TRENWICK STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of December 19, 1999
(the "Agreement") by and between Trenwick Group Inc., a Delaware
corporation ("Trenwick"), and LaSalle Re Holdings Limited, a company
organized under the laws of Bermuda ("LaSalle" or the "Issuer").
WHEREAS, concurrently with the execution and delivery of
this Agreement, LaSalle, LaSalle Re Limited, a company organized under the
laws of Bermuda, Trenwick, Trenwick Group (Delaware) Inc., a Delaware
corporation and Xxxxx Holdings International Limited, a company organized
under the laws of Bermuda ("New Holdings"), are entering into an Agreement,
Scheme of Arrangement, Plan of Merger, and Plan of Reorganization dated as
of the date hereof (the "Business Combination Agreement"); and
WHEREAS, as a condition to Trenwick's willingness to
enter into the Business Combination Agreement, Trenwick has requested that
LaSalle agree, and LaSalle has so agreed, to grant to Trenwick an option to
purchase up to 3,105,110 common shares, par value $1.00 per share, of
LaSalle ("LaSalle Common Shares") in accordance with the terms and subject
to the conditions set forth herein.
NOW, THEREFORE, to induce Trenwick to enter into the
Business Combination Agreement, and in consideration of the foregoing and
the mutual representations, warranties, covenants and agreements set forth
herein and in the Business Combination Agreement, the parties hereto agree
as follows. Capitalized terms used herein but not defined herein shall have
the meanings ascribed to them in the Business Combination Agreement.
1. Grant of Option. Subject to the terms and conditions
set forth herein, LaSalle hereby grants to Trenwick an irrevocable option
(the "LaSalle Option") to purchase up to 3,105,110 (as adjusted as set
forth herein) shares (the "Option Shares") of LaSalle Common Shares (such
number of Option Shares representing 19.9% of the LaSalle Common Shares
issued and outstanding on the date hereof) in the manner set forth below at
a price (the "Exercise Price") of $12.81 per Option Share (which price per
share is equal to the average of the last sale prices of LaSalle Common
Shares on the ten (10) trading days immediately prior to the date of public
announcement of the Business Combination Agreement, payable in cash or by
cashless exercise in accordance with Section 4 hereof. Notwithstanding the
foregoing, in no event shall the number of Option Shares for which the
LaSalle Option is exercisable exceed 19.9% of the number of issued and
outstanding shares of LaSalle Common Shares.
2. Exercise of Option. The LaSalle Option may be
exercised by Trenwick, in whole or in part, at any time or from time to
time after the Business Combination Agreement becomes terminable by
Trenwick under circumstances which would or could entitle Trenwick to
receive the LaSalle Termination Fee pursuant to Section 7.4(c) of the
Business Combination Agreement (a "Trigger Event") (regardless of whether
the Business Combination Agreement is actually terminated or whether there
occurs a closing involving LaSalle). In the event Trenwick wishes to
exercise the LaSalle Option, Trenwick shall deliver to LaSalle a written
notice (an "Exercise Notice") specifying the total number of Option Shares
it wishes to purchase and whether such exercise is in cash or by cashless
exercise in accordance with Section 4 hereof. Each closing of a purchase of
Option Shares (an "Option Closing") shall occur, but subject to the
satisfaction or waiver of the conditions set forth in Section 3 hereof, at
a place, on a date and at a time designated by Trenwick in an Exercise
Notice delivered at least two (2) business days prior to the date of the
Option Closing. The LaSalle Option shall terminate upon the earlier of: (i)
the Effective Time; (ii) the termination of the Business Combination
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Agreement other than under circumstances which also constitute a Trigger
Event; or (iii) the 180th day following a Trigger Event (or if, at the
expiration of such 180 day period the LaSalle Option cannot be exercised by
reason of any applicable judgment, decree, order, law or regulation, ten
(10) business days after such impediment to exercise shall have been
removed or shall have become final and not subject to appeal, but in no
event under this clause (iii) later than the 365th day following such
Trigger Event). Notwithstanding the foregoing, the LaSalle Option may not
be exercised if Trenwick is in material breach of any of its
representations or warranties, or in material breach of any of its
covenants or agreements, contained in this Agreement or in the Business
Combination Agreement. Upon the giving by Trenwick to LaSalle of the
Exercise Notice and the tender of the applicable aggregate Exercise Price,
but subject to the satisfaction or waiver of the conditions set forth in
Section 3 hereof, Trenwick shall be deemed to be the holder of record of
the Option Shares issuable upon such exercise, notwithstanding that the
stock transfer books of LaSalle shall then be closed or that certificates
representing such Option Shares shall not then be actually delivered to
Trenwick.
3. Conditions to Closing. The obligation of LaSalle to
issue the Option Shares to Trenwick hereunder is subject to the conditions,
which (other than the conditions described in clauses (i), (iii) and (iv)
below) may be waived by LaSalle in its sole discretion, that (i) all
waiting periods, if any, under the HSR Act, applicable to the issuance of
the Option Shares hereunder shall have expired or have been terminated;
(ii) the Option Shares shall have been approved for listing on the NYSE
upon official notice of issuance; (iii) all consents, approvals, orders or
authorizations of, or registrations, declarations or filings with, any
federal, state or local administrative agency or commission or other
federal, state or local Governmental Authority, including without
limitation, the Bermuda Monetary Authority, if any, required in connection
with the issuance of the Option Shares hereunder shall have been obtained
or made, as the case may be including, without limitation, by Trenwick; and
(iv) no preliminary or permanent injunction or other order or decree by any
court of competent jurisdiction, law or regulation prohibiting or otherwise
restraining such issuance shall be in effect.
