SCHEME IMPLEMENTATION AGREEMENT

Transcription

1 SCHEME IMPLEMENTATION AGREEMENT TOWER LIMITED VERO INSURANCE NEW ZEALAND LIMITED

2 AGREEMENT DATED 27 JUNE 2017 PARTIES 1. Tower Limited (NZCN ) a company incorporated in New Zealand of Level 14, 45 Queen Street, Auckland, 1010, New Zealand (Tower) 2. Vero Insurance New Zealand Limited (NZCN 1331) a company incorporated in New Zealand of Level 7, 48 Shortland Street, Auckland, 1010, New Zealand (Vero) BACKGROUND A. Tower and Vero have agreed that Vero will acquire all of the shares in Tower (other than those held by Vero) by a scheme of arrangement under Part 15 of the Companies Act between Tower and the Scheme Shareholders. B. The parties have agreed to implement the Scheme on the terms of this Agreement. 1. DEFINITIONS AND INTERPRETATION 1.1 Definitions: The meanings of the terms used in this agreement are set out below. ASX means ASX Limited and, where the context requires, the financial market that it operates. Business Day means a weekday in which trading banks are open for over the counter banking business in Auckland, New Zealand and Brisbane, Australia. Confidentiality Deed means the confidentiality deed between Tower and Vero dated 20 March Companies Act means the Companies Act Competing Proposal has the meaning given to that term in clause 9.1. Cost Reimbursement has the meaning given to that term in clause Counter Proposal has the meaning given to that term in clause 9.4. Court means the High Court of New Zealand. Data Room Index means the index of materials and information disclosed in writing through the data room hosted by Ansarada in relation to the Transaction (including written answers given by or on behalf of Tower to questions and requests for information made by or on behalf of Vero through the data room), prior to close of business on the Business Day prior to the date of this Agreement. Deed Poll means the deed poll to be entered into by Vero in favour of the Scheme Shareholders in the form set out in Annexure 2 or such other form as agreed in writing between the parties. Due Diligence Materials means the due diligence materials and information, including written answers given by or on behalf of Tower to questions and requests for information made by or on behalf of Vero, listed in the Data Room Index.

3 Scheme Implementation Agreement Page 2 Effective means when used in relation to the Scheme, the coming into effect, under section 236(3) of the Companies Act, of the order of the Court made under section 236(1) in relation to the Scheme and all of the conditions set out in clause 3.1 having been satisfied or waived (where capable of being waived) in accordance with this agreement and the Scheme. Effective Date means the date on which the Scheme becomes Effective. End Date means 31 October2017, or such later date as Tower and Vero agree in writing. Fairfax SIA means the Scheme Implementation Agreement between Tower and Fairfax Financial Holdings Limited dated 9 February Final Orders means, on application of Tower, orders by the Court that the Scheme shall be binding on Tower, Vero, Tower Shareholders and such other persons or class of persons as the Court may specify, in accordance with section 236(1) (and section 237, if applicable) of the Companies Act. Final Orders Date means the day on which the Final Orders are sealed by the Court. Financial Adviser means any financial adviser retained by Tower in relation to the Scheme from time to time acting in its capacity as such, and includes Goldman Sachs. First Court Date means the first day on which an application made to the Court for orders under section 236(2) of the Companies Act convening the Scheme Meeting is heard. Fundamental Warranties means the representations and warranties in paragraphs 4 to 12 (inclusive) and paragraph 14 of Schedule 1. GAAP has the meaning set out in section 8 of the Financial Reporting Act Government Agency means any foreign or New Zealand government or governmental, semi-governmental, administrative, fiscal or judicial body, department, commission, authority, tribunal, agency or entity, or any governmental minister. GST means the Tax imposed by the GST Act. GST Act means the Goods and Services Tax Act Implementation Date means the day on which the Scheme is to be implemented, being four Business Days after the Scheme Record Date, or such other date as agreed in writing by Tower and Vero. Independent Adviser means the independent adviser appointed by Tower in respect of the Scheme. Independent Adviser's Report means the report from the Independent Adviser to accompany the Scheme Booklet, including any update or supplementary report, stating its opinion on the merits of the Transaction. Initial Orders means, on application by Tower, orders by the Court for the purposes of section 236(2) of the Companies Act. Insolvency Event means, in relation to an entity: the entity resolving that it be wound up or a court making an order for the winding up or dissolution of the entity;

