receiver) has been appointed in respect of any member of the Group or
the Sellers or all or any of its assets.
	 
	 	8.1.4	 	No voluntary arrangement has been proposed under section 1
Insolvency Act 1986 in respect of any member of the Group or the
Sellers.
	 
	 	8.1.5	 	No member of the Group or the Sellers is insolvent, or unable
to pay its debts within the meaning of section 123 Insolvency Act
1986, or has stopped paying its debts as they fall due.
	 
	 	8.1.6	 	No compromise or arrangement under section 425 of the
Companies Act 1985 has been proposed, agreed to or sanctioned in
respect of any member of the Group or the Sellers.
	 
	 	8.1.7	 	No member of the Group or the Sellers has entered into any
compromise or arrangement with its respective creditors or any class
of its respective creditors generally.
	 
	 	8.1.8	 	There is no unsatisfied judgement or court order outstanding
against any member of the Group or the Sellers in any jurisdiction.

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	 	8.1.9	 	No action is being taken by the Registrar of Companies to
strike any member of the Group off the register under Section 652 of
the Companies Act 1985.

	9.	 	LICENCES AND COMPLIANCE WITH LAW
	 
	9.1	 	Each member of the Group has in all material respects carried on and is
carrying on its business and operations and dealt with its assets in
compliance with the applicable laws (including Environmental Laws) and
regulations and by laws in each country in which its business and
operations is carried on.
	 
	9.2	 	All licences, consents, authorisations and other permissions and
approvals required by any Group Company for or in connection with the
carrying on of the business now being carried on by each member of the
Group are in full force and effect, have been complied with in all
material respects, and no notice has been received by any member of the
Group that any such licences, consents, permissions or approvals are
likely to be revoked. A summary of all such licences (other than licences
for the use of Intellectual Property and licences to occupy any of the
Properties), consents, authorisations and other permissions and approvals
are set out in the Disclosure Letter. There are no circumstances which
indicate that any of the said licenses, consents, authorisations and other
permissions and approvals will or are likely to be revoked or not renewed,
in whole or in part, in the ordinary course of events (whether as a result
of the acquisition of the Shares by the Buyers or otherwise).
	 
	9.3	 	No member of the Group nor a person for whose acts or defaults a member
of the Group may be vicariously liable has:

	 	9.3.1	 	induced a person to enter into an agreement or arrangement
with any member of the Group by means of an unlawful or immoral
payment, contribution, gift or other inducement;
	 
	 	9.3.2	 	offered or made an unlawful or immoral payment, contribution,
gift or other inducement to a government official or employee; or
	 
	 	9.3.3	 	directly or indirectly made an unlawful contribution to a
political activity.

	9.4	 	No Group Company is a party to (or is concerned in) any agreement,
arrangement, concerted practice or course of conduct which (i) was
registrable under the provisions of the Restrictive Trade Practices Act
1976 (as amended), or (ii) contravened the provisions of the Resale Prices
Act 1976, or (iii) falls within Article 81 and/or Article 82 of the EC
Treaty; or (iv) falls within Article 53 and/or Article 54 of the Agreement
on the European Economic Area; or (v) falls within the prohibitions
contained in Chapter I or Chapter II of the Competition Act 1998; or (vi)
otherwise infringes the competition legislation or practice of any other
jurisdiction.
	 
	9.5	 	No Group Company has received any notice or other communication (formal
or informal) by or on behalf of the Office of Fair Trading (whether under
the Fair Trading Act 1973, the Competition Act 1980, the Competition Act
1998 or otherwise), the Competition Commission, the European Commission,
the Secretary of State for Trade and Industry, the EFTA Surveillance
Authority or any other authority having jurisdiction in competition
matters in relation to any breach of any competition law by virtue of any

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	 	 	agreement, arrangement, concerted practice or course of conduct to which
any Group Company is a party.
	 
	9.6	 	No Group Company is subject to or in default of any order, judgment,
decision or direction given by any court or governmental or regulatory
authority, or party to any undertaking or assurance given to any such
court or authority, in relation to competition matters which is still in
force.
	 
	10.	 	POWERS OF ATTORNEY
	 
	 	 	No member of the Group has given any power of attorney or other written
authority which is still outstanding or effective to any person to enter
into any contract or commitment on their behalf (other than to their
directors, officers and employees to enter into routine trading contracts
in the normal course of their duties).
	 
	11.	 	INSURANCES
	 
	11.1	 	A list of the insurance policies (the “Policies”) held by each member of
the Group is attached to the Disclosure Letter and no claims are
outstanding under such Policies in respect of any member of the Group.
	 
	11.2	 	Each of the Policies is valid and enforceable and is not void or voidable
and so far as the Sellers are aware, there are no circumstances which
might make any of the Policies void or voidable or enable any insurer to
refuse payment of all or part of any claim under the Policies.
	 
	11.3	 	Each fixed, physical asset of any member of the Group (excluding the
Properties) has at all times been and is at the date of this agreement
insured at a value and against each risk which a person carrying on the
business carried on by that member of the Group would normally insure
against in the ordinary course of that business.
	 
	11.4	 	The Group has paid all premiums due in respect of all the Policies.
	 
	12.	 	ASSETS
	 
	12.1	 	Each of the material assets (other than the Property) included in the
Accounts or acquired by any member of the Group since the Last Accounting
Date (other than current assets sold, realised or applied in the normal
course of trading) is owned both legally and beneficially by the relevant
member of the Group and each of those assets capable of possession is in
the possession of the relevant member of the Group (save where in the
possession of a third party in the normal course of business).
	 
	12.2	 	No option, right to acquire, mortgage, charge, pledge, lien (other than a
lien arising by operation of law in the ordinary course of trading) or
other form of security or encumbrance or equity on, over or affecting the
whole or any part of the undertaking or assets of any member of the Group
is outstanding and there is no agreement or commitment to give or create
any and no claim has been made by any person to be entitled to any.
	 
	12.3	 	The assets (other than the Property) of each Group Company and the
facilities and services to which each Group Company has a contractual
right include all rights,

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	 	 	properties, assets, facilities and services necessary for the carrying on
of the business of that Group Company in the manner in which it is
currently carried on.
	 
	12.4	 	No Group Company is a party to any hiring or leasing agreement, hire
purchase agreement, credit agreement or other similar agreement which is
material in the context of the business of the relevant Group Company.
	 
	12.5	 	No Group Company depends in any material respect upon the use of assets
owned by, or facilities or services provided by, any member of either of
the Sellers’ Groups.
	 
	13.	 	PROPERTY
	 
	13.1	 	The Properties comprise all of the land and premises vested in, occupied
or used by, or in the possession of, any member of the Group. The
information in respect of the Properties set out in Schedule 6A and 6B is
true and not misleading in any respect.
	 
	13.2	 	The Company has no actual or contingent obligations or liabilities (in
any capacity including as principal contracting party or guarantor) in
relation to any lease, licence or other interest in, or agreement relating
to, land apart from the Properties.
	 
	13.3	 	The Company/each Group Company (as appropriate) has a good and legally
marketable title to the Properties (but excluding any Property held under
a non-assignable lease) and the Company/each Group Company (as
appropriate) is solely legally and beneficially entitled to the
Properties.
	 
	13.4	 	So far as the Sellers are aware the Company/each Group Company (as
appropriate) has under its control all title deeds and documents necessary
to prove its title to the Properties.
	 
	13.5	 	So far as the Sellers are aware the Material Properties have the benefit
of all permanent and legally enforceable easements and other contractual
rights (if any) necessary for the continued present use and enjoyment of
the same.
	 
	13.6	 	The existing use of the Material Properties is the lawful permitted use
under the current Town and Country Planning legislation and under the
terms of the lease under which any Material Properties are held or
otherwise and are not temporary uses and all necessary consents to such
existing uses have been obtained.
	 
	13.7	 	So far as the Sellers are aware the Material Properties are not subject
to any overriding interests within the meaning of section 70 of the Land
Registration Act 1925.
	 
	13.8	 	So far as the Sellers are aware, the Properties are not subject to the
payment of any outgoings other than uniform business rates, water and
sewerage rates, rent, service charge and insurance premiums and there is
no outstanding liability for any rent, service charge, insurance premiums,
rates, taxes or other outgoings.
	 
	13.9	 	There are no outstanding enforcement or other notices or proceedings
issued in respect of any Material Properties and there is no resolution or
proposal for compulsory acquisition by the local or any other authority
nor any outstanding order or notice of any such authority that affects the
existing use of any Material Properties or involves expenditure

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	 	 	in complying with it nor any other circumstances known which may result in
any such order or notice being served in respect of any Material
Properties.
	 