4. Payment and Delivery of Certificates.
(a) At any Option Closing, Trenwick shall pay to LaSalle
the aggregate purchase price (equal to the Exercise Price multiplied by the
number of Option Shares to be purchased at such Option Closing) for the
shares of LaSalle Common Shares purchased pursuant to the exercise of the
LaSalle Option in immediately available funds by wire transfer to a bank
account designated in writing by LaSalle; provided, however, that failure
or refusal of LaSalle to designate such account shall not preclude Trenwick
from exercising the LaSalle Option. At Trenwick's option, in lieu of
delivering the cash Exercise Price, Trenwick may instruct LaSalle in
writing to deduct from the number of shares of LaSalle Common Shares that
would otherwise be issued upon such exercise, a number of shares of LaSalle
Common Shares equal to the quotient obtained from dividing:
(x) the product obtained by multiplying (1) the number of
shares of LaSalle Common Shares for which the LaSalle Option is
being exercised and (2) the Exercise Price then in effect, by
(y) the Fair Market Value of a share of LaSalle Common Shares.
"Fair Market Value" shall have the meaning specified in Section 12(b)(v).
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(b) At any Option Closing, simultaneously with the
delivery of immediately available funds as provided in Section 4(a),
LaSalle will deliver to Trenwick a certificate or certificates representing
the number of Option Shares to be purchased by Trenwick at such Option
Closing, which Option Shares will be free and clear of all liens, claims,
charges and encumbrances of any kind whatsoever and if the option is
exercised in part only, LaSalle shall deliver a new option evidencing the
rights of Trenwick thereof to purchase the balance of the shares
purchasable hereunder and (ii) Trenwick will deliver to LaSalle a copy of
this Agreement and a letter agreeing that Trenwick will not offer to sell
or otherwise dispose of such shares in violation of applicable law or the
provisions of this Agreement. LaSalle shall pay all expenses, and any and
all United States federal, state and local taxes and other charges that may
be payable in connection with the preparation, issue and delivery of stock
certificates under this Section 4 in the name of Trenwick or its designee.
LaSalle shall use its reasonable best efforts to cause the LaSalle Common
Shares being delivered at the Option Closing to be approved for listing on
the NYSE and shall pay all expenses in connection with the application for
approval and the listing of such shares.
5. Representations and Warranties of LaSalle. LaSalle
hereby represents and warrants to Trenwick that (a) LaSalle is a company
duly organized, validly existing and in good standing under the laws of
Bermuda and has the corporate power and authority to enter into this
Agreement, (b) the execution and delivery of this Agreement by LaSalle and
the consummation by LaSalle of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of
LaSalle and no other corporate proceedings on the part of LaSalle are
necessary to authorize this Agreement or any of the transactions
contemplated hereby, (c) this Agreement has been duly executed and
delivered by LaSalle, constitutes a valid and binding obligation of LaSalle
and, assuming this Agreement constitutes a valid and binding obligation of
Trenwick, is enforceable against LaSalle in accordance with its terms, (d)
LaSalle has taken all necessary corporate action to authorize and reserve
for issuance and to permit it to issue, upon exercise of the LaSalle
Option, and at all times from the date hereof through the expiration of the
LaSalle Option will have reserved, 3,105,110 authorized and unissued Option
Shares, such amount being subject to adjustment as provided in Section 9,
all of which, upon their issuance and delivery in accordance with the terms
of this Agreement, will be validly issued, fully paid and nonassessable,
(e) upon delivery of the Option Shares to Trenwick upon the exercise of the
LaSalle Option, Trenwick will acquire the Option Shares free and clear of
all claims, liens, charges, encumbrances and security interests of any
nature whatsoever, (f) none of LaSalle, any of its affiliates or anyone
acting on its or their behalf has issued, sold or offered any security of
LaSalle to any person under circumstances that would cause the issuance and
sale of the Option Shares, as contemplated by this Agreement, to be subject
to the registration requirements of the Securities Act as in effect on the
date hereof and, assuming the representations of Trenwick contained in
Section 6(d) are true and correct and based on Trenwick's commitment in its
letter referred to in Section 4 hereof, the issuance, sale and delivery of
the Option Shares hereunder would be exempt from the registration and
prospectus delivery requirements of the Securities Act, as in effect on the
date hereof (and LaSalle shall not take any action which would cause the
issuance, sale and delivery of the Option Shares hereunder not to be exempt
from such requirements), and (g) the execution and delivery of this
Agreement by LaSalle does not, and, subject to compliance with applicable
law, the consummation by LaSalle of the transactions contemplated hereby
will not, violate, conflict with, or result in a breach of any provision
of, or constitute a default (with or without notice or a lapse of time, or
both) under, or result in the termination of, or accelerate the performance
required by, or result in a right of termination, cancellation, or
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acceleration of any obligation or the loss of a material benefit under, or
the creation of a lien, pledge, security interest or other encumbrance on
assets (any such violation, conflict, breach, default, termination,
acceleration, right of termination, cancellation or acceleration, loss, or
creation, a "Violation") of LaSalle or any of its subsidiaries, pursuant to
(i) any provision of the LaSalle Bye-Laws, (ii) any provision of any
material loan or credit agreement, note, mortgage, indenture, lease,
benefit plan or other agreement, obligation, instrument, permit,
concession, franchise or license (a "Material Contract") of LaSalle or any
of its subsidiaries or to which any of them is a party or by which any of
them or their properties or assets are bound, or (iii) any judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to LaSalle
or any of its subsidiaries or any of their respective properties or assets,
which Violation, in the case of each of clauses (ii) or (iii), would have
Material Adverse Effect on LaSalle.