4 Scheme Implementation Agreement Page 3 (c) (d) (e) (f) a liquidator, provisional liquidator, administrator, receiver, receiver and manager or other insolvency official being appointed to the entity or in relation to the whole, or a substantial part, of its assets; the entity executing a deed of company arrangement; the entity ceasing, or threatening to cease to, carry on substantially all the business conducted by it as at the date of this agreement; the entity is or becomes unable to pay its debts when they fall due within the meaning of the Companies Act (or, if appropriate, legislation of its place of incorporation); or the entity being deregistered as a company or otherwise dissolved. IPSA means the Insurance (Prudential Supervision) Act Listing Rules means the main board listing rules of NZX or ASX (as applicable, and taking into account the Exempt Foreign Entity listing status of Tower). Matching Period has the meaning given to that term in clause 9.4. Material Adverse Change means a significant adverse event or circumstance: in the nature of an earthquake, lightning, storm, flood, fire, explosion, cyclone, tidal wave, landslide, or adverse weather conditions; or the imposition by any Government Agency of onerous new regulatory or operating restrictions, that occurs, or is announced, after the date of this agreement which has, or is reasonably likely to have either individually, or when aggregated with any other matters, events or circumstances of a similar kind or category, the effect of: diminishing the consolidated net assets of the Tower Group taken as a whole by at least $22.5 million (which is 10% of the last reported figure); or diminishing the consolidated on-going underlying profitability by more than $5 million from the last reported figure (excluding the impact of any CEQ reserve strengthening); (c) causing any Tower Group Member to breach any regulatory capital requirement to which it is subject, in each case other than matters, events or circumstances: (d) (e) (f) (g) required or specifically permitted by this agreement or the Scheme; resulting from changes in general economic or political conditions, the securities market in general or law; done or not done at the written request or with the written approval of Vero, including any reasonably foreseeable consequences arising as a result of such matters; resulting from the actual or anticipated change of control of Tower contemplated by the Transaction;

5 Scheme Implementation Agreement Page 4 (h) resulting from changes in generally accepted accounting principles or the judicial interpretation of them. provided however, that with respect to clauses (e) to (h), such matter does not have a materially disproportionate effect on the Tower Group. NZX means NZX Limited and, where the context requires, the main board financial market that it operates. Pacific Islands means Fiji, Papua New Guinea, the Cook Islands, Vanuatu, American Samoa, Samoa, Tonga and the Solomon Islands. RBNZ means the Reserve Bank of New Zealand constituted under the Reserve Bank of New Zealand Act Registered Address means in relation to a Tower Shareholder, the address shown in the Share Register. Registrar has the meaning set out in the Companies Act. Regulatory Approvals means the approvals from the Government Agencies contemplated by clauses 3.1 (Regulatory Approvals) and 3.1(h) (NZCC Approval). Related Company has the meaning set out in section 2(3) the Companies Act read as if a reference to a company was a reference to any company or body corporate wherever incorporated. Representative means in respect of a party, its Related Companies and each director, officer, employee, adviser, agent or representative of that party and its Related Companies. Scheme means the scheme of arrangement under Part 15 of the Companies Act under which all of the Scheme Shares will be transferred to Vero and the Scheme Shareholders will receive the Scheme Consideration, the form of which is attached as Annexure 1 or such other form as agreed in writing between the parties and approved by the Court under section 236(1) of the Companies Act. Scheme Booklet means the information contemplated by clause 5.2(c) to be approved by the Court and despatched to the Tower Shareholders and which will include the notice of meeting and proxy form, an explanatory statement, the Scheme and the Deed Poll, but for the purpose of this definition excludes the Independent Adviser s report or any summary of such report. Scheme Consideration means the consideration to be provided by Vero in consideration for the transfer of the Scheme Shares held by a Scheme Shareholder to Vero, being, in respect of each Scheme Share, $1.40 cash and otherwise subject to the terms of this Scheme (as reduced by the per share amount or value of any dividend the record date for which falls on or between the date of this agreement and the Implementation Date). Scheme Meeting means any meeting of Tower Shareholders for the purposes of section 236(1) of the Companies Act ordered by the Court to be convened under section 236(2) of the Companies Act (and includes any adjourned meeting). Scheme Record Date means 7.00pm (New Zealand time) on the fifth Business Day after the later of the Final Orders Date and the date on which the last of the Regulatory Approvals are satisfied or, if capable of waiver, waived in accordance with this agreement, or such other date as agreed in writing by Tower and Vero. Scheme Resolution means the resolutions to be put to Tower Shareholders at the Scheme Meeting to approve the Scheme.

6 Scheme Implementation Agreement Page 5 Scheme Share means a Tower Share held by a Scheme Shareholder as at the Scheme Record Date. Scheme Shareholder means a Tower Shareholder as at the Scheme Record Date other than Vero. Second Court Date means the first day on which an application made to the Court for an order under section 236(1) of the Companies Act approving the Scheme is heard, or if the application is adjourned for any reason, the first day on which the adjourned application is heard. Separation Proposal means: the proposal Tower announced to the market on 29 November 2016, comprising a proposal to transfer its non-christchurch earthquake related insurance policies and liabilities from Tower Insurance Limited (RunOffCo) to another Tower Group member (New Tower), and for the shares in RunOffCo to be (indirectly) transferred to Tower s shareholders under a scheme of arrangement; or any proposed transaction similar to the above. Share Register means the register of shareholders of Tower maintained in accordance with the Companies Act. Subsidiary has the meaning set out in section 5 of the Companies Act. Takeovers Code means the code set out in the schedule to the Takeovers Code Approval Order Takeovers Panel means the Takeovers Panel as constituted under the Takeovers Act Tax means: all forms of taxes, duties, imposts, charges, withholdings, levies, GST or other governmental impositions assessed or charged by any government agency in New Zealand or in any other jurisdiction; and all costs, charges, interest, penalties, fines, expenses and other additional statutory charges, relating to, or arising in connection with, the imposition of any such Tax, whenever arising, and Taxes and Taxation have a corresponding meaning. Tax Authority means any government agency in New Zealand or any other jurisdiction responsible for the collection of any Tax or administration of any Tax Law. Tax Law means any law in relation to any Tax applicable to, and binding upon, a Tower Group Member, in any jurisdiction. Tax Return means any return relating to Tax or other Tax related document which will be lodged with a Tax Authority or which a taxpayer will prepare and retain under applicable Tax Law. Tax Warranties means the representations and warranties set out in paragraph 23 of Schedule 1. Timetable means the indicative timetable for the implementation of the Transaction set out in Annexure 3.