	13.10	 	Each policy of insurance in respect of the Material Properties is valid
and enforceable and is not void or voidable and so far as the Sellers are
aware, there are no circumstances which might make any such policy void or
voidable or enable any insurer to refuse payment of all or part of any
claim under any such policy and all the usual incidences (for which cover
is generally available on normal commercial terms) in relation to the
Material Properties are in force.
	 
	13.11	 	The Sellers have not received any written notice of outstanding
disputes, notices or complaints which affect the use of the Material
Properties for the purposes for which they are now used.
	 
	13.12	 	There are, and during the period of ownership of the Property by the
Company/Group Company (as appropriate) have been, no Property Proceedings
and so far as the Sellers are aware none are pending or threatened.
	 
	13.13	 	So far as the Sellers are aware, no fact or circumstance exists which
might give rise to a Property Proceeding in respect of the Material
Properties.
	 
	13.14	 	There is no outstanding notice, judgment, order, decree, arbitral award
or decision of a court, tribunal, arbitrator or governmental agency
affecting the Material Properties.
	 
	13.15	 	Where applicable the Company has complied in all material respects with
its obligations under the Fire Precautions Act 1971 in respect of the
Material Properties and has applied for and obtained fire certificates
thereunder in respect of the Material Properties to the extent required by
such Act.
	 
	13.16	 	All buildings and structures comprised in the Material Properties are in
good and substantial repair and condition and so far as the Sellers are
aware, there are no material defects therein (whether latent, inherent or
otherwise) and no such buildings and structures have been the subject of
flooding or drainage defects.
	 
	13.17	 	Full details of all leases in respect of the Material Properties have
been disclosed in writing to the Buyers or their solicitors prior to the
date hereof.
	 
	13.18	 	Where applicable, the Company does not at the date hereof hold any
estate or interest in the Material Properties in the United Kingdom, or
any estate or interest which was derived from such an estate or interest,
that was transferred or granted to it by an instrument executed within two
years prior to the date hereof, such instrument having been stamped on the
basis that either group relief under section 42 of the Finance Act 1930,
section 11 of the Finance Act (Northern Ireland) 1954 or section 151 of
the Finance Act 1995 applied or that relief under section 76 of the
Finance Act 1986 applied.
	 
	14.	 	IP WARRANTIES
	 
	14.1	 	A Group Company is the sole and absolute legal and beneficial owner of
all the Intellectual Property listed in schedule 5. The Intellectual
Property listed in Schedule 5 is free from Encumbrances.

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	14.2	 	The owner or applicant for each Intellectual Property Right specified in
Schedule 5 is correctly stated. Schedule 5 contains a complete and
accurate list of the registrable Intellectual Property owned by the Group
and/or used in connection with the business of the Group which is material
to the business of the Group.
	 
	14.3	 	All application, filing, registration and renewal fees have been paid in
relation to the Intellectual Property Rights listed in Schedule 5.
	 
	14.4	 	The Group owns, or has licensed to it, all Intellectual Property required
to carry on the business of the Group substantially as it is carried on at
Completion. The Sellers are not aware of any fact or matter which may
render the Intellectual Property vulnerable to loss or liable to
termination following the acquisition by the Buyer’s Group of the Shares
pursuant to this Agreement on the same basis as it is presently used.
	 
	14.5	 	So far as the Sellers are aware, none of the operations of any member of
the Group infringes or is likely to infringe the Intellectual Property of
a third party.
	 
	14.6	 	No claim has been made by any member of the Group which alleges that a
third party is infringing or is likely to infringe the Intellectual
Property of the Group used in connection with the business of the Group.
	 
	14.7	 	As at Completion, no member of the Group has received notification of any
claim made by a third party which alleges that the operations of any
member of the Group infringe, or are likely to infringe, the Intellectual
Property of a third party or which otherwise disputes the right of any
member of the Group to use the Intellectual Property used in connection
with the business of the Group.
	 
	14.8	 	No member of the Group has granted a licence, assignment or other right
in respect of any of the Intellectual Property Rights.
	 
	14.9	 	A list of all material licences or rights granted to any of the Group
Companies or which any of the Group Companies intends to enter into for
the purposes of the business of the Group or which are currently being
negotiated relating to the Intellectual Property used in connection with
the business of the Group are set out in schedule 5. So far as the
Sellers are aware, there has been, or is, no notice of breach nor notice
of any other cause for termination of any such licences or undertakings.
	 
	14.10	 	Confidential information of the Group, or which has been used by the
Group, has been kept confidential and has not been disclosed to third
parties except in the ordinary course of business and subject to written
confidentiality obligations from the third party. So far as the Sellers
are aware, these confidentiality obligations have not been breached and
none of the operations of the Group involves the unauthorised use of
confidential information disclosed in circumstances which might entitle a
third party to make a claim against any member of the Group.
	 
	15.	 	IT WARRANTIES, DATA PROTECTION AND DOMAIN NAMES
	 
	15.1	 	Computer Systems

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	 	15.1.1	 	The In-House Computer Software is legally and beneficially owned by
the Company free from any encumbrance and no licence or permission is
required from any third party to use the In-House Computer Software
in connection with the business of the Group.
	 
	 	15.1.2	 	No member of the Group has authorised a third party to reverse
engineer or create derivative words of software or systems included
in the In-House Computer Software.
	 
	 	15.1.3	 	The Company is validly licensed to use the Licensed Computer
Software in connection with the business of the Group.
	 
	 	15.1.4	 	The Licensed Computer Software does not contain any third party
software or systems which are not available from third party
suppliers on arm’s length commercial terms.
	 
	 	15.1.5	 	The Computer Systems are adequate for the immediate needs of the
business of the Group, including without limitation as to the system
capacity and ability to process current peak volumes in a timely
manner.
	 
	 	15.1.6	 	In the twelve months prior to the date hereof none of the Group
Companies have suffered any substantial disruption or interruption in
or to its use of the Computer Systems and the Sellers are not aware
of any fact or matter which may so disrupt or interrupt or affect the
use of such equipment following the acquisition by the Buyer’s Group
of the Shares pursuant to this Agreement on the same basis as it is
presently used.
	 
	 	15.1.7	 	The Company has taken reasonable measures to protect the secrecy
and confidentiality of the In-house Computer Software, and the source
code relating to such In-house Computer Software is in the sole
possession of the Company.
	 
	 	15.1.8	 	The Company has full right and authority to use the Computer
Systems, and such use is not wholly or partly dependent on any
facilities or services not under the exclusive ownership and control
of the Company.

	15.2	 	Computer Contracts

	 	15.2.1	 	All the Computer Contracts are valid and binding and none of the
Computer Contracts have been the subject of any breach or default, or
any event which (with notice or lapse of time or both) would
constitute a default, or is liable to be terminated or otherwise
adversely affected by Completion.
	 
	 	15.2.2	 	The Company shall be entitled to continue to use the Computer
Systems notwithstanding the transactions contemplated in this
Agreement without consent from any third party.
	 
	 	15.2.3	 	The Company has not copied or used any of the Computer Software in
violation of the applicable license or otherwise violated any of
their agreements or the rights of others with respect thereto.

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	 	15.2.4	 	The Company has binding maintenance and support contracts for the
Licensed Computer Software. There is no reason to believe that the
contracts will not be renewed when they expire on the same or
substantially similar terms.

	15.3	 	Data Protection

	 	15.3.1	 	The Group is in material compliance with all applicable data
protection laws and no notice or allegation has been received by the
Group from a competent authority alleging that the Group has not so
complied.
	 
	 	15.3.2	 	As at Completion, the Group has not been notified of any claim
against the Company by an individual for breaches of applicable data
protection laws.

	15.4	 	Domain Names
	 
	 	 	The Group Companies’ domain names, currently registered with an authorised
body, are transferable to the Buyer’s Group.
	 
	15.5	 	Euro
	 
	 	 	The Nexus System can:

	 	15.5.1	 	process and display data representing any amount in the Euro as it
processes and displays data representing amounts in other currencies;
and
	 
	 	15.5.2	 	perform currency conversions.

	16.	 	EMPLOYEES
	 
	16.1	 	General

	 	16.1.1	 	No Group Company is a party to any contract for services or
consultancy agreement with any individual or services company (the
primary role of which is to make available to any Group Company the
services of a consultant).
	 