6. Representations and Warranties of Trenwick. Trenwick
represents and warrants to LaSalle that (a) Trenwick is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Delaware and has the corporate power and authority to enter into
this Agreement and to carry out its obligations hereunder, (b) the
execution and delivery of this Agreement by Trenwick and the consummation
by Trenwick of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Trenwick and no
other corporate proceedings on the part of Trenwick are necessary to
authorize this Agreement or any of the transactions contemplated hereby,
(c) this Agreement has been duly executed and delivered by Trenwick and
constitutes a valid and binding obligation of Trenwick, and, assuming this
Agreement constitutes a valid and binding obligation of LaSalle, is
enforceable against Trenwick in accordance with its terms, and (d) any
Option Shares acquired upon exercise of the LaSalle Option will be acquired
for Trenwick's own account, for investment purposes only and will not be,
and the LaSalle Option is not being, acquired by Trenwick with a view to
the public distribution thereof in violation of any applicable provision of
the Securities Act, and (e) the execution and delivery of this Agreement by
Trenwick does not, and, subject to compliance with applicable law, the
consummation by Trenwick of the transactions contemplated hereby will not,
violate, conflict with, or result in the breach of any provision of, or
constitute a default (with or without notice or a lapse of time, or both)
under, or result in any Violation by Trenwick or any of its subsidiaries,
pursuant to (i) any provision of the certificate of incorporation or
by-laws of Trenwick, (ii) any Material Contract of Trenwick or any of its
subsidiaries or to which any of them is a party or by which any of them or
any of their properties or assets are bound, or (iii) any judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to Trenwick,
any of its subsidiaries or any of their respective properties or assets,
which Violation, in the case of each of clauses (ii) or (iii), would have a
Material Adverse Effect on Trenwick.
7. Restrictions on Transfer.
(a) Restrictions on Transfer. Prior to the first
anniversary of the date on which Trenwick purchases any Option Shares
hereunder (the "Expiration Date"), Trenwick shall not, directly or
indirectly, by operation of law or otherwise, sell, assign, pledge, or
otherwise dispose of or transfer any Option Shares acquired by Trenwick
pursuant to this Agreement ("Restricted Shares") beneficially owned by it,
other than in accordance with Section 7(b), 7(c) or Section 8. Subsequent
to the Expiration Date, Trenwick shall not, directly or indirectly, by
operation of law or otherwise, sell, assign, pledge or otherwise dispose of
or transfer any Restricted Shares beneficially owned by it to any
purchaser, assignee, pledgee or other transferee who would, immediately
after such sale, assignment, pledge, disposition or transfer, beneficially
own more than 4.9% of the then outstanding voting power of the Issuer of
the Restricted Shares, except in accordance with Section 7(b), 7(c) or
Section 8 and other than in market transactions at prevailing prices.
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(b) Permitted Sales. Following the termination of the
Business Combination Agreement, Trenwick shall be permitted to sell or
transfer any Restricted Shares beneficially owned by it if such sale is
made pursuant to a tender or exchange offer or merger that has been
approved or recommended, or otherwise determined to be fair to and in the
best interests of the shareholders of LaSalle, by a majority of the members
of the Board of Directors of LaSalle (which majority shall include a
majority of directors who were directors prior to the announcement of such
tender or exchange offer or merger).
(c) LaSalle's Right of First Refusal. At any time after
the first occurrence of a Trigger Event and prior to the expiration of
twenty-four (24) months immediately following the first purchase of LaSalle
Common Shares pursuant to the LaSalle Option, if Trenwick shall desire to
sell, assign, transfer or otherwise dispose of any shares of LaSalle Common
Shares or other securities acquired by it pursuant to the LaSalle Option,
Trenwick shall give LaSalle written notice of the proposed transaction (a
"Trenwick Offer Notice"), identifying the proposed transferee, accompanied
by a copy of a binding offer to purchase such LaSalle Common Shares or
other securities signed by such transferee and setting forth the terms of
the proposed transaction. A Trenwick Offer Notice shall be deemed an offer
by Trenwick to LaSalle, which must be accepted, if at all, within five (5)
business days of the receipt of such Trenwick Offer Notice, on the same
terms and conditions and at the same price at which Trenwick is proposing
to transfer such LaSalle Common Shares or other securities to such
transferee. The purchase of any LaSalle Common Shares or other securities
by LaSalle shall be settled within five (5) business days of the date of
the acceptance of the offer and the purchase price shall be paid to
Trenwick in immediately available funds. In the event of the failure or
refusal of LaSalle to purchase all of the LaSalle Common Shares or other
securities covered by a Trenwick Offer Notice, Trenwick may sell all, but
not less than all, of such LaSalle Common Shares or other securities to the
proposed transferee at a price no less than the price specified and on
terms no more favorable to the transferee than those set forth in the
Trenwick Offer Notice; provided that the provisions of this sentence shall
not limit the rights Trenwick may otherwise have in the event LaSalle has
accepted the offer contained in the Trenwick Offer Notice and wrongfully
refuses to purchase the LaSalle Common Shares or other securities subject
thereto. The requirements of this Section 7(c) shall not apply to (i) any
disposition as a result of which the proposed transferee would not
beneficially own more than three percent (3%) of the outstanding voting
power of LaSalle, (ii) any disposition of LaSalle Common Shares or other
securities by a person to whom Trenwick has assigned its rights under the
LaSalle Option with the consent of LaSalle, (iii) any sale by means of a
public offering registered under the Securities Act, or (iv) any transfer
to a wholly-owned subsidiary of Trenwick which agrees in writing to be
bound by the terms hereof.