7 Scheme Implementation Agreement Page 6 Tower Board means the board of directors of Tower. Tower Group means Tower and each of its Related Companies and a reference to a Tower Group Member or a member of the Tower Group is to Tower or any of its Related Companies. Tower Indemnified Parties means Tower, its Related Companies and the directors, officers and employees of Tower and at its Related Companies. Tower Investment Assets means the regulatory and surplus capital and cash assets of the Tower Group. Tower Investment Policy means the policies of the Tower Group with respect to the investment of Tower Investment Assets. Tower Prescribed Occurrence means, other than: as expressly required or permitted by this agreement or the Scheme; with the written consent of Vero, not to be unreasonably withheld, the occurrence of any of the following between the date of this agreement and 8.00am on the Implementation Date: (c) Tower converting all or any of its shares into a larger or smaller number of shares; Tower reducing its share capital in any way or reclassifying, combining, splitting or redeeming or repurchasing directly or indirectly any of its shares; Tower: agreeing to buy-back any Tower shares; or resolving to approve the terms of a buy-back of Tower shares under the Companies Act; (d) (e) (f) (g) a member of the Tower Group issuing shares, or granting a right or an option over an unissued share, or agreeing to make such an issue or grant such a right or an option, other than any issue or grant (or agreement to issue or grant) by a Subsidiary of Tower to that Subsidiary s direct parent company for the purpose of continuing to meet any solvency requirements imposed by a regulator in the jurisdiction in which that Subsidiary operates; a member of the Tower Group issuing, or agreeing to issue, securities convertible into shares, or debt securities, other than any issue (or agreement to issue) by a Subsidiary of Tower to that Subsidiary s direct parent company for the purpose of continuing to meet any solvency requirements imposed by a regulator in the jurisdiction in which that Subsidiary operates; Tower declaring, paying or making any dividend or distribution; a member of the Tower Group acquiring, or agreeing to acquire, any material business or assets valued at more than $2 million (and for the avoidance of doubt) other than: the writing of new insurance business in the ordinary course; and acquisition of financial assets for the investment portfolio of the Tower Group in the ordinary course;

8 Scheme Implementation Agreement Page 7 (h) (j) (k) (l) (m) (n) (o) (p) a member of the Tower Group disposing, or agreeing to dispose, of any material part of the Tower Group s business or property; a member of the Tower Group charging, or agreeing to charge, any material substantial part, of the Tower Group s business or property; a member of the Tower Group making any change to its constitution; a member of the Tower Group resolving that it be wound up; a liquidator or provisional liquidator of a member of the Tower Group being appointed; a court making an order for the winding up of a member of the Tower Group; an administrator of a member of the Tower Group being appointed under the Companies Act; a member of the Tower Group executing a deed of company arrangement; or a receiver, or a receiver and manager, being appointed in relation to the whole, or a substantial part, of the property of the Tower Group. Tower Registry means Computershare Investor Services Limited. Tower Representations and Warranties means the representations and warranties of Tower set out in clauses 5.7 and Schedule 1. Tower Risk Policies means the risk management policies and practices applicable to the insurance business of the Tower Group. Tower Share means a fully paid ordinary share of Tower. Tower Shareholder means each person who is registered as the holder of a Tower Share from time to time. Transaction means the acquisition of Tower by Vero through implementation of the Scheme. Vero Group means Vero and each of its Related Companies and a reference to a Vero Group Member or a member of the Vero Group is to Vero or any of its Related Companies. Vero Indemnified Parties means Vero and each of its Related Companies and their respective directors, officers and employees. Vero Information means information regarding the Vero Group provided by Vero to Tower in writing for inclusion in the Scheme Booklet, being: information about Vero, its Related Companies, businesses and interests and dealings in Tower Shares; and any other information concerning the Vero and its Related Companies required under section 236(2) of the Companies Act or, in each case, by the requirements and guidance note published by the Takeovers Panel in February 2017 and that the parties agree is Vero Information and that is identified in the Scheme Booklet as such. Vero Representations and Warranties means the representations and warranties of Vero set out in Schedule 2.