	 	16.1.2	 	There is no subsisting employment contract between any Group
Company and any of their Employees which cannot be lawfully
terminated on three months’ notice or less without compensation
(other than compensation for unfair dismissal in accordance with the
Employment Rights Act 1996).
	 
	 	16.1.3	 	The Disclosure Letter contains details as at the date of this
Agreement of:
	 

	 	 	(a)	 	the total number of Employees including those
who are on secondment, maternity leave or absent because of
disability or other long-term leave of absence and who have
or may have a statutory or contractual right to return to
work with any Group Company;
	 
	 	 	(b)	 	the date of start of employment, period of
continuous employment and salary of each Employee;

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	 	 	(c)	 	terms of all share incentive schemes, share
option scheme or profit sharing, bonus or other incentive
schemes, applicable to all or any Employees or their
dependants; and
	 
	 	 	(d)	 	the terms of all current recognition,
procedural, collective or other agreements between any Group
Company and any trade union or other body representing the
Employees or any of them;

	 
	 	16.1.4	 	There is no agreement or arrangement between any Group Company and
an Employee or former employee with respect to his employment, his
ceasing to be employed, his suspension from employment, any variation
of his contract of employment or his retirement which is not included
in the written terms of his employment or previous employment and
disclosed in the Disclosure Letter.
	 
	 	16.1.5	 	No Group Company has entered into any arrangement regarding any
future variation in any contract of employment in respect of any of
the Employees or any agreement imposing an obligation on any Group
Company to increase the basis and/or rates of remuneration and/or the
provision of other benefits in kind (including any share incentive,
share option, profit related pay, profit sharing bonus or other
incentive scheme) to or on behalf of any of the Employees at any
future date.
	 
	 	16.1.6	 	The Employees constitute all of the directors, officers and
employees employed or otherwise engaged by the Company or any Group
Company in the business of the Group.

	16.2	 	Compliance with laws
	 
	 	 	Each Group Company has complied in all material respects with all relevant
provisions of the Treaty of Rome, EC Directives, statutes, regulations,
collective agreements, terms and conditions of employment, orders,
declarations and awards relevant to the Employees or its former employees
or the relations between any Group Company and any trade union, staff
association or any other body representing its Employees or former
employees and has complied in all material respects with all their
obligations concerning health and safety at work of each of the Employees
and its former employees and has not incurred any liability to any
Employee or former employee in respect of any accident or injury.
	 
	16.3	 	Redundancies and transfer of business

	 	16.3.1	 	Within one year ending on the date of this Agreement no Group
Company has:
	 

	 	 	(a)	 	given notice of redundancies to the relevant
Secretary of State or started consultations with appropriate
representatives under Chapter II of Part IV of the Trade
Union and Labour Relations (Consolidation) Act 1992 or failed
to comply with its obligations under Chapter II of Part IV of
that Act; or
	 
	 	 	(b)	 	been a party to a relevant transfer (as defined
in the Transfer of Undertakings (Protection of Employment)
Regulations 1981) or failed to

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	 	 	 	 	comply with a duty to inform and consult appropriate
representatives under those Regulations.

	 	16.3.2	 	No Group Company has employed and no Group Company does employ or
otherwise engage any person whose contract of employment after any
“relevant transfer” (as defined in regulation 2 of the Transfer of
Undertakings (Protection of Employment) Regulations 1981) has had
effect as if made originally between that person and any Group
Company or any predecessor to any Group Company.

	16.4	 	Trade unions
	 
	 	 	No Group Company has any agreement or arrangement with or recognises a
trade union, works council, staff association or other body representing
any of their employees for the purpose of collective bargaining or other
negotiating purposes.
	 
	16.5	 	Industrial relations
	 
	 	 	Within the one year preceding the date hereof no Group Company has been
engaged or involved in any trade dispute (as defined in section 218 of the
Trade Union and Labour Relations (Consolidation) Act 1992) with any
employee, trade union, staff association or any other body representing
employees and no event has occurred which could or might give rise to any
such dispute and no industrial action involving employees, official or
unofficial, is now occurring or threatened nor has any industrial
relations or employment matter been referred either by a Group Company or
its employees or by any trade union staff association or any other body
representing employees to ACAS for advice, conciliation or arbitration.
	 
	16.6	 	Changes since the Last Accounting Date
	 
	 	 	Since the Last Accounting Date no Group Company has made, announced or
proposed any changes to the emoluments or benefits (including pension fund
commitments) of or any bonus to any employees and no Group Company is
under any express or implied obligation to make any such changes with or
without retrospective operation.
	 
	16.7	 	Loans
	 
	 	 	There are no amounts owing or agreed to be loaned or advanced by any Group
Company to any Employees or former employees (other than amounts
representing remuneration accrued due for the current pay period, season
ticket loans, accrued holiday pay for the current holiday year or for
reimbursement of expenses).
	 
	16.8	 	Notice of termination, leave of absence, disciplinary warning and
outstanding offers

	 	16.8.1	 	Before the date of this Agreement no Employee of any Group Company
had given or received notice to terminate his employment or
engagement.
	 
	 	16.8.2	 	There are no Employees of any Group Company who are on secondment
or other leave of absence (other than maternity leave, normal
holidays or absence of no more than one week due to illness).

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	 	16.8.3	 	No Employee of any Group Company is subject to a current
disciplinary warning.
	 
	 	16.8.4	 	There are no outstanding offers of employment or engagement by any
Group Company to employ or engage an employee and no person has
accepted an offer to become an employee but not yet taken up the
position accepted.
	 
	 	16.8.5	 	Before the date of this Agreement no Employee has tendered written
notice of resignation as a result of the acquisition of the Company
by the Buyers or other performance of the terms of this Agreement.
	 
	 	16.8.6	 	No Employee will be entitled to treat his employment as terminated
or to receive any payment or benefit or to have his contract of
employment altered or be entitled to an increased period of notice of
termination of employment as a result of the provisions of this
Agreement.

	16.9	 	Enquiries and discrimination
	 
	 	 	So far as the Sellers are aware, there are no existing enquiries or
investigations existing affecting any Group Company in relation to any
Employee or former employee (both of the Company or any Group Company) by
the Equal Opportunities Commission, the Commission for Racial Equality,
the Disability Rights Commission or the Health and Safety Executive or any
other bodies in other jurisdictions with similar functions or powers in
relation to workers.
	 
	16.10	 	Intellectual Property Rights
	 
	 	 	No Employee or former employee of any Group Company nor anyone who is or
who has at any time in the past provided services to any Group Company
under a contract for services has any right to ownership of any invention
or improvement made or discovered by him in the course of employment with
a Group Company or claimed under the Patents Act 1977 or otherwise any
compensation or payment in respect of or right to use any such invention
or improvement.
	 
	16.11	 	Claims by Employees
	 
	 	 	No Employee or former employee of any Group Company or any employee of a
predecessor in business has served on any Group Company any claim or right
of action against any Group Company:

	 	16.11.1	 	in respect of any accident or injury which is not fully covered by
insurance; or
	 
	 	16.11.2	 	for breach of any contract of services or for services; or
	 
	 	16.11.3	 	for loss of office or arising out of or connected with the
termination of his office or employment.

	17.	 	PENSIONS AND OTHER BENEFITS
	 
	17.1	 	For the purposes of this paragraph 17:

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	 	 	“Disclosed Schemes” means the Global Aerospace Underwriting Managers
Pension Scheme (the UK Scheme), the FURBS, the Retirement Plan of AAU, the
Capital Accumulation Plan of AAU, the Pension Plan for Employees of Global
Aerospace Underwriting Managers (Canada) Limited, the Supplemental
Retirement Plan to the Retirement Plan of AAU and the Group Benefits Plan
insofar as the terms of those schemes have been disclosed to the Buyers in
the documents referred to in the Disclosure Letter.
	 
	 	 	“FURBS” means the funded unapproved retirement benefit schemes for Peter
James Bernhard, Kenneth James Mowbray Walder, Anthony John Medniuk,
Matthew Farrell and Andrew Alexander Duguid.
	 
	 	 	“Relevant Employee” means a director or employee or former director or
former employee of a Group Company.
	 
	17.2	 	Save for the Disclosed Schemes there is not in operation, and no proposal
has been announced to enter into or establish, any agreement, scheme, or
arrangement for the payment by a Group Company of, or payment by a Group
Company of a contribution towards, a pension, allowance, lump sum on or
after retirement, death or invalidity or post-retirement medical or dental
benefits, ex gratia or otherwise (together “Benefits”) for the benefit of
or in respect of any Relevant Employee, nor is any Group Company a party
to any custom or practice to provide Benefits to or in respect of any
Relevant Employee.
	 