8. Registration Rights. Following the termination of the
Business Combination Agreement, but not later than the second anniversary
of the last date that Trenwick acquired Option Shares under this Agreement,
Trenwick may by written notice (the "Registration Notice") to LaSalle
request LaSalle to register under the Securities Act all or any part of the
Restricted Shares beneficially owned by Trenwick (the "Registrable
Securities") pursuant to a bona fide firm commitment underwritten public
offering in which Trenwick and the underwriters shall effect as wide a
distribution of such Registrable Securities as is reasonably practicable
and shall use their commercially reasonable efforts to prevent any person
(including any Group (as used in Rule 13d-5 under the Exchange Act)) and
its affiliates from purchasing through such offering Restricted Shares
representing more than one percent (1%) of the outstanding shares of common
stock of LaSalle on a fully diluted basis (a "Permitted Offering"). The
Registration Notice shall include a certificate executed by Trenwick and
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its proposed managing underwriter, which underwriter shall be an investment
banking firm of nationally recognized standing (the "Manager"), stating
that (i) they have a good faith intention to commence promptly a Permitted
Offering and (ii) the Manager in good faith believes that, based on the
then prevailing market conditions, it will be able to sell the
Registrable Securities at a per share price equal to at least eighty
percent (80%) of the then Fair Market Value (as defined below) of such
shares. LaSalle (and/or any person designated by LaSalle) shall thereupon
have the option exercisable by written notice delivered to Trenwick within
five (5) business days after the receipt of the Registration Notice,
irrevocably to agree to purchase all or any part of the Registrable
Securities proposed to be so sold for cash at a price (the "Option Price")
equal to the product of (i) the number of Registrable Securities to be so
purchased by LaSalle and (ii) the then Fair Market Value of such shares.
Any such purchase of Registrable Securities by LaSalle (or its designee)
hereunder shall take place at a closing to be held at the principal
executive offices of LaSalle or at the offices of its counsel at any
reasonable date and time designated by LaSalle and/or such designee in such
notice within twenty (20) business days after delivery of such notice. Any
payment for the shares to be purchased shall be made by delivery at the
time of such closing of the Option Price in immediately available funds. As
used herein, the "Fair Market Value" of any share shall be the average of
the daily closing sales price for such share on the NYSE during the ten
(10) NYSE trading days immediately preceding the date such Fair Market
Value is to be determined.
If LaSalle does not elect to exercise its option pursuant
to this Section 8 with respect to all Registrable Securities, it shall use
its commercially reasonable efforts to effect, as promptly as practicable,
the registration under the Securities Act of the unpurchased Registrable
Securities proposed to be so sold; provided, however, that (i) Trenwick
shall not be entitled to more than an aggregate of two effective
registration statements hereunder and (ii) LaSalle will not be required to
file any such registration statement during any period of time (not to
exceed ninety (90) days after such request in the case of clauses (A), (B)
or (C) below) when (A) LaSalle is in possession of material non-public
information which it reasonably believes would be detrimental to be
disclosed at such time and, in the opinion of counsel to LaSalle, such
information would have to be disclosed if a registration statement were
filed at that time; (B) LaSalle is required under the Securities Act to
include audited financial statements for any period in such registration
statement and such financial statements are not yet available for inclusion
in such registration statement; or (C) LaSalle determines, in its
reasonable judgment, that such registration would interfere with any
financing, acquisition or other material transaction involving LaSalle or
any of its affiliates. LaSalle shall use its reasonable best efforts to
cause any Registrable Securities registered pursuant to this Section 8 to
be qualified for sale under the securities or blue sky laws of such
jurisdictions as Trenwick may reasonably request and shall continue such
registration or qualification in effect in such jurisdiction; provided,
however, that LaSalle shall not be required to qualify to do business in,
or consent to general service of process in, any jurisdiction by reason of
this provision.
The registration rights set forth in this Section 8 are
subject to the condition that Trenwick shall provide LaSalle with such
information with respect to such holder's Registrable Securities, the plans
for the distribution thereof, and such other information with respect to
such holder as, in the reasonable judgment of counsel for LaSalle, is
necessary to enable LaSalle to include in such registration statement all
material facts required to be disclosed with respect to a registration
thereunder.
A registration effected under this Section 8 shall be
effected at LaSalle's expense, except for underwriting discounts and
commissions and the fees and the expenses of counsel to Trenwick, and
LaSalle shall provide to the underwriters such documentation (including
certificates, opinions of counsel and "comfort" letters from auditors) as
are customary in connection with underwritten public offerings as such
underwriters may reasonably require. In connection with any such
registration, the parties agree (i) to indemnify each other and the
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underwriters in the customary manner (provided that Trenwick shall only be
required to indemnify other parties to such underwriting agreement for
information relating to such Trenwick and supplied by it for inclusion in
such registration statement), (ii) to enter into an underwriting agreement
in form and substance customary for transactions of such type with the
Manager and the other underwriters participating in such offering and (iii)
to take all further actions which shall be reasonably necessary to effect
such registration and sale (including, if the Manager deems it necessary,
participating in road show presentations).