9 Scheme Implementation Agreement Page Interpretation: In this agreement, headings are for convenience only and do not affect interpretation and, unless the context requires otherwise: (c) (d) (e) (f) (g) (h) (j) (k) (l) (m) (n) words importing the singular include the plural and vice versa; words importing a gender include any gender; other parts of speech and grammatical forms of a word or phrase defined in this agreement have a corresponding meaning; a reference to a person includes an individual, the estate of an individual, a corporation, an authority, an association or a joint venture, a partnership, a trust and any Government Agency; a reference to a clause, party, attachment, exhibit or schedule is a reference to a clause of, and a party, attachment, exhibit and schedule to this agreement, and a reference to this agreement includes any attachment, exhibit and schedule; a reference to a statute, regulation, proclamation, ordinance or by law includes all statutes, regulations, proclamations, ordinances, instruments or by laws amending, consolidating, modifying or replacing it, whether passed by the same or another Government Agency with legal power to do so, and a reference to a statute includes all regulations, proclamations, ordinances, instruments and by laws issued under that statute; a reference to any document (including this agreement) is to that document as varied, novated, ratified or replaced from time to time; any agreement, representation, warranty or indemnity by two or more parties (including where two or more persons are included in the same defined term) binds them jointly and severally; the word includes in any form is not a word of limitation; a reference to $ or dollar is to New Zealand currency; a reference to any time is, unless otherwise indicated, a reference to Auckland time; a term defined in or for the purposes of the Companies Act has the same meaning when used in this agreement; a reference to the Listing Rules includes any variation, consolidation or replacement of these rules and is to be taken to be subject to any waiver or exemption granted to the compliance of those rules by a party; and a reference to fairly disclosed means disclosed (in writing) to the extent that, and in sufficient detail so as to enable, a reasonable bidder experienced in transaction processes similar to that applicable to the Transaction and experienced in a business similar to any business conducted by the Tower Group, to reasonably identify the nature and scope of the relevant matter, event or circumstance. 1.3 Business Day: Where the day on or by which any thing is to be done is not a Business Day, that thing will be done on or by the next Business Day. 1.4 Contra proferentem excluded: No term or condition of this agreement will be construed adversely to a party solely on the ground that the party was responsible for the preparation of this agreement or a provision of it.

10 Scheme Implementation Agreement Page Awareness: Where a representation or warranty is given so far as Tower is aware or with a similar qualification as to Tower s awareness or knowledge, Tower s awareness or knowledge is limited to and deemed only to include those facts, matters or circumstances of which Michael Stiassny, Richard Harding, David Callanan, Richard McIntosh or Glenys Talivai is aware (or ought to be aware had they made reasonable enquiries) as at the date the statement is made or given. 2. PROCEEDING WITH THE TRANSACTION 2.1 Tower to propose Scheme Tower agrees to propose the Scheme to Tower Shareholders on and subject to the terms of this agreement. Vero agrees with Tower to assist Tower to propose the Scheme to Tower Shareholders on and subject to the terms of this agreement. 3. CONDITIONS PRECEDENT AND PRE-IMPLEMENTATION STEPS 3.1 Conditions precedent: Subject to this clause 3.1, the Scheme will not become Effective, and the obligations of Vero under clause 4.3 are not binding, until each of the following conditions precedent are satisfied or waived to the extent and in the manner set out in clauses 3.2 and 3.3: Fairfax SIA: Within seven Business Days of the date of this agreement, the Fairfax SIA being validly terminated by mutual agreement between the parties or by notice from Tower to Fairfax Financial Holdings Limited under the Fairfax SIA, and Tower providing evidence that all amounts owing to Fairfax Financial Holdings Limited under the Fairfax SIA have been paid in accordance with the terms of the Fairfax SIA. Regulatory Approvals: RBNZ Approval: Before 5.00pm on the End Date, notice being given by the RBNZ under section 28 of IPSA confirming that it would remain satisfied of the matters in section 19(1) (m) of the IPSA following implementation of the Scheme, on terms that are acceptable to Vero acting reasonably. Vero agrees that it will not seek any changes to the conditions of Tower Insurance Limited s RBNZ licence relating to the minimum solvency margin of $50 million prior to the Implementation Date. Pacific Islands Approvals: Before 5.00pm on the End Date, Tower or Vero (as applicable) has received in writing all necessary applicable approvals, consents, authorisations or no objection confirmations in connection with the change of control as a consequence of the Transaction from applicable regulators of Tower s subsidiaries in the Pacific Islands, on terms that are acceptable to Vero acting reasonably (it being agreed, without limitation, that Vero is not required to accept any condition imposing any operating restrictions on the business of the Tower Group or Vero (as the case may be) or requiring any capital injection, or any other form of additional financial support, into Tower or any Tower subsidiary in the Pacific Islands).

11 Scheme Implementation Agreement Page 10 (c) Regulatory Intervention: Before and as at 7.59am on the Implementation Date: there is not in effect any temporary restraining order, preliminary or permanent injunction or other order, in each case issued by a court of competent jurisdiction in New Zealand in a proceeding brought by a Government Agency preventing or delaying the Transaction; and no action (other than action carried out in the ordinary course of business by a Tax Authority) or investigation in relation to any Tower Group Member or the Scheme is announced or commenced by any Government Agency. (d) (e) (f) Court Approval: The Court approves the Scheme in accordance with section 236(1) of the Companies Act. Shareholder Approval: Tower Shareholders approve the Scheme at the Scheme Meeting by the requisite majorities required under the Companies Act. No Tower Prescribed Occurrence: No Tower Prescribed Occurrence occurs between the date of this agreement and 7.59am on the Implementation Date. (g) Rating: Before and as at 7.59am on the Implementation Date, A.M. Best Company has not (other than as a result of the announcement of the Transaction or the actions of Vero itself): lowered the financial strength rating assigned to Tower Insurance Limited (TIL) to any rating lower than A-; or imposed conditions (financial or otherwise) specifically on TIL and its subsidiaries relating to the retention of the rating held by TIL as at the date of this agreement. (h) NZCC Approval: Before 5.00pm on the End Date, a clearance being given, or authorisation granted, under the Commerce Act 1986 in connection with the Scheme, in either case on terms acceptable to Vero acting reasonably. 3.2 Best endeavours (c) Vero undertakes to Tower to use its best endeavours to procure that the conditions precedent in clauses 3.1 (Regulatory Approvals) and 3.1(h) (NZCC Approval) are satisfied as soon as reasonably practicable and otherwise in accordance with their terms. Tower undertakes to Vero to use its best endeavours to procure that the conditions precedent in clauses 3.1 (Fairfax SIA), 3.1 (Regulatory Approvals), 3.1(d) (Court Approval), 3.1(e) (Shareholder Approval) and 3.1(f) (No Tower Prescribed Occurrence) are satisfied in accordance with their terms. Each party undertakes to use its best endeavours to procure that there is no occurrence within the control of Tower or Vero (as the context requires) that would prevent a condition precedent in clause 3.1, which such party will use best endeavours to satisfy, being satisfied in accordance with its terms, provided that nothing in this clause 3.2 will require either party to incur any additional costs (other than customary advisor costs and filing fees) or to offer, agree to or accept any undertakings, commitments or conditions (other than as required under clause 3.2(d)).