	17.3	 	Except for the Disclosed Schemes, no Group Company has any outstanding
liabilities in respect of any former scheme agreement or arrangement whose
purpose was or included the provision or funding of Benefits.
	 
	17.4	 	All material information relating to the benefits and discretionary
practices provided under the Disclosed Schemes and any outstanding claims
or complaints made or threatened in connection with the Disclosed Schemes
or (in relation to any Benefits) any Group Company has been disclosed to
the Buyers in the documents referred to in the Disclosure Letter.
	 
	17.5	 	Each Group Company and, so far as the Sellers are aware, the trustees,
administrators, managers, custodians and fiduciaries (as applicable) of
each Disclosed Scheme have complied and are in compliance with their
respective obligations under the Disclosed Schemes, and all applicable
legislation relating to the Disclosed Schemes and each Disclosed Scheme is
and has at all times operated in accordance with the trusts, powers and
provisions of their governing documentation, all applicable legislation,
and the general requirements of law and regulatory practice and no report
has been made to any regulatory authority in relation to any potential or
actual non-compliance.
	 
	18.	 	LITIGATION
	 
	18.1	 	Except as a result of claims that arise in the Group’s ordinary course of
business as an agent:

	 	18.1.1	 	no member of the Group is a party to any civil, criminal,
arbitration, administrative or other proceedings;

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	 	18.1.2	 	no notification of any material civil, criminal, arbitration,
administrative or other proceeding is pending or threatened by or
against any member of the Group;
	 
	 	18.1.3	 	no fact or circumstance exists which might give rise to a material
civil, criminal, arbitration, administrative or other proceeding
involving any member of the Group.

	18.2	 	So far as the Sellers are aware, no governmental or official
investigation or inquiry concerning any Group Company is in progress or
pending.
	 
	19.	 	BROKERAGE OR COMMISSIONS
	 
	 	 	No person is entitled to receive from any member of the Group a finder’s
fee, brokerage or commission in connection with this agreement or anything
in it and no member of the Group is liable to pay to any of its directors,
employees, agents and advisers any sum whatsoever in connection with the
sale of the Shares.
	 
	20.	 	ENVIRONMENTAL
	 
	20.1	 	Neither the Sellers nor any Group Company has received any written notice
of any claims, proceedings, actions or regulatory investigations pending
against any Group Company with respect to non-compliance with or liability
(whether actual or prospective), obligation or duty under Environmental
Laws nor have any such claims, proceedings, actions or investigations been
threatened in writing.
	 
	20.2	 	No written claims, complaints, demands or notices have been received by
the Sellers or any Group Company alleging or specifying any breach of or
liability under any Environmental Laws by any Group Company.
	 
	21.	 	EFFECT OF SALE
	 
	21.1	 	Save as otherwise provided for in this Agreement before the date of this
Agreement none of the individuals referred to in clause 1.5.1 or 1.5.2 has
been expressly notified by a director of a Group Company or a Senior
Employee that he or she intends to resign as a director of a Group Company
or as an employee of a Group Company as a result of the performance of the
transaction contemplated by this Agreement.
	 
	21.2	 	Neither the execution of nor performance of this Agreement or any
document to be executed at or before Completion will make any member of
the Group liable to offer for sale, transfer or otherwise dispose of or
purchase or acquire any assets, including shares held by it in other
bodies corporate under their articles of association or any agreement or
arrangement.

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SCHEDULE 4

LIMITATIONS ON THE SELLERS’ LIABILITY

	1.	 	LIMITATION ON QUANTUM
	 
	1.1	 	The Sellers shall not be liable to any Buyer in respect of a Relevant
Claim or a Tax Claim:

	 	1.1.1	 	unless the amount that would otherwise be recoverable by the
Buyers (or any of them in aggregate between them) from the Sellers
(but for this paragraph 1.1.1) in respect of that Relevant Claim or
Tax Claim exceeds £100,000. Any claims which share a common basis by
reference to the nature of the acts or omissions or circumstances in
respect of which each claim is made shall be aggregated for the
purposes of this paragraph 1.1.1. Any claims which do not share a
common basis or relate to the same facts as aforesaid shall be
treated for the purposes of this paragraph 1.1.1 as giving rise to
separate claims; and
	 
	 	1.1.2	 	unless and until the amount that would otherwise be
recoverable from the Sellers by the Buyers (or any of them in
aggregate between them) (but for this paragraph 1.1.2) in respect of
that Relevant Claim or Tax Claim, when aggregated with any other
amount or amounts recoverable in respect of other Relevant Claims and
Tax Claims recoverable by the Buyers (or any of them in aggregate
between them) (excluding any amounts in respect of a Relevant Claim
or a Tax Claim for which the Sellers have no liability because of
paragraph 1.1.1), exceeds £1 million and in the event that the
aggregated amounts exceed £1 million the Sellers shall be liable for
the entire amount not just the excess.

	1.2	 	CGU’s total aggregate liability in respect of all Relevant Claims, Tax
Claims and Relevant Indemnity Claims (which Claims, for the avoidance of
doubt, shall include any payments associated with such Claims required to
be paid by CGU under clause 25) is limited to US$85,351,562.50 and RSA’s
total aggregate liability in respect of all Relevant Claims, Tax Claims
and Relevant Indemnity Claims (which Claims, for the avoidance of doubt,
shall include any payments associated with such Claims required to be paid
by RSA under clause 25) is limited to US$67,310,937.50, comprising in
total US$152,662,500.
	 
	1.3	 	For the avoidance of doubt, the liability of the Sellers to each of the
Buyers in respect of each Relevant Claim and Tax Claim shall be joint and
several subject to the limitation on their respective liability under
paragraph 1.2.
	 
	1.4	 	The Sellers total aggregate liability in respect of any Relevant Claim,
claim under the Tax Warranties or Indemnity Claim which arises in relation
to Ortac shall be assessed only by reference to the diminution in value of
Global’s investment in Ortac arising from such Relevant Claim, claim under
the Tax Warranties or Indemnity Claim, except to the extent that any such
Claim results also in any separate loss or liability being suffered by any
Group Company, in which case, the Sellers’ total aggregate liability shall
include any

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	 	 	loss or liability to any Buyer referable to the loss or liability suffered
by the relevant Group Company.
	 
	2.	 	TIME LIMITS FOR BRINGING CLAIMS
	 
	 	 	Neither of the Sellers shall be liable to a Buyer for a Relevant Claim or
a Tax Claim unless the Buyer has notified the relevant Seller of the
Relevant Claim or Tax Claim stating (in such detail as the Buyer is then
reasonably able to provide) the matter which gives rise to the Relevant
Claim or Tax Claim and the nature of the Relevant Claim or Tax Claim:

	 	2.1.1	 	subject to paragraph 2.1.2, in respect of any claims under the
Warranties (except the Tax Warranties) on or before the first
Business Day occurring 18 months after Completion; or
	 
	 	2.1.2	 	in respect of any Tax Claim;

	 
	 	 	(a)	 	where that claim relates to a liability to Tax
imposed by the United Kingdom, on or before the first
Business Day occurring 6 years after the end of the
accounting period during which Completion occurs; or
	 
	 	 	(b)	 	where that claim relates to a liability to Tax
imposed by any other jurisdiction, on or before the date
falling 30 days after the statutory time limit in relation to
a Tax Authority bringing a claim in relation to Tax
(including any extension granted to such time limit) in the
jurisdiction in which the Tax in question is sought.

	3.	 	NOTICE OF CLAIMS
	 
	3.1	 	A Relevant Claim made by one or more Buyers against one or more Sellers
and notified in accordance with paragraph 2 of this Schedule and not
satisfied, settled or withdrawn is unenforceable against the Sellers:

	 	3.1.1	 	where the Relevant Claim is based upon what, at the time of
service of the notice, is a contingent liability, if legal
proceedings in respect of such Relevant Claim have not been commenced
within 12 months of such claim ceasing to be contingent; or
	 
	 	3.1.2	 	where the Buyer is taking or has taken such action at the
request of the Sellers pursuant to paragraph 5 of this schedule in
connection with such claim, if legal proceedings in respect of such
Relevant Claim have not been commenced within 12 months of the Buyer
ceasing to take such action; or
	 
	 	3.1.3	 	with regard to any other Relevant Claim, if legal proceedings
in respect of such a claim have not been commenced within 12 months
of the service of such notice.