LaSalle shall be entitled to include (at its expense)
additional shares of its common stock in a registration effected pursuant
to this Section 8 only if and to the extent the Manager determines that
such inclusion will not adversely affect the prospects for success of such
offering.
9. Adjustment upon Changes in Capitalization. (a) Without
limitation to any restriction on LaSalle contained in this Agreement or in
the Business Combination Agreement, in the event of any change in LaSalle
Common Shares by reason of stock dividends, split-ups, mergers,
amalgamations, recapitalizations, subdivisions, conversions, combinations,
exchange of shares or the like, the type and number of shares or securities
subject to the LaSalle Option, and the Exercise Price per Option Share
provided in Section 1, shall be adjusted appropriately to restore to
Trenwick its rights hereunder, including the right to purchase from the
LaSalle (or its successors) shares of LaSalle Common Shares representing
19.9% of the outstanding LaSalle Common Shares for the aggregate Exercise
Price calculated as of the date of this Agreement as provided in Section 1.
(b) In the event that LaSalle shall enter into an
agreement: (i) to consolidate with merge or amalgamate into any person,
other than Trenwick or one of its subsidiaries, and shall not be the
continuing or surviving corporation of such consolidation, merger or
amalgamation; (ii) to permit any person, other than Trenwick or one of its
subsidiaries, to merge or amalgamate into LaSalle and LaSalle shall be the
continuing or surviving corporation, but, in connection with such merger or
amalgamation, the then-outstanding shares of LaSalle Common Shares shall be
changed into or exchanged for stock or other securities of LaSalle or any
other person or cash or any other property; or (iii) to sell or otherwise
transfer all or substantially all of its assets to any person, other than
Trenwick or one of its subsidiaries, then, and in each such case, the
agreement governing such transaction shall make proper provision so that
upon the consummation of such transaction and upon the subsequent exercise
of the LaSalle Option, Trenwick shall be entitled to receive, for each
share of LaSalle Common Shares with respect to which the LaSalle Option has
not theretofore been exercised, an amount of consideration in the form of
and equal to the per share amount of consideration that would be received
by the holder of one share of LaSalle Common Shares (and, in the event of
an election or similar arrangement with respect to the type of
consideration to be received by the holders of LaSalle Common Shares,
subject to the foregoing, proper provision shall be made so that the holder
of the LaSalle Option would have the same election or similar rights as
would the holder of the number of shares of LaSalle Common Shares for which
the LaSalle Option is then exercisable).
10. Restrictive Legends. Each certificate representing
shares of LaSalle Common Shares issued to Trenwick at a Closing will have
typed or printed thereon a restrictive legend in substantially the
following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY BE REOFFERED OR SOLD ONLY IF SO REGISTERED OR IF
AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE. SUCH SECURITIES
ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER AS SET
FORTH IN THE STOCK OPTION AGREEMENT, DATED AS OF DECEMBER 19,
1999, A COPY OF WHICH MAY BE OBTAINED FROM THE ISSUER UPON
REQUEST.
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It is understood and agreed that: (i) the reference to
the resale restrictions of the Securities Act in the above legend shall be
removed by delivery of substitute certificate(s) without such reference if
such Option Shares have been registered pursuant to the Securities Act,
such Option Shares have been sold in reliance on and in accordance with
Rule 144 under the Securities Act or Trenwick has delivered to LaSalle a
copy of a letter from the staff of the Securities and Exchange Commission,
or an opinion of counsel, in form and substance satisfactory to LaSalle and
its counsel, to the effect that such legend is not required for purposes of
the Securities Act; (ii) the reference to restrictions pursuant to this
Agreement in the above legend shall be removed by delivery of substitute
certificate(s) without such reference if the Option Shares evidenced by
certificate(s) containing such reference have been sold or transferred in
compliance with the provisions of this Agreement and under circumstances
that do not require the retention of such reference; and (iii) the legend
shall be removed in its entirety if the conditions in the preceding clauses
(i) and (ii) are both satisfied. In addition, such certificate(s) shall
bear any other legend as may be required by law. Certificates representing
shares sold in a registered public offering pursuant to Section 8 shall not
be required to bear the legend set forth in this Section 10.
11. Profit Limitation.
(a) Notwithstanding any other provision of this Agreement
or the Business Combination Agreement, in no event shall Trenwick's Total
Profit (as hereinafter defined) exceed $15 million (such amount, the
"Profit Limit") and, if it would otherwise exceed such amount, Trenwick, at
its sole election, shall, within five business days, either (i) deliver to
the Issuer for cancellation Option Shares (valued, for purposes of this
Section 11, at their closing market price on the NYSE on the date of such
delivery), (ii) pay cash to the Issuer or refund in cash any LaSalle
Termination Fee previously paid to Trenwick or reduce or waive the amount
of any LaSalle Termination Fee payable to Trenwick pursuant to Section
7.4(c) of the Business Combination Agreement, or (iii) undertake any
combination thereof, so that Trenwick's Total Profit shall not exceed the
Profit Limit after taking into account the foregoing actions. As used
herein, "Total Profit" means the aggregate amount (before taxes) of (i) $12
million, payable in excess of expenses, pursuant to Section 7.4(c) of the
Business Combination Agreement, (ii) amounts paid by LaSalle pursuant to
Section 12 hereof and (iii) (x) the net cash amounts received by Trenwick
pursuant to the sale or other disposition of Option Shares (or any other
securities into which such Option Shares are converted or exchanged) to any
unaffiliated party, less (y) Trenwick's purchase price for such Option
Shares.