12 Scheme Implementation Agreement Page 11 (d) Without limiting this clause 3.2: (iii) (iv) (v) Vero will promptly apply for RBNZ approval to the change of control and provide to Tower a copy of any draft application and drafts of all correspondence with the RBNZ, and final copies of the same; each party will take all steps it is responsible for as part of the Regulatory Approval process, including responding to requests for information at the earliest practicable time; each party will provide the other party with all information reasonably requested in connection with the applications for Regulatory Approvals; Vero will consult with Tower in advance in relation to the progress of obtaining the Regulatory Approvals and keep Tower informed of the progress in relation to obtaining such approval, including as to conditions or other arrangements proposed by the relevant Government Agency; and Vero and Tower will work collaboratively and jointly undertake meetings and phone calls with applicable regulators in relation to the progress of obtaining the Regulatory Approvals, except where a regulator requests a separate meeting, and only after Vero and Tower have consulted together in good faith about that requirement. 3.3 Waiver of conditions precedent: (c) The conditions precedent in clauses 3.1 (Regulatory Approvals), 3.1(c) (Regulatory Intervention), 3.1(d) (Court Approval) and 3.1(e) (Shareholder Approval) cannot be waived. The conditions precedent in clauses 3.1 (Fairfax SIA), 3.1(c) (Regulatory Intervention), 3.1(f) (No Tower Prescribed Occurrence), 3.1(g) (Rating) and 3.1(h) (NZCC Approval) are for the sole benefit of Vero and may only be waived by Vero (in its absolute discretion) in writing. Waiver of a breach or non-fulfilment in respect of one condition precedent does not constitute: a waiver of breach or non-fulfilment of any other condition precedent resulting from the same event; or a waiver of breach or non-fulfilment of that condition precedent resulting from any other event. 3.4 Termination on failure of condition precedent: If any event occurs which would, or in fact does, prevent a condition precedent in clause 3.1 being satisfied and that condition precedent is not waived by Tower or Vero or both (as applicable) in accordance with clause 3.3, the parties will consult in good faith to: determine whether the Transaction may proceed by way of alternative means or methods; change the date of the application made to the Court for an order under section 236(1) of the Companies Act approving the Scheme or adjourning that application (as applicable) to another date agreed by Tower and

13 Scheme Implementation Agreement Page 12 Vero (being a date no later than five Business Days before the End Date); or (iii) extend the relevant date or extend the End Date. If the parties are unable to reach agreement under clause 3.4 within five Business Days of becoming aware of the relevant occurrence or relevant date or by the End Date, then unless that condition precedent is waived by Tower or Vero or both as provided in clause 3.3, either party may terminate this agreement, subject to clause Certain notices: (c) If Tower or Vero becomes aware that any condition precedent has been satisfied, it will promptly notify the other in writing of this fact. If, before the time specified for satisfaction of a condition precedent, an event that will prevent, or is likely to prevent, that condition precedent being satisfied occurs, the party with knowledge of that event will immediately give the other party written notice of that event. Tower and Vero (as the case may be) will promptly advise each other orally and in writing of any change or event causing, or which, so far as can reasonably be foreseen, would cause: (iii) a representation or warranty provided in this agreement by a relevant party to be false or misleading in any material respect; a breach or non-fulfilment of any of the conditions precedent; or a material breach of this agreement by a relevant party. 4. TRANSACTION STEPS 4.1 Scheme: Tower will propose to the Tower Shareholders a scheme of arrangement in the form of the Scheme. 4.2 Scheme Consideration: Each Scheme Shareholder is entitled to receive the Scheme Consideration in respect of each Scheme Share held by that Scheme Shareholder subject to and in accordance with the terms of this agreement and the Scheme. 4.3 Payment of Scheme Consideration: Subject to the terms and conditions of this agreement and the Scheme, Vero undertakes and warrants to Tower (in its own right and separately as trustee or nominee for each of the Scheme Shareholders) that, in consideration of the transfer to Vero of each Tower Share held by a Scheme Shareholder at the Scheme Record Date under the terms of the Scheme, Vero will on the Implementation Date: accept that transfer; and pay or procure the payment of the Scheme Consideration in accordance with the Scheme.