	4.	 	SPECIFIC LIMITATIONS
	 
	4.1	 	Neither of the Sellers shall be liable to a Buyer in respect of a
Relevant Claim or a claim under the Tax Warranties:

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	 	4.1.1	 	to the extent that the matter giving rise to the Relevant
Claim would not have arisen but for:

	 
	 	 	(a)	 	a deliberate and voluntary act or transaction
carried out by a Buyer’s Group Undertaking after Completion
otherwise than in the ordinary course of trading or business
of that Buyer’s Group Undertaking and which that Buyer’s
Group Undertaking knew or ought reasonably to have known on
the basis of its actual knowledge at the relevant time would
give rise to a Relevant Claim; or
	 
	 	 	(b)	 	the passing of, or a change in, a law,
regulation, published interpretation of the law or published
administrative practice by the English courts, other courts
of competent jurisdiction, or a governmental department,
agency or regulatory body after the date of this Agreement or
an increase in the Tax rates or an imposition of Tax, in each
case not actually or prospectively in force at the date of
this Agreement;

	 
	 	4.1.2	 	to the extent that the matter giving rise to the Relevant
Claim arises from an act, omission or transaction occurring before
Completion at the request or direction of, or with the consent of, a
member of that Buyer’s Group (save that this paragraph shall not
apply to an act, omission or transaction undertaken by, or at the
request or direction of, or with the consent of, a member of a
Buyer’s Group (or any representative thereof) in its capacity as a
member of any insurance underwriting pool, with the exception of the
New Global Aerospace Pool managed by any member of the Group before
Completion);
	 
	 	4.1.3	 	to the extent that the relevant Buyer is actually aware as at
the date hereof that it has or will have as at Completion a Relevant
Claim or a claim under the Tax Warranties against the Sellers or
either of them.

	4.2	 	If in respect of any one matter or series of matters a Relevant Claim may
be made under the Warranties and an Indemnity Claim may be made under the
Indemnities, to the extent that the claim is satisfied under the
Warranties, any amount payable under the Indemnities in respect of the
same matter is reduced accordingly and vice versa.
	 
	5.	 	RECOVERY FROM ANOTHER PERSON
	 
	5.1	 	This paragraph 5 shall apply in circumstances where:

	 	5.1.1	 	any claim, action or demand (for the purposes of this
paragraph 5 a “claim”) is made against a company in a Buyer’s Group
or the Group by any person other than a Seller’s Group Undertaking or
such a company becomes aware of a fact, matter or circumstance likely
to give rise to such a claim which, in any such case, gives rise, or
the Buyer is aware should reasonably be expected to give rise, to a
claim by a Buyer against any of the Sellers under the Warranties
(excluding the Tax Warranties); or
	 
	 	5.1.2	 	a company in a Buyer’s Group or the Group should reasonably be
expected (based on its actual awareness) to be able to make recovery
from some other person (other than a Seller’s Group Undertaking)
including, for the avoidance of

- 107 -

 

 

	 	 	 	doubt, any member of any insurance underwriting pool managed by
any member of the Group before Completion, of a sum in respect of
any fact, matter or circumstance by reference to which that Buyer
has or should be reasonably expected to have a claim against any
of the Sellers under the Warranties (excluding the Tax
Warranties); or
	 
	 	5.1.3	 	the Sellers (or either of them) have paid to a Buyer an amount
in respect of a claim under the Warranties (excluding the Tax
Warranties) and subsequent to the making of such payment that Buyer
recovers from some other person a sum which is referable to that
payment.

	5.2	 	In the case of the circumstances referred to in paragraph 5.1.1 or 5.1.2
the relevant Buyer shall:

	 	5.2.1	 	as soon as reasonably practicable, but in any event within 10
days, after it becomes aware of the same, give notice to the Sellers
in writing that the relevant circumstances have arisen and shall
consult with the Sellers with respect thereto;
	 
	 	5.2.2	 	subject in each case to the giving of confidentiality
undertakings reasonably acceptable to that Buyer, and so far as
permitted by law or regulation provide to the Sellers and their
advisers reasonable access to personnel and reasonable access to and
(at the Seller’s own cost) to copy relevant documents, records and
information as the Sellers shall reasonably request in connection
therewith including any proceeding instituted by or against any
company in the Buyer’s Group or the Group under clauses 5.1.1 and
5.1.2; and
	 
	 	5.2.3	 	keep the Sellers informed of all material developments in
relation thereto.

	5.3	 	Subject to paragraph 5.4, the relevant Buyer shall and shall procure that
the relevant company in the Buyer’s Group and the Group shall:

	 	5.3.1	 	in the case of the circumstances referred to in paragraph
5.1.1 and 5.1.2, prior to that Buyer taking any action (other than
pursuant to paragraphs 2 and 5.2 of this Schedule) against any of the
Sellers under the Warranties (excluding the Tax Warranties) and
subject to the relevant members of that Buyer’s Group and the Group
being indemnified and secured to that Buyer’s reasonable satisfaction
against all costs and expenses which may be incurred by reason of
such action on an after-Tax basis by the Sellers, take all such
action as the Sellers (acting jointly) may reasonably request in
writing including where reasonable the institution of proceedings and
the instruction of professional advisers to act on behalf of each
relevant company in that Buyer’s Group or the Group to avoid,
dispute, resist, compromise, defend or appeal against any such claim
as is referred to in paragraph 5.1.1 against such member of that
Buyer’s Group or the Group or to make such recovery by that Buyer’s
Group or the Group as is referred to in paragraph 5.1.2, as the case
may be; and
	 
	 	5.3.2	 	subject to the relevant members of that Buyer’s Group and the
Group being indemnified on an after Tax basis and secured to its
reasonable satisfaction

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	 	 	 	against all costs and expenses which are incurred by reason of
such action by the Sellers, not settle or compromise any liability
or claim to which such action is referable without the prior
written consent of the Sellers, which consent shall not be
unreasonably withheld or delayed; and
	 
	 	5.3.3	 	in the case of paragraph 5.1.3 only, repay to the relevant
Sellers an amount equal to the amount recovered upon receipt or, if
lower, the amount paid by any of the Sellers (or either of them) to
the Buyer less, in either case, any amount payable by the Buyer in
respect of Tax on the amount recovered.

	5.4	 	No Buyer may be required to take any action or to procure any action to
be taken at the request of the Sellers under paragraph 5.3.1 or to refrain
from settling or compromising any liability or claim without the consent
of the Sellers under paragraph 5.3.2 (or to procure the same) if, to do so
or to refrain from doing so (as the case may be) would or would be
reasonably likely to materially adversely affect the reputation or
business of that Buyer, any member of that Buyer’s Group or any member of
the Group.
	 
	5.5	 	In the event of any of the circumstances referred to in paragraph 5.1.1
having occurred, the Buyers shall each, and shall each use all reasonable
endeavours to procure that each relevant company in the Buyer’s Group or
the Group shall, preserve until 31 December 2008 all material documents,
records, correspondence, accounts and other information relevant to a
matter which may give rise to a claim under the Warranties (excluding the
Tax Warranties) as referred to in clause 5.1.
	 
	6.	 	MITIGATION
	 
	 	 	Nothing in this schedule 4 restricts or limits any Buyer’s general
obligation at law to mitigate any loss or damage which it may incur in
consequence of a matter giving rise to a Relevant Claim or a claim under
the Tax Warranties.
	 
	7.	 	PROVISION OF INFORMATION
	 
	 	 	If, at any time after the date of this Agreement, either Seller wants to
insure against its liabilities in respect of Relevant Claims or Tax
Claims, the Buyers shall each provide such information (at the cost of the
Sellers) in relation to this Agreement as a prospective insurer and/or
insurance broker may reasonably require and each such Buyer is able and
permitted by law and regulation to provide before effecting the insurance,
provided that any such prospective insurer and/or insurance broker
executes a confidentiality undertaking in such form as may reasonably be
required by the Buyers.
	 
	8.	 	DISCLOSURE
	 
	8.1	 	The Sellers shall not be liable in respect of a claim under the
Warranties to the extent that the facts and circumstances giving rise
thereto are fairly disclosed in the Disclosure Letter.
	 
	8.2	 	When the Warranties are deemed to be repeated at Completion by reference
to the facts and circumstances then subsisting, the Sellers’ liability in
respect of a claim under the Warranties when deemed to be repeated shall
be limited in accordance with the

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	 	 	provisions of paragraph 8.1 but shall not be limited as a result of the
disclosure of additional facts and circumstances after the date of the
Agreement.
	 