(b) Notwithstanding any other provision of this Agreement
or the Business Combination Agreement, the LaSalle Option may not be
exercised for a number of Option Shares that would, as of the date of the
Exercise Notice, result in a Notional Total Profit (as hereinafter defined)
of more than the Profit Limit and, if exercise of the LaSalle Option
otherwise would exceed the Profit Limit, Trenwick, at its discretion, may
increase the Exercise Price for that number of Option Shares set forth in
the Exercise Notice so that the Notional Total Profit shall not exceed the
Profit Limit; provided, that nothing in this sentence shall restrict any
exercise of the LaSalle Option permitted hereby on any subsequent date at
the Exercise Price set forth in Section 1 hereof. As used herein, the term
"Notional Total Profit" with respect to any number of Option Shares as to
8
which Trenwick may propose to exercise the LaSalle Option shall be the
Total Profit determined as of the date of the Exercise Notice assuming that
the LaSalle Option were exercised on such date for such number of Option
Shares and assuming that such Option Shares, together with all other shares
of LaSalle Common Shares held by Trenwick and its subsidiaries as of such
date, were sold for cash at the closing market price for the LaSalle
Common Shares on the NYSE Composite Tape at the close of business on the
preceding trading day (less customary brokerage commissions).
12. Certain Repurchases.
(a) Trenwick "Put". Subject to the limitations set forth
in Section 11, upon delivery of written notice to LaSalle by Trenwick (the
"Repurchase Notice"):
(i) at any time during which the LaSalle Option is
exercisable pursuant to Section 2 (the "Repurchase Period"),
LaSalle and its successors in interest shall repurchase from
Trenwick all or any portion of the LaSalle Option, as specified by
Trenwick, at the Option Repurchase Price set forth in Section
12(b)(i); and
(ii) at any time prior to the fifth anniversary of the
date hereof, LaSalle and its successors in interest shall
repurchase from Trenwick all or any portion of the LaSalle Common
Shares purchased by Trenwick pursuant to the LaSalle Option, as
specified by Trenwick, at the Share Repurchase Price set forth in
Section 12(b)(iii).
(b) Certain Definitions. For purposes of this Section 12,
the following definitions shall apply:
(i) "Option Repurchase Price" shall mean (A) the
difference between the Option Repurchase Market/Offer Price (as
defined below) for the LaSalle Common Shares as of the date of the
applicable Repurchase Notice and the Exercise Price, multiplied by
(B) the number of shares of LaSalle Common Shares purchasable
pursuant to the LaSalle Option or the portion thereof covered by
the applicable Repurchase Notice, but only if the Option
Repurchase Market/Offer Price is greater than the Exercise Price.
(ii) "Option Repurchase Market/Offer Price" shall mean,
as of any date, the higher of (X) the highest price per share
offered as of such date pursuant to any tender or exchange offer
or other offer with respect to a business combination offer
involving LaSalle or any of its material subsidiaries as the
target party which was made prior to such date and not terminated
or withdrawn as of such date and (Y) the Fair Market Value (as
defined in Section 12(b)(v)) of the LaSalle Common Shares as of
such date.
9
(iii) "Share Repurchase Price" shall mean the product of
(A) the sum of (I) the Exercise Price paid by Trenwick per share
of LaSalle Common Shares acquired pursuant to the LaSalle Option
and (II) if the Share Repurchase Market/Offer Price (as defined
below) is greater than the Exercise Price, the difference between
the Share Repurchase Market/Offer Price and the Exercise Price,
and (B) the number of LaSalle Common Shares to be repurchased
pursuant to this Section 12.
(iv) "Share Repurchase Market/Offer Price" shall mean, as
of any date, the higher of (X) the highest price per share offered
pursuant to a tender or exchange offer or other business
combination offer involving LaSalle as the target party during the
Repurchase Period prior to the delivery by Trenwick of a notice of
repurchase and (Y) the Fair Market Value of the LaSalle Common
Shares as of such date.
(v) "Fair Market Value" shall mean, with respect to any
security, the per share average of the last sale prices on the
NYSE (or such other national stock exchange or national market
system as shall then be the primary trading market for such
security) for the ten (10) trading days immediately preceding the
applicable date.
(c) Payment and Redelivery of LaSalle Options or LaSalle
Common Shares. In the event that Trenwick exercises its rights under this
Section 12, LaSalle shall, within ten (10) business days thereafter, pay
the required amount to Trenwick in immediately available funds and Trenwick
shall surrender to LaSalle the LaSalle Option or the certificate or
certificates evidencing the LaSalle Common Shares purchased by Trenwick
pursuant hereto, and Trenwick shall warrant that it has sole beneficial
ownership of the LaSalle Option or such LaSalle Common Shares and that the
LaSalle Option or such LaSalle Common Shares are then free and clear of all
claims, liens, charges, encumbrances and security interests of any nature
whatsoever.