14 Scheme Implementation Agreement Page 13 Where a Scheme Shareholder is to be paid the relevant Scheme Consideration in foreign currency in accordance with the Scheme Booklet, then Tower may procure that the payment pursuant to clause 4.3 can be made in foreign currency converted by a reputable financial institution, provided however that this will be a matter between Tower and the applicable Scheme Shareholder where the shareholder bears exchange rate risk. Vero will satisfy its obligation by complying with clause No amendment to Scheme without consent: Tower will not consent to any modification of, or amendment to, or the making or imposition by the Court of any condition in respect of, the Scheme without the prior written consent of Vero or the consent of Vero s counsel if such modification or amendment is made, imposed or requested at a Court hearing. 5. IMPLEMENTATION 5.1 Obligations of both parties timing: (c) (d) Subject to clause 5.1, the parties will use their best endeavours to take all necessary steps and exercise all rights necessary to implement the Transaction, in accordance with the Timetable. Failure by a party to meet any timeframe or deadline set out in the Timetable will not constitute a breach of clause 5.1 to the extent that such failure is due to circumstances and matters outside the party s control. Each party will keep the other informed about their progress against the Timetable and notify each other if it believes that any of the dates in the Timetable are not achievable. To the extent that any of the dates or timeframes set out in the Timetable become not achievable due to matters outside of a party s control, the parties will consult in good faith to agree any necessary extension to ensure such matters are completed within the shortest possible timeframe. 5.2 Tower s obligations: Without limiting the general nature of clause 5.1, Tower will execute all documents and do all acts and things within its power as may be reasonably necessary or desirable for the implementation of the Transaction on a basis consistent with this agreement and as expeditiously as possible and in particular Tower will: Announce Recommendation of Scheme: following execution of this agreement, announce, in a form agreed between Tower and Vero, that each of the directors of Tower: intends to recommend to Tower Shareholders that the Scheme be approved; and who holds Tower Shares intends to vote his or her Tower Shares in favour of the Scheme; Independent Adviser: (if not already appointed) promptly appoint the Independent Adviser (with the approval of the Takeovers Panel) and provide assistance and information reasonably requested by the Independent Adviser on a good faith basis and on the understanding that, to the extent accepted by the Independent Adviser, the Independent Adviser will rely on that information to enable it to prepare the Independent Adviser's Report for the Scheme Booklet (and any update to that report) as soon as practicable;

15 Scheme Implementation Agreement Page 14 (c) Preparation of Scheme Booklet: subject to clause 5.2(d), as soon as practicable after the date of this agreement: prepare the Scheme Booklet in accordance with the requirements of all applicable laws and in particular with the Companies Act, the Takeovers Code, and the Listing Rules, and taking into account the guidance note the Takeovers Panel published in February 2017; include in the Scheme Booklet a statement by the Tower Board: (A) (B) unanimously recommending that Tower Shareholders vote in favour of the Scheme; and that each Tower Board member who holds Tower Shares intends to vote his or her Tower Shares in favour of the Scheme; (d) Consultation with Vero: consult with Vero as to the content and presentation of the Scheme Booklet including: providing to Vero: (A) (B) drafts of the Scheme Booklet; and drafts of any extract from the Independent Adviser's Report which: refers to factual information about Vero; or which the Independent Adviser agrees may be provided to Vero, for the purpose of enabling Vero to provide comments on those draft documents to Tower; (iii) (iv) (v) (vi) taking all comments made by Vero into account in good faith when producing a revised draft of the Scheme Booklet; providing to Vero a revised draft of the Scheme Booklet within a reasonable time before the draft of the Scheme Booklet which is provided to the Takeovers Panel and NZX for approval is finalised; obtaining written approval from Vero for the form and content in which the Vero Information appears in the Scheme Booklet; using its reasonable endeavours to enable Vero to directly provide any information to, or answer questions of, the Independent Adviser about Vero; and providing to Vero a full copy of the Scheme Booklet and Independent Adviser s Report in the form to be provided to the Court or at such earlier point in time as those documents are in final form. (e) Lodgement of Draft Scheme Booklet with Takeovers Panel and NZX: provide an advanced draft of the Scheme Booklet and Independent Advisers Report to the Takeovers Panel and to NZX for their review (with a copy to Vero) and keep Vero reasonably informed of any issues raised by the Takeovers Panel and NZX in relation to the draft and consult with Vero in good faith prior to taking any steps or actions to address any such issues (provided that, where such issues relate to