	9.	 	GENERAL
	 
	 	 	Nothing in this schedule 4 shall have the effect of limiting or
restricting any liability of either of the Sellers in respect of a
Relevant Claim or Tax Claim based upon or arising as a result of any fraud
including, without limitation, fraudulent concealment.

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SCHEDULE 5

REGISTERED INTELLECTUAL PROPERTY RIGHTS

TRADE MARKS

Global Aerospace Underwriting Managers Limited:

	 	 	 	 	 	 	 	 	 
	Registration	 	 	 	 	 	 	 	 
	No.	 	Trademark	 	Date of
Registration       	 	 	Class
	UK 1,509,034	 	
BAIG (+ device)
	 	6 August 1992
	 	 	36	 
	 
	UK 1,509,280	 	
BRITISH AVIATION

INSURANCE GROUP\BAIG

(+device)
	 	6 August 1992
	 	 	36	 
	 
	CTM,1711,548	 	
AEROINSURE.COM (+ device)
	 	16 June 2000
	 	 	36	 
	 
	NZ 616 974	 	
AEROINSURE.COM (+ device)
	 	19 June 2000
	 	 	36	 
	 
	AU 839430	 	
AEROINSURE.COM
	 	19 June 2000
	 	 	36	 
	 
	AU 893431	 	
AEROINSURE.COM (+ device)
	 	19 June 2000
	 	 	36	 
	 
	NZ616973	 	
AEROINSURE.COM
	 	19 June 2000
	 	 	36	 
	 
	NZ220456	 	
BAIG (+ device)
	 	7 August 1992
	 	 	36	 
	 
	NZ220457	 	
BRITISH AVIATION

INSURANCE GROUP
	 	7 August 1992
	 	 	36	 
	 
	AU584041	 	
BAIG (+ device)
	 	7 August 1992
	 	 	36	 
	 
	AU643436	 	
BRITISH AVIATION

INSURANCE GROUP/BAIG (+

device)
	 	18 October 1994
	 	 	36	 
	 
	AU 921015	 	
GLOBAL AEROSPACE
	 	Application only
	 	 	36	 
	 
	AU 921016	 	
GLOBAL AEROSPACE device
	 	Application only
	 	 	36	 
	 
	US 76/120044	 	
GLOBAL AEROSPACE
	 	31 August 2000
	 	 	36	 
	 
	CTM 17105508	 	
AEROINSURE.COM
	 	16 June 2000
	 	 	36 	 (withdrawn)

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Associated Aviation Underwriters Inc :

	 	 	 	 	 	 	 	 	 
	Registratio	 	 	 	Date of	 	 	 	 
	 No.	 	Trademark	 	Registration	 	Class
	US 76330405	 	
AEROINSURE.COM (+ device)
	 	26 October 2001
	 	 	36	 
	US 76330404	 	
AEROINSURE.COM
	 	26 October 2001
	 	 	36	 

DOMAIN NAMES

Global Aerospace Underwriting Managers Limited :

	 	 	 
	Domain Name	 	Registration Date
	 
	global-aerospace.co.uk	 	
20 March 2001
	 
	ga-insurance.co.uk	 	
27 March 2001
	 
	ga-insure.co.uk	 	
27 March 2001
	 
	global-aero.co.uk	 	
27 March 2001
	 
	globalaero.co.uk	 	
27 March 2001
	 
	ga-insurance.com	 	
27 March 2001
	 
	ga-insure.com	 	
27 March 2001
	 
	global-aero.com	 	
27 March 2001
	 
	gaum.org	 	
6 October 2002
	 
	aeroinsure.com	 	
18 February 2002
	 
	global-aero.com.au	 	
September 2002
	 
	global-aerospace.com.au	 	
September 2002
	 
	globalaerospace.com.au	 	
September 2002
	 
	globalaero.com.au	 	
September 2002
	 
	baig.co.uk	 	
Not known
	 
	gaum-inc.com	 	
8 August 2000
	 
	aeroinsure.co.uk	 	
11 February 2000
	 
	gaum.co.uk	 	
8 August 2000
	 
	aeroassurance.com	 	
21 February 2000

- 112 -

 

	 	 	 
	Domain Name	 	Registration Date
	 
	aeroversichern.com	 	
21 February 2000
	 
	Flugversichern.com	 	
21 February 2000
	 
	Volassurance.com	 	
21 February 2000
	 
	pbo-online.com	 	
27 November 2001

Associated Aviation Underwriters Inc:

	 	 	 
	Domain Name	 	Registration Date
	 
	aau.co.uk	 	
4 November 1998
	 
	aau.com	 	
21 September 1995

Aviation Insurance Australia Limited:

	 	 	 
	Domain Name	 	Registration Date
	 
	aviationinsurance.com.au	 	
1 December 1999

Global Aerospace Underwriting Managers (Canada) Limited:

	 	 	 
	Domain Name	 	Registration Date
	 
	aeroinsure.ca	 	
7 December 2000
	 
	gaum.ca	 	
7 December 2000
	 
	baig.ca	 	
14 January 2000
	 
	global-aero.ca	 	
1 May 2000

Licences granted to Global or any Group Companies

	1.	 	Website Development and Licence Agreement between (1) Wildnet New Media
Group Limited (2) Global Aerospace Underwriting Managers Limited and (3)
Associated Aviation Underwriters Inc.

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SCHEDULE 6A

THE MATERIAL PROPERTIES

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	Rent Review	 	Current
	Property Description	 	Address	 	Date of Lease	 	Parties	 	Lease Expires	 	Date	 	Rent
	
	 	
	 	
	 	
	 	
	 	
	 	

	1.   2nd and 3rd

      floors 
       Fitzwilliam

      House	 	
10 St Mary’s Axe
London EC3
	 	16 March 1992
	 	Universities
Superannuation
Scheme Limited (1)

British Aviation
Insurance Group

Limited (2)

Aviation and
General Insurance

Company Limited and
others (3)
	 	24 June 2007
	 	 	 	£932,270 pa
	 	 	 	 	 	 	 	 	 	 	 	 	 
	2.   49,276 rentable

      square feet on
      the
fifth floor	 	
51 John F.
 Kennedy
Parkway,

Short Hills,

New Jersey 07078
	 	14 August 1986
	 	Associated Aviation Underwriters

(Original Tenant)

Prudential Insurance Company of America

As amended by
Amendment to Lease
Agreement dated 18
November 1992
between PM Short
Hills Joint Venture
(The Prudential
Insurance Company
of America and
Mitsui Real Estate
Sales New York
Company, Ltd,
Printon Kane Group,
Inc and the
Original Tenant.

Amendment Number 2
to Lease
	 	30 June 2010
	 	 	 	$1,648,244

(1995-2000)

$1,675,384

(2000-2007)

$1,823,212

(2007-2010)

- 114 -

 

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	Rent Review	 	Current
	Property Description	 	Address	 	Date of Lease	 	Parties	 	Lease Expires	 	Date	 	Rent
	
	 	
	 	
	 	
	 	
	 	
	 	

	 	 	 	 	 	 	Agreement
dated 19 December
1994

Renewal and Third
Amendment of Lease
between PM Short
Hills Joint Venture
(The Prudential
Insurance Company
of America) and
Associated Aviation
Underwriters,
Inc.(Tenant) dated
1 July 1995

Termination
Agreement between
the Tenant and
Reckson Short Hills
LLC	 	 	 	 	 	 

- 115 -

 

SCHEDULE 6B

THE NON-MATERIAL PROPERTIES

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	Rent Review	 	Current
	Property Description	 	Address	 	Date of Lease	 	Parties	 	Lease Expires	 	Date	 	Rent
	
	 	
	 	
	 	
	 	
	 	
	 	

	1.   Part Ground 
      and
8th Floor 
      Offices,
      Potsoken
      House	 	
155-157 Minories
and 83-86 Aldgate
High Street, London
EC3N 1QP
	 	30 March 1989
	 	Pearl Assurance Public Limited
Company    (1)

Aviation and General Insurance
Company Limited (2)
	 	24 December 2008
	 	 	 	£154,000
pa

(Sub-lease £113,000 pa)
	 	 	 	 	 	 	 	 	 	 	 	 	 
	2.   4,997 rentable

      square feet on 
      the
fourteenth
      floor of
the
      building	 	
3399 Peachtree Road

NE, Atlanta

Georgia 30326
	 	9 August 1990
	 	Corporate Property Investors (1)
Associated Aviation
Underwriters (Original Tenant)