(d) Repurchase Price Reduced at Trenwick's Option. In the
event that payment of the repurchase price specified in Section 12(a) would
subject the repurchase of the LaSalle Option or the LaSalle Common Shares
purchased by Trenwick pursuant to the LaSalle Option to a vote of the
stockholders of LaSalle pursuant to applicable law, regulations, or
requirements of a national securities exchange or national market system or
the LaSalle Bye-Laws, then Trenwick may, at its election, reduce the
repurchase price or the number of shares covered by the Trenwick repurchase
request to an amount which would permit such repurchase without the
necessity for such a vote.
(e) Repurchase at the Election of LaSalle.
(i) Except to the extent that Trenwick shall have
previously exercised its rights under Section 12(a), at the
written request of LaSalle during the six-month period immediately
following the Repurchase Period, LaSalle may repurchase from
Trenwick, and Trenwick shall sell to LaSalle, all (but not less
than all) of the LaSalle Common Shares acquired by Trenwick
pursuant hereto and with respect to which Trenwick has beneficial
ownership at the time of such repurchase, at a price equal to the
sum of (A) the greater of (I) one hundred ten percent (110%) of
the Current Market Price (as defined in Section 12(e)(iii)) or
(II) the sum of (X) the Purchase Price in respect of the shares so
acquired plus (Y) Trenwick's Pre-Tax Carrying Cost (as defined in
Section 12(e)(iii)), multiplied in either case by the number of
shares so acquired, and (B) the amount of the documented
out-of-pocket expenses (to the extent not previously reimbursed or
10
compensated for pursuant hereto or pursuant to the Business
Combination Agreement) incurred by Trenwick in connection with the
Business Combination Agreement and this Agreement and the
transactions contemplated thereby and hereby, including reasonable
accounting, investment banking and legal fees (the "Section 12(e)
Repurchase Consideration"); provided, that LaSalle's rights under
this Section 12(e) shall be suspended (with any such rights being
extended accordingly) during any period when the exercise of such
rights would subject Trenwick to liability or disgorgement of
profits pursuant to Section 16(b) of the Exchange Act.
(ii) If LaSalle exercises its rights under this Section
12(e), LaSalle shall, within ten (10) business days pay the
Section 12(e) Repurchase Consideration in immediately available
funds and Trenwick shall surrender to LaSalle certificates
evidencing the LaSalle Common Shares purchased hereunder with
respect to which Trenwick then has beneficial ownership, and
Trenwick shall warrant that it has sole beneficial ownership of
such LaSalle Common Shares and that all such shares are then free
and clear of all claims, liens, charges, encumbrances and security
interests of any nature whatsoever.
(iii) As used in Section 12(e)(i), (A) "Current Market
Price" shall mean the average of the last sale prices per share of
LaSalle Common Shares on the NYSE for the ten (10) trading days
immediately preceding the date of LaSalle's request for repurchase
pursuant to this Section 12(e) and (B) "Pre-Tax Carrying Cost"
shall mean an amount equal to the interest on the aggregate
purchase price paid by Trenwick for the LaSalle Common Shares
purchased pursuant to the LaSalle Option from the date of purchase
to the date of repurchase at the rate of interest announced by
Citibank, N.A. at its prime or base lending or reference rate
during such period, less any dividends received on the shares so
purchased, divided by the number of shares of LaSalle Common
Shares so purchased.
13. Binding Effect; No Assignment; No Third Party
Beneficiaries. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns. Neither this Agreement nor the rights or the obligations of either
party hereto are assignable, except by operation of law, or with the
written consent of the other party (it being agreed that all transactions
contemplated by Section 2.1(b) and (c) of the Business Combination
Agreement shall not be considered assignments in violation of this Section
13). Nothing contained in this Agreement, express or implied, is intended
to confer upon any person other than the parties hereto and their
respective permitted assigns any rights or remedies of any nature
whatsoever by reason of this Agreement. Any Restricted Shares sold by a
party in compliance with the provisions of Section 8 shall, upon
consummation of such sale, be free of the restrictions imposed with respect
to such shares by this Agreement, unless and until such party shall
repurchase or otherwise become the beneficial owner of such shares, and any
transferee of such shares shall not be entitled to the registration rights
of such party.
11
14. Specific Performance. The parties recognize and agree
that if for any reason any of the provisions of this Agreement are not
performed in accordance with their specific terms or are otherwise
breached, immediate and irreparable harm or injury would be caused for
which money damages would not be an adequate remedy. Accordingly, each
party agrees that, in addition to other remedies, the other party shall be
entitled to an injunction restraining any violation or threatened violation
of the provisions of this Agreement. In the event that any action should be
brought in equity to enforce the provisions of the Agreement, neither party
will allege, and each party hereby waives the defense, that there is
adequate remedy at law.
15. Entire Agreement. This Agreement, the Business
Combination Agreement (including any exhibits and schedules thereto) and
the Confidentiality Agreement constitute the entire agreement, and
supersede all other prior agreements and understandings, both written and
oral, between the parties with respect to the subject matter of this
Agreement.
16. Further Assurances. Each party will execute and
deliver all such further documents and instruments and take all such
further action as may be necessary in order to consummate the transactions
contemplated hereby.
17. Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability
of the other provisions of this Agreement, which shall remain in full force
and effect. In the event any court or other competent authority holds any
provisions of this Agreement to be null, void or unenforceable, the parties
hereto shall negotiate in good faith the execution and delivery of an
amendment to this Agreement in order, as nearly as possible, to effectuate,
to the extent permitted by law, the intent of the parties hereto with
respect to such provision and the economic effects thereof. If for any
reason any such court or regulatory agency determines that Trenwick is not
permitted to acquire the full number of shares of LaSalle Common Shares
provided in Section 1 hereof (as the same may be adjusted), it is the
express intention of LaSalle to allow Trenwick to acquire such lesser
number of shares as may be permissible, without any amendment or
modification hereof. Each party agrees that, should any court or other
competent authority hold any provision of this Agreement or part hereof to
be null, void or unenforceable, or order any party to take any action
inconsistent herewith, or not take any action required herein, the other
party shall not be entitled to specific performance of such provision or
part hereof or to any other remedy, including but not limited to money
damages, for breach hereof or of any other provision of this Agreement or
part hereof as the result of such holding or order.
18. Notices. All notices, requests, claims, demands and
other communications under this Agreement shall be in writing and shall be
deemed given if (i) delivered, personally, or (ii) sent by overnight
courier service (providing proof of delivery), or (iii) telecopied (which
is confirmed), or (iv) five (5) days after being mailed by registered or
12
certified mail (return receipt requested) to the parties at the following
addresses (or at such other address for a party as shall be specified by
like notice):
If to Trenwick:
Xxxx X. Xxxxx
Vice President and
Chief Financial Officer
Trenwick Group Inc.
Xxx Xxxxxxxxxx Xxxxx
Xxxxxxxx, XX 00000
Fax: (000) 000-0000
with a copy to:
Xxxxx & XxXxxxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxxxx
Fax: (000) 000-0000
If to LaSalle, to:
LaSalle Re Holdings Limited
Xxxxxxxxxxx Xxxxxxxx
00 Xxxxxx Xxxxxx
Xxxxxxxx XX 00
Bermuda
Fax: (000) 000-0000
with a copy to:
Xxxxx, Xxxxx & Xxxxx
000 X. XxXxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx
Fax: (000) 000-0000
19. Governing Law; Choice of Forum. This Agreement shall
be governed by, and construed in accordance with, the laws of the State of
Delaware without regard to the conflicts of law principles thereof. Each of
the parties hereto (a) consents to submit itself to the personal
jurisdiction of any federal court located in the State of Delaware or any
13
Delaware state court in the event any dispute arises out of this Agreement
or any of the transactions contemplated by this Agreement, (b) agrees that
it will not attempt to deny or defeat such personal jurisdiction by motion
or other request for leave from any such court and (c) agrees that it will
not bring any action relating to this Agreement or any of the transactions
contemplated by this Agreement in any court other than a federal court
sitting in the state of Delaware or a Delaware state court.
20. Interpretation. When a reference is made in this
Agreement to a Section, such reference shall be to a Section of this
Agreement unless otherwise indicated. Whenever the words "include",
"includes" or "including" are used in this Agreement, they shall be deemed
to be followed by the words "without limitation." The descriptive headings
herein are inserted for convenience of reference only and are not intended
to be part of or to affect the meaning or interpretation of this Agreement.
21. Counterparts. This Agreement may be executed in one
or more counterparts, each of which shall be deemed to be an original, but
both of which, taken together, shall constitute one and the same
instrument.
22. Expenses. Except as otherwise expressly provided
herein or in the Business Combination Agreement, all costs and expenses
incurred in connection with the transactions contemplated by this Agreement
shall be paid by the party incurring such expenses.
23. Amendment. This Agreement may not be amended, except
by an instrument in writing signed on behalf of each of the parties.
24. Waiver. Any agreement on the part of a party to waive
any provision of this Agreement, or to extend the time for performance,
will be valid only if set forth in an instrument in writing signed on
behalf of such party. The failure of any party to this Agreement to assert
any of its rights under this Agreement or otherwise will not constitute a
waiver of such rights.
25. Loss or Mutilation. Upon receipt by LaSalle of
evidence reasonably satisfactory to it of the loss, theft, destruction or
mutilation of this Agreement, and (in the case of loss, theft or
destruction) of reasonably satisfactory indemnification, and upon surrender
and cancellation of this Agreement, if mutilated, LaSalle will execute and
deliver to Trenwick a new Agreement of like tenor and date. Any such new
Agreement executed and delivered will constitute an additional contractual
obligation on the part of LaSalle, whether or not the Agreement so lost,
stolen, destroyed, or mutilated shall at any time be enforceable by anyone.
26. Extension of Time Periods. The time periods for
exercises of certain rights hereunder shall be extended (but in no event by
more than six (6) months): (a) to the extent necessary to obtain all
governmental approvals for the exercise of such rights, and for the
expiration of all statutory waiting periods; and (b) to the extent
necessary to avoid any liability or disgorgement of profits under Section
16(b) of the Exchange Act by reason of such exercise.
27. Further Assurance. Each party agrees to execute and
deliver all such further documents and instruments and take all such
further action as may be necessary in order to consummate the transactions
contemplated hereby.
14
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective duly authorized officers as of
the date first above written.
TRENWICK GROUP INC.
By: /s/ Xxxxx X. Xxxxxxx, Xx.
-----------------------------------------
Name: Xxxxx X. Xxxxxxx, Xx.
------------------------------
Title: Chairman, President and CEO
------------------------------
LASALLE RE HOLDINGS LIMITED
By: /s/ Xxx X. Xxxxxxxxxxx
-----------------------------------------
Name: Xxx X. Xxxxxxxxxxx
------------------------------
Title: President & CEO
-----------------------------
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