16 Scheme Implementation Agreement Page 15 Vero Information, Tower will not take any steps to address them without Vero s prior written consent, not to be unreasonably withheld); (f) Section 236A(2) statement: apply to the Takeovers Panel for the production of: (prior to the First Court Date) a letter stating that the Takeovers Panel intends to provide a statement under section 236A(2) of the Companies Act stating that the Takeovers Panel has no objection to the Court granting the Final Orders and does not intend to appear at the First Court Date; and (prior to the Final Orders Date) a statement under section 236A(2) of the Companies Act stating that Takeovers Panel has no objection to the Court granting the Final Orders; (g) Court documents: In relation to each Court application made in relation to the Scheme, including any appeal, Tower must give Vero drafts of all documents required to be given by Tower to the Court (including the originating applications, affidavits, memoranda, submissions and draft Court orders) a reasonable time before they are due to be submitted to the Court (and in any event not less than 96 hours before submission) and must consider in good faith and where practicable incorporate the reasonable comments of Vero and its Representatives on those documents. Tower must not provide the Court with any Court orders (whether in draft or not) or applications for Court orders, or consent to any changes to any Court orders, without Vero having approved such documents being submitted to the Court or such changes being consented to; (h) (j) Court direction: following an application for the letter of intention in accordance with clause 5.2(f) promptly apply to the Court for the Initial Orders; Delisting: if requested by Vero in writing at any time after the Effective Date, Tower will take all steps reasonably necessary for Tower to be removed from the official lists of NZX and ASX, including lodging a request for removal with NZX and ASX and satisfying any conditions reasonably requested by NZX or ASX for it to act on that request; Supplementary disclosure: if, after despatch of the Scheme Booklet, it becomes aware: that information included in the Scheme Booklet is or has become misleading or deceptive in any material respect (whether by omission or otherwise); or of information that is required to be disclosed to Tower Shareholders under any applicable law but was not included in the Scheme Booklet, promptly consult with Vero in good faith as to the need for, and form of, any supplementary disclosure to Tower Shareholders, and make any such disclosure that it considers reasonably necessary in the circumstances, having regard to applicable laws; (k) Scheme Meeting: as soon as reasonably practicable despatch the Scheme Booklet and convene the Scheme Meeting in accordance with the Initial Orders;

17 Scheme Implementation Agreement Page 16 (l) (m) (n) (o) Lodge the Scheme Booklet: upon sending the Scheme Booklet to Tower Shareholders, lodge a copy of that Scheme Booklet with NZX and ASX in accordance with the Listing Rules; Vero Representation at Scheme Meeting: allow a representative of Vero the opportunity to attend and speak on the Scheme at any Scheme Meeting (prior to the Tower Shareholders being asked to vote on any relevant resolution); Hold the Vote: unless otherwise agreed in writing with Vero, continue to take all reasonable steps necessary to hold the Scheme Meeting as soon as practicable and in any event at a time prior to the End Date (and Tower will not put forward any other scheme proposal for approval, or otherwise support any other takeover offer, before the Scheme Meeting to approve the Scheme); Proxies: (iii) solicit proxies in favour of the approval of the Scheme and against any resolution submitted by any shareholder that is inconsistent with implementation of the Scheme and the completion of any of the transactions contemplated by this agreement, including, if so requested by Vero, acting reasonably, using proxy solicitation services firms; provide Vero with a daily report detailing proxies received in respect of any Scheme Meeting; and if Vero chooses, permit Vero (at its own expense), directly or through a nominee (reasonably selected by Vero), to actively solicit proxies in favour of the Scheme and to disclose in the Scheme Booklet that Vero may make such solicitations; (p) (q) (r) (s) (t) (u) (v) (w) Investor engagement and proxy solicitation: fully cooperate with Vero on proxy solicitation for retail shareholders and institutions and Tower s shareholder engagement more generally; Shareholder Opposition to the Scheme: promptly report to Vero evidence of any opposition the Scheme from the Tower Shareholders; Court approval: if the Scheme Resolution is passed by the requisite majorities of the Tower Shareholders, seek the Court's approval of the Final Orders; Vero representation at Court Hearings: consent to separate representation by Vero at Court hearings and allow Vero to be heard in relation to the application for both the Initial Orders and the Final Orders; Lodge Initial Orders and Final Orders: lodge with the Registrar a copy of the Initial Orders and the Final Orders within the applicable timeframes set out in the Companies Act; Scheme Consideration: close the Share Register as at the Scheme Record Date and determine entitlements to the Scheme Consideration in accordance with the Scheme and the Deed Poll; Registration: subject to Vero satisfying its obligations under clause 4.3, effect the transfer of the Scheme Shares to Vero on the Implementation Date; Listing: not do anything to cause Tower Shares to cease being quoted on the NZX or ASX or to become permanently suspended from quotation prior to completion of the Transaction unless Vero has agreed in writing;

18 Scheme Implementation Agreement Page 17 (x) (y) (z) Information: provide Vero with such information as Vero reasonably requests in relation to Tower s solicitation of votes in favour of the Scheme; Compliance with laws: do everything reasonably within its power to ensure that the Transaction is effected in accordance with all applicable laws, regulations and policy; Implementation: if the Scheme become Effective, do all things contemplated of it under the Scheme and all other things (if any) necessary for Tower to do to lawfully give effect to the Scheme; and 5.3 Vero s obligations: Without limiting the general nature of clause 2.1, Vero will execute all documents and do all acts and things within its power as may be reasonably necessary or desirable for the implementation of the Transaction on a basis consistent with this agreement and as expeditiously as possible, and in particular Vero will: Vero Information: prepare and promptly provide to Tower the Vero Information for inclusion in the Scheme Booklet and consent to the inclusion of that information in the Scheme Booklet; Supplementary disclosure: if, after despatch of the Scheme Booklet, it becomes aware: that information included in the Scheme Booklet with respect to the Vero Group is or has become misleading or deceptive in any material respect (whether by omission or otherwise); or of information Booklet with respect to the Vero Group that is required to be disclosed to Tower Shareholders under any applicable law but was not included in the Scheme Booklet, promptly provide that information to Tower; (c) (d) (e) (f) (g) (h) Review of Scheme Booklet: review the drafts of the Scheme Booklet prepared by Tower and provide comments promptly on those drafts in good faith; Independent Adviser s Report: provide any assistance or information reasonably requested by the Independent Adviser in connection with the preparation of the Independent Adviser s Report; Representation: if requested by Tower, procure that it is represented by counsel at the Court hearings convened for the purposes of considering the Initial Orders and the Final Orders, at which through its counsel, Vero will undertake (if requested by the Court) to do all such things and take all such steps within its power as are necessary in order to ensure the fulfilment of its obligations under this agreement and the Scheme; Deed Poll: no later than the Business Day prior to the First Court Date, enter into the Deed Poll; Accuracy of Vero Information: before a draft of the Scheme Booklet is lodged with the Takeovers Panel and NZX, and again before the Scheme Booklet is despatched to Tower Shareholders, confirm to Tower the accuracy and completeness of the Vero Information in the Scheme Booklet, including that it does not contain any material statement that is false or misleading in a material respect including because of any material omission; Share transfer: if the Scheme becomes Effective, accept a transfer of the Tower Shares as contemplated by clause 4.3; and