As amended and modified by
First Amendment to Lease dated
28 February 2001 between
Property Georgia OBJLW Two
Corporation and Associated
Aviation Underwriters, Inc
(Tenant)
	 	14 May 2011
	 	 	 	$139,916 
(2001-2002)

$144,113.40

(2002-2003)

$148,460.80

(2003-2004)

$152,908.20

(2004-2005)

$157,505.40

(2005-2006)

$162,252.50

- 116 -

 

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	Rent Review	 	Current
	Property Description	 	Address	 	Date of Lease	 	Parties	 	Lease Expires	 	Date	 	Rent
	
	 	
	 	
	 	
	 	
	 	
	 	
	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	(2006-2007)

$167,099.60
(2007-2008)

$172,096.60

(2008-2009)

$177,243.50

(2009-2010)

$182,540.40

(2010-2011)

	 	 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	3.    6,924 rentable

      square feet on 
      the
first floor 
      of the
building	 	
500 Hills Drive,

Bedminster

Somerset New Jersey

07921
	 	1 February 1997
	 	Sammis Pluckemin Associates (1)

Associated Aviation

Underwriters Inc (2)
	 	31 January 2007
	 	 	 	$190,410 pa

(1997-2002)

$207,720 pa

(2002-2007)	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	4.    4,935 rental
      
square feet on 
      the
twenty-first 
      floor	 	
300       South Riverside

Plaza    Chicago

Illinois       60606
	 	1 July 1986
	 	Tishman Midwest Management
Corporation (1) Associated
Aviation Underwriters (Original
Tenant)

As amended and modified by
First Amendment to Lease dated
29 March 1996 between American
National
	 	31 August 2005
	 	 	 	$86,362.50
(01/09/02 -
31/08/03)

$88,521.50
(01/09/03 -
31/08/04)	 	 

- 117 -

 

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	Rent Review	 	Current
	Property Description	 	Address	 	Date of Lease	 	Parties	 	Lease Expires	 	Date	 	Rent
	
	 	
	 	
	 	
	 	
	 	
	 	

	 	 	 	 	 	 	Bank and Trust Company of
Chicago and the Original
Tenant; and

Second Amendment to the Lease
dated 18 March 2002 between
Lasalle Bank, National
Association and Associated
Aviation Underwriters,
Inc.(Tenant)
	 	 	 	 	 	$90,734.60
(01/09/04 –
31/08/05)
	 	 	 	 	 	 	 	 	 	 	 	 	 
	5.    5,361 square
      
feet on the
       fourth
floor of the
      
building	 	
12377 Merit Drive,

Dallas, Texas 75251
	 	3 March 1988
	 	Park Central Joint Venture (1)
Associated Aviation
Underwriters (2)

As amended and modified by the
First Amendment of Lease dated
9 January 1995 between the
Equitable Life Assurance
Society of the United States
and Associated Aviation
Underwriters, Inc (Tenant)
	 	31 December 2004
	 	 	 	$96,498 pa
	 	 	 	 	 	 	 	 	 	 	 	 	 
	6.    8,855 rentable

      square feet of 
      the
building	 	
9393 W. 110th
Street Overland
Park Kansas 66210
	 	29 March 2002
	 	Knickerbocker Properties, Inc.
(XXI ) (1)

Associated Aviation
Underwriters Inc. (2)

As amended and modified by the
First Lease Modification Agreement dated 28 August 2002
between the Landlord
	 	31 March 2012
	 	 	 	$14,586.90 per month (01/09/02 -
31/03/03)

$15,127.20 per month
(01/04/03 -

- 118 -

 

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	Rent Review	 	Current
	Property Description	 	Address	 	Date of Lease	 	Parties	 	Lease Expires	 	Date	 	Rent
	
	 	
	 	
	 	
	 	
	 	
	 	
	 	 
	 	 	 	 	 	 	and Tenant.
	 	 	 	 	 	31/03/04)

$15,311.70 per
month (01/04/04 -
31/03/05)

$15,496.20 per
month (01/04/05 -
31/03/06)

$15,680.70 per
month (01/04/06 -
31/03/07)

$15,865.20 per
month (01/04/07 -
31/03/08)

$16,049.60 per
month (01/04/08 -
31/03/09)

	 	 

- 119 -

 

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	Rent Review	 	Current
	Property Description	 	Address	 	Date of Lease	 	Parties	 	Lease Expires	 	Date	 	Rent
	
	 	
	 	
	 	
	 	
	 	
	 	
	 	 
	7.    6,371 rentable
      
square feet on
       the
fifteenth 
       floor of
the 
       building	 	
21650 Oxnard Street

Woodland Hills

California 91367
	 	26 July 1996
	 	A H Warner Center Properties,

Limited Liability Company (1)

Associated Aviation

Underwriters, Inc (2)
	 	29 November 2006
	 	 	 	$16,234.10 per
month (01/04/09 -
31/03/10)

$16,418.60 per
month (01/04/10 -
31/03/11)

$16,603.10 per
month (01/04/11 -
31/03/12)

$137,614 pa (11/96
- 3/99)

$160,549 pa (3/99 -
11/02)

$170,840 pa (11/02

- 11/06)

	 	 
	8.   1150 square

      feet
of the	 	
5400 Carillon

Point, Kirkland
	 	20 March 2001
	 	HQ Global Workplaces Inc (1)

Associated Aviation

Underwriters Inc
	 	1 May 2003
	 	 	 	$1,290 (monthly base	 	 

- 120 -

 

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	Rent Review	 	Current
	Property Description	 	Address	 	Date of Lease	 	Parties	 	Lease Expires	 	Date	 	Rent
	
	 	
	 	
	 	
	 	
	 	
	 	
	 	 
	        building	 	
Washington 98033

	 	 	 	(2)
	 	 	 	 	 	service fees)	 	 
	 9.   3200
square
        feet of
the
       building	 	
15 Melanie Lane

East Hanover New

Jersey
	 	8 September 1997
	 	Christian N. Peter (1)
Associated Aviation
Underwriters, Inc (2)
	 	31 December 2002
	 	 	 	$22,404 pa	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	10.  8,515 square
      
feet of the 
      
building	 	
100 Renfrew Drive

Markham Ontario
	 	7 October 1992
	 	Armadale Properties Limited (1)
British Aviation Insurance
Group (Canada) Limited (2)

As amended and modified by
lease Amending Agreement dated
23 November 1993 between the
Landlord and Tenant; and

by Agreement to Lease dated 27
June 1997 between Sun
Microsystems of Canada, Inc,
the Tenant and the Landlord.
	 	25 June 2003
	 	 	 	Can$253,651 pa	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	11.  690 rentable

       square feet of the
      
building	 	
150 Consumers Road

Toronto
	 	18 July 2002
	 	Ben Walker Limited (1)

Global Aerospace Underwriting

Managers (Canada) Limited (2)
	 	31 August 2004
	 	 	 	Can$13,289

pa	 	 

- 121 -

 

SCHEDULE 7

INFORMATION TECHNOLOGY

Part 1

Annex 1:

Licensed Computer Software:

eEnterprise

Aeroinsure

Aeroinsure.com

Annex 2:

In-House Computer Software:

Nexus

Basil

Broker

GARS

Hull & Casualty Claim

Merlin

Premium

Quote

Receivables

Vertical

- 122 -

 

Part 2

Computer Contracts

	 	 	 	 	 	 	 
	Contact	 	Description	 	Parties	 	Date
	
	 	
	 	
	 	

	eEnterprise	 	
Dynamics License
Agreement and
Registration
Information
(Dynamics is
currently called
eEnterprise)
	 	Great Plains
Software, Inc. and
licensee (not
specified)
	 	November 1994
	 	 	 	 	 	 	 
	Aeroinsure.com	 	
Website Development
and Licence
Agreement
	 	Wildnet New Media
Group Limited,
Global Aerospace
Underwriting
Managers Limited
and Associated
Aviation
Underwriters, Inc.
	 	2002

date unclear -

possibly 20 March

2002
	 	 	 	 	 	 	 
	Aeroinsure	 	
Website Development
and Management
Agreement
	 	Wildnet New Media
Group Limited and
BAIG
	 	3 July 2000
	 	 	 	 	 	 	 
	IBM - Mainframe
software rental
	 	
Term Lease Master
Agreement no.
577AH78
	 	IBM Credit
Corporation and
Associated Aviation
Underwriters, Inc.
	 	4 December 1997

	 	 	 	 	 	 	 
	
Wildnet	 	
Website Support and
Hosting Agreement
	 	
Wildnet New Media
Group Limited and
Associated Aviation
Underwriters, Inc.
	 	
2002

no date specified
	 	 	 	 	 	 	 
	AT&T	 	
Managed Network
Services (MNS)
Agreement, as
amended by 2nd
Amendment dated 12
June 2002, and
including MNS
Express Services
Attachment for
Managed Router
Solutions dated 27
July 1999.
	 	AT&T and Associated
Aviation
Underwriters, Inc.
	 	27 July 1999
	 	 	 	 	 	 	 
	AT&T	 	
Master Agreement
(General Terms and
Conditions) for
Internet Services
	 	AT&T and Associated
Aviation
Underwriters, Inc.
	 	22 July 1999

- 123 -

 

	 	 	 	 	 	 	 
	Contact	 	Description	 	Parties	 	Date
	
	 	
	 	
	 	

	AT&T	 	
Master Agreement

for Managed

Internet Services
	 	AT&T and Associated
Aviation
Underwriters, Inc.
	 	30 August 1999
	 	 	 	 	 	 	 
	AT&T	 	
Contract Tariff

Order Form
	 	AT&T and Associated
Aviation
Underwriters, Inc.
	 	May 1999
	 	 	 	 	 	 	 
	AT&T	 	
Contract Tariff

Service Order

Attachment
	 	AT&T and Associated
Aviation
Underwriters, Inc.
	 	20 May 2002
	 	 	 	 	 	 	 
	 
AT&T	 	
MNS Addendum Pages
	 	AT&T and Associated
Aviation
Underwriters, Inc.
	 	21 April 2000

- 124 -

 

SCHEDULE 8

ACTION PENDING COMPLETION

The Sellers shall procure that, between the execution of this Agreement and
Completion, each Group Company will, except to the extent otherwise agreed in
advance in writing with each of the Buyers or save to the extent otherwise
provided for in this Agreement:

	1.	 	carry on its business in the ordinary and usual course;
	 
	2.	 	not create, allot, issue, acquire, repay or redeem any share or loan
capital or agree, arrange or undertake to do any of those things or
acquire or agree to acquire, an interest in a corporate body or merge or
consolidate with a corporate body or any other person, enter into any
demerger transaction or participate in any other type of corporate
reconstruction;
	 
	3.	 	not acquire or dispose of, or agree to acquire or dispose of, any
material revenues, assets, business or undertakings except in the ordinary
course of its business or assume or incur, or agree to assume or incur, a
material liability, obligation or expense (actual or contingent) except in
the ordinary course of its business;
	 
	4.	 	not make, or agree to make, capital expenditure exceeding in total
£100,000 (or its equivalent at the time) or incur, or agree to incur, a
commitment or commitments involving capital expenditure exceeding in total
£100,000 (or its equivalent at the time) except in the ordinary course of
business;
	 
	5.	 	not declare, pay or make a dividend or distribution (within the meaning
of section 209 of the Taxes Act) or pass a shareholder resolution;
	 
	6.	 	not make a claim under section 152 or 153 of TCGA which affects an asset
owned by a Group Company;
	 
	7.	 	not create, or agree to create or amend, an Encumbrance over the Property
or another asset or redeem, or agree to redeem, an existing Encumbrance
over the Property or another asset;
	 
	8.	 	in relation to the Property:

	 	8.1.1	 	not change its existing use;
	 
	 	8.1.2	 	 save in relation to the property interest at 100 Renfew Drive,
Markham, Ontario not terminate, or give a notice to terminate, a
lease, tenancy or licence;
	 
	 	8.1.3	 	 save in relation to the property interest at 100 Renfew Drive,
Markham, Ontario and save in relation to the property interest at
2nd
and 3rd floors, Fitzwilliam House, 10 St. Mary’s Axe, London EC3
where the new rent on review does not exceed £1,384,500 not agree a
new rent or fee payable under a lease, tenancy or licence save to the
extent required under the terms of the lease, tenancy or licence.

- 125 -

 

	9.	 	enter into, as principal, any contract or commitment (or make a bid or
offer which may lead to a contract or commitment) which has a value or
would involve expenditure in excess of £100,000 or which is of a long term
and onerous nature or agree to any variation of any existing contract to
which that Group Company is a party and which may have a material effect
upon the nature or scope of the operations of the Group;
	 
	10.	 	(whether in the ordinary course of business or otherwise) acquire or
dispose of, or agree to acquire or dispose of, any business, or any asset
(or group of connected assets) having a value in excess of £100,000;
	 
	11.	 	(except, in each case, in the ordinary course of its business provided
that such change would not increase the total staff costs of the Group by
more than 4% of the current total staff costs of the Group or the
remuneration of any one director or Employee by more than £50,000 per
annum) not amend the terms and conditions of employment (including pension
fund commitments and incentive arrangements) or engagement of a director,
other officer or Employee or provide, or agree to provide, a gratuitous
payment or benefit to a director, officer or employee (or any of their
dependants) or terminate the employment or engagement of such a director,
officer or Employee or agree to employ or engage an individual in the
business of the Group;
	 
	12.	 	not amend, or agree to amend, the terms of its borrowing or indebtedness
in the nature of borrowing or create, incur, or agree to create or incur,
borrowing or indebtedness in the nature of borrowing (except pursuant to
facilities (if any) disclosed in the Disclosure Letter where the borrowing
or indebtedness in the nature of borrowing does not exceed the amount
available to be drawn by each Group Company under those facilities);
	 
	13.	 	except in the ordinary course of business, not give, or agree to give, a
guarantee, indemnity or other agreement to secure, or incur financial or
other obligations with respect to, another person’s obligation;
	 
	14.	 	not alter the governing provision of the Disclosed Schemes nor exercise
any discretion or power to increase the obligations of any Group Company
under the Disclosed Schemes (except as required by law and except as
required as part of the administration of the Disclosed Scheme in the
ordinary course);
	 
	15.	 	except in the usual course of its business, not start litigation or
arbitration proceedings having or likely to have a value in excess of
£100,000 or that relate to the seeking of equitable relief;
	 
	16.	 	except in the usual course of its business, not compromise, settle,
release, discharge or compound litigation or arbitration proceedings or a
liability, claim, action, demand or dispute, or waive a right in relation
to litigation or arbitration proceedings where such proceedings have a
value in excess of £100,000; or
	 
	17.	 	except in the ordinary course of its business, not enter into an
agreement, arrangement or obligation (legally enforceable or not) in which
either Seller, another Seller’s Group Undertaking, a director or former
director of a Seller’s Group Undertaking or a person connected with any of
them is interested.

- 126 -

 

SCHEDULE 9

KEY PERSONNEL

Anthony John Medniuk

Peter James Bernhard

Kenneth James Mowbray Walder

Alan Edric Tasker

Andrew Alexander Duguid

John Gerard Kelly

Saleema Brohi

Mark Chapman

Cameron Johnston

Andrew Critchley

Jeffrey Cassidy

- 127 -

 

	 	 	 	 
	 	 	
EXECUTED by the parties:	 
	 	 	 	 
	 	 	
Signed by Clive Watson
	)
	 	 	
a duly authorised
	)
	 	 	
representative of
	)
	 	 	
CGU INTERNATIONAL
	)
	 	 	
INSURANCE PLC
	)
	 	 	 	 
	 	 	
Signed by David Reeves
	)
	 	 	
a duly authorised
	)
	 	 	
representative of
	)
	 	 	
ROYAL & SUN ALLIANCE
	)
	 	 	
INSURANCE PLC
	)
	 	 	 	 
	 	 	
Signed by Christopher Bell
	)
	 	 	
and Martin Kauer
	)
	 	 	
for and on behalf of
	)
	 	 	
CONVERIUM AG
	)
	 	 	 	 
	 	 	
Signed by Thomas Braune
	)
	 	 	
and Hartmut Hesse
	)
	 	 	
duly authorised
	)
	 	 	
representatives of
	)
	 	 	
MÜNCHENER
	)
	 	 	
RÜCKVERSICHERUNGS-
	)
	 	 	
GESELLSCHAFT
	)
	 	 	
AKTIENGESELLSCHAFT
	)
	 	 	
IN MÜNCHEN
	)
	 	 	 	 
	 	 	
Signed by Forrest N. Krutter,
	)
	 	 	
Secretary, and Janelle K. Kay,
	)
	 	 	
Assistant Secretary,
	)
	 	 	
duly authorised
	)
	 	 	
representatives of
	)
	 	 	
NORTHERN STATES
	)
	 	 	
AGENCY, INC
	)

- 128 -

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