19 Scheme Implementation Agreement Page 18 Scheme Consideration: if the Scheme becomes Effective, procure the provision of the Scheme Consideration in the manner and amount contemplated by clause 4.3 and the terms of the Scheme. 5.4 Content of Scheme Booklet: The parties agree that the Scheme Booklet will contain statements to the effect that: Tower is responsible for the content of the Scheme Booklet other than, to the maximum extent permitted by law, the Vero Information, the Independent Adviser s Report or any other report or letter issued to Tower by a third party; and Vero is responsible for the Vero Information (and no other part of the Scheme Booklet). If after a reasonable period of consultation and having acted reasonably and in good faith, Tower and Vero are unable to agree on the form or content of the Scheme Booklet: where the determination relates to Vero Information, Vero will, acting reasonably, make the final determination as to the form and content of the Vero Information; and in any other case, Tower will, acting reasonably, make the final determination as to the form and content of the Scheme Booklet. 5.5 Conduct of business: From the date of this agreement up to and including the Implementation Date, Tower will conduct, and will ensure that its Related Companies conduct, their businesses in accordance with applicable laws, in the ordinary and proper course of business in substantially the same manner and at the same locations as previously conducted and, where appropriate for that purpose, use reasonable efforts to: (iii) (iv) (v) preserve intact current business organisations; keep available the services of its current executive leadership team; maintain and preserve its relationships with its regulators, customers, suppliers, licensors, licensees and others having business dealings with it; ensure all licences, approvals and permits necessary to operate the Tower Group's business are kept in force, and all conditions attaching to those licences, approvals and permits are complied with in all material respects; maintain its business and assets, including maintaining at least its current level of insurance and adequate levels of capital so as to satisfy the higher of the RBNZ capital requirements and the target solvency operating range approved for the business by the Tower Board. Nothing in clause 5.5 restricts the ability of Tower to take any action: which is required or expressly permitted by this agreement or the Scheme; or

20 Scheme Implementation Agreement Page 19 which has been agreed to in writing by Vero (not to be unreasonably withheld). (c) Without limiting clause 5.5, Tower will not, and will ensure that its Related Companies do not, other than with the prior written consent of Vero, such consent not to be unreasonably withheld or delayed, from the date of this agreement up to and including the Implementation Date: (iii) (iv) (v) (vi) (vii) (viii) (ix) (x) (xi) subject to clause 5.5(d), dispose, or agree to dispose of any business, asset, interest in a joint venture, entity or undertaking, the value of which exceeds $500,000, to any person other than another entity within the Tower Group, excluding investment portfolio dispositions in the ordinary course; acquire, or agree to acquire any securities, business, asset, interest in a joint venture, entity or undertaking the price or value of which exceeds $500,000 in relation to any individual item, from another person other than another entity within the Tower Group, excluding investment portfolio acquisitions in the ordinary course; incur further financial indebtedness (including by drawing down on any facility) in excess of $3.5 million in the aggregate except if, and to the extent, required to meet any solvency requirements imposed by the RBNZ or IPSA; make (or agree to make) any payment or incur (or enter into) any capital expenditure except in the normal and ordinary course of the Tower Group's business, other than payments not exceeding in aggregate $500,000 and payment of the break fee that may be payable in connection with the Fairfax SIA; do or cause to be done, or fail to do or cause not to be done, anything that would or may result in the Scheme not being implemented or being implemented otherwise than in accordance with the Timetable and the terms of this agreement; do anything which might reasonably be expected to give rise to the occurrence of a Tower Prescribed Occurrence; change its methods of accounting for financial reporting purposes in effect at 30 September 2016, except as may be required by changes in (or, in its reasonable good faith judgment, is advisable under) applicable law or GAAP; make, change or revoke any material tax election, file any amended Tax Return, settle any tax claim, audit, action, surrender any right to claim a material tax refund, offset or other reduction in tax liability or change its method of tax accounting (except, with respect to any amended Tax Return or any change in Tax accounting method, as may be required by changes in applicable law or the official interpretation by any relevant Tax Authority), in each case, if such action would have the effect of increasing any of its Tax liabilities by an amount that exceeds $500,000; declare, make or pay any dividend or other distribution; acquire any land or enter into any new leases in respect of any land; enter into, vary or cancel any contract, or series of contracts which should reasonably be assessed together, where the aggregate annual